Poverty and Recovery, the Two Faces of the US

Detroit. Once the engine of industrial capitalism, the roaring furnace at the heart of the United States. But after decades of slow decline that only three years ago left its flagship companies – General Motors, Ford and Chrysler — at the brink of collapse, the cradle of the automotive industry needed a ventilator to survive. Today, Detroit is walking on its own again, albeit with difficulty.

Thanks to the multibillion dollar bailout of the sector’s big three — one of the successes that Barack Obama boasts about, although it was initiated by George W. Bush 2008 — Detroit has, in recent years, become an example of the economy’s recovery.

But, it is still a reflection of the country’s other face: Alarming levels of poverty and unemployment, the two great challenges that the winner of Tuesday’s elections will face.

“Where would we be now if there hadn’t been a bailout?” wonders Jack Callahan, a 58-year-old storekeeper of Islandview, a suburb in the city’s east. “Worse. Without a doubt, much worse,” he told La Nación.*

Between 2006 and 2009, the three automakers fired 120,000 people and closed dozens of factories in the United States. But after the bailout, which became one of the central themes of the campaign between Obama and Mitt Romney for its significance in the role of the State in the economy, the companies managed to change course.

Obama’s plan resulted in the creation of thousands of jobs in Michigan, Indiana, Missouri and Ohio. And although it failed to regain the luster of an industry in free fall, it did soften the impact of the crisis.

“This industry is the lifeblood of the city and the state,” said an employee of the Ford factory in Dearborn, west of Detroit, an industrial zone that began its rise to fame in 1913 when Henry Ford created the first auto production line with the Model-T, which became the favorite car of the industrial working class. She added, “It couldn’t be left to fail as Romney intended.”*

The reference to the Republican candidate is rife here, where they have not forgiven him for the article he published in the tumultuous moments of 2008, in which he opposed the bailout and called for the auto companies to be left to their fate.

The big three have passed from the red into the black. Ford — which needed no help to adapt — made more profit in the first six months of this year than in the last five years. General Motors, which received $50 billion, created more than 2,000 jobs. And Chrysler added another 12,000.

Despite a visible revival (it accelerated by 2 percent in the third quarter of this year) distrust about the U.S. economy remains. Michigan, like the rest of the country, has found it difficult to reduce unemployment. Almost 100,000 new jobs are needed each month to keep up with population growth. More than twice this many jobs would need to be constantly generated in order to rapidly reduce unemployment levels.

“Detroit would have collapsed if the auto companies had not been saved. The majority of the city’s economy is tied to the industry, from the factory workers to engineers, lawyers and trade. It’s all linked,” Victoria Mantzopoulos, professor of political science at the University of Detroit, explained to La Nación. She concluded, “It would have been catastrophic.”*

Despite glimmers of life, Detroit is still struggling to regain some of its old glory. In each of its streets, remnants of past grandeur persist: crumbling buildings, thousands of abandoned houses and entire suburbs, closed stores and schools that stopped receiving students years ago.

What was once the fourth largest city in the country is today the poorest of the major North American metropolises. According to the U.S. Census Bureau, 41 percent of homes in Detroit and its suburbs are below the poverty line.

The country has been unable to bring the poverty level below a record 15 percent, although the extension of unemployment insurance payments and the improvement of the labor market have helped to prevent an increase. In total, 46.2 million people were considered poor in the U.S. last year. It was the highest total in more than half a century.

Delray, a southern suburb of Detroit, mirrors that reality. It’s a ghost town and it is difficult to imagine that it was once a booming urban center with banks, shops, churches and schools.

“This was a working class neighborhood. But as the factories closed and thousands of jobs were lost, the people left. The few that remain today live resigned to poverty,”* remembers 56-year-old Ben Emerson, who, as a young man, used to fish in the Detroit River, now one of city’s most polluted areas.

Unemployment — the issue that dominated the campaign — has also been especially cruel to Detroit, where it skirts 20 percent, well above the national unemployment rate of 7.9 percent. That remains the country’s greatest preoccupation. According to diverse studies, in the last ten years the middle class has shrunk, net wealth has collapsed, salaries have decreased and living standards have declined.

“America’s middle class has suffered its worst decade in modern history,”* concluded investigators from the Pew Research Center.

Half a century ago, when Detroit was a city of two million inhabitants – instead of the 700,000 of today – it was the paradigm of industrialized society, with one of the highest incomes per family in the country. No-one would have predicted that it would one day struggle to pull itself out of decay and decline.

* Editor’s note: The original quotations, accurately translated, could not be verified.