Really? In the 1970's in the US it was possible to own a house and support a family of 4 on a single income in the manufacturing sector. It was also possible to work your way through college and exit with a degree and no debt, in a job market which made that worth it.
Yes global poverty has decreased, but the material standard of living has decreased for most people in the working class in the developed world, while wealth has skyrocketed for a select lucky few.
It's more complex than saying "everyone is made richer" - it seems what has happened is that a few people have been made much richer, and everyone else is somehow equalizing somewhere closer to the bottom.
Who told you that? Both inflation adjusted median personal and household income have increased by double digit percentages over the past 50 years. In the case of household incomes that still happened even with the shrinking average household size (i.e. number of people in a household).
What he said isn't controversial for most academics studying this.
https://en.wikipedia.org/wiki/The_Two-Income_Trap
https://medium.com/@6pranavk/insight-of-the-day-cost-disease...
AC & Dishwashers are also only a few thousand dollars of value, mostly on the AC side. The rest are relatively luxury items.
And low end AC & Dishwashers can be had for only a few thousand dollars NOW. Back in the 70s the cheapest ones were still expensive enough to require an upper middle class income.
They're not. Home ownership is currently at about the same level it was in the 90's, declining from a boom in the 2000's driven by sub-prime lending, but if you look at generational differences, everyone younger than baby boomers is basically owning homes at much lower rates.
https://journal.firsttuesday.us/bad-news-for-tomorrows-homeo...
https://www.census.gov/housing/hvs/files/currenthvspress.pdf
So why is the average home size nearly double the size in the 70s?
Want to compare to 1970? Then live with those restrictions and you'll probably have enough money to pay for insurance, college, etc.
Large TVs in 2020 cost just as much as small TVs did in the 70s (if not less), adding air bags to a car costs mere hundreds of dollars, and is ammortized over 20 years, and cancelling your phone plan is not going to let you support a family of four on a single blue-collar income. Shit, cancelling your phone plan won't even compensate for the annual growth in your health insurance premiums - which is something that compounds every year.
TVs are an example of the plethora of technology that most homes have. From microwaves to air conditioners to cell phones...
"Canceling one thing isn't going to support your family" Which is why I didn't mention one thing... I mentioned a handful of things. A host of "modern conveniences" that add up.
Education, health insurance and other things cost more? Those are also things that the government has stepped in to make more affordable as well... which is a massive topic in of itself.
My main point stands... quality of life and cost of life has risen with hundreds of costs that add up (a mere 100 for an air bag... a mere couple bucks a month for data on your phone... a mere 5 for text messages... a mere 100 for a microwave... etc.etc.etc.etc).
Remove all the "extra" stuff that's standard today compared to 50 years ago and even with outliers (IE Health Insurance), you'll still be much closer to being able to afford the same quality of life as "way back then".
So, inflation as calculated on a basket of goods divorced from living expenses gives inaccurate comparisons. Yes wholesale food prices for example got really cheap, but overall food is still a significant fraction of people’s budgets.
This may have something to do with the fact that the cost of housing has risen drastically as compared to median income over the past few decades[2]
While the cost of education has also more than doubled for men, and increased by 20% for women relative to median income (despite a 73% increase in median income for women) since the 70's[3]
Yes income is increasing, but the costs for the markers of a middle-class existence are increasing much faster.
[1]https://www.marketwatch.com/story/this-depressing-chart-show...
[2]https://www.longtermtrends.net/home-price-median-annual-inco...
[3]https://college-education.procon.org/median-incomes-v-averag...
Your point stands tho.
Basically everywhere that wasn't the US and Canada (excluding Pearl Harbor).
For the US it was a huge shock, for a country like Poland it was Tuesday.
https://en.wikipedia.org/wiki/September_1939#September_1,_19...
I'll be honest and say I didn't even know the origin of the quote :-))
Modern expectations mean that this isn't what people think it is. You also owned one car per family in the '70s; new houses often have to build two parking spaces. Housing prices were held down because public housing was still being built; today it's unmaintained and often torn down. Old houses were built on small lots; suburbs today require a quarter-acre. Colleges received way more public funding as a proportion of their income than they do today, and enrollment was lower.
