Home » Welcome to the Third World » Welcome to the Third World, Part 13: Suburbs Become Ghettos

Welcome to the Third World, Part 13: Suburbs Become Ghettos

by John Rubino on May 12, 2014 · 32 comments

Not so long ago, a reasonably-presentable American could live an hour outside of a city and commute in for a government or banking job, thus getting the best of both worlds: city-level wages and a 3,000 square foot house with a big yard for the kids.

But then municipal governments ran out of money and started laying off, while banks, traumatized by their 2009 near-death experience, cut back on mortgage and consumer lending and fired the related staff. The only other jobs available were in service industries like food and retail that paid next to nothing and didn’t offer benefits.

Meanwhile, the cost of living in and commuting from suburbia has been rising. The chart below shows the average price of a gallon of gas, a pretty good proxy for the cost of a daily commute, up by nearly 50% since 2005. At about $3.60 a gallon, the current national average price is 7 cents higher than it was a year ago, with no letup in sight.

Gas prices

All of a sudden our hypothetical suburbanites find themselves with barely enough income to cover their mortgage or rent, let alone their health care, food (which is also way up lately) and gas. And now the kids are about to go off to college…

The result: millions of formerly middle class families living in nice suburban houses or expensive apartments are slowly going broke. The New York Times just published a long, fascinating but very depressing article on the morphing of suburbia to ghetto in California’s Inland Empire. An excerpt follows; the full article is here:

Hardship Makes a New Home in the Suburb

MORENO VALLEY, Calif. — The freeway exits around here are dotted with people asking for money, holding cardboard signs to tell their stories. The details vary only slightly and almost invariably include: Laid off. Need food. Young children.

Mary Carmen Acosta often passes the silent beggars as she enters parking lots to sell homemade ice pops, known as paletas, in an effort to make enough money to get food for her family of four. On a good day she can make $100, about double what she spends on ingredients. On a really good day, she pockets $120, the extra money offering some assurance that she will be able to pay the $800 monthly rent for her family’s three-bedroom apartment. Sometimes, usually on mornings too cold to sell icy treats, she imagines what it would be like to stand on an exit ramp herself.

“Everyone here knows they might have to be like that,” said Ms. Acosta, 40, neatly dressed in slacks and a chiffon blouse, as she waited for help from a local charity in this city an hour’s drive east of Los Angeles. Both she and her husband, Sebastian Plancarte, lost their jobs nearly three years ago. “Each time I see them I thank God for what we do have. We used to have a different kind of life, where we had nice things and did nice things. Now we just worry.”

Five decades after President Lyndon B. Johnson declared a war on poverty, the nation’s poor are more likely to be found in suburbs like this one than in cities or rural areas, and poverty in suburbs is rising faster than in any other setting in the country. By 2011, there were three million more people living in poverty in suburbs than in inner cities, according to a study released last year by the Brookings Institution. As a result, suburbs are grappling with problems that once seemed alien, issues compounded by a shortage of institutions helping the poor and distances that make it difficult for people to get to jobs and social services even if they can find them.

In no place is that more true than California, synonymous with the suburban good life and long a magnet for restless newcomers with big dreams. When taking into account the cost of living, including housing, child care and medical expenses, California has the highest poverty rate in the nation, according to a measure introduced by the Census Bureau in 2011 that considers both government benefits and living costs in different parts of the country. By that measure, roughly nine million people — nearly a quarter of the state’s residents — live in poverty.

Not long ago, the Inland Empire, as the sprawling suburban area east of Los Angeles is known, attracted people hoping to live out that good life. Before the recession, it was booming; housing developments were cropping up all the time, quickly followed by big box stores and strip malls to cater to the new residents.

The region was — and still is — the fastest growing in the state. But the jobs have never really followed the people who come here looking for cheaper housing. The median home value is $325,000 and the median rent is $1,690, according to the real estate database Zillow. That compares with $462,000 and $1,860 in Los Angeles.

For many, those costs are still unaffordable. Unemployment in the region hovers around 10 percent and nearly one-fifth of all residents live in poverty, the highest rate among the largest metropolitan areas in the country. By the official federal measure, nearly one-third of all children here are poor. The number of poor in San Bernardino and Riverside Counties nearly doubled over the last decade.

“This is where poor people live now, and this is where they are going to live,” said Alan Berube, an author of the Brookings Institution study. “When poverty moved out of the inner cities it didn’t just go next door, it went 30 miles away. But at the time those families might not have been poor — they were just chasing the middle-class dream. Then, boom, that evaporated.”

