The Chinese did rather well in the age of globalization. In 1990, 943 million people there lived on less than $3 a day measured in 2021 dollars – 83% of the population, according to the World Bank. By 2019, the number was brought down to zero. Unfortunately, the United States was not as successful. More than 4 million Americans – 1.25% of the population – must make ends meet with less than $3 a day, more than three times as many as 35 years ago.
The data is not super consistent with the narrative of the US’s inexorable success. Sure, American productivity has zoomed ahead of that of its European peers. Only a handful of countries manage to produce more stuff per hour of work. And artificial intelligence now promises to put the United States that much further ahead.
Graph of China and the US poverty rates
But this story ignores how the US chooses to spend its riches. It seems reasonable that the success of a society and its system of government, the morality of its political compromises and agreements, would be determined to an important degree by how it chooses to deploy the fruits of its accomplishments and how it apportions the costs of its failures. Unlike China, the US did not offer much to the people eking out a living around the poverty line. Per head, the US’s economic output is six times China’s, and yet, inexplicably, there seem to be more abjectly poor Americans than Chinese.
The story of US inequality is known by now. It is nonetheless breathtaking how its lopsided distribution of income keeps getting worse. In 1980, the income of Americans in the middle of the income distribution added up to a bit more than 52.5% of the income of those perched at the top 90th percentile. At the turn of the century, it was 48%. By 2023, it had slipped further, to 42.5%.
The poor’s share of the US economic pie is shrinking to developing-world levels. The income of Americans in the top 90th percentile of wealth grew more than twice as fast between 2000 and 2023 as that of Americans in the bottom 10th percentile. These days, Americans in the poorest 10th of the population draw about 1.8% of the nation’s income, about the same as poor Bolivians. In Nigeria, they reap 3%, in China 3.1%, in Bangladesh 3.7%.
It would be comfortable to blame market forces. They have played a critical role in shaping the US’s distribution of success. Globalization and technology have not only contributed to reduce the share of national income that is spent on labor. They have also exacerbated inequalities among the working class, rewarding the most educated workers while replacing the less skilled with robots.
And yet, a summary glance at the Trump administration’s main initiatives – the president’s Big Beautiful Bill Act and his indiscriminate tariffs, which will raise the price of many staples and produce a drag on business spending and employment – underscores how the US’s dismal performance at sharing the fruits of its success with the less well-to-do in its society is not some bug in American capitalism. It is a feature.
The legislation will take health coverage from millions of people and dramatically raise healthcare costs for millions more through massive cuts to Medicaid and the health insurance subsidies under the Affordable Care Act. It will trim hundreds of billions from the Snap nutrition assistance program for the poor. Altogether, the latest estimate by the Budget Lab at Yale finds that the impact of Trump’s tariffs and his big, beautiful bill will trim household income for all except the richest fifth of American families. The bottom 10% would suffer a 7% cut.
Sure, America’s indifference towards its poor did not appear suddenly during the Trump administration. It’s been a feature of Democratic and Republican governments over the last 50 years, letting appeals to market efficiency trump calls to address the US’s growing inequalities. Since Jimmy Carter left office, the income of the rich has grown more than that of the poor in every administration except that of Bill Clinton and, yep, Donald Trump’s first, when subsidies to respond to the Covid pandemic raised incomes across the poorer half of the population.
What’s telling is that despite Trump’s claims to represent the common American worker trodden upon by indifferent economic forces, he is out to exacerbate the ills of American capitalism. The millions of angry Maga followers applauding Trump’s swipes at an unfair global order will eventually come to find that the rhetoric may have changed, but the US is not about to change the way it shares its riches.
This is not to congratulate China for its authoritarian government, for its repression of minorities or for the iron fist it deploys against any form of dissent. But it merits pondering how this undemocratic government could successfully slash its poverty rate when the richest and oldest democracy in the world wouldn’t.
