The north wind cuts cold and sudden across the historic green of New Haven. It blows through the 'tent city' where the homeless huddle. And it blows round the spires and quadrangles of Yale University, one of America's richest Ivy League colleges.

The contrast is stark: Charlene Johnson, three months pregnant, emerges from her bivouac, worrying about the winter that lies between her and her due date. And all around are Yale's stone walls, elegant colonial churches and smart people walking past boutiques and coffee shops, carrying their course books.

'You know what's underneath you?' challenges Rod Cleary, who was released from prison in Los Angeles after a conviction for gang fighting, found but lost a job in New Haven, and has now been evicted. 'I'll tell ya: bones. This green was a cemetery once; you're sitting on a pauper's grave. And, man, that's what it's going to be again if we ain't careful.'

Charlene fell behind with her rent in June and took a bribe of $200 to move out of her digs, so the landlord could hike up the price. 'It seemed like I had some money for once, and it was summer.' Her son Nikolas was billeted with a friend and Charlene started looking for a place with her boyfriend, Scott, hopefully before the cold set in. Without success - Scott was laid off on Wednesday from a construction firm. 'Not enough work,' he says. 'And once you're out, you're a speck of dirt on the ground, and they walk over you.'

New Haven's tent city was established after the authorities closed down a homeless overflow shelter a few weeks ago. At sundown yesterday it was to be cleared by the police, with Charlene, Scott, Rod and 150 others sent on their way into what promises to be a vicious winter.

New Haven is a metaphor for the America which on Tuesday elects its Senate and House of Representatives. It is the country's fourth poorest city, where the ghetto laps at the walls of a university worth $11 billion (£7bn) in tax-exempt endowments, educating America's next generation of rulers. A sign at the freeway turn-off advertises New Haven as the birthplace of President George Bush.

It is a city with the same infant mortality rate as Malaysia and a terrifying rate of deaths from AIDS - one day care center alone commemorated the loss of 600 clients at a memorial service on Wednesday. But it is located in America' richest state, Connecticut, which has, proportionally, more millionaires than any other.

This is the super-rich New York hinterland for those too wealthy even to feel the pinch on Wall Street. It is called the 'Zebra Coast', laid out in strips of black/white, black/white; poor/rich, poor/rich. And in New Haven the polarity is underpinned by the history of Yale University's engagement in the slave trade - currently being excavated by some of its own students.

'New Haven,' says the Rev David Lee of Varick Church in the city's northwestern ghetto, 'is a microcosm of America. It's the vicious cycle between rich and poor and the system of exploitation. The wealth is in your face all the time, something you can never aspire to. It's like being a kid in a candy store, being told you can look but you can't never have a lollipop.'

The mall downtown, on the 'wrong' side of the green, is a ghost mall; just a few 'hoodrats' hanging around Cross Flava records and security guards to keep them in order. 'Folks who commute to work,' says the boy behind the counter, 'they spend where they live. And the people who live here don't have anything to spend.'

Statistics released last month by the government census bureau show that for the first time in 10 years the number of people caught in the poverty trap has suddenly increased. Unemployment is up from 4.2 per cent in 2000 to 5.7 per cent last year. While the middle class shrinks, the numbers living below the official poverty line of $18,104 a year for a family of four has shot up to 33 million - from 11.3 to 11.7 per cent. That's the first increase since 1992.

While President Bush's windfall tax breaks to the super-rich breezed through Congress (with Democratic help), the proposed rise in the minimum wage is frozen.

The proportion of children without health cover has increased from 63.8 per cent to 67.1 per cent. The poverty rate for children in the US is worse than in 19 'rich' countries, according to a study by the University of Michigan.

Income statistics showed the first significant decline in average income among blacks in two decades; the white average also fell, and only Hispanics maintained their level.

Statisticians are struck by differences between this dive and the usual downward turns that accompany recessions. 'The poor are trailing further behind than in the past,' says Robert Greenstein of the Center on Budget and Policy Priorities in Washington. 'The increase in poverty is likely to be larger in 2002.'

Such is the power of money in Connecticut and its neighbors that the North-East was the only region in the country in which the mean income did not decline. But the price was paid here where Elm Street, after skirting the mock-Oxbridge walls and towers of Yale, twists abruptly into New Haven's own nightmare.

