BBC Article on the Economic Crisis in Detroit

US military units stand guard after businesses were destroyed during the 1967 Rebellion in Detroit. Thousands of National Guard and Airborne Units were deployed in the city to put down the disturbances.
Originally uploaded by Pan-African News Wire File Photos

Detroit's woes augur ill for US

By Adam Brookes
BBC News, Detroit

Americans are worried that hard times lie ahead. But in Detroit, Michigan, they have already arrived, with a vengeance.

Michigan, by some calculations, has lost 400,000 jobs in the past seven years. That's in a state whose population is only 10 million.

Detroit is seeing unemployment running at nearly 8%, twice the national average.

The number of homes in the city "foreclosed" - or repossessed by mortgage lenders - is among the highest in the country.

The city's charities are getting busier, a sign of economic distress.

At Gleaners Community Food Bank, a charity which provides food to needy people, organisers report an upsurge in appeals for help.

"This is ground zero when it comes to poverty," Augie Fernandez says. "Here we are in the capital of manufacturing and we're just seeing it dissipate away."

A significant trend is now apparent to the Gleaners staff: a marked increase in the number of professional workers who are seeking food assistance.

Prosperity to poverty

Daniel Wolfe worked in civil engineering for 22 years. He lost his job eight months ago.

We meet Daniel and his wife Cynthia as they collect free groceries from a charity food bank - cereal, muffins and tinned spaghetti sauce.

Theirs is an extraordinary - and salutary - story, one which illustrates the fragility that often underlies American prosperity.

Daniel had been earning $90,000 a year, he tells me. He's an articulate man, with a professional, warm demeanour.

He was laid off when the state government, itself strapped by a shrinking tax base, cut back on contracts to private companies.

In the course of eight months, Daniel and his family have gone from prosperity to poverty.

His unemployment benefits expired. Much of that money had been spent on trying to keep up the family health insurance. And his savings disappeared, to the point where he says he is, quite literally, broke.

He had never before accepted charity.

"To find myself in a position where I couldn't afford a gallon of milk, I couldn't afford a loaf of bread - it was very humbling," he says.

"For want of a better term it made me feel like a loser, like I wasn't able to provide even the basic things for my family, let alone anything beyond that."

I ask Daniel and Cynthia if they thought of themselves as middle class. They both answer yes. I ask if they still think of themselves as middle class.

"I think we're on the poverty line right now," says Daniel. He wonders if he will be able to hold on to his house.

Perfect storm

Michigan's problems stem in large part from the troubles of the big car manufacturers.

But there is much more. A perfect economic storm is hitting this state - falling property prices, a credit crunch, a shrinking tax base and rising oil prices.

At a truck stop on Interstate 94, we found Michael Hatfield, the owner and operator of a huge purple rig.

Every time the cost of fuel rises, he says, the cost of the vegetables he is hauling goes up, and his profit goes down.

"My profit's gone down big time. That means my wage goes down because I own the truck and trailer," he says.

"And it has a big effect at home. Luckily I got most everything paid for and my kids are grown. If I had little kids I'd be selling the truck."

The American economy is geared to cheap, plentiful, fuel. But with prices over $3 a gallon for gasoline, family budgets and business plans all get squeezed.

And winter's coming. How much to heat that big home that you can't sell?

'Canary in the coalmine'

So will Michigan's pain spread to the rest of the country?

Daniel Howes, a columnist for the Detroit News, tells me that at least some of Michigan's problems are specific to Michigan.

"What's happened in this state is somewhat unique to the manufacturing and auto business," he says.

"The Michigan economy has been tied to the auto business for a century. So it's hard to generalise that what's going to happen here is going to happen anywhere else."

States that have more diversified economies may fare better during a national slowdown, he says.

But back at Gleaners food bank, Augie Fernandez is wary. He calls Michigan the "canary in the coalmine".

"Keep an eye on Michigan," he says. "I believe what's happening here could happen to the rest of America if we don't watch ourselves."

Are economic difficulties causing you to cut back on your Christmas spending? Will you shop less during the Thanksgiving holidays this year than you did last year? Send us your comments using the form below:

Story from BBC NEWS:
http://news.bbc.co.uk/go/pr/fr/-/2/hi/business/7097585.stm
Published: 2007/11/16 08:36:19 GMT