Some thoughts
The theme of this series (the previous articles are here) is that much of what affluent people in general and Americans in particular have come to take for granted is turning out to be a delusion bought with debt, unrealistic energy assumptions and fraudulent bookkeeping, and is evaporating as those, um, mistakes come to light. Entitlements like Social Security and Medicare, for instance, only exist in their current forms because so much of their real cost is hidden in largely-unreported “unfunded liabilities.” Cities have been able to offer good roads and quick police response because they pay their cops and road workers with the promise of wildly unrealistic future pensions.

The concept of suburbia, meanwhile, always depended on debt and cheap energy. For a typical American family to heat and cool four times the space of its counterparts in other countries — and to move two tons of metal 100 miles each day just to get to a job — is only possible as long as the rest of the world is kept poor and therefore unable to consume fossil fuels at the North American rate. But as China, India and Brazil get into the game, energy costs are rising. Combine this with the ongoing decline in finance/government jobs, and the unworkability of modern suburbia becomes obvious.

But calling suburbia’s demise inevitable doesn’t make it any less tragic for the victims. Anyone who’s lived in an affluent suburb knows they are (or at least used to be) home to perhaps the world’s highest concentration of innately happy, optimistic beings, namely kids, dogs and adults with big houses and good jobs, none of whom are guilty of anything more than a lack of attention to macroeconomic trends. So while schadenfreude is appropriate for, say, imploding law firms or investment banks, dying suburbs just deserve our pity.

  • Bob

    Great piece, realistic even if a bit depressing.

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  • marin

    As a foreigner living in place in Europe where the problem is certainly present as a a lower scale, sure most European suburbia does not provide the kind of space nor entail the same consumption of fossil resources. However I wonder whether the problem is not essentially a social one.

    What does prevent the US to make an alternative use of its great resources?
    0) “Big Housing” can be shared in a smart way, I wonder why young generations would not adapt to a changed American way where small would not be ugly,
    1)The garden and open space could certainly be transformed into great feeding resources,
    2)The transportation of our times be changed with limited resources (bicycles, buses…) into much more effective patterns,
    3) City organization can certainly be partly changed as well at decent cost, even more so in current times.

    In the end, I understand that the US city problem may indeed be a social one… And you certainly do not change a city with gardens, bikes and buses alone.

    • Joey 2 pack

      The counties wanted the big houses because they brought in big tax revenue. The article didn’t mention that with so many foreclosures the cities of Stockton, Vallejo and San Bernadino went bankrupt.

  • tom

    My wife recently spent a few weeks in Germany. Mass transit is excellent and the cities are clean and orderly. Rents are high and near everyone lives in a small apartment/condo. The social contract comes with a lot of compromise. America will indeed trend in that direction and likely lower as Asian wages lower the bar on our living standards. When the dollar adjusts downward Americans in the declining suburbs will have even more unpleasant decisions to make. This will go on for decades. Smart young people should adjust right now. Older folks better hope their money lasts and their pensions stay solvent.

  • David Zuniga

    Well written, John. Tragic but trenchant, someone must do what you do, even if few (yet) are really listening. Imagine the shock — like a neutron bomb spread over an entire republic — when the 152-year-long counterfeiting party is well and truly busted.

    Your descriptive narrative here is a taste of that economic nuclear winter to come. It will be far bloodier than the first one, of far greater magnitude and shorter duration — but Great Depression II will also burn real, valuable lessons into the American mind once more.

    It’s long overdue, we have to admit.


  • Fabian

    Yep great realistic piece. Everything will end at some point and the paragraph before the last is really to the point.

  • Captain Kirk

    When I bailed on SoCal in late 2005/early 2006, I was laughed at by those there who are not “guilty of anything more than a lack of attention to macroeconomic trends.” They saw no end in sight and bought the lie, I saw it for what it is, and no I never said I told you so, though I did and do think it.

    The suburban beings that I feel sorry for most are the dogs and kids mentioned above. They are the real victims, but then again, historically speaking that was always so, and will always be so.

  • pipefit9

    You would think ‘with a big yard for the kids’, that suburbanites would make the partial adjustment of growing a vegetable garden with some of that space. It is not always easy to see into people’s back yards, but it appears that only slightly more than zero percent are doing so.

