What does Detroit say about the working class in the US? City has lost over 25 percent of its population since 2000. People take scrap metal from old buildings to export to China.

One of the biggest examples of the US eroding its working class is through the example of Detroit.  The city of Detroit has lost a stunning 25 percent of its population between 2000 and 2010.  Poverty is rampant with 3 out of 5 kids living below the poverty line.  It is a startling revelation of what can happen to what was the fifth biggest city in the United States and now is merely a shell of itself.  There is a documentary, Detropia which grimly shows dilapidated buildings while many tear out scrap metal to sell on the open market.  You also hear from citizens trying to make sense of what is occurring.  What is stunning is the population of Detroit is now back to levels last seen in the first half of the 1900s.  A town built around big US automakers reflects what a country can look like when it loses a big part of its manufacturing base in pursuit of low wage capitalism.  The rust belt gives us a clearer perspective as to why we have 47 million Americans on food stamps while the stock market inches closer to record levels.

The shrinking city of Detroit

Detroit is a personification of what has happened to our working class.  What is startling is how little coverage is given to this issue.  One of the star cities of the US suddenly is a shell and the buildings reflect a bygone era.  Many buildings are stripped clean for scrap metal.  Ironically much of this scrap metal is exported to China.  From one busted economy to a fast booming one.  It also highlights a global trend.  Low wage capitalism creates a system where large income disparities exist.  There may appear to be little hope for many but this is the new system and the population of Detroit reflects this change:

What is interesting however, is that hiring is picking back up even in Detroit?  Why?  Because wages and benefits have been slashed to the bone.  We are now exporting lower wages and a lower standard of living back.  When you setup a debt based system addicted to squeezing out every last cent, you begin to chase gains all over the world.  Many companies have pursued this path.  After the big automaker bailouts, many new hires came in making half of what previous workers made and with stripped down benefits.  This has resulted in more hires:

This upsurge in hiring is helpful but this is in a city where unemployment is at 20+ percent and underemployment is likely at 40+ percent.  There are plans on bulldozing down parts of the city to “right size” since the city no longer needs to be built out to accommodate nearly 2 million people.  The sense you get with Detroit is of ruins.  The ruins of a working class.

Now whether this is reversible in the short-term is debatable.  We are now driven largely by massive global completion and a severe addiction to debt.  The Fed is determined to erode the value of the dollar so that our debts become more manageable over time.  We continue to deficit spend and the long term consequences are now coming back to bite us.

Home prices in Detroit have picked up modestly since the trough of the recession:

Real estate is incredibly cheap in Detroit for a variety of reasons.  At a certain point, prices get so low that it becomes attractive to buy.  The city has gone through some dramatic pain over the last few decades.  Things have picked up a bit recently but to reverse the erosion of the US standard of living, it will take more than a couple of good years.

The US used to have a more even income breakdown across states but that is no longer the case.  You have cities that are back up and booming like San Francisco with global demand while other areas like Detroit operate almost in a third world fashion.

If you enjoyed this post click here to subscribe to a complete feed and stay up to date with today’s challenging market!