Here's what our photographer saw when he and his family spent more than two days on a train traveling across China
China’s middle class is larger, richer and more vocal than ever before. That threatens the Communist Party, says Rosie Blau
Jul 9th 2016
WHEN 13-YEAR-OLD Xiao Kang began to feel lethargic and his breathing grew wheezy last autumn, his parents assumed he was working too hard at school. Then his fellow classmates at Changzhou Foreign Languages Middle School started complaining too. The private school in a wealthy city on China’s eastern seaboard had moved to a smart new campus in September 2015, close to a site formerly occupied by three chemical factories. Tests showed the soil and water to have concentrations of pollutants tens of thousands of times the legal limits, and over 100 pupils have been diagnosed with growths on their thyroid and lymph glands. Yet the school denies responsibility, and the local authority has put pressure on parents to keep their children in attendance and stopped them from protesting. The toxic school remains open.
Xiao Kang and his family are beneficiaries of China’s rise. His forebears were farmers and more recently factory workers, but he attends the “best” school in the city (meaning it gets the highest university entrance scores). His father hopes he will become an architect or a designer and may go to study abroad one day. As with many of his generation, all the financial and emotional resources of the boy’s two parents and four grandparents are concentrated on this single child. The family is shocked that the government is so heedless of the youngster’s fate. If a school in any other country was found to be built on poisoned ground, it would immediately be shut, says the boy’s father. Why not in China?
For most of China’s modern history, its people have concentrated on building a materially comfortable existence. Since 1978 more than 700m people have been lifted out of poverty. For the past four decades almost everyone could be confident that their children’s lives would be better than their own. But the future looks less certain, particularly for the group that appears to be China’s greatest success: the middle class. Millions of middle-income Chinese families like Xiao Kang’s are well fed, well housed and well educated. They have good jobs and plenty of choices in life. But they are now confronting the dark side of China’s 35 years of dazzling growth.
This special report will lay out the desires and aspirations of this fast-expanding group. Many Chinese today are individualistic, empowered and keen to shape society around them. Through social media, they are changing China’s intellectual landscape. They are investing in new experiences of all kinds. But discontent over corruption, inequality, tainted food and a foul environment is sharp and deep; many worry that their hard-fought gains are ill-protected. For decades the Communist Party has kept control over a population that now numbers 1.4 billion by exceeding people’s expectations. Their lives have improved faster than most of them could have dreamt. Though the state has used coercion and repression, it has also relieved many pressure points. Now it is finding it increasingly hard to manage the complex and competing demands of the middle class; yet to suppress them risks holding back many of the most productive members of society.
When the Communist Party seized power in 1949, China’s bourgeoisie was tiny. In the Cultural Revolution two decades later, wealth, education and a taste for foreign culture were punished. But after housing was privatised in the 1990s, the government tied its fortunes to this rapidly expanding sector of society, encouraging it to strive for the material trappings of its rich-world peers.
For the first time in China’s history a huge middle class now sits between the ruling elite and the masses. McKinsey, a consultancy, estimates its size at around 225m households, compared with just 5m in 2000, using an annual income of 75,000-280,000 yuan ($11,500-43,000) as a yardstick. It predicts that between now and 2020 another 50m households will join its ranks. They are spread across the country, but are highly concentrated in urban areas (see map); around 80% of them own property; and they include many of the Communist Party’s 88m members.
Though China’s population as a whole is ageing, the middle class is getting younger. Nearly half of all people living in cities are under 35: they are eight times more likely than country-dwellers to be university graduates; and most are treasured and entitled only children, with no memory of a time when their country was poor. The internet has expanded their horizons, even if the government shuts out many foreign websites and quashes dissenting voices. Today’s young Chinese tend to do what they want, not what society expects—a profound and very recent shift. Most of these young people exercise their autonomy by choosing their own marriage partners or shelling out for a new car. But many have an appetite for civic engagement too: they are the foot-soldiers of China’s non-government organisations, a vast, though often politically sensitive, array of groups seeking to improve society in a variety of ways.
Pressures on the middle class are growing. Some feel that no matter how able they are, the only way they can succeed is by having the right connections. Housing has been a driver of economic growth, yet property rights are shaky, and the government encourages private investment without adequately regulating financial products. As more people go to university, returns to education are falling and graduate jobs are harder to come by. Many fret that their children may not see the progressive improvements in material well-being they themselves have enjoyed, and more youngsters are going abroad.
Political scientists have long argued that once individuals reach a certain level of affluence they become interested in non-material values, including political choice. Average income per person in China’s biggest cities is now at roughly the same level as in Taiwan and South Korea when those countries became democracies. When China opened up its markets in the 1980s, democratic demands were widely expected to follow. They did, but were savagely silenced in Tiananmen Square in 1989. Since then, a mixture of political repression, fear of chaos, pride in China’s advance and a huge rise in living standards has kept the country steady.
China’s middle classes increasingly look and behave like their rich-world peers, but they do not necessarily think like them. Intellectuals privately express a sense of despair that since becoming party chief in 2012, Xi Jinping has shuttered free expression and ramped up ideology. Yet most of the population at large seems unconcerned. If an election were held tomorrow, Mr Xi would very probably win by a large majority—and not just because there is no viable opposition.
However, although few people in China are demanding a vote, many are becoming more and more frustrated by the lack of political accountability and transparency, even if they rarely label them as such. The party is clearly worried. In an internal document in 2013 it listed “seven things that should not be discussed”: universal values, press freedom, civil society, economic liberalism, historical mistakes made by the party, Western constitutional democracy and questioning the nature of socialism with Chinese characteristics. Recently these have often become flashpoints between the middle class and the government.
No wonder that political trust in China is declining. A series of nationwide surveys from 2003 to the present, commissioned by Anthony Saich of Harvard University, show that the wealthy think less of the government than poorer folk do. Other polls show that richer and better-educated people are more likely to support the rule of law, market allocation of resources and greater individual autonomy; the less-well-off often favour traditional values and authoritarian rule.