Students have been given special maps, and advice not to venture past the CITGO gas station, where the ghetto begins. Houses are boarded up and gas stations take cash only - payable up front - and have bullet-proof glass and bars at the pay point. Sandwich and gift card stores also deal in Western Union money transfers, like the one Carl Robbins is sending back to his family in Kingston, Jamaica - $150 out of the $650 he grossed this week as a hospital janitor.

At the gas station on Dixwell Avenue, Everton Mayne gets his money back on a pack of Newport cigarettes because he has found the same pack down the road four cents cheaper. 'You got to think about these things,' he cautions.

Monica Osborn works in the operating rooms at Yale and New Haven Hospital, and in 11 years has increased her wage from $8 to $13 an hour (Connecticut calculates that $17 is the 'livable wage'). Recently her son suffered concussion and, although she works at a hospital, health insurance comes extra and she was caught out. Her employer docked the cost of treatment from her wages, leaving her to manage for two months on $300 for a family of four. 'I can feel it getting worse,' she says. 'Trying to feed the kids, we all have two, maybe three, jobs. I do hair braiding to get by.'

Wages at the university are a little better, says Mark Wilson, who for years worked on the ancillary workforce before becoming an officer of the hotel and catering workers' union that fought to close what it calls the 'casual pipeline' whereby the university would lay off employees the day before it was obliged to take them on staff.

'I don't actually wipe their butts,' says Wesley Smith, earning $11 an hour loading a trolley full of students' dirty laundry, 'but I got to get clean what they wipe off.'

Yale is exempt from paying city taxes, except on commercial property it owns. But a consortium of community groups asked the university to donate a single day's interest on its invested endowment - that's $5.2 million - to the city's public schools. So far, no response.

'We just wanted some kind of partnership,' says the Rev David Lee, who - as a graduate of Yale Divinity School - this year harvested enough signatures to seek election to the university board. He was seen off by the architect Maya Li, in what was regarded as a brazen snub to what Lee's church calls 'the host community'.

Dixwell Avenue is where Lee tries 'to put a bit of hope back in people's eyes that's just been taken away'. He says: 'I can feel it, just over the past year; people is sinking back down. It's hard to keep people off drugs. It's hard to tell people not to go to crime, when they made that extra effort to straighten out, then got beaten back down again. I had a man in my congregation come to me on Sunday saying his daughter who is 13 was considering suicide.'

There is now a brutally simple barometer of poverty in modern America: HIV.

At the Immanuel Baptist Church on Chapel Street, a few blocks from fancy restaurants where the young elite go for dinner, there was a service with a difference on Wednesday. The AIDS Interfaith Network was commemorating the lives of 600 of its clients who have died of the disease since it was established 15 years ago.

Some of the congregation were living with HIV, a couple in wheelchairs; others were those who work with and for them. The network was set up by a group of churches to fill the abyss between a dire need and the malfunctioning of America' commercial healthcare system.

Project director Joyce Poole says: 'AIDS has become the disease of the poor - 80 to 90 per cent of our clients are living below the poverty level; 15 per cent are homeless; most have not worked in years. Half are dually diagnosed with HIV and hepatitis C. If you can't support yourself, you do it by other means, and those means are often criminal. Most of our clients have had at least one encounter with the Department of Corrections.'

Yet Connecticut's AIDS prevention budget has just been cut by 30 per cent - due, says America's richest state, to the economic downturn. 'This is a discourse,' says Poole, 'about poverty.' And as America prepares to go to the polls, the gap between rich and poor is widening by the day.

Hard times

· One in 11 families, one in nine Americans, and one in six children are officially poor.

· The most affluent fifth of the population received half of all household income last year. The poorest fifth got 3.5 per cent.

· The official poverty line is an income of $18,104 pa (£11,570) for a family of four. A single parent of two working full-time for a minimum wage would make $10,712 (£6,846).

· 40 per cent of homeless men are veterans.

· Up to a fifth of America's food, worth $31bn, goes to waste each year, with 130lb of food per person ending up in landfills.

The Observer Research Unit

© Guardian Newspapers Limited 2002

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