Put your hand out for Detroit

Will Hodges explains how young entrepreneurs are helping to rebuild the bankrupt city

A city driven by a high-tech economy and run by young entrepreneurs in their 20s and 30s. That's US President Obama's vision for a new, young America - and it's finding its conception in the most unlikely of locales. Detroit, a long-time byword for industrial decline and urban decay, is quietly reinventing itself as a hub for entrepreneurship and new industries.

Ghost town

Ironically, the catalyst for this reinvention has been the collapse of Detroit's economy which has left the city unable to pay its debts - with no other option but to file for bankruptcy. The filing, the largest by an American city in US history, is the culmination of several decades of industrial decline, attributed in large part to the demise of the US automobile industry. At the height of its success US car giant General Motors, headquartered in the city, had 350,000 employees - most of these in the Detroit area. The number of employees in the city has now fallen to less than 5,000, creating a terrifying domino effect of rising unemployment, falling tax revenues and home repossessions.

With the city hemorrhaging jobs, Detroit's population has also fallen sharply, shrinking by a quarter in the last decade alone and down by more than 60% from its peak of 1.8 million in the 1950s. The downtown area of the city bears the physical scars of this decline: dozens of abandoned apartment blocks and stores which have reduced the value of local real estate to near worthless levels.

Feeling good

However, amongst the decay the city is witnessing the first green shoots of hope. Rock-bottom house prices are attracting a new breed of resident - young business owners and entrepreneurs who have been incentivised by the city's relaxed regulation and tax breaks.

The transformation is part of a wider incentive to remodel the city as a hub for technology and innovation. At the forefront of the efforts is local businessman Dan Gilbert, founder of mortgage lender Quicken Loans. Gilbert's efforts to reinvent the city have seen him plough $1 billion (£650 million) into buying and refurbishing vacant buildings in a bid to spruce up the downtown area and kick start the real estate market back to life.

He has also spearheaded a business initiative, inviting more than 60 companies to open offices in the district, including Twitter, Whole Foods, and mobile apps maker Uber. Meanwhile, his venture capital fund Detroit Venture Partners has spent heavily on funding young start-ups in the city, investing almost $80 million in 2010 alone. Among the companies backed by the fund are Miso Media, a music technology start-up, and iRule, a creator of cloud software.

We love this city

Gilbert's optimism Detroit can reinvent itself as a 21st Century city is shared by many of the city's younger residents. Eli Hoeler, 21, is a student at Wayne State, Detroit's largest university and has been following the events surrounding the city's bankruptcy closely. "One of Detroit's problems is it doesn't retain the people it educates", he explains. "If the bankruptcy really does stop the '60 year decline' as Michigan Governor Rick Snyder says, of course that would help keep people here."

Is there hope for a new Detroit rising out of the rubble? "I see more small start-ups going on," he says. "People from the suburbs are starting businesses downtown, but undoubtedly more large industry investments would be immensely valuable."

Key dates in the story of Detroit

1701 Detroit is founded by French explorer Antoine de La Mothe Cadillac.

1760 British troops gain control of Detroit during the French and Indian War.

1796 Detroit becomes part of the United States.

1896 Henry Ford builds his first automobile in Detroit.

1903 The Ford Motor Company is founded.

1939-1945 The Second World War sees Detroit's automobile plants temporarily converted into munitions factories with a rapid population increase.

1942 The Davison, the world's first "urban depressed freeway", is opened in Detroit.

1950 Detroit's population peaks at 1.86 million.

1967 The city sees major racial conflict that culminates in the Twelfth Street Riot, one of the most violent in US history.

1970s Gas crises affect Detroit's automobile industry as consumers switch to smaller and more efficient foreign cars.

1991 Crime rates in Detroit peak at more than 2,700 violent crimes per 100,000 people.

2011 More than half of Detroit's property owners fail to pay their tax bills.

2013 Detroit files for bankruptcy.

The next Detroit...

The rise, fall and potential re-rise of Detroit have been extensively studied over the past few decades, and the city is now widely seen as a key case study in urban economic, geographical and social planning with lessons for societies across the world.

The trajectory of Detroit has been compared with those of other US cities. For example, Memphis, the commercial capital of the state of Tennessee and the home of Elvis Presley, is also struggling with industrial decline, a shrinking population and municipal debts.

Further down the Mississippi, New Orleans suffered like Detroit during the latter part of the twentieth century from economic and social problems and municipal and federal neglect. These fostered the conditions that allowed 2005's Hurricane Katrina to have such a devastating effect on the city, creating quasi post-apocalyptic landscapes akin to those found in some parts of Detroit. As with Detroit, however, the city's commercial heritage, strong cultural identity and potential for regeneration have made it a magnet today for entrepreneurs and social renewal initiatives.

Could a European society suffer the fate of Detroit? In a way, the city's difficulties are specifically American because they're due to a large extent to its historically extreme reliance on the automobile industry and the way in which the city was constructed to suit it, neither of which would be the case to the same extent for any European city.

In addition, in the UK at least, cities don't have the same fiscal independence from central government that many US cities enjoy, so a localised economic meltdown of the same kind isn't really possible. However, Wolfgang Münchau recently suggested in the Financial Times that the whole of Greece, with its massive debts, civil unrest and significant emigration, could face Detroit-style long-term non-reversible decline, with a corresponding decay in infrastructure.

Greece has in fact long reminded us that there's nothing new about the decline of once economically dominant societies - the ruins of the Acropolis were once the centre of a powerful city-state. Looking further afield, but to more recent history, the massive statues of Easter Island, made by a civilisation almost completely destroyed by a deadly combination of economic, social and environmental factors, are perhaps the most startling monuments on the planet to how societies can rapidly rise and then collapse.