US economic polarization and role of China
ACCORDING to various reports of the IMF and World Bank immense economic integration, opening up and modernization is urgently needed for the quick global economic recovery. The US is direct control over international economic and financial organizations due to which it has imposing additional conditions to their assistance to other countries. The US suppresses its opponents with economic coercion. The hegemony of the US dollar is the main source of instability and uncertainty in the world economy. It has been following an unwise monetary policy due to which the interest rate is constantly on the rise. It has created economic and financial hardships around the globe but the policy makers of the US are not ready to act wisely.
Even the US national economy is based on the unequal distribution of wealth which has now burnt the social fabric of it. Poverty is on the rise and unemployment is rampant in different States, especially in the Afro-American areas. Most recently, China released a report indicating and highlighting the real causes and facts about the growing economic polarization in the US. Revelations are shocking that one per cent of US households hold more than 20 percent of national household wealth. Moreover, it has been further widening on account of COVID-19 and other factors, and continues to pull at the fabric of US society. The report titled “Rising Economic Polarization in the US: Truth and Facts” was published by the Xinhua News Agency showcasing some remarkable facts behind the US’ widening wealth gap.
In this regard, according to the World Bank, the Gini coefficient, which measures inequality in income distribution, in the US has gone up from 0.353 in 1974 to 0.415 in 2019, exceeding the warning level of 0.4, which indicates a large income gap which is now creating instability and social unrest among the different factions of the society. It has already disturbed the even factors of production and distribution in the USA. Unfortunately, the widening gap of wealth was further increased by the onslaught of COVID-19, when economic recession led to massive job losses and further deterioration in the economic situation of low-income earners. Moreover, the excessive money supply and large-scale fiscal spending have driven up stock and housing prices, bringing enormous benefits to wealthier asset owners. But the middle class and poor people have been suffering from this increasing economic disparity in the US.
According to US Federal Reserve Bank report on household wealth, the total wealth of the richest 1 percent reached a record $45.9 trillion at the end of the fourth quarter of 2021, and their fortunes and bounties increased by more than $12 trillion, or more than a third, during the course of the pandemic which vividly reflect chronic inbuilt economic exploitation of the elite group in its society. In this regard, the widening wealth gap has also led to the middle class shrinking. The fortune magazine in its report (November 2022) that 61 percent of US adults were considered middle class in 1971, a figure that dropped to just 50 percent in 2021. Furthermore, Pew Research Centre upholds that fewer Americans consider themselves to be middle class than before the Great Recession.
The further narrowing of the US middle class has also led to tense relations between different races/factions in the US, as the middle class, which is mostly made up of white Americans, believes other races’ improvement is based on sacrifices made by white Americans, thus fuelling their anger. It has actually led to growing populism in the US, created antagonism between different race groups and therefore given a platform to extreme politicians who advocate a toxic form of populism and led to an increase in cases of extreme violence. The US politicians and policy makers have been playing for political mileage and badly ignored the root causes of increasing economic disparity, economic recession, slowdown of industrialization and last but not the least concentration of wealth in few hands.
Different published reports clearly indicate that the widening wealth gap is one of the main causes of the deepening social crisis in the US. Unfortunately it created ethnic conflicts, homelessness, urban riots and violent crimes in the US so-called civilized society. The rampant gunshot incidents at educational centres clearly indicate the volcanoe’s anger among the youth against economic inequality and prevailing wealth distribution system in the US. Due to the increasing polarization between the rich and the poor, the US has witnessed frequent demonstrations in recent years. From the Occupy Wall Street movement in 2011 to the Black Lives Matter protests against police violence in the US in 2020, some demonstrations have even turned violent. It has further widened the racial gap between whites and blacks.
According to the US Census Bureau, 82 per cent of 18- to 24-year-olds from high-income families have gone to college, compared with just 45 percent of those from low-income families. A report by the US Department of Housing and Urban Development showed that more than 580,000 people were homeless in 2020, with 226,000 sleeping outside, in cars or in abandoned buildings. On the contrary, US politicians are doing very little to change their people’s lives. Partisan conflicts and constant changes in government have led to flip-flops in US policies.
To conclude, the US policies have become counterproductive and do not help to reduce the wealth gap. In this connection, the unending power grabbing battle between Democrats and Republicans on taxation has resulted in a failure to effectively tax the rich, who have tried every possible means to “legally” avoid paying their dues. The true tax rate of the richest Americans is only 3.4 per cent, far lower than that of ordinary wage earners. It seems that the US has lost its national identity. Its national economy is under performed. Its politics is compromised. Its society is divided. Its national policies are polarized and create socio-economic chaos. It seems that Land of Dreams is losing its fairytale orientation because of faulty lines in its socio-economic-politico systems. The role of China has been positive, productive and participatory in the world economy and governance.