Wang Zhengxu of the University of Nottingham in Britain and You Yu of Xiamen University in China go further. They observe a clear decline in trust in legal institutions, the police and local government between 2002 and 2011, despite a consistently good economic performance and rising social benefits, and reckon that “the era of critical citizens” has arrived in China.
Many wondered how the party could ever survive after it brutally crushed pro-democracy demonstrators in 1989. Its solution was to make people rich very quickly. Since 1990 the blistering pace of economic growth has been the party’s most important source of legitimacy, delivering its overriding priority: stability. For a while these goals meshed well with each other and with people’s personal aspirations: under an unspoken agreement, people could amass wealth so long as they did not try to amass political power too. The recent slowdown in growth puts a question mark over that compact.
Kingdom in the middle
Looking ahead, in a host of areas from taxation to industrial overcapacity to the environment, the party must make an invidious choice: introduce unpopular reforms now and risk short-term instability, or delay reform and jeopardise the country’s future. On present form, stability is likely to win: the mighty party is terrified of its own people.
The middle class is not the only source of potential instability. In the western province of Xinjiang, repression of ethnic minorities has aggravated an incipient insurgency. Tibet is simmering too. And across China millions of workers in declining industrial sectors risk losing their livelihoods. Many migrants from rural areas working in cities feel rootless and marginalised, denied access to facilities such as health care and education. Divisions within the party elite are also a potential problem. And although dissidents have been silenced for now, they could find their voice again.
China’s Communist Party has shown extraordinary resilience to destabilising forces and an impressive ability to recreate itself. It has ditched most of its founding principles and tied itself to the middle-class wealth-creators, expanding its membership to include the very group it once suppressed. Since the 1990s the Chinese model has proved so flexible that it appeared to break the democratic world’s monopoly on economic progress. To some it seemed to offer a credible alternative to democracy.
Now China is beginning to reach the limits of growth without reform. The complexity of middle-class demands, the rush of unintended consequences of economic growth and now a slowing economy are challenging the party’s hold. It has to find new ways to try to appease a population far more vocal and more individualistic than previous generations.
《经济学人杂志》The long march abroad
China’s brightest and wealthiest are leaving the country in droves
Jul 9th 2016
Dreaming of America
IN FAR WESTERN China on the edge of the Gobi desert, 17-year-olds in a social-studies class are discussing revolution (the Russian one) and the use and abuse of nationalism (Germany, Italy). When the teacher asks what “totalitarianism” is, a girl immediately replies: “One leader, one ideology, no human rights.” These are Chinese pupils in a Chinese classroom studying the second world war, but by attending Lanzhou Oriental Canadian School they have already written themselves out of at least part of a Chinese future. They will all go to university abroad, many to Canada, others to the United States, Australia and Britain. So great is Chinese demand for foreign schooling that even here in Gansu, China’s second-poorest province, a new block is being built to house more students; the hoardings on the building site are plastered with posters about “The Chinese Dream”, a slogan Xi Jinping launched in 2012 to promote the country’s “great revival”. But like hundreds of thousands of people across China, these teenagers and their families harbour a different dream: escape.
Since the country started opening up in 1978, around 10m Chinese have moved abroad
The extraordinary outflow of people from China is one of the most striking trends of recent decades. Since the country started opening up in 1978, around 10m Chinese have moved abroad, according to Wang Huiyao of the Centre for China and Globalisation, a think-tank in Beijing. Only India and Russia have a larger diaspora, both built up over a much longer period. The mass exodus of students like those at Lanzhou Oriental is just one part of the story. Since 2001 well over 1m Chinese have become citizens of other countries, most often America; a far larger number have taken up permanent residence abroad, a status often tied to a specific job that may last for years and can turn into citizenship.
Chinese make up the bulk of individuals who are given investor visas, a fast-track immigration system offered by many countries to the super-wealthy. Others are just moving their money offshore, investing in foreign companies or buying property. Officially Chinese citizens are limited to moving $50,000 abroad a year, but many are finding inventive ways to get round that rule, including overpaying for imports, forging deals with foreign entities and even starting, then losing, fake lawsuits against foreign entities, triggering huge “damages”.
An export industry
Studying abroad has become an ambition for the masses: 57% of Chinese parents would send their child overseas to study if the family had the means, according to the Shanghai Academy of Social Sciences. Even Mr Xi sent his daughter to study at Harvard. Nor is this open only to the super-rich. Liang Yuqi from Zhangye, a city close to Lanzhou, is being quietly guided towards a relatively cheap Canadian state university to study psychology. Her parents are government officials who have never been abroad (cadres must hand in their passport) and will pool money from relatives to fund her foreign education. The sacrifice is worth it, says her mother: in middle school Yuqi was “fat” and “mediocre”, now she is confident and asks lots of questions. Many others are spending their all to make the break. More than half a million university students went overseas last year.
This aspirational market is served by hundreds of international schools in China. Some cater for non-Chinese citizens, often the foreign-born offspring of returning Chinese. Since 2003 a growing number of regular Chinese schools, such as Lanzhou Oriental Middle School, have launched lucrative international programmes for Chinese passport-holders (fees at Lanzhou Oriental’s international arm are 70,000 yuan ($11,000) a year, 11 times the price of a regular education there). Their popularity caused a backlash against the use of public facilities and funds to send kids to study abroad after they finished school. Beijing city government and a number of provincial authorities have stopped approving new international programmes, and the education ministry is pondering nationwide restrictions. But students are leaving younger and younger. Since 2005 the number of Chinese secondary-school pupils in America alone has increased almost 60-fold, to 35,000.
Of the 4m Chinese who have left to study abroad since 1978, half have not returned, according to the education ministry. By most unofficial counts the share is even larger. In some fields the brain drain is extreme: almost all of China’s best science students go abroad for their PhDs, and 85% of Chinese science and engineering graduates with American PhDs had not returned home five years after leaving, a study by the National Science Foundation found this year. Many of the teenagers at Lanzhou Oriental Canadian School know that they are responsible for their entire family’s future: 16-year-old Hai Yingqi says she has to get a good enough job upon graduation to allow her parents, young brother and all four grandparents to emigrate.
