Ed Glaesar compared and contrasted the trajectories of Seattle and Detroit:

For 50 years, economists have documented that urban reinvention and entrepreneurship rely on small companies and industrial diversity, not industrial monoliths.

At the start of the 20th century, Detroit was one of the most innovative cities on earth, with an abundance of small automotive entrepreneurs supplying each other with parts, financing and new ideas.

As the Big Three rose to dominance, Detroit became synonymous with urban decline. Boeing’s outsize footprint in Seattle set the stage for the city’s 20 tough years after 1960.

Before the industrial revolution, cities were centers of small, smart companies that connected with each other and the outside world. Small companies and smart people are the sources of urban success today. The industrial city now seems like an unfortunate detour during which cities exploited economies of scale but lost the interactive exchange of ideas that is their most important asset.

http://economix.blogs.nytimes.com/20...er=rss&emc=rss
That explains the Detroit conundrum in a nutshell.

Last week I attended an event here in New York that was hosted by the University of Michigan's Center for Entrepreneurship. It was one of two related events, the other event being held in San Francisco. As far as I know, there was no comparable event held in the Detroit area, or in Michigan at all for that matter.

The keynote speaker at the event was the guy who is the head of NYC's department for entrepreneurial development. His message was essentially that New York's strategy of economic development prioritizes quality of life issues over all else. There was a guy in the audience who tried to grill him on the city's tax structure and the speaker did acknowledge how burdensome it is, but effectively brushed it off as a less pressing issue especially considering the precarious time that municipal budgets are going through nationwide. The speaker also juxtaposed the New York of today against the New York of the 1970s and 1980s, during which NYC went through a period of disinvestment parallel to what Detroit was going through at the time, and noted how disastrous it was to the entire region's economy.