Hiiraan Online

Tuesday October 7, 2014
by Karl Muth 

Karl Muth suggests Detroit’s Somalian community might hold the key to the city’s revival.

Instead, a junk hovers on the horizon, its sails unmolested by time or wind. Tankers named in multiple languages, in multiple alphabets, skate along the edges of the lane. The sea salt in the breeze is strong, strong enough that you can taste it on your lips after a morning looking out at an ancient harbour where Egyptian triremes, Greek merchant ships, and Syrian traders have gathered over the last 4,000 years. Occasionally, a particularly strong combination of wind and wave whips into the shore, coating the worn stucco facades of buildings in Berbera with a crystalline sheen. Men call out from the fish stands, eager to sell their harvest before it spoils. Kiosks and inlets of ancient buildings, many with Italian inscriptions, are subdivided once and then once again to make the intimate surroundings of the souks. The prettiest engine note in town is that of Toyota's three-litre inline six, always near idle, never turning a revolution in anger.

When you talk with people here, they are not shy. They smile at the end of a sentence, even when the story they are telling is sad. They gesture to the distance, seemingly in any direction. But there is one direction known: west-northwest. This is the direction toward Minneapolis and Detroit, two towns that anyone of the merchant class in Somalia knows well. These towns are not seen as an El Dorado or a destination for illegal immigration.

These towns are seen as an extension of Somaliland.

I spoke to one man in Hargeisa who seemed to know all about Detroit. I told him I’d spent some time in Detroit and he said, “Oh, where?” We got to talking about places and business and the economy and he asked me a series of questions about Detroit that were shockingly accurate and specific (“So that’s near 9 Mile and Gratiot?”). How does this guy know so much about Detroit, I asked myself. Well, his cousin… two of his cousins… who aren’t really his cousins but he calls them cousins… they moved to Detroit and now they talk with him all the time on Skype.

Okay. But why the Somalis in Detroit? The answer, it turns out, looks a lot like the Indians in Uganda in the 1970’s.

Idi Amin kicked Indians out of Uganda under threat of violence for being too commercially successful. The Indian businesspeople who came to Uganda in the 1960’s had come from an environment of tiny margins and hypercompetition. They arrived in Uganda and found the competition from Ugandan businesspeople to be disorganised, undercapitalised, and uncooperative. It was not hard for even mediocre Indian businesspeople to build enterprises that substantially outperformed those built by most Ugandan businesspeople. In addition to this, enormous cultural knowledge developed and was shared cooperatively: the Indians quickly got better at doing business in Uganda and formed cartels and business associations that allowed newcomers to share in these insights, spreading and institutionalising strategic business advantages in the Indian-Ugandan diaspora.

The Somalis in Detroit are not so different. They arrived about thirty years ago and have become dominant in Detroit, as landlords, owners of small businesses, taxi services, and other enterprises. They lend to each other at extraordinarily low interest rates, while African-American businesspeople in Detroit borrow at rates at least four to five times higher, meaning on a cost-of-capital basis the Somalis are already miles ahead. Somalia is a place of weak regulatory structures and informal cartels, so forming cartels in a new place is natural – this cooperative business culture means informal networks easily crush competing businesses (as in Somalia, in Detroit fifty seemingly-independent Somali taxi drivers may form a cartel that effectively controls the livery business in an entire postal code). The level of business communication in the Detroit Somali community is nonpareil; agreements that are cooperative, franchisesque, creditor-debtor, and otherwise are commonplace and generally efficient with surprisingly well-aligned incentives.

Meanwhile, African-American businesses in Detroit have long feuded with each other, fighting over limited customer spending power and illusory promises of small business stimulus, with little cooperation and little attempt to operate at scale (which is the only practicable economic defence against a highly-efficient rival cartel). Municipal government, which has for years operated as a distributed kleptocracy, knows so little about what is going on in the city’s business climate that the city’s treasurer was unprepared to make credible estimates during the city’s bankruptcy proceedings.

The knee-jerk reaction of policymakers might be to imitate Idi Amin and to protect the American business-owners of Detroit from better-equipped, more savvy foreign competitors. From the auto industry to the railyards to the steel mills, Detroit has a history of this kind of short-sighted, cry-for-help, sky-is-falling muniprotectionism. It has never worked and will not work now. It is counterproductive, uncreative, and doomed to fail.

I propose that, instead of hopeless protectionist policies to slow the inevitable failure of businesses in many parts of Detroit, we instead accelerate these failures and allow business-savvy and better-capitalised Somalis and others to take over the Detroit market. By making Detroit a hub for the world’s most savvy entrepreneurial businesspeople, Detroit could revitalise commercial activity at the street level with successful small businesses, which is precisely what’s needed. Moreover, having a destination for East Africa’s most enterprising entrepreneurial immigrants would be good policy and good practice: America must devise innovative ways to encourage even higher immigrant productivity, and Detroit would be a fantastic place to begin that series of case studies.

The city known to locals as Xamar and to the international press corps as Mogadishu was originally known to the Europeans as the trading centre of Somalia Italiana, a “New Milan” for Africa. Somalia has been a site of business innovation since Biblical times; it was a man from these lands that founded the Bazaar of Baghdad and it was another Somali trader who founded the famed eastern market of Damascus - long ago, the price for gold on the edges of the Egyptian empire was set in the town we now call Hargeisa (then the capital of the area the Romans later recognised as Ogodia). Perhaps, in a new kind of unapologetic, migratory, diasporatic colonialism, we should allow Detroit to be a “New Mogadishu” for the Somalis. Luigi Amedeo wrote in his journals in the era of the First World War that no matter Italy’s folly in Africa, it could not exceed the mismanagement that preceded it. While, in retrospect, Amedeo’s writings smack of overconfident colonial bravado, perhaps his sentiments can be more truly said of Detroit. It is difficult to imagine how the savvy Somali entrepreneurial diaspora could possibly run Detroit any worse than its recent public- and private-sector incumbents and their mix of mismanagement, corruption (certainly not isolated to Kwame Kilpatrick’s mayoral tenure), and unbridled spending.

The time for a Somalia Italiana has passed, but perhaps it is time for a Detroit Soomaali – there must be a future or, to paraphrase Napoleon, il doit y avoir quelque chose à travers le détroit.