One, two, flee
China has long seen education as a passport to success, which helps explain why the middle class is now focusing on foreign schools and universities. One Beijing businesswoman preparing to give birth in America says she wants to avoid sending the child to a Chinese school because she would have to bribe her way into a good primary school, and then “make sure the teacher is happy”—more bribes: “It’s not the money I mind, but the trouble.” Another parent questions how a child can learn values in such a system, and cites the corrupting influence of “patriotic education”, the compulsory propaganda classes all pupils must attend, where there is only one right answer and nothing can be questioned.
Others find different exit strategies. The super-rich can, in essence, buy foreign residency. Chinese citizens who invest at least £2m ($3m) in Britain are promised permanent residency in five years; Australia offers a similar scheme for A$5m ($3.6m). Around 70,000 Chinese millionaires have emigrated to Canada since 2008 under an immigrant investor scheme. This is no longer in operation, but the country is now encouraging Chinese entrepreneurs and startups. Hong Kong has cracked down on mainland mothers giving birth there to gain Hong Kong passports (and citizenship has become less appealing than it used to be), but birth tourism to America and other countries is increasing. And many of those working for multinational companies eventually transfer elsewhere.
Businesspeople who have returned to the mainland now lead some of China’s most innovative companies. But most come back only once they have secured an escape route for themselves or their children. The government has sponsored some expensive schemes to lure academics back to China, and some have taken up the invitation, having first made sure that their children were born abroad so they would be able to choose where to live in future. Yao Ming, a famous 2.29-metre-tall basketball player, is one of China’s icons, a true product of the Communist Party (which encouraged his exceptionally tall parents to marry), but his daughter, now six, was born in America. Chen Kaige, one of China’s best-known film directors, has at least two American children; Gong Li, a film star, and Jet Li, a Chinese martial-arts actor, both have Singaporean passports.
Outflows of capital, even more than people, directly mirror political risk. The torrent of cash flowing out of China almost exactly matches fears about the strength of the economy and the government’s capacity to handle it (see chart). In the second half of 2015, for example, capital moved abroad at an annual rate of $1 trillion in response to a fragile economy, the government’s botched attempt to intervene in the falling stockmarket and a slight but unexpected drop in the yuan. The government temporarily slowed that outflow by stepping up capital controls earlier this year and taking some sensible decisions on the economy. Yet as with so many problems, the party dealt with the immediate crisis, not the underlying cause.
China has long been a land of emigration, establishing small outposts of its people in almost every country in the world. Their main motive was to escape poverty. But those now bowing out are among China’s richest and most skilled. It is a profound indictment of their country that being able to leave it is such a strong sign of success.
Chris Giles, Economics Editor
Sterling’s malaise set to hit households harder than they expect
Since Britain voted to leave the EU in June’s referendum, sterling has taken a battering. Against the US dollar, the pound has fallen to a 30-year low, trading on Thursday at $1.29. This was 13 per cent lower than the $1.48 rate that prevailed before it became clear the Leave campaign would win.
Because Brexit has also hit the value of the euro, the composite value of sterling, weighted by Britain’s trading relationships, is down 11.4 per cent to lows not seen since 2011.
But while the moves in sterling’s value are clear, what it means for Britain’s economy is far less certain.
The difficult economics of currency
In recent months economists have made many predictions about the effects of Britain’s exit from the EU, with the vast majority expressing confidence that leaving the bloc will be bad for the UK economy. The same near unanimity and confidence about the effects of sterling’s depreciation will be impossible to find.
Instead of clear advice, economists know the impact on trade flows is ambiguous. In the past, there have also been great variations in the link between a cheaper currency — and more expensive imports — and inflation.
Kristin Forbes, an external member of the Bank of England’s Monetary Policy Committee, said last year: “Changes in the exchange rate do not seem to affect different goods and sectors in the most basic ways which one would expect.”
Cause and effect
The main conclusion of Ms Forbes’ research was that the cause of a currency movement is vital in determining its likely effects.
Although she did not make the connection, falling out of a pegged exchange-rate system at a time of artificially high interest rates and high unemployment — as was the case in Britain in 1992 — will have materially different effects than a similar-sized depreciation on the back of a vote to leave the EU with interest rates at 0.5 per cent and full employment.
Dropping out of the European exchange rate mechanism while remaining in the EU in the 1990s encouraged companies to locate themselves in the UK and export into continental Europe.
No one should expect a weaker exchange rate on the back of the new reality of highly uncertain trading links with the EU to have the same galvanising effect, said Richard Barwell of BNP Paribas. “It is surely going to be more difficult for UK companies to attract new long-term customers in overseas markets, irrespective of what they do to prices, if those customers are not sure whether those UK companies are going to be on the wrong side of trade barriers in a few years time.”
Evidence of this behaviour emerged on Thursday in a survey of the German chamber of commerce, obtained by the TUC, which showed a quarter of German companies with operations in the UK planned to cut jobs after the Brexit vote, while one in three planned to invest less in Britain.
Sterling and inflation
A weaker exchange rate will raise certain domestic prices rapidly. Petrol and air fares, where costs are denominated globally in dollars, are obvious examples where prices are already on the rise. The prices of imported fruit and vegetables, tobacco and even books have also been sensitive to sterling in the past.
But the overall relationship between higher import prices and inflation is uncertain. Traditionally, the BoE had a rule of thumb that about 60-90 per cent of the drop in the exchange rate would be felt in higher import prices. An 11 per cent depreciation in sterling’s value, therefore, should add 2-3 per cent to prices over a period of time.
But more recently, the BoE noticed that in the 2007-08 financial crisis, the knock-on effect was much higher. It now thinks that if there is a sudden shock to supply in the UK economy — which would apply if the EU puts up new trade barriers — and a fall in sterling, the inflationary effects will be greater.
In times of a supply shock, Ms Forbes suggests, “UK firms might take advantage of higher import prices to raise domestic prices in order to pay for higher production costs and generate enough cash flow to stay in business”.
That would imply households will be hit harder in the pocket that they might expect from sterling’s current malaise.
Sterling and trade
A further problem for those politicians predicting a surge in exports is that the UK’s trade is no longer obviously of the type that responds favourably to a depreciation.
