Good News about the World 3

Good News about the World 3 September 20, 2011

Brad Wright, in his new, important book (Upside: Surprising Good News About the State of Our World), asks if the following claims are true or not, and I apologize for the quality of this image but it’s readable and I created it on a free app for my iPhone and if you click it the image will get big and you can read it.

Brad Wright’s conclusion, fully supported with strong facts from social scientific studies, is this:

The answer? According to Federal Reserve Bank economists W. Michael Cox and David Alm, all twelve of these commonly accepted economic beliefs are false.

Once you’ve read this post:  What do you see here? Any suggestions? ideas? proposals?

Just because various thinkers or news media repeat these ideas over and over doesn’t make them true, and Michael Kruse, who often comments here