4 graphs about the US economy and inequality

Ben Horton

Image Credit: Getty

The January 2018 special issue of International Affairs explores the crisis in the liberal international order (LIO), an order which since 1945 has been dominated by the US. Carla Norrlof’s article in the issue examines the impact of the LIO on the US economy, and asserts that Donald Trump’s ‘America first’ doctrine could harm the country both domestically and abroad. In this post we’ve drawn out the key statistics from Carla’s article, which challenge public assumptions about inequality and economic power in the US.

The liberal international order has made America great…

A common refrain from the Trump administration is that the world has profited at the expense of the US economy. In March 2017, the President accused German Chancellor Angela Merkel of not contributing enough to NATO, and leaving the US to pick up the tab.

Likewise in January 2017 the President criticized the US–China trade relationship, claiming that trade was ‘totally one-sided’ and that despite the benefits it accrued, China was refusing to apply pressure to North Korea.

In both examples, President Trump demonstrates the transactional approach which has characterized his vision of international relations. In both, there is a palpable drive for change in the global system, to one which better serves US interests. A closer look at the data, however, reveals that the international order as is has actually been of huge benefit to the US. Figure 1 shows the share of global production and commercial capability held by the recognized major powers in 2016. In terms of global GDP and company value, the US holds a commanding lead.

Figure 1: Great Power production and commercial capability, 2016

Figure 2 shows the share of global financial and military capability held by the same countries. Here again the US eclipses the competition, including even its supposed rival Great Power — China.

Figure 2: Great Power financial and military capability, 2016

While these graphs do not provide future projections, it is at least clear that the environment maintained by the existing liberal international order has allowed the US to become a dominant force both economically and militarily, despite President Trump’s claims to the contrary.

… However, the spoils have not been equally shared

Figure 3: Income inequality between the top and bottom income earners in the United States, 1978–2016

While the first graphs demonstrate the financial might of the US economy, Figure 3 shows that the benefits have not been equally distributed. The gulf in earnings between the poorest and richest in US society has widened considerably since the 1970s.

The right-hand graph in Figure 3 shows that by 2016 the top 20% of earners in the US made 16 times as much as the lowest 20%. In 1978 they earned 11 times the amount. If that divide is not stark enough, the left-hand graph shows that by the same year the top 5% of earners made 28 times as much as the lowest 20%. In 1978 they earned 16 times as much as the lowest 20%.

Crucially, this inequality has persisted regardless of which party has held the presidency, as six Democrat administrations share this period with six Republican administrations.

So what does this mean?

While President Trump’s claim that the United States has not benefitted from the liberal international system is incorrect, his campaign tapped into the sense of grievance felt by voters who have seen the effects of the acute inequality of the domestic economy. This is a grievance for which the liberal internationalists, so far, have failed to find an answer.

As Carla Norrlof argues:

The liberal dilemma is not that the LIO distributes gains unfavourably to the United States, but that not everyone in the United States wins because US domestic policies have not kept pace with global economic integration.

What remains unclear, however, is whether the ‘America first’ policies of the Trump administration will provide the answer which has thus far been lacking.

For more on this question, read Carla Norrlof’s latest article in International Affairs: ‘Hegemony and inequality: Trump and the liberal playbook’.

Carla Norrlof is Associate Professor of Political Science at the University of Toronto. Find out more about her research here.

Ben Horton is the Digital Marketing Coordinator for International Affairs.

International Affairs Blog

The official blog of International Affairs, the…