The Decline of Detroit vs. the Rise of Indianapolis
How did this happen? One answer, according to the Mackinac Center for Public Policy, is that Detroit's city government is far larger, more regulation prone, and more bureaucratic than Indianapolis's city government: the ratio of residents to city employees, a key measure of city government productivity, is 50:1 in Detroit, one of the worst in the United States, but is 203:1 in Indianapolis, one of the best. More broadly, the central issue in political economy concerns the optimal delineation of the sphere of government activity versus that ascribed to markets, and in this essay we examine this question from the vantage point of municipalities.
Another answer: Indianapolis Mayor Stephen Goldsmith took office in 1992, committed to a turnaround based on privatization of city services, and creating a climate more conducive to entrepreneurship. During his eight-year tenure as mayor, the city's population increased by nearly 50,000 residents, induced by a more business-friendly environment and its corollary, smaller government. The Indianapolis turnaround was engendered via a three-part program that included privatization and transparency.