Economics says trade deficits fall if UK consumers switch rapidly to domestic goods and services from their foreign equivalents and if foreigners buy British. But in a study of the 2007-08 depreciation, the BoE found the effects of this were much smaller than in the 1990s because British households kept buying cars made in Germany and other imported goods even though they were more expensive, while the volume of British service exports did not respond rapidly to becoming cheaper in global markets.
Britain’s trade balance did improve but more slowly than in the 1990s and the largest effects came from UK households cutting back on foreign holidays, with some other improvements in exports.
In summary, Brexit has unleashed a different sort of currency depreciation, according to modern economics, one that is less likely to encourage domestic investment for exports, is more likely to raise inflation and will be more painful for hard-pressed families. As David Miles, a former MPC member, told MPs soon after the referendum: “I am not terribly optimistic that, if sterling now stays at the current level, we should expect a marked increase in exports from the UK and a significant reduction in the current account deficit”.
Stephen King, adviser to HSBC, added that if exports were not significantly stimulated, sterling’s fall would have the effect of raising prices faster than wages, thus cutting living standards. “This is when you get into the whole risk of recession, stagnation and income squeezes of one sort or another,” he added.
Why many baby boomers may struggle in retirement
Younger Americans have more confidence about wage growth as expansions proceed
By Ben Leubsdorf, July 10, 2016
The gap in consumer confidence between the under-35 and 55-and-over categories, as measured by the Conference Board’s index, hit a record in June..
Baby boomers are fretful about the U.S. economy, leaving cheerier millennials on the hook to keep spending and overall growth on track.
Going back decades, consumer surveys have shown Americans in their 20s and 30s more optimistic about the economy compared with their parents and grandparents. But the generation gap has been unusually wide in recent years in gauges from the Conference Board and University of Michigan. Confidence among consumers under age 35 is back to prerecession levels, while sentiment among people 55 and older remains far lower, deteriorating for more than a year.
The divide, partly driven by greater optimism about income growth among younger households, helps explain why consumer spending decelerated in 2015 and early this year despite low interest rates, cheap gasoline and falling unemployment.
Older Americans pulled back their spending last year and in the first three months of 2016, according to data from Chase credit and debit cards, while younger Americans ramped up outlays.
“All the growth is being driven by young people, and in fact the older people are dragging down growth,” said Diana Farrell, chief executive at J.P. Morgan Chase & Co. Institute, which analyzed the spending data.
Ray Hernandez, 35 years old, and his wife live in Heath, Texas, in the booming Dallas metro area where they bought their first house in early June after a four-month hunt.
“You can tell the economy’s great because every house we tried, we’d get overbid by, like, $40,000 in cash,” he said.
He admitted to some nervousness about the future. But Mr. Hernandez, the creative director at a Dallas technology company, said for now, local restaurants are full and “everybody’s out spending money.”
The limited spending power of young Americans will likely struggle to carry economic growth indefinitely.
Many 20- and 30-somethings bear high student-debt burdens that could restrict their ability to buy a home or make other major purchases.
They typically earn and spend less money than middle-age households, according to Labor Department data. And the median net worth for families under 35 was a mere 6% of the median net worth for 55- to 64-year-olds as of 2013, according to the Federal Reserve.
It’s “a little bit more confident consumer, but also a less wealthy consumer,” said Marshal Cohen, chief retail analyst at research firm NPD Group.
Consumer spending is such a dominant force in the U.S. economy that even a modest sustained decline in outlays typically heralds a full-blown recession.
Growth in inflation-adjusted spending has slowed over the past year and a half, expanding at a 1.5% annual rate in the first quarter—the smallest increase in two years and about one-third the pace seen in late 2014, according to Commerce Department data.
Still, that was enough to keep overall output expanding in the face of headwinds including a sharp decline in business investment.
To be sure, the link between consumer sentiment and actual spending has been fuzzy at times. There were signs of a pickup in household outlays this spring even as readings on confidence remained mixed, boosting expectations for overall economic growth in the second quarter.
Still, businesses have been adapting to the shift in spending.
“It used to be the retired, the people who had time and money to spend on this,” said Todd Leff, chief executive at Hand & Stone, a Trevose, Pa.-based chain of massage and facial spas. Now, he said, it’s “stressed-out young professionals and young parents.”
As its customer base has skewed younger over the past five years, Mr. Leff said the company has reoriented. More money goes to advertising on Facebook, he said, and memberships that used to require a yearlong commitment now are available on a month-to-month basis.
“Certainly we want everybody,” he said, but “we see the millennials as the customers of the future.”
Older consumers, for now, are wary about opening their wallets.
The Conference Board’s consumer-confidence index has moved lower since early 2015, depressed by falling confidence among people 55 and older.
Readings for consumers under 35 are choppy from month to month but have remained near prerecession levels. The confidence gap between the under-35 and 55-and-over categories hit a record in June, at roughly three times its average level since 1980.
A somewhat similar pattern has emerged in the University of Michigan’s long-running survey of consumer sentiment. The gap between 18-to-34 year olds and 55-and-older households widened to a record last August and remained larger than normal into the spring.
Richard Curtin, the Michigan survey’s chief economist, said the age gap reflects stronger confidence about wage growth among younger Americans and tends to widen as economic expansions proceed.
Now, seven years after the last recession ended, he said that “older households have become more concerned about the future of the economy,” and so “have acted to increase the proportion of their savings” by putting off spending and borrowing.
That could become a self-fulfilling prophecy, if a pullback in consumer spending leads to a broader economic slowdown.
Spending by seniors has been declining at Checkers and Rally’s brand fast-food restaurants while spending by younger customers has been rising, said Terri Snyder, the chain’s chief marketing officer.
She said young diners are benefiting from minimum-wage increases in many states and cheap gas, but many older Americans are constrained by fixed incomes and rising medical bills.
“While younger people have more disposable income, the seniors probably have the toughest time of anybody right now,” Ms. Snyder said.