    Gardening is hard, physical work, but a pretty good deal considering you can get organic produce out of the deal. But Americans still think food comes from the grocery store. I suppose that it does, for now. But what if the price of food doubles while wages stay flat?

    Also, there is a bit of a learning curve. If you wait until the price of food doubles, before learning to garden, you could be in for shock. In the two or three years it takes you to gain experience, the price of food may double again!!

  • BroccoliSoupTown

    The middle class lifestyle is a lie based on debt, but because it’s one that’s been believed by nearly everyone who tries to live it, people who live within their means appear poor. I’ve been told by plenty of friends and family that they don’t know how my family of 5 can possibly get by when they see our modest 1150 sq. ft. house and 15-year-old cars. They think a programmer ought to be able to afford nicer things. They don’t realize that the “rich” people they’re comparing us to only have a bigger house and newer cars than we do because they got it by going deep in debt. And if you can only afford something by going into debt, you can’t actually afford it!

    • MacFly1

      Agree! And although some are waking up, most Americans will discover this when its too late.

    • Bruce C

      I also agree, and I think that is really what some of the people referenced in the piece are “guilty” of – not just “a lack of attention to macroeconomic trends.”

      But I also think there is more to it than that even, because “globalization” is causing a drop in living standards in established, developed “Western” societies and a rise in developing “Eastern” ones, but will never be as high as the Western ones once were. There are too many people in the world and not enough resources to maintain US/Western living standards for everyone. In the meantime, the growth of “middle classes” in developing countries is fueling corporate profits which partly explains the otherwise inexplicable rise of the US and European stock markets.

    • Miggy

      Somewhat true but the pendulam has moved way too far. My grandfather is a good example. He was a cutter at a manufacturing plant and worked his way to foreman until retirement. Him and my grandmother lived modestly but at the same time owned a small home, took vacations every year, and lived very comfortably through retirement into their nineties with his pension.

      Try that now. Inflation, taxes, regualation, cheap labor through easy access to America and globabization has made their story far less attainable today. To say debt is the problem is too narrow minded. Debt may be the problem in many cases but even the folks that want to just make ends meet modestly are having real issues.

      • BroccoliSoupTown

        That’s definitely a huge part of it too, for sure. Very few make enough income to live anything resembling a middle class lifestyle anymore. Most jobs now pay poverty wages, and all of it goes to skyrocketing housing, medical, and food costs.

      • Doc

        That was a unique period in history based on the fact that every industrial center on the planet was wiped out during WWII except for the US. We became the world’s factory and my grandparents on both sides had a similar story – they reaped the benefits of this quirk of history.

        That story is less attainable because it was a one off. It takes more to compete now, but if you live like they did you will most likely be just fine with a little hard work (i.e. cook your own food, don’t borrow money, live in a smaller house, don’t have cable TV, try not to use the AC so much, don’t make unnecessary trips, and on and on). Our grandparents may have appeared to live really well but they were also frugal.

    • Eatie Gourmet

      There are many people who appear to be prosperous, but it is only because they are doing it on payments. I hear people all the time who say, “those people are loaded – they’ve got a boat, an rv, a (some kind of beautiful expensive vehicle — I don’t really follow that sort of thing, so can’t be specific), kids always have the newest (sneakers — whatever they call them these days)…. And I’m thinking, No, what they have is a load of debt… It is a façade.

      And, yes, those are the people who are losing their houses and going bankrupt.

  • MacFly1

    With entrepreneurship like that, Ms. Acosta should pack up, move to Texas, and sell to the oil people making all that money. A truck selling taco’s, etc. would make a killing.

  • T.j. Thomas

    The more I read articles like this the more I’m depressingly reminded of Octavia Butler’s famous dystopian novel Parable of the Sower. And it was set in California as well.

  • Jason Carter

    I wonder if those in high-tax, high unemployment states will eventually migrate to lower tax states. I recently relocated from SW Florida to Tennessee. I am paying so much less for food, fuel, energy, water, and housing that it is equivalent to receiving a 25% raise or more. And Florida isn’t even a high-tax state but the cost of insurance, energy, water, and housing is considerably higher.

    • http://www.Best-Make-Money-Online.com/ Best Make Money Online

      Very interesting story.
      What we do also know is that the 1% aren’t hurting.
      Except for hurting the 99%.

  • Jim Parrish

    Well, I got to go to work tomorrow in my 9 mpg utility service vehicle.

