Interview: K-shaped economy shows U.S. politics' neglect of bottom tier, says expert

For Peter Atwater, the economist who popularized the term during the COVID-19 pandemic, the K-shaped economy reflects not just an economic pattern but a much deeper social rupture. "What really troubled me was the disparity in confidence between those at the top and those at the bottom," he told Xinhua in a recent exclusive interview.

by Zhao Xiaona, Larry Neild

LONDON, Jan. 14 (Xinhua) -- The term "K-shaped economy" has become widely used to describe the growing divide in U.S. society, where some groups and industries continue to accumulate wealth and opportunities while many others struggle with stagnant wages, job insecurity and rising living costs.

For Peter Atwater, the economist who popularized the term during the COVID-19 pandemic, the K-shaped economy reflects not just an economic pattern but a much deeper social rupture. "What really troubled me was the disparity in confidence between those at the top and those at the bottom," he told Xinhua in a recent exclusive interview.

Atwater, an adjunct professor at the College of William & Mary, said the concept reflects "the extraordinary divide politically, socially, ethnically and economically between those at the top and those at the bottom."

Although inequality itself is not new, he said, what makes today's situation more dangerous is that the pathway upward is disappearing. "The ladder between the bottom and the top has lost rungs -- if not disappeared altogether."

In the current U.S. economy, the rewards of being large, wealthy or technologically dominant have grown dramatically, while the ability of ordinary people to move up has weakened, he said.

Atwater linked this pattern to the concentration of financial wealth, technology's bias toward scale and capital, and a growing generational divide in asset ownership. Older Americans tend to hold property and financial assets, while younger and lower-income groups increasingly rely on renting and borrowing, making it harder to build financial security.

The persistence of the K-shaped economy is closely tied to political choices, Atwater said. "What we're seeing in terms of policy is a growing either ignorance or lack of interest in addressing the plight of those at the bottom, and at the same time focusing really on the interests of those at the top."

He said that U.S. policymaking has become insulated within an elite "echo chamber," in which political and financial leaders primarily speak to one another while losing sight of the experiences of ordinary workers. As a result, economic growth increasingly benefits capital owners and large corporations rather than people who rely on wages.

Atwater further said the effects of the K-shaped economy now extend well beyond income disparities: Poverty, labor-market fragmentation and industrial decline are already visible, but social and political consequences are becoming more pronounced.

"It's not surprising that at a time when the term the K-shaped economy is popular, we see a lot of focus on affordability," he said. As housing, healthcare and everyday expenses become harder to afford, political reactions have intensified. Atwater noted that the election of more radical figures in major U.S. cities and the spread of wealth tax proposals reflect growing frustration with extreme inequality.

The economist warned that prolonged polarization could lead to policies aimed at punishing wealth rather than restoring opportunity, potentially undermining investment and long-term growth.

He said he is particularly struck by the "mounting hopelessness" of young Americans. "Those who are now just entering the workforce are quite pessimistic about their opportunities," he said, adding that history has a stark lesson to teach: "Ultimately, revolution is led by the young with nothing to lose."

For Atwater, the widespread use of the term "K-shaped economy" is itself a warning sign. The question now is how the divide will close. "Is it the bottom rising up, or is it the top falling to the bottom?"

From a global perspective, Atwater said the pandemic exposed the deep interdependence of global economies, prompting many governments to shift from global integration to self-sufficiency. This shift, combined with rising costs and persistent inflation, disproportionately affected those at the bottom of the economic spectrum, reinforcing the K-shaped divide.

"When confidence is low, we develop zero-sum thinking. We believe that others have somehow benefited at our expense," he said. In such an environment, nationalism and protectionism gain strength, and those policies, in turn, raise costs and reduce opportunity, feeding back into the K-shaped economy.

"We have just come off a period of extraordinary globalization and interdependence," Atwater said. "As that pendulum swings, we need to be cognizant of the shortcomings of isolationism and mounting nationalism."■