Worsening wealth gaps in the US—Root Cause behind “Trumpism”

Although Trump has walked off the stage, Trumpism will not just fade away. The connotation of Trumpism is American populism, white supremacy and anti-globalism. This kind of values not only intensified the political and social divisions in the United States, escalated racial discrimination, and repeatedly challenged American democracy and law system, but also overturned basic international mechanisms and rules such as open market and free competition, and caused tensions and regression in the international order. According to an opinion poll in the US, Trump has been considered by the majority of Americans to be “the worst president in American history”. Even so, Trump still won 46.9% of the votes in the 2020 presidential election, and according to Gallup polls, 57% of Republican supporters still believe that Trump is the best candidate for the 2024 presidential election.

Why has Trump, who is considered by many to be the worst president ever, and has only his and his family's interests in his eyes, become an idol of nearly half of American voters? Analysts believe that this is not only because Trump’s “white supremacy” concept has been sought after by some fanatic racists, but also because the US has been haunted by social issues such as the widening gap between the rich and the poor, the shrinking middle class, and the rapid increase in the number of people struggling on society’s bottom rung.

The United States is the world’s largest economy. Although its GDP in 2020 dropped by 3.5%, its per capita GDP still stood at $60,000, `higher than that of Japan, Germany, Britain, France, and other major Western economies. However, since the late 1980s, the US economy has gradually shifted from industry-driven to finance-driven. In the face of rising labor costs and intensified environmental problems, “Reaganomics” pushed an outward migration of manufacturing. Except core industries such as airplanes, automobiles, and chips, the US has transferred most of its manufacturing industries overseas and to developing countries and regions to reduce business spending and pollution, at the same time keeping its leading edge in manufacturing and innovation and benefits from import substitution. This significant change in industrial structure has caused a sharp increase in the proportion of service industries in America, while the proportion of manufacturing has dropped. In 2019, financial services and service industries accounted for 80% of the total US GDP, and manufacturing accounted for 11.2%. In this process, the US economy continued to rise. In less than 30 years from 1991 to 2019, the US GDP nearly quadrupled.

However, American financial capitalism has also caused a “K-shaped” change in the distribution of wealth. On one hand, the US stock market has repeatedly hit record highs, the operative capabilities of capital and financial products in US financial markets have surged; the market capitalization of innovative technology companies, especially digital information technology companies, have remained high. On the other hand, manufacturing relocation has led to a severe drain of jobs, and the gap between the incomes of the middle and lower classes in the US and high-income group continues to widen. In 2018, when the Gini coefficient was 0.485, the gap between rich and poor hit a 50-year high. The richest 10% of American households accounted for nearly75% of the net worth of the national total.

Over the years, the US has attracted a large number of talents and immigrants from all over the world. “American Dream” in other words is the “middle class dream”. Americans believe that as long as they work hard to find a decent job, they would be able to live a decent life. However, according to statistics from the US Census Bureau in 2018, there were 39.7 million poor people in the US, and at least 500,000 Americans were homeless. Especially for the people over the age of 60, 1/12 of them lacked sufficient food, and the total number of these people was 5.5 million. One reason that Trump was able to win the 2016 US presidential election was that he committed to bring Americans’ lives back to the 1950s.

The COVID-19 pandemic has further increased the gap between the rich and the poor and the “K-shaped” income distribution. We can imagine the middle and lower classes’ dissatisfaction with American politics and the state of affairs. In the past 10 years, the Republican Party has turned increasingly to the right, the Democratic Party increasingly to the left, the two major political forces’ divergences over how to tackle problems in income distribution and enlarge middle-income groups have polarized increasingly. The Republican Party hopes to increase employment opportunities by reducing taxes, buying American goods and hiring Americans, cutting immigrants and refugees, to stimulate the return of overseas manufacturing investment and reduce its dependence on overseas goods; the Democratic Party hopes to increase taxes on the rich, raise the minimum wage, expand government expenditures on social welfare, and increase subsides to the poor.

At present, the Biden administration’s policies focus on issues such as the US economy, people’s livelihoods, the pandemic, and climate change. Biden has signed a new “Buy America” executive order and called to replace government vehicles with new-energy ones, and promised this decision would create 1 million new jobs at home. The Biden administration is also pushing for a new pandemic relief bill of $1.9 trillion, providing a subsidy of $1,400 to every unemployed American. The problem is that the recent decision of blocking retailing investors from purchasing stocks left room for speculation. Some analysts say that the gap between the rich and the poor in the US may be further widened in 2021.

Contributed by Zhu Feng, Institute of International Relations, Nanjing University

Translated by Ren Meiqi