Wednesday, October 25, 2006

The big picture on economy

An interesting article was published today by Jonah Goldberg in the National Review. Here are some of the things he argues:

Poverty, as defined for millennia, is pretty much nonexistent in the United States. Until very recently, poverty was defined by material scarcity of essentials, chiefly food, shelter and clothing. Today, some people go without these things, but scarcity isn’t the culprit.
To understand how subjective poverty in America is, one need only recognize the fact that most rich people from a century ago would be considered poor by today’s standards, and today’s poor would be considered rich by the standards of 1900. In 1900, 2 percent of homes had electricity, and 1 out of 10 homes had flush toilets. Today, pretty much all of them do. In other words, the tangible goods that defined wealth have been democratized.
Absurdly, according to the official measurements used by the federal government, fewer people lived in poverty in 1973 than today. But in 1973, most poor people didn’t have a car. Today, almost 75 percent of those officially in poverty have a motor vehicle. Today’s poor households, according to statistician Nicholas Eberstadt, are more likely to have telephones and televisions than non-poor families were in 1970. In the 1970s, undernourishment still factored into poverty. Today, obesity is a far bigger problem.
There are other factors that seem to be invisible to government bean counters. We live in a “knowledge economy,” but the folks who measure the gross domestic product don’t count the money spent on research and development (as well as money spent on training and education) as an investment. Instead, the government merely counts each iPod twice: “when it arrives from China, and when it sells. That, in effect, reduces Apple — one of the world’s greatest innovators — to a reseller of imported goods.”
Meanwhile, the single-most underreported good-news economic story of the 21st century so far is the explosion in American productivity. From 2000 to 2004, productivity in the United States grew by 17 percent. That is a staggering number which tells us more about the long-term health of the American economy than statistics about the GDP, unemployment or wage growth.

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