Widening wealth gap--the roots of "Trumpism"

Donald Trump is no longer president of the United States, yet "Trumpism" will not simply fade away. The essence of Trumpism is American populism, white supremacy and anti-globalization. These overbearing values and policy principles, which rely on American hegemony, not only exacerbated the fragmentation of American society and politics and intensified racism. They led to different suppressive actions against China in trade, technology, diplomacy, and media, which overthrew such fundamental international mechanisms and principles as market openness and free competition. According to an American public opinion poll, Trump is considered as "the worst president in the history of the United States ". However, ironically, in the 2020 presidential election, Trump still won 46.9% of the votes. In addition, according to a Gallup poll, 57% of Republican supporters still believe Trump is the best presidential candidate for the 2024 elections.

What made Trump an idol for almost half of the American population? Analysts believe this is not only due to Trump's extremist ideas of white supremacy which gained zealous following from certain racists, but also due to the increase in the gap between the rich and the poor over the past few decades, the shrinking middle class, and the drastic increase in the scale of the lower class which brought about deep social issues.

The United States is the biggest economic entity in the world. Although its GDP dropped by 3.5% in 2020, its per capita GDP still stood at$60,000. However, since late 1980s, the operative methods of American economy gradually shifted from "industrial capitalism" to "financial capitalism". Facing increasing human cost and environmental pollution of the manufacturing industry, "Reaganomics" facilitated the outflow of American manufacturing. Except keeping airplanes, cars, chips and other core industries, the US transferred the majority of manufacturing overseas to developing countries and regions. This was aimed at maintaining its high-end manufacturing and scientific and technological innovation, while reducing environmental pollution and the pressure of labor cost. This historical industrial structure shift caused the proportions of financial service and other service industries to drastically increase in American economic operations. However, proportion of the manufacturing industry also dropped conspicuously. In 2019, financial and other service industries accounted for 80% of the overall GDP in the US, whereas manufacturing accounted for 11.2%. During this process, American economic power consistently rose. From 1991 to 2019, in less than 30 years, American GDP nearly doubled, its performance is the most outstanding in developed countries.

However, American "financial capitalism" caused an abnormal “K-shaped” change in wealth distribution in America. On one hand, the American stock market continues to break historical records, the capital in the American financial market and the operative abilities of its financial products continue to boost. On the other hand, having the majority of the manufacturing industry relocated caused blue-collar workers to lose a large number of work opportunities. The income gap between the lower and upper classes in America continued to increase. In 2018, the Gini coefficient increased to 0.485, the gap between the poor and the rich reached a new peak in over 50 years. 10% of the wealthiest families in the US accounted for almost 75% of all family net assets. From 1989 to 2018, for 50% of the lowest income families, the net increase of family fortunes was almost zero.

For many years, America absorbed large numbers of talents and immigrants. One feature of the "American dream" is "dream of the middle class". In other words, Americans believe that as long as people work hard and find a decent job, they will be able to buy a house and a car, and live a rich life. However, statistical data from the 2018 US Office of Population Censuses and Surveys found that the country had almost 40 million people living in poverty. Every night, there were at least 500,000 homeless people. Especially for Americans over the age of 60, every 1 in 12 people didn’t have sufficient food, with a total number of 5.5 million people. When they reach the age of 65, approximately 40% of the American middle class will be, or nearly be, living in poverty.

In the face of the increasing wealth gap and the continued expansion of the scale of middle- and low-income classes, one can imagine the middle and lower classes' dissatisfaction with national politics and status quo. What is worst is that, in the past decade or so, Republicans became more rightist, and Democrats became more leftist. The two political powers are polarized in their political views on how to solve the income distribution problem and expand the scale of the middle class. Republicans hope to decrease taxes, buy American products and hire American workers, to reduce the number of immigrants and refugees, and bring back manufacturing and investment overseas to increase employment opportunities and reduce US dependence on foreign manufactured goods. Democrats hope to increase rich people's taxes, raise minimum wages, expand government welfare spending, and increase subsidies for lower income people to solve the current problems. Four years ago, a main reason behind Trump’s presidential election win was because during his campaign, he promised to solve the gap between the rich and the poor and address the low incomes of the lower class.

Currently, the policies of Joe Biden's administration are focused on the American economy, people's livelihoods, combating the COVID-19 pandemic and tackling climate change. In domestic politics, its intention to de-Trumpize is clear. Biden has signed a new “Buy America” executive order which demands government vehicles to all be replaced with new-energy automobiles, and promises that this decision will increase 1 million jobs in the US. The Biden administration is also pushing for a $1.9 trillion new pandemic-relief bill to provide $1,400 in subsidies for each unemployed American and prolong the repayment period for student loans. However, recently, the American stock market imposed restrictions on private investors which exacerbates speculative and profit-chasing tendencies in the US capital market. Biden's decision to no longer exploit coal and natural gas on public land will reduce employment in the energy sector in America. Therefore, analysts believe that the gap between the rich and the poor will further widen in 2021.

Contributed by Zhu Feng, Executive Director at Nanjing University Collaborative Innovation Center of South China Sea Studies, Dean at Nanjing University Research Institute of International Relations

Translated by Zhang Junye