Financial Resilience at the Root of the Crisis – Michigan, U.S.

Abstract

The United States (U.S.) has been described as the root of the global financial crisis. The events of the financial, sovereign debt, and Euro crisis and the accompanying economic turmoil that have spread throughout most of the Western world have been traced back to the excessive consumer borrowing, sub-prime mortgage lending and ultimately the housing bubble in the United States. Its burst in 2008 created a shock that overshadowed prior recession and fiscal stress of governmental entities in the United States. Deriving over 90% of their own tax revenues from property taxes, local governments in Michigan have been hit even more excessively. However, the cases analysed in this chapter not only tell a unique story of deep shock and legacy costs, but also of creative ways of surviving the crisis, exerting different patterns of financial resilience. In general, state regulations restricted buffering the impact, and some cities additionally suffered from their geographical vicinity to and economic dependency on Detroit, a city that stands for the turbulence of the U.S. automobile industry. After first deploying buffering capacities that still existed, two cases saw the crisis as an opportunity to address their vulnerabilities (reactive adapters), an opportunity that was not recognised in the case of a constrained adapter. In contrast, one case showed strong anticipatory and coping capacities that have been built up in the past, equipping the local government to operate in a lean and efficient way, and to proactively adapt to arising shocks.

Citation

Korac, S., Saliterer, I. and Scorsone, E. (2017), "Financial Resilience at the Root of the Crisis – Michigan, U.S.", Governmental Financial Resilience (Public Policy and Governance, Vol. 27), Emerald Publishing Limited, Leeds, pp. 207-227. https://doi.org/10.1108/S2053-769720170000027012