Housing has gone from subsidized to restricted and college has gone from subsidized to free-market while demand keeps rising. It's not surprising that the price increased. (And the protectionism lobby is now also the anti-housing lobby!)
Here is a Brookings report that explores whether global trade has directly contributed to worsening income inequality: https://www.brookings.edu/articles/worsening-american-income...
This is more of a feature of the transition from a Bretton Woods/Treasury/politics-based monetary policy to neoliberal/central bank/finance-based one no? At 10% inflation, the creditors just ate most of your mortgage debt regardless of whether you worked in manufacturing or not.
Since the 1970s, physical house size has increased from around 1600 sq.ft to around 2600 sq.ft. At the same time, house occupants has dropped from about 3 to about 2.5 [0]. In addition to that, the building requirements and safety features have increased costs significantly per square foot.
Average house price in 1975 was around 42k [1]. That is a little over 200k in 2020 dollars [2]. Doing some math with 200k/1600 vs 380k/2600 gives $125/sq.ft and $146/sq.ft or roughly a 14% increase in relative cost. In 1975, median income was around 12k [3] while median income in 2018 was around 63k [4]. (EDIT: I'd note that I'm being generous as home prices dropped significantly this year and I went with the higher numbers)
SHOCK!!!!
An average house in 1975 is 16.5x the yearly income while an average house in 2020 is only 6x yearly income despite being 40% bigger and 15% less occupied while being safer to live in as well.
I'll give you college debt, but for all the wrong reasons. The government artificially incentivizes bad loans. They insist that kids CAN'T get that 380k house loan (even though the house is collateral), but also insist that kids CAN get that same 380k for a piece of (often useless) paper without any collateral backing. Get rid of the stupid laws and you'll watch that problem go away all by itself. Get rid of the pressure to have a degree to sweep floors and you'll watch college prices fall even faster.
[0] https://www.aei.org/carpe-diem/new-us-homes-today-are-1000-s...
[1] https://fred.stlouisfed.org/series/ASPUS
[2] https://www.usinflationcalculator.com/
[3] https://www2.census.gov/prod2/popscan/p60-104.pdf]
[4] https://www.census.gov/library/stories/2019/09/us-median-hou...
As a side-note, lately I've been curious about what's actually been driving the cost of higher education. I know it's often cited as "administrative costs", but what does that actually mean? Where does the money actually go?
If you're asking about tuition? A few places.
Marketing, sports stadiums, student services (Counselling, mental health, etc), bureaucratic waste (Middle managers overseeing operations people), overbuilt facilities that serve no pedagogical value (Stained glass windows and large, pretty university grounds don't maintain themselves).
But that's just the half of it. In addition to tuition, most universities force you to pay for room and board, by living on-campus. Those fees go into paying for overpriced, poor-quality catered food, and overpriced dorm rooms.
I had 28k in margin interest last year, 100% deductible.
US is greatly skewed to the rich
The problem isn't with the "Single Income" part.
It is with the "cost" of hosting and medical care.
The world in general has a huge incentive in driving up asset prices. And Housing is one of the biggest asset.( Correct me if it is not the biggest ) And rent is the biggest expenses in living cost.
What needs to be done is fixing housing prices / supply.
"We" (the US) still lives in a violent world, or at the very least a slow, soft violent world where soft power might cut us off from Taiwan.
I find the fact that one half of the "techno-elite" crowd thinks that giving up on hard problems is a long term feasible position. We must be able to manufacture and produce the absolute best fundamental technologies from a strategic standpoint, even if it isn't a core, market efficient concern.
The rest of the world is modernizing, dealing with modern problems (disease spread, high end technical manufacturing, green technology), and we can't even get out of our own way. Frustrating.
I fear as a country we are not capable of that type of thing any more and I am not only frustrated, I'm saddened.
BTW if anyone has any examples of more recent (post-2016) successes of a similar magnitude and impressiveness, I could definitely use a mood boost.