Stock-market volatility and global uncertainty in the wake of the U.K. vote to exit the European Union could further damage confidence among older households, which are more likely to have substantial investment portfolios or retirement savings.
And for the next four months, uncertainty at home generated by the 2016 presidential campaign could weigh on consumers, businesses and the economy at large. Political turmoil has a tendency to rattle Americans of all ages. For instance, sentiment and confidence nose-dived amid the debt-ceiling fight of 2011 and the federal-government shutdown in 2013.
Report underscores damage done by financial crisis to economic advancement for half a billion people
By Josh Zumbrun, July 13, 2016
The fallout from the financial bubble and global crisis has had far-reaching impact on income advancement for more than half a billion people
Across 25 of the world’s advanced economies, about two-thirds of the population—more than half a billion people—earn the same as or less than their peers did a decade ago.
Between 540 million and 580 million people in 2014 had lower or stagnant incomes than similarly situated people in 2005, according to a new study from the McKinsey Global Institute, the research arm of the global consulting firm McKinsey & Co. The finding presents a break from the trend in advanced economies during the post-World War II era when, throughout twists and turns, most families ended up improving on the standard of living of their predecessors.
“Prior to the financial crisis, all but 2% of people in the Western world ended up better off than people like them 10 years ago,” said Richard Dobbs, a McKinsey senior partner and one of the report’s authors. “But the world changes when you get a cohort of people who are no longer advancing.”
The study highlights the extent of the fallout from the financial bubble and global crisis it left behind. Incomes a decade ago were boosted by that unsustainable bubble, and the ensuing financial crisis plunged the global economy into a recession from which it has yet to fully recover.
The damage helps explain why many voters are rejecting the established political order, as seen in the U.K.’s vote to exit the European Union, in the embrace of nationalist political parties, or the hunger for candidates removed from the political establishment as seen in the Republican and Democratic presidential races in the U.S.
McKinsey surveyed households in the U.K., France and the U.S. In these countries, 30% to 40% of people said their incomes hadn’t advanced, indicating that even if transfers and taxes have allowed some families to improve statistically, many still yearn for higher incomes. These households expressed sharply negative views about trade and immigration.
Research into income inequality has often focused on the earnings of those at the very top, such as the work by French economist Thomas Piketty, who has highlighted the growing wealth and incomes of the top 1%. Other approaches to measuring inequality include that of the U.S. Census Bureau, which regularly produces data on the share of the population in poverty and a measure of inequality known as the Gini coefficient. The Pew Research Center has highlighted the shrinking number of people earning incomes near the median.
Other researchers, such as Stanford University’s Raj Chetty, have looked at whether people born in the lowest quintile of society rise to higher quintiles —which would require people at higher levels falling down. The McKinsey study sought to distinguish itself by comparing households of today to households at the same place in the income distribution a decade ago.
These aren’t the same households; new households have formed, young workers have entered the workforce, middle-aged workers advanced in their careers and recent retirees left the workforce. But overall, most income percentiles are lower today than a decade ago.
The report highlights that one consequence, if these current trends aren’t reversed, is that “today’s younger generation is at risk of ending up poorer than their parents.”
Across the advanced world, about one-third of households bucked the trend. Those households varied across countries. In the U.K., for instance, the poorest 30% of households advanced. In the Netherlands, the poorest 10% and top 20% advanced. In Italy, households across the income spectrum lost ground.
In the U.S., households from the 80th to 95th percentile gained, underscoring the extent to which America’s upper middle class has thrived. Households from the 60th to 80th percentile were little changed. Households in the bottom 60% lost ground, as did those at the very top. To be sure, these households earn dramatically more than those at the median, but most of those gains occurred before the recession, and hadn’t been fully regained as of 2014 by this measure.
Governments in most advanced countries have cushioned the declines, at least in part. When measured in terms of disposable incomes, after taxes and transfers, disposable incomes were lower for only 20% to 25% of households.
With slow economic growth, and potential disruptions from the aging of the workforce and workplace automation, McKinsey cautioned these trends could continue in the decade ahead, and that most households in advanced economies could experience another a decade of stagnation.
NICHOLAS CONFESSORE JULY 13, 2016
A Donald J. Trump rally last week in Raleigh, N.C. Mr. Trump is voicing the bewilderment and anger of whites who do not feel at all powerful or privileged
The chant erupts in a college auditorium in Washington, as admirers of a conservative internet personality shout down a black protester. It echoes around the gym of a central Iowa high school, as white students taunt the Hispanic fans and players of a rival team. It is hollered by a lone motorcyclist, as he tears out of a Kansas gas station after an argument with a Hispanic man and his Muslim friend.
In countless collisions of color and creed, Donald J. Trump’s name evokes an easily understood message of racial hostility. Defying modern conventions of political civility and language, Mr. Trump has breached the boundaries that have long constrained Americans’ public discussion of race.
Mr. Trump has attacked Mexicans as criminals. He has called for a ban on Muslim immigrants. He has wondered aloud why the United States is not “letting people in from Europe.”
His rallies vibrate with grievances that might otherwise be expressed in private: about “political correctness,” about the ranch house down the street overcrowded with day laborers, and about who is really to blame for the death of a black teenager in Ferguson, Mo. In a country where the wealthiest and most influential citizens are still mostly white, Mr. Trump is voicing the bewilderment and anger of whites who do not feel at all powerful or privileged.
But in doing so, Mr. Trump has also opened the door to assertions of white identity and resentment in a way not seen so broadly in American culture in over half a century, according to those who track patterns of racial tension and antagonism in American life.
Dozens of interviews — with ardent Trump supporters and curious students, avowed white nationalists, and scholars who study the interplay of race and rhetoric — suggest that the passions aroused and channeled by Mr. Trump take many forms, from earnest if muddled rebellion to deeper and more elaborate bigotry.
On campuses clenched by unforgiving debates over language and inclusion, some students embrace Mr. Trump as a way of rebelling against the intricate rules surrounding privilege and microaggression, and provoking the keepers of those rules.
Among older whites unsettled by new Spanish-speaking neighbors, or suspicious of the faith claimed by their country’s most bitter enemies, his name is a call to arms.
