Economy

What This Cute Elephant Says About the 2016 Election

Below is a chart that bears an uncanny resemblance to your average elephant. Behind the cute image, however, is a story of globalization that might explain a central feature of the 2016 election.

The so-called "elephant graph" shows the global income growth for every percentile from 1988 to 2008. With the exception of people in the 75-90th percentile — "basically poor people in rich countries," NewsCo Shift's Kaila Colbin writes — incomes rose steadily for people around the world. If you're wondering why working class people in the United States might be skeptical about the benefits of the global economy, that dip in the elephant's trunk where incomes aren't growing helps to explain it.

As N. Gregory Mankiw wrote in The New York Times in July, economists are far more likely than the average American worker to see global trade deals in a positive light. For example, a 2014 IGM Economic Experts Panel poll found that 0 percent of respondents disagreed that trade deals helped most Americans. Conversely, a recent NYT-CBS News poll found that "only 35 percent of registered voters thought the United States gained from globalization, while 55 percent thought it lost."

The disconnect could be explained by looking at three main points on the elephant graph.

  1. The top of the trunk: People in the "global 1 percent" saw their incomes rise 60 percent over the 20-year span, which has fueled frustrations over widening income inequality on the left and on the right.
  2. The top of the head: Here we have people in the 50-60th percentile — mostly people in China and India whose incomes increased as a result of industrialization and global trade deals. This group isn't getting rich or making nearly as much as low-wage workers in America, for example, but they're doing well compared to earlier generations of their family.
  3. The base of the trunk: As noted above, those in the 75-90th percentile actually saw their incomes stagnate (or even decrease) over time. In that context, it makes sense that they'd express skepticism about the impact of globalization in America. After all, they're basically the only group that hasn't seen any demonstrable perks from global trade deals — and that's why the issue has been invoked by low-income Americans, including those who support Donald Trump and Bernie Sanders.

One of the reasons that economists say globalization helps America is because it has boosted high-level metrics like GDP and productivity. But while economic conditions have steadily improved from a high-level standpoint, the same can't be said for the average worker who has watched their income stagnate (or decline) since the 1980s, as Andrew McAfee of MIT's Initiative on Digital Economy explained in a 2012 blog post:

In the early 1980s the picture started to change for the average American worker. There were still a lot of jobs available, but they started to pay less well. Median household income became decoupled from the other three stats and grew more slowly than they did. By the time of the 2001 recession, median income was lagging behind pretty badly.

Here's how Colbin sums up the impact of that de-coupling:

"This is the hollowing out of the American middle class," Colbin writes. "This is the shift from labor to capital. And this, I believe, is the source of a significant amount of global discontent: where phenomena like Brexit and Sanders and Trump find fertile ground."

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