The city of Detroit emerged from bankruptcy yesterday, a process that was successful because of something the participants labeled the “Grand Bargain.” The Grand Bargain is a complicated plan, but its key feature involves the transfer of the city’s extremely valuable art collection to a charitable trust, in exchange for about $800 million in new financing provided by the state and private parties. It sounds like a clever solution to a difficult problem.
What jumped out at me from this morning’s LA Times article, was this comment from bankruptcy professor Laura Bartell describing how the parties managed to hammer out the deal: “When everyone realized the situation, there wasn’t a lot to argue about.” Really? Nothing to argue about? From what I had heard about the situation leading up to the Detroit bankruptcy, there should have been a lot to argue about. Depending on your point of view, you could point the finger at a profligate city administration, or poor planning, or at greedy unions, or the state for treating the city unfairly, or the surrounding suburbs that pulled taxpayers out of the city, or the decline of auto manufacturing and other industries. All of these various stakeholders had legitimate grievances against the others. All represented competing interests that had to be balanced.
To resolve the city’s financial crisis, one can imagine representatives of all these competing interests gathered in a room blaming one another for the city’s problems, and ultimately forcing all of the parties to make the concessions and contributions necessary to get the city back on its feet. Probably that happened to some extent. But the professor’s comment suggests that something else happened also. And that something else could have arisen from an understanding gained by all of the participants of the realities of the situation, and a focus on available solutions.
To say that when everyone fully understands the situation, there isn’t a lot to argue about, seems an apt description of an ideal kind of mediation or negotiation process. Arguing about responsibility for the problem, while often unavoidable, doesn’t necessarily lead to resolution, and might even lead the parties away from making a deal. It’s no good to identify the responsible party, if that party lacks the capacity to fix the problem. That’s especially true in bankruptcy court, where people who mismanage their businesses, and fail to pay their debts still often walk away free. What is needed is recognition of the realities of the problem, and the creativity needed to devise solutions.