On the internet, Mr. Trump is invoked by anonymous followers brandishing stark expressions of hate and anti-Semitism, surprisingly amplified this month when Mr. Trump tweeted a graphic depicting Hillary Clinton’s face with piles of cash and a six-pointed star that many viewed as a Star of David.
“I think what we really find troubling is the mainstreaming of these really offensive ideas,” said Jonathan Greenblatt, the national director of the Anti-Defamation League, which tracks hate groups. “It’s allowed some of the worst ideas into the public conversation in ways we haven’t seen anything like in recent memory.”
Mr. Trump declined to be interviewed for this article, and his spokesman declined to comment.
Outside a former aircraft factory in Bethpage, N.Y., not far from a strip of halal butchers and Indian restaurants now known as Little India, a Long Island housewife who gave her name as Kathy Reb finished a cigarette on a spring evening. Nervously, she explained how she had watched the complexion of her suburb outside New York City change. “Everyone’s sticking together in their groups,” she said, “so white people have to, too.”
The resentment among whites feels both old and distinctly of this moment. It is shaped by the reality of demographic change, by a decade and a half of war in the Middle East, and by unease with the newly confident and confrontational activism of young blacks furious over police violence. It is mingled with patriotism, pride, fear and a sense that an America without them at its center is not really America anymore.
In the months since Mr. Trump began his campaign, the percentage of Americans who say race relations are worsening has increased, reaching nearly half in an April poll by CBS News. The sharpest rise was among Republicans: Sixty percent said race relations were getting worse.
And Mr. Trump’s rise is shifting the country’s racial discourse just as the millennial generation comes fully of age, more and more distant from the horrors of the Holocaust, or the government-sanctioned racism of Jim Crow.
Some are elated by the turn. In making the explicit assertion of white identity and grievance more widespread, Mr. Trump has galvanized the otherwise marginal world of avowed white nationalists and self-described “race realists.” They hail him as a fellow traveler who has driven millions of white Americans toward an intuitive embrace of their ideals: that race should matter as much to white people as it does to everyone else. He has freed Americans, those activists say, to say what they really believe.
“The discussion that white Americans never want to have is this question of identity — who are we?” said Richard Spencer, 38, a writer and an activist whose Montana-based nonprofit is dedicated to “the heritage, identity and future of people of European descent” in the United States. “He is bringing identity politics for white people into the public sphere in a way no one has.”
Another Republican once sounded alarms about globalization, unchecked immigration and the looming obsolescence of European-American culture. But in two bids for the Republican nomination, that candidate, Patrick J. Buchanan, won a total of four states. Mr. Trump won 37.
Mr. Buchanan’s 1992 and 1996 campaigns were dismissed as a political and intellectual dead end for Republicans.
“I said, ‘Look, we’re the white party,’” Mr. Buchanan said in an interview from his Virginia home, recalling his attacks on multiculturalism and non-European immigration. “‘If this continues, we’re going the way of the Whigs.’ Everyone said, ‘That’s a terrible thing to say.’”
Mr. Buchanan was campaigning against a backdrop of overwhelming white political and cultural dominance in America. But in the years that followed, the number of immigrants living in the United States illegally would double and then triple, before leveling off under the Obama administration around 11 million. Deindustrialization, driven in part by global trade, would devastate the economic fortunes of white men accustomed to making a decent living without a college degree.
Patrick J. Buchanan in 1995
Demographers began to speak of a not-too-distant future when non-Hispanic whites would be a minority of the American population. In states like Texas and California, and in hundreds of cities and counties around the country, that future has arrived.
“It is the changes that are taking place that have created the national constituency for Donald Trump,” Mr. Buchanan said.
For many Americans, President Obama’s election, made possible in part by the rising strength of nonwhite voters, signaled a transcendent moment in the country’s knotty racial history. But for some whites, the election of the country’s first black president was also a powerful symbol of their declining pre-eminence in American society.
Work by Michael I. Norton, a professor at Harvard Business School, suggests that whites have come to see anti-white bias as more prevalent than anti-black bias, and that they think further black progress is coming at their expense. On talk radio and Fox News, complaints about bigotry are routinely dismissed as a mere hustle — blacks “playing the race card” or being racist themselves. And during Mr. Obama’s presidency, whites have increasingly seen his policies as freighted with preference toward blacks, according to data collected by Michael Tesler, a political scientist at the University of California, Irvine.
Mr. Tesler used polling questions about the causes and depth of racial inequality — such as whether blacks suffer greater poverty because of discrimination or lack of effort — to classify people as either “racial conservatives” or “racial liberals.” During Mr. Obama’s two terms, Mr. Tesler found, racial liberals accelerated their migration to the Democratic Party. As the 2016 campaign began, the Republican Party was not just the party of most white voters. It was also, to use Mr. Tesler’s phrase, the party of racial conservatism.
Few politicians were better prepared than Mr. Trump to harness these shifts. While open racism against blacks remains among the most powerful taboos in American politics, Americans feel more free expressing worries about illegal immigrants and dislike of Islam, survey research shows. In Mr. Trump’s hands, the two ideas merged: During Mr. Obama’s presidency, he has become America’s most prominent “birther,” loudly questioning Mr. Obama’s American citizenship and suggesting he could be Muslim.
When Mr. Obama ran for re-election, few Americans said they disapproved of him because of his race. But they were comfortable citing his supposed religion. In 2012, according to surveys conducted for the Cooperative Congressional Election Study, a majority of Mitt Romney’s voters said Mr. Obama’s religion made them less likely to vote for him. Almost all of these voters believed he was not Christian, an opinion that closely correlated with conservative racial attitudes found in Mr. Tesler’s research.
Mr. Trump “is speaking an anti-other message — that Obama’s foreign, which is mixed in with being black, and perceptions that he is Muslim,” Mr. Tesler said. “It is a catchall for expressing ethnocentric opposition to Obama, without saying you’re against him because he’s black.”
A Vague Refrain: ‘I Disavow’
In June 2015, two weeks after Mr. Trump entered the presidential race, he received an endorsement that would end most campaigns: The Daily Stormer embraced his candidacy.
