It was the site of America's first black-owned daily paper and first black radio station. It was here Martin Luther King was born. It was here King preached freedom from the pulpit of Ebenezer Baptist Church.

In the 1960s, as the civil rights struggle raged, Sweet Auburn was wealthy and middle-class. Its businesses prospered, its nightclubs boomed. Ray Charles and Aretha Franklin played at the Top Hat Club and partied at the Palamat Motor Lodge opposite. As American blacks freed themselves from oppression, Sweet Auburn stood ready to reap the benefits.

It never happened. Sweet Auburn is not very sweet today. The Palamat is overgrown with weeds. Auburn's sidewalks line abandoned lots and shuttered buildings. Homeless men (all black) cluster on street corners. Freed from segregation, Auburn became an impoverished ghetto.

Perhaps nothing else so encapsulates the endless paradoxes of being black in America. Never have blacks had so much legal freedom, yet there are record numbers in jail. Traditional black neighbourhoods have collapsed into drug-ridden crime strongholds, even as the black middle class is the biggest in history.

It is now 40 years since the Voting Rights Act that secured the black vote. It is 10 years since hundreds of thousands of blacks came to Washington in the Million Man March to demand a way out of poverty. It is a single month since Hurricane Katrina exposed the racial faultlines that fracture the big cities.

Almost four decades after King was killed, there are still two Americas. One is largely white and wealthy, one largely black and poor. They live cheek by jowl in the same country yet in separate worlds. The shocking thing about the TV pictures from New Orleans was not black poverty, it was the reaction of whites. 'Most whites were shocked about the amount of poverty in New Orleans, but black media have talked about poverty for the past 20 years,' said David Canton, professor of history at Connecticut College.

Bare statistics tell the story. Black life expectancy is six years shorter than that of whites. Black unemployment is twice as high. Blacks are twice as likely as whites to die from disease, accident or murder at every stage of their lives. About 24 per cent of black families live below the poverty line, compared with 8 per cent of the white population.

Yet nothing about race in America is that simple. In the Savoy Bar of Atlanta's Georgian Terrace Hotel, young blacks sip Martinis and flirt, dressed up to the nines. Outside, crowds spill out of the Fox Theatre dressed for an evening out. They are all black.

'It is great to be black in Atlanta,' said Monique Williams, a pretty 26-year-old legal clerk at the bar. 'This is our city.'

Certainly Atlanta, unofficial capital of the New South, can sum up the best of black America. It has a majority black population, a black mayor and an economy that is home to some of the biggest businesses in the world, including Coca-Cola and CNN. It has wealthy black suburbs, black universities and offers every opportunity for aspiring young blacks. It is a long way from the city of Gone With the Wind, where the only blacks were maids and slaves.

Mayor Shirley Franklin seems to sum up this hopeful city, often hailed as a beacon for black Americans. As Atlanta's first black woman mayor, she has won a national profile after a term aimed at rejuvenating a rundown downtown. She is hard-working, putting in 12-hour days and seven-day weeks, and has ended a series of corruption scandals that plagued previous administrations. She is likely to win re-election next month, backed by black voters and white business.

But Atlanta's politics are defined by race. A new law, backed by Franklin, made begging illegal in the downtown area last month. The move triggered a race row, with some politicians saying the law targeted young black men. When it finally passed, emotions ran so high that police arrested seven people, including a clergyman and a former city councillor.

At every level of US politics race is never far away. King, were he alive, would have rejoiced at the fact that successive Secretaries of State, Colin Powell and Condoleezza Rice, have been black. He would also have been impressed that one of the hottest Democratic tips for the White House, and a possible running mate of Hillary Clinton in 2008, is Barack Obama, who is black.

But those stories have twists. Powell and Rice sprang from solid middle-class backgrounds. They have risen by playing down race. They have also emerged in the Republican Party, not the traditional home of black support. Moreover, Obama's blackness does not come from America. It is a legacy of a Kenyan father. He was born in Hawaii and his mother is a white woman from Kansas. In the world of race in America in 2005 nothing is ever as simple as black or white.

Yet the racial line often seems starkly clear. Nowhere more so than in New Haven, Connecticut: home both to Yale University and one of America's poorest black communities. The border is well known and obvious. It is where Elm Street, lined with Oxbridge-style student cloisters, suddenly changes to Dixwell Avenue, main thoroughfare of the black ghetto.

On one side is the world of the elite, where Ivy League students bustle from lecture halls to cafes. On the other side is north-west New Haven, where Dixwell's shops struggle to make ends meet, houses are in decay and drugs and crime are rife. One world is mostly white, the other almost all black.

As he sits on New Haven's famous green, surrounded by the trappings of Yale's wealth, there is no doubt on which side of the divide Nelson Brown falls. Black, poor and homeless, he pushes a shopping cart full of metal cans he picks up to recycle. The cart is draped with a faded and dirty US flag. 'It's all I can do to survive,' he said of his latest haul of soft drink cast-offs.