  • Jim Parrish

    Let’s bring on the doomer porn. Makes everybody feel better. Middle class lifestyle is a lie? Jeez.

    • Tony D

      Agreed. This article is a series of simplistic generalisations supported with the odd selective example,
      Unpinning this article is the presupposition that all of the jobs are in the centre of cities, Wrong, Peak hour exists not because everyone is travelling to the same place but because they travel at the same time. Many people in suburbs have short journeys to work.
      This article Doomer porn thats designed to make the doomer “community” feel good about itself.

      John, nearly six months in and no collapse, not even close yet. Yeah, I know it will be sudden, but it won’t it the flick of a switch either.

  • Nys Parkie

    In the HUGE metroplex’s this could be an issue. Smaller Urban centers like, Toledo, Buffalo, Sioux City and the like….it isn’t so gloomy. Not everyone lives in LA, SF, Dallas, NY or Boston….

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  • Jessmaster

    I disagree with the ending statement. People in the suburbs buy into the materialist vanity, largely disregarding the dire costs of their greed in people in other parts of the world. For the vast majority of Americans, the suffering of the near-slaves making their electronic gadgets, the real slavery of the people making their chocolate, the deaths in collapsing buildings of those making their clothes, is out of sight, out of mind. I do pity them, particularly the children who don’t do their own buying, but do their parents deserve this? I don’t like the word “deserve”, but yeah, they kinda do.

  • http://PeterPalms.com/banking Peter Palms

    In its first printing July 1994 G.Edward Griffin in his book “The Creature From Jekyll Island” first forecast the economic collapse of the United States and now in its 28 printing and the Fifth Edition in September 2010, it is well up to day in its description of how it was happening then and how it got to where it is today. There is going to be hell to pay and we are going to pay it. But you can refuse to play the game any more.

  • Nygel Rose

    Interesting article! Here is something equally interesting: Unilever
    goes online for sustainable business. Full story here: http://bit.ly/QL1mxK.

  • LoungeLizard

    I believe there’s also another angle to add to this scenario which, although I haven’t read all previous 12 episodes on this subject, I don’t think has been touched on fully. Namely – Producting Contribution.

    I would wager that most middle class families rely on one or two incomes that, when you strip away the candy, don’t really contribute much to a proper functioning economy (I expect lots of people would argue with that point, but it doesn’t make it any less true). Many jobs, even those that require a good level of prior schooling or experience to attain, are really a kind of parasitic role on society. What I mean by that is it’s quite evident that the US has shunned and exported a very good portion of its manufacturing skills and jobs, and turned more towards a service based economy. Jobs that are chiefly service based participate in what is essentially just an internal money-go-round. They don’t actually grow an economy. Further more, a service based economy has a built in problem in that those at the top of the pile slowly leech more of the limited capital that’s sloshing around the system from those at the bottom (even if you print large amounts of extra cash). With no extra income being added by production/producing, there will only ever be one outcome. A large section of the population become very poor, a small section of the population become very rich. Sounds familiar?

    Unless the US returns to a productive contribution to the world economy by means of competitive exports and manufacturing then I’m afraid some of the best jobs in the new America will be in the form of doctors, dentists, plumbers, mechanics, hairdressers, farmers, etc…or those that actually have a skill that people desire the need of. If I lived in the US and I didn’t have a productive skill or trade, I’d be starting to get very worried.

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  • Chrissy Cunningham

    As a 29 year old who is married with no children, I can tell you that I live slightly above poverty. My husband who is a welder makes 16 an hr. I, as a CNA make 10 dollars an hour. Bi-weekly we bring home 1,400 dollars and with our monthly bills amounting to 2,000… we have around 800 dollars left over for gas, food and nessecities.
    I would have gone to college to get a degree of some kind if college wasn’t over priced. I could have kept my nice 15 an hr job back in 2007, if the government didn’t cut their spending multiple times. The point is, as a family of 2 we live below our means as much as possible. We have a modest home 20 min outside of the city. We rarely eat out and hardly buy anything extra.
    In order to have a decent car that is not constantly breaking down, I’ve taken out a loan for a 2010 hybrid. We have no college debt, very little living debt and we are still scrambling for extra cash every month.
    Yes, it is about living within your means or income but it’s also about accepting the fact that the US economy will never be what it was in the 1990’s. This is as good as it will ever be… and that’s something we all should be thinking of.

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