Founded in 2013 by a neo-Nazi named Andrew Anglin, The Daily Stormer is among the most prominent online gathering places for white nationalists and anti-Semites, with sections devoted to “The Jewish Problem” and “Race War.” Mr. Anglin, 31, explained that although he had some disagreements with him, Mr. Trump was the only candidate willing to speak the truth about Mexicans.
“Trump is willing to say what most Americans think: It’s time to deport these people,” Mr. Anglin wrote. “He is also willing to call them out as criminal rapists, murderers and drug dealers.”
Mr. Trump’s campaign electrified the world of white nationalists. They had long been absent from mainstream politics, taking refuge at obscure conferences and in largely anonymous havens online. Most believed that the Republican Party had been subverted and captured by liberal racial dictums.
Many in this new generation of nationalists shun the trappings of old-fashioned white supremacy, appropriating the language of multiculturalism to recast themselves as white analogues to La Raza and other civil rights organizations. They call themselves “race realists” or “identitarians” — conservatives for whom racial heritage is more important than ideology.
But across this spectrum, in Mr. Trump’s descriptions of immigrants as vectors of disease, violent crime and social decay, they heard their own dialect.
Mr. Spencer, a popular figure in the white nationalist world, said he did not believe that Mr. Trump subscribed to his entire worldview. But he was struck that Mr. Trump seemed to understand and echo many of his group’s ideas intuitively, and take them to a broader audience.
“I don’t think he has thought through this issue in a way that I and a number of people have,” Mr. Spencer said. “I think he is reacting to the feeling that he has lost his country.”
Richard Spencer, a white nationalist in Montana, said Mr. Trump was “bringing identity politics for white people into the public sphere in a way no one has.”
This year, for the first time in decades, overt white nationalism re-entered national politics. In Iowa, a new “super PAC” paid for pro-Trump robocalls featuring Jared Taylor, a self-described race realist, and William Johnson, a white nationalist and the chairman of the American Freedom Party. (“We don’t need Muslims,” Mr. Taylor urged recipients of the calls. “We need smart, well-educated white people who will assimilate to our culture. Vote Trump.”) David Duke, the Louisiana lawmaker turned anti-Semitic radio host, encouraged listeners to vote for Mr. Trump.
Modern political convention dictates that candidates receiving such embraces instantly and publicly spurn them. In 2008, when it was revealed that a minister who endorsed the Republican nominee, Senator John McCain, had made anti-Semitic and anti-Muslim remarks, Mr. McCain forcefully repudiated them.
Mr. Trump did something different
Asked about the robocall, Mr. Trump seemed to sympathize with its message while affecting a vague half-distance. “Nothing in this country shocks me; I would disavow it, but nothing in this country shocks me,” Mr. Trump told a CNN anchor. “People are angry.”
Pressed, Mr. Trump grew irritable, saying: “How many times you want me to say it? I said, ‘I disavow.’”
Asked six weeks later about Mr. Duke’s support, he said he had been unaware of it: “David Duke endorsed me? O.K. All right. I disavow, O.K.?” Later, on Twitter, he repeated the phrase: “I disavow.”
Mr. Trump has often used those words when confronted by reporters. The phrase is comfortingly nonspecific, a disavowal of everything and nothing. And whatever Mr. Trump’s intentions, it has been powerfully reassuring to people on the far right.
“There’s no direct object there,” Mr. Spencer said. “It’s kind of interesting, isn’t it?”
Mr. Trump’s new supporters took his approach as a signal of support. In an interview on a “pro-white” radio show called “The Political Cesspool,” Mr. Johnson, of the American Freedom Party, praised Mr. Trump’s handling of the controversy.
“He disavowed us,” Mr. Johnson acknowledged, “but he explained why there is so much anger in America that I couldn’t have asked for a better approach from him.”
Mr. Taylor, who has written that blacks “left entirely to their own devices” are incapable of civilization, and whose magazine, American Renaissance, once published an essay arguing that blacks were genetically more prone to crime, wrote on his blog that Mr. Trump had handled the attacks on him “in the nicest way.”
Like others in his world, Mr. Taylor does not know if Mr. Trump agrees with him on everything. In an interview, he suggested that it did not really matter, and that Mr. Trump was expressing the discomfort many white people felt about other races.
“Ordinary white people don’t want the neighborhood to turn Mexican,” Mr. Taylor said, adding, “They just realize that large numbers of Mexicans will change the neighborhood in ways they don’t like.”
Jared Taylor, a self-described race realist, made robocalls urging Iowa voters to support Mr. Trump
At a Trump rally last month in Richmond, Va., as at most Trump rallies, the audience was mostly white men. They strolled by police barricades in work boots or pressed khakis, grinning at a ragtag assortment of protesters nearby. In interviews, they complained about the Mexican flags brandished outside Trump events and wondered why the government was paying to fix up Section 8 houses for people with late-model iPhones. They recounted Hispanic co-workers mocking them.
“They’ll tell you straight to your face, ‘This is our country now — no more gringos!’” said Nick Conrad, a sheet metal worker who wore a “Hillary Clinton for Prison” T-shirt and wraparound sunglasses. “They’re not in it for our culture. They’re not here to assimilate.”
Mr. Conrad shrugged.
“He says what everyone thinks,” Mr. Conrad said of Mr. Trump. “He says what we’re all thinking. He’s bringing people together. We say, ‘Hey, that’s right; we can say this.’”
Retweets and Repercussions
Mr. Trump dismisses those who accuse him of embracing or enabling racism. “I’m the least racist person,” he declared in December in an interview with CNN.
But on the flatlands of social media, the border between Mr. Trump and white supremacists easily blurs. He has retweeted supportive messages from racist or nationalist Twitter accounts to his nine million followers. Last fall, he retweeted a graphic with fictitious crime statistics claiming that 81 percent of white homicide victims in 2015 were killed by blacks. (No such statistic was available for 2015 at the time; the actual figure for 2014 was 15 percent, according to the F.B.I.)