New Haven is the reality of America's urban black poor. 'People like the Katrina victims are living in every American city. We just ignore it,' said Robert Brown, a political scientist at Atlanta's Emory University. It is this world Katrina exposed to a white America that barely knew it existed outside of gangsta rap videos on MTV. This is the world abandoned by America in the post-civil rights era. It is a black underclass that failed to leave the inner city as whites fled to the suburbs, gutting cities of cash and jobs.

But there are other issues at work too. The divide of black and white masks another chasm just as deep: the gulf between poor and rich blacks. In fact, this divide is even more unbalanced than the racial one. The wealth of black America is far more concentrated in its top few per cent than white America.

Poor urban blacks have been abandoned by wealthy black Americans who move into the suburbs and mainstream America as fast as they can. The underclass they leave behind is a grim place and getting worse. In 1940 the illegitimacy rate among blacks was 19 per cent; today it is 70 per cent. Only 30 to 40 per cent of black men graduate from high school. That fact has prompted a bout of soul searching by middle-class blacks. Some have condemned what they see as self-perpetuating joblessness, poor education and a culture that worships crime. Others have appealed for more help, an increase in the affirmative action which has done apparently little to end black poverty.

The argument was crystallised in a spat between the black comedian Bill Cosby and the black author Mike Dyson. Cosby began it with a public excoriation of bad (and single) parenting, slang English, unplanned pregnancies, dropping out of education, and high crime. He even slammed black names 'like Shaniqua, Shaligua, Mohammed and all that crap'. Cosby then went on tour holding town hall-style 'call-outs' in black communities.

It was an argument Dyson had little time for. He dubbed Cosby's roadtrip the 'Blame the Poor Tour' and wrote a book called Is Bill Cosby Right? Or Has the Black Middle Class Lost Its Mind? Dyson said poor blacks could not be blamed for a society geared up to see them fail and which had stacked the odds against them before they were born. Many leading blacks have joined the fight against Cosby. 'He unerringly and wrongly blames the poor. He seems to think that if they would only change their minds, all their problems would go away,' said Ronald Walters, director of the African American Leadership Institute at the University of Maryland.

There is one thing both sides agree on: the black experience of America has been unique. Other immigrant groups have followed a familiar pattern of four stages. They arrived poor, suffered prejudice, assimilated, then prospered. So it went for the Irish, Italians, Asians and many others. In fact, Asians are now more successful than white Americans. They are more educated and get better jobs.

But much of black America is stuck at stage two, as it has been for generations. Unless one believes in racist theories, the answer must lie within black America's own historical experience. They were the only ethnic group brought to America involuntarily. For 250 years they were kept as slaves. Until the late 1960s blacks in the South were denied the vote, forced to eat in separate restaurants and segregated from society. Lynchings were still happening in the 1960s as the Beatles played in Liverpool and Bobby Moore lifted the World Cup in London. The exhibits of the Martin Luther King museum on Auburn Avenue are most shocking for showing how recently an apartheid system was the norm in swaths of America. That history lies heavy on black America's back. It is not a burden to be unshouldered in a generation or two.

Certainly that racist past is still alive for Robert Howard, a black civil rights worker in rural Georgia. He remembers vividly the days when white people in and around his home in Walton County could beat - or even kill - black people with little fear from the law. It was a time of segregation and deference, of living in fear when the word 'nigger' came from the lips of white people and not rap artists.

A tall, thin, graceful man, Howard exudes a calm when talking about race relations now versus then. 'Things are better. Of course they are. But you'd be amazed by how much is still to change,' he said.

Howard has worked tirelessly for a memorial to a Walton County lynching from 1946 when four local blacks were butchered by their white neighbours. It has earned him both praise and insult. 'There's some black people here right now who are still scared,' he declared.

But things have changed. Walton, like so many southern counties, used to be cotton country. No longer. The cotton fields have surrendered to strip malls or to forestry. It used to be strictly segregated. No more. That everyday racism is long gone too. Blacks have political power here, as they do now even in the deepest parts of the Deep South. Where segregation still exists, it is largely voluntary and economic, and not a matter of law.

But therein lies the problem. Even as the old racism lies dead, its legacy endures in the American economy. As the black middle class grows and black politicians rise to the pinnacle of power, wealthy America - both black and white - has still not come to grips with the problems of its millions of poor black citizens. 'We are grappling with that. Protest will not win these issues. All the old racist laws have been stricken from the books. Now it's economics,' said Brown.

It is a problem that cannot be ignored for ever.

Martin Luther King's most famous words summed up the optimism of the 1960s' civil rights struggle with: 'I have a dream.'

Now the poet Langston Hughes best describes black America at the start of the 21st century. 'What happens to a dream deferred?' he wrote. 'Does it dry up like a raisin in the sun? Or fester like a sore - And then run?'

Two worlds

In 2005 black unemployment in the US was 10.8 per cent, compared to 4.7 per cent for whites.

More than 70 per cent of whites own their homes. Fewer than 50 per cent of blacks do.

Blacks are twice as likely as whites to die from disease, accident or murder.

Black life expectancy is six years less than white life expectancy.

Blacks are three times as likely as whites to be jailed and their sentences are often six months longer.

Net worth of a black household is 10 times less than a white one.