It's hard to assign an achievement to a specific country unless it's a government project.
I'm not a Tesla fanboy, but Tesla is an American company.
Also historically speaking, America (compared to some other governments and policy bodies in the world) doesn't generally over regulate or adopt policies on young industries. This is generally in the spirit of not quashing broad innovation too early.
To your point though, we are indeed struggling with modern problems. Many of our modern problems though are partially due to modern marvels. I for one am optimistic we will make progress in some of these areas.
Don't get me wrong, I understand the cynicism here. There is no perfect system, but I just don't know of one that has empirically produced better results. Certainly not socialism or communism.
War. Wartime has always been a fantastic generator of innovation. It unfortunately destroys mass amounts of capital and kills and wounds many people in the process.
> wealth, and prosperity
Charity and taxpayer-funded government investment. The Marhshall Plan dramatically improved the prosperity and efficiency of much of Europe and was paid for by US taxes. The Green Revolution was funded by the US, UN, and Rockefeller Foundation.
Capitalism is a valuable tool, but too many accolades are laid at its feet these days.
Capitalism is not a singular thing, economic policy of the 30s, 60s and 2020s is very different. There are various schools of though: Shumpeterian, kensyan, neoliberal, austeian, etc. Lately neoliberal system has been dominant, and delivered remarcably poor results for most of us.
We should be discussing the economic system we currently have and various ways it is / was / can be structured. Even the justice system, the cornerstone of civilised society, has been corrupted.
For example why is it that we have publicly funded police but not publicly funded lawyers that can actually hold firms to account for contract violations? Why do companies that pay no taxes enjoy priority when it comes to public prosecution over regular Joe. Why is it, that if I owe the state a few grand, I will be hauled before a court within a day, but if BigCorpX owes the state a few billion they get to negotiate a special tax deal with massive 'discounts'? The list is truly endless.
“At the insistence of the United States, in 1986 Japan agreed to limit its exports of semiconductors, mainly the "dynamic random access memory" (DRAM) chips, to America. These chips are used in high-tech consumer electronics equipment like computers and video cassette recorders. The agreement expires this July 1, and the Bush Administration thus soon must decide whether to renew it. Doing so would make Washington a hypocrite in its free trade efforts to open markets abroad for American products. The 1986 chip agreement, after all, restricts trade, ostensibly to help some American segments of the semiconductor industry. The agreement in fact has harmed American computer manufacturers, who have found themselves paying higher prices for computer chips. This makes American computer manufacturers less competitive and drives up computer prices for all Americans.” [by Bryan Johnson, published January 24, 1991 – 20 min read]
!! @ “high-tech consumer electronics equipment like […] video cassette recorders”
https://www.heritage.org/asia/report/the-us-japan-semiconduc...
It would be an interesting couple of evening's research to compare and contrast the competitive rise of Japan in the 80's and the rise of China in the 10's and how the US reacted to both and how both reacted back.
Are you sure about that? "Total global trade" seems unstable to me. Look at the coronavirus, and countries mostly unable to produce their own masks, having to import instead from far away countries — but that country sold to the highest bidder primarily. Here were I live, I couldn't buy any masks (back in April and May).
> the cost of attempting to be self sufficient in everything (like semiconductor manufacturing) means closing borders to competitors outside
Can that be done differently? A country can have a small amount of domestic production, to keep knowledge and tech available in the country. Whilst importing most things from abroad, because of the benefits you mention with global trade. — Then you get both stability in case of crisis, and global trade efficiency? And more local jobs
In regard to the masks, examples exist and the world isn't perfect. No doubt it will be a business school case study for decades to come.
As far as personal anecdotes (because seeing numbers and seeing it with your own eyes are not the same), I have been traveling for more than three decades to developing countries and have seen the changes, the access to medicine, clothing, school supplies, food availability. From the developed world, we would still call these people poor, but the quality of life for the same class of people over a few decades has changed dramatically.
> Can that be done differently? A country can have a small amount of domestic production, to keep knowledge and tech available in the country. Whilst importing most things from abroad, because of the benefits you mention with global trade. — Then you get both stability in case of crisis, and global trade efficiency? And more local jobs
Just run through the thought experiment. It can be done, but that small amount of domestic production needs to find either subsidy or a customer that must have things made domestically (like maybe a government). Subsidy means the taxes you and I are paid are allocated to create sub-efficient industry. Domestic production needs, while real for purposes of national security etc, are tricky. We have seen in recent years Trump (his predecessor too), using executive power to force things to happen on the basis of national security. Some are fine with it, other call it abuse of power. My point is just, it is messy.
This is an interesting issue. The existence of national borders and the restriction on the free movement of people reduces the efficiencies achieved with specialization. Imagine how more efficient it'd be if Taiwan had easy access to US semiconductor talent. Similarly, it'd be more efficient if the seasonal migrations that help agriculture didn't happen and those people actually lived near the crops they help maintain.
I mean it's more complicated than that, most seasonal migrations of agriculture workers happen in large part because the seasonal workers come from areas with lower standards of living and lower cost of living. Partially, they are attractive as workers because they are able to take lower wages than the people who live where the crops are grown.
When I first started my career in software in 2000, you could hire 6 Chinese engineers for the price of one American engineer, or even 2 for the price of an American high-school student. Nowadays, the good software engineers in China (the ones who work for Google etc.) get paid just as much as their American counterparts. Similarly, the good American engineers have largely maintained or improved their salary - hell, L7 compensation at Google (and the equivalent at Facebook/Snapchat/Apple/Lyft/etc.) is ~4x the highest compensation I remember seeing 15 years ago. Wages for mediocre software engineers (say those whose only skill is building PHP webapps by copying code from StackOverflow) have marginally improved in China and have fallen significantly in the U.S. We replaced a geographic wealth gradient with a skill-based one, which IMHO is significantly more fair but probably doesn't feel like it if you were on the losing side of the gradient.
Not necessarily, or indentured servitude would have been impossible.
> Nowadays, the good software engineers in China (the ones who work for Google etc.) get paid just as much as their American counterparts
This seems to be more of a result of the low friction of hiring a good remote developer. It's also not completely true - a top developer in Berlin or Dublin (which is where I live) makes less than the same developer would in the valley (I know that because I was offered to move) and a lot more than a developer makes in Brazil (where I'm from). I am not aware of any remote developer who gets paid what they'd be if they were living in London or San Francisco.
That's not true. I can provide a data point: a Googler who works in Beijing, 3 years into his career with 2 years at Google[1], get paid roughly 72k USD per year. I don't think this is even comparable to the compensation level in Valley. That said, if you compare with the Japan or Europe (except Switzerland) counterpart, it does seem to be on the same level, so the outlier here is US.
[1] To be fair this does not matter because he is stuck at L3 due to works nullified by internal protests.
If there was a year round harvest they wouldn't be migrant workers. It brings to mind a "silly stopgap" solution mix of paying people in low wage countries to operate farming drones to subsitute for the AI in spite of the cost of building the body being higher and the infastructure and tools required to control a bot not corresponding with migrant farm worker origins.
This is very comforting to regions that are specialized in high-cost, high-margin, high-technology products, and not very comforting to regions that specialize in low-cost, low-margin, low-technology products. The countries growing the bananas that go into your smoothies have specialized in growing bananas, but they aren't making any money from it.
Low capital banana growers would do far worse if they tried to compete by growing grain crops in the region as they have to contend with high capital mechanized and chemical using operations with massively better yield and closer markets.
Specialization is at least a local maximia to them even if there are other options better in the long term. Take say West Virgina's coal mining vs a more diversified industry.
If they made great smoothies (in addition to growing bananas), then they wouldn’t be leaving that market to blond Californian influencers living in Bali.
This happened for bananas going into the smoothies, rubber going into tires (at the time), coffee going into lattés, oil going into tires (at a later time), etc
With free trade you put more workers in competition with each other pushing down salaries while capitalists can move their investment to a wider variety of places to get increased return.
Even for poor countries it is not always a good thing. China before WWII got screwed over by western capitalists owning all the industry. That is why they have the required local partners now.
I am not saying free trade is inherently bad. Just that you can have too much of a good thing. I think we are way past that in the current world and should be scaling back, not ramping up.
I find a lot of people in the US are quick to point out the problems with free trade, but tend not to look at examples of places that took strong protectionist positions and how that played out over the span of decades. Point being, there are examples to be made for either argument being taken towards a limit.
As we've seen with Brexit and Trump, nationalism trumps economics. America is having a hard time tolerating a growing China, and frankly, China is worth opposing. It had been hoped their growing middle classes would lead to demand for a more liberal government, but that hasn't happened, and instead the CCP sees Western liberal ideas as a kind of alien mind virus which must be extirpated. Another cold war with local hotspots looks almost inevitable.
Nationalism in its modern (post-1865) form is a product of technology + economics. The U.S. before 1865 was a relatively lose confederation of states: this is enshrined in the 10th amendment (now largely forgotten, but which reserved all powers not explicitly delegated to the federal government or people "to the states"), and indeed in the word "state". Same thing in other nations like Germany and Italy: before 1871 these were independent states like Prussia, Bavaria, Saxony, Hanover, Brandenburg, Westfalen, Bohemia, Sardinia, Tuscany, Venetia, Florence, etc.
The driver for national unification was largely industrialization. New technologies like the railroad, telegraph, steel-making, mass production, etc. gave large advantages (particularly on the battlefield) to larger political unions that could draw on the labor of many regions and specialize. Political bodies that didn't adopt these technologies got rolled. The North likes to view the American Civil War in terms of slavery, and the South likes to view it in terms of states rights, but fundamentally it was a clash between the industrial system in the North vs. the plantation system in the South. And just like Brexit and Trump are doing now, the South fought viciously to preserve their self-determination and way of life, but the industrial system was just more efficient.
Right now, we're seeing protectionist lip-service. My iPhone is still made all over the world, my employer still makes a majority of its money in foreign countries, I still have to compete with foreign buyers when buying a home (though it's better now than it was in 2015-2018). It'll be interesting to see what happens if there's a serious threat to that. We had a previous era of globalization in 1900-1914 that ended with WW1 - but arguably that was because the world wasn't ready for it, and globalization was entwined in the lives of the rich but not the common people. Now there's a significant number of people who are largely unaware of how dependent their lifestyles are on globalization, and I'm curious what'll happen if it's actually threatened.
Minor nitpick, but the Confederacy viewed slavery as the cornerstone of their government[1]. Those who now claim the Civil War was about 'states rights' are engaging in simple, brazen revisionism.
> In what’s now known as the “Cornerstone Speech,” Stephens told a Savannah, Ga., crowd in 1861 that “our new government is founded upon exactly the opposite ideas [as those of slavery foes]; its foundations are laid, its cornerstone rests, upon the great truth that the negro is not equal to the white man; that slavery, subordination to the superior race, is his natural and normal condition. This, our new government, is the first, in the history of the world, based upon this great physical, philosophical, and moral truth.”
[1] https://www.csmonitor.com/Books/chapter-and-verse/2015/0708/...
Take a good look. Back in 2012, people were genuinely thinking that Zuckerberg was going to run for the election. And they rightly though that if facebook was for example post "Go Vote Zuck" on the frontpage, he might've well won.
This has implications for how the future could look that go far beyond what seems most "reasonable", what looks most like the past and what will make each individual person feel best. It doesn't necessarily have to be war - it could also happen through peaceful but intense competition and trade.
The most aggression we'll see is covert secret service actions, disinformation campaigns, cyber war, etc. They'll never dare drop real bombs.
See e.g. https://www.storm.mg/article/2971332
And even if you take the rewards of comparative advantage and redistribute them to account for this, you are still destroying the social fabric of families and communities. Vitality, self-respect, and good values come from being engaged in productive work.
My bank account tells a different story. Only very few people got richer. General purchasing power fell off like cliff in the US after the 70s when all the outsourcing happened. There is nothing positive about globalization. The bad effects are somewhat mitigated by a massive amount of technological progress.
> closing borders to competitors outside eventually leads to inferior product.
There is no proof for that. With close borders you can simply steal the intellectual property of your competitor and match the quality within a year. The Chinese are doing this for decades.
> In general though, everyone is lifted up and made richer over time
This is quantifiable wrong. Maybe you have to get out of your filter bubble. If anything globalization leads to more inequality. The statistics about how the top 1% make all the money whereas everybody else loses are neither controversial nor new.
In Asian countries, i.e. Taiwan, China, SK, Japan, Vietnam, as well as, say Mexico after NAFTA/NAFTA 2.0, what are the numbers regarding general purchasing power?
On the other hand wages in China have shot up and the huge pool of cheap rural labour is mostly tapped out. Low end manufacturing is moving to other countries, Samsung now does most of their smartphone final assembly in Vietnam but those countries are smaller. That trend is playing out it's end game. Employment in the US and Europe was rising, and came close to 100% before the Pandemic.
So I actually agree with your criticism, but not that there's nothing positive about it. Things change, overall I think things are changing for the better but that's never a painless process. That's why although I'm a believing market capitalist, I also support social programs and universal health care. If corporations deserve bailouts, so do ordinary citizens. We're all in it together.
I would have no problem with that if it didn't happen at the cost of American worker which it clearly did.
> Employment in the US and Europe was rising, and came close to 100% before the Pandemic.
You can thank the "nationalistic" trade policies of Trumps USA towards China for that. In Europe on the other hand (which had no such policies) unemployment especially in the periphery was and is still sky high and the situation was looking pretty grim also before the pandemic.
As for globalisation, the US became the dominant global economy how exactly? Protectionism, aside from being an autocratic intrusion into the freedoms of citizens, just doesn't work.
Take the US steel industry, a main target of Trump protectionism. Yes blast furnace employment is marginally up, but steel mill employment has been hammered because it largely depends on working imported steel. The domestic furnaces can't expand fast enough to meet supply, and don't produce some of the steels needed by manufacturing anyway. As a result manufacturers consuming steel are facing inflated prices and reduced competitiveness. It's unintended consequences all over the place.
We have a long way to go before the US system feels like a a kindly helping grandfather rather than an abusive angry father that blames you for not working harder.
Globalization does increase inequality, particularly in countries with a lot of capital, but it also makes the very poor better off. What the US calls the middle classes do stagnate, though, and capitalists are the biggest winners - which, don't forget, also includes pension funds as a significant fraction.
Most of the top 1% are wage slaves like everyone else. The top 1% by income isn't what's interesting; it's the top 1% by assets. Wealth inequality is much bigger than income inequality.
So the reason why Chinese masses are so much better off today is this very "one-sided" version of globalism. You might as well call it nationalism.
Which is more or less what the US did with China.
Nationalism made China rich. Not globalism.
Specializations change over time. The US, specifically Silicon Valley, has different specializations today than it did in the 60's. A lot of the semiconductor specialization moved overseas, costs came down, and in general the world is richer. Other specializations include things like China and injection molding, Japan and mechatronic technologies in the 80's and 90's, Thailand and lenses, etc
Obviously the protectionist crowd would take issue with all this, but free trade theory is studied and applied all over in trade agreements, specialization zones (like Shenzen), etc. Generally speaking though, the cost of attempting to be self sufficient in everything (like semiconductor manufacturing) means closing borders to competitors outside, which eventually leads to inferior product. With robust competition, the consumer usually wins on both quality and price. Obviously there are other consequences, such as job migration etc. In general though, everyone is lifted up and made richer over time (evident by the fact that there is quantitatively less poverty in the world today and the 1960's and even the most poor can enjoy things like cellphones, leather jackets, and shoes that fit well that even the kings of a century ago could not). The system isn't perfect, but atleast in my eyes it is the one that does the most good for the most people.