In January and February he retweeted messages from a user with the handle @WhiteGenocideTM, whose profile picture is of George Lincoln Rockwell, the founder of the American Nazi Party. A couple of days later, in quick succession, he retweeted two more accounts featuring white nationalist or Nazi themes. Mr. Trump deleted one of the retweets, but white supremacists saw more than a twitch of the thumb. “Our Glorious Leader and ULTIMATE SAVIOR has gone full wink-wink-wink to his most aggressive supporters,” Mr. Anglin wrote on The Daily Stormer.
In fact, Mr. Trump’s Twitter presence is tightly interwoven with hordes of mostly anonymous accounts trafficking in racist and anti-Semitic attacks. When Little Bird, a social media data mining company, analyzed a week of Mr. Trump’s Twitter activity, it found that almost 30 percent of the accounts Mr. Trump retweeted in turn followed one or more of 50 popular self-identified white nationalist accounts.
At times, a circular current seems to flow between white nationalists and Mr. Trump on Twitter. Criticized for his recent message about Mrs. Clinton, Mr. Trump insisted that no allusion to Jews was intended and denounced reporters for drawing the connection. Mr. Trump’s social media director said in a statement that he had “lifted” the image from an anti-Clinton Twitter feed where “countless images appear.” Among them, it turned out, was a series of photos of Mrs. Clinton’s head arranged in the shape of a swastika.
The original image was later traced by Mic, an online magazine aimed at younger readers, to the politics section of 8chan, a message board ridden with anti-Semitic memes and racist images. There and on other message boards, such as 4chan and Reddit, Mr. Trump’s attacks on political correctness and illegal immigration resonate with a broader audience. Some claim membership in the “alt-right,” a loose and contested term that can encompass white nationalists, anti-immigration conservatives and anonymous trolls whose taunts are laced with GIFs and obscure internet slang.
Mr. Trump has denied accusations that a graphic he posted this month on Twitter contained anti-Semitic imagery.
After Mr. Trump attacked a profile of his wife, Melania, in GQ, the article’s author, the journalist Julia Ioffe, who is Jewish, was inundated with anti-Semitic abuse on social media, including a cartoon depicting Ms. Ioffe in a concentration camp.
Asked whether he condemned the attacks, Mr. Trump told an interviewer: “I don’t have a message to the fans. A woman wrote an article that’s inaccurate.”
Resonating on Campuses
Mr. Trump’s influence is playing out perhaps most vividly on college campuses, an otherwise deeply liberal redoubt where young people grapple openly and frenetically with their own race and identity.
For a generation weaned on a diet of civic multiculturalism, supporting Mr. Trump breaks the ultimate taboo. Students writing Mr. Trump’s name and slogans in chalk have been accused of hate crimes and spurred calls for censorship. And on campuses frozen by unyielding political correctness and expanding definitions of impermissible speech, some welcome the provocation that Mr. Trump provides.
Three days after a gunman claiming allegiance to the Islamic State killed 49 people in a gay club in Orlando, Fla., a crowd of college students gathered two blocks from the site of the massacre. They wore Trump hats or T-shirts and chanted, “Build that wall.” They cracked jokes about trigger warnings or whether the sidewalk counted as a safe space.
A few minutes later, a black S.U.V. pulled up, delivering Milo Yiannopoulos, a 30-something gay conservative raised in London and now a minor celebrity among the alt-right.
Since 2014, Mr. Yiannopoulos has toured college campuses in the United States and England, staging a performance that is equal parts spectacle and stump speech. Mr. Yiannopoulos dismisses statistics on campus rape as an official fiction and favors the slogan “Feminism is a cancer.”
His barbs are directed chiefly at liberals, feminists and Black Lives Matter activists, all of whom routinely show up to protest or disrupt his speeches. His followers film these confrontations and share them enthusiastically on YouTube and Facebook. In one video, Mr. Yiannopoulos arrives at a speech on a sedan chair carried by several young men wearing Trump hats.
“I knew I could have fun on campuses because they are so uptight and they are so ruled by the people I don’t like,” said Mr. Yiannopoulos, who considers himself a “free-speech fundamentalist.” He added, “Less cynically, they’re an important battleground.”
Shortly after the shooting, Mr. Yiannopoulos announced plans to speak at the University of Central Florida in Orlando. The university canceled his appearance, first citing a shortage of security personnel and then claiming that no suitable space was available on the 1,415-acre campus. Instead, Mr. Yiannopoulos spoke near the nightclub.
He stood just feet from the network television encampments, though none had sent cameras or reporters to cover him. Wearing a dark pinstriped suit under the unrelenting Florida sun, he warned of a gathering menace from Muslim immigrants, sprinkling his speech with anecdotes about sexual assaults in Germany and gender-segregated swimming pools.
In Mr. Yiannopoulos’s telling, liberals were dupes and hypocrites, so blinded by glib multiculturalism that they could not even admit how dangerous Islam was to gay people, like the victims of the Orlando massacre. To cheers and whoops, he praised Mr. Trump’s plan to bar Muslims from entering the country.
Afterward, fans lined up to get his autograph. Most seemed to be Trump supporters, but not all were conservative. Several described themselves as socially liberal or libertarian. A few said they just wanted to hear what Mr. Yiannopoulos had to say.
Milo Yiannopoulos, right, spoke to supporters last month in Orlando, Fla., near the site of the Pulse nightclub shooting. Mr. Yiannopoulos tours college campuses, denouncing liberals, feminists and Black Lives Matter activists, among others
“The setup of U.C.F. has very few places where people are allowed to speak,” said Allen Greathouse, a slender 20-year-old from Melbourne, Fla. “You can only speak in the free-speech zones.”
Another student, Simon Dickerman, said he was voting for Mr. Trump. He volunteered that he frequently visited 4chan, an online message board where users compete with one another to post ever more provocative content, from Nazi shorthand to racist cartoons.
Mr. Dickerman said he understood why such images bothered some older people, though they carried little such charge to him and his friends.
“Of course they don’t actually want Jews to die,” Mr. Dickerman said. “They want to shock.” His peers, he added, “are kids who don’t really know about the Holocaust.”
“And they don’t care about history,” he said. “And some of them think it’s funny.”