The U.S. has the highest GDP per capita among major countries and this trend is increasing, yet many Americans think the country is in a period of economic decline.Peter Morgan/The Associated Press
When the rest of the world looks at the American economy, they see a remarkable story of dynamism, innovation and outperformance. The United States has the highest gross domestic product per capita among major countries, and its lead is growing.
But when Americans – particularly tens of millions of blue-collar and middle-class folks – are asked to describe that same economy, they tell a different story. Instead of seeing the U.S. as an outlier of success, they experience it as something closer to the opposite. They think the country has long been in decline or stagnation, and their lives with it.
That’s why the choice at the top of the ballot in November is between protectionist Donald Trump and protectionist Kamala Harris.
It’s a paradox: How can the U.S. economy look so good from the outside, while generating so much disappointment for those inside it? Further paradox: Both views are right.
I spent the past couple of days at what was billed as Canada’s Productivity Summit, hosted by the University of Calgary’s School of Public Policy. Some of the best minds in politics, economics and business came together to talk about the wide and growing gap between Canadian and U.S. economic output. That gap is not a matter of perception. It is all too real.
Back in 1990, U.S. economic output per person was about 20 per cent higher than Canada. That was stable until the mid-2010s, according to data from the World Bank. But by 2019, per person GDP down south was roughly 30 per cent higher than up here. By 2023, the World Bank put the gap at 33 per cent, and growing.
It’s a similar story for European economies. U.S. per capita GDP was 12 per cent ahead of Germany in 2019, but by last year the gap had risen to 18 per cent.
According to the U.S.-based Conference Board, GDP per hour produced by the average Canadian worker has slumped to just 73 per cent of the U.S. level.
You’d think the happiest voters on the planet would be Americans. But as we know, the American voter is not happy. They’re furious. What’s going on?
Let’s start with what GDP per capita means. It’s total output, divided by population. It’s an average. It’s not an actual representation of how big or small a slice of economic pie anyone is getting.
Put Jeff Bezos in a room with 99 homeless people and divide the room’s total wealth by 100, and on average everyone is a billionaire.
The U.S. has more economic pie, but also a particularly unequal distribution of slices. The average U.S. worker may be producing nearly 40 per cent more per hour than the average Canadian, but that doesn’t mean the person working a low-wage job in the U.S. is making 40 per cent more. If anything, he may be making less.
What’s more, that low- and middle-income American may experience more job and life insecurity than her European or Canadian counterparts. She’s less likely to be unionized, easier to fire, has few or no job benefits, and may have limited or insecure health insurance, or none at all. Average American workers also get little to no paid vacation days or sick days.
The average American lives several years less than their counterparts in Europe and Canada. Even as the U.S. was sprinting ahead economically, average American life expectancy was steadily falling.
The rest of the world looks at the U.S. and sees a dynamic economic-growth machine – and that’s true. But what many U.S. voters see, particularly those without a college degree, is that they appear to be less well-off than their parents, or the overall economy. And that’s also true.
Now for the final paradox.
The U.S. has been a big winner in the modern economy, and mostly a winner from global free trade. There are problems with the system – China should never have been allowed into the World Trade Organization – but free trade is a machine that generates wealth.
But while free trade is a net positive overall, its benefits aren’t necessarily distributed equally. The same goes for free markets generally. Creative destruction includes destruction. There can be winners and losers. All boats have not been lifted equally over the past 40 years.
A logical response to all this would be for the U.S. to keep the gains from free trade, and use some of them to fund making life better for those who sometimes end up on the short end of the economic stick. I’m talking about a proper safety net, with everything from universal health care to higher minimum wages.
Instead, Democrats and Republicans alike are focused on fixing the problem by fostering more high-wage blue-collar jobs, through industrial subsidies and tariffs. For Democrats, the answer to millions of American suffering from a quality-of-life crisis is partly about protectionism. For Mr. Trump, it’s almost entirely about protectionism.
Protectionism may increase the size of the slice of pie going to a limited number of workers (and shareholders!) in targeted industries. But over all, it will make the pie smaller for Americans and America’s trading partners. Especially Canada, the economy most closely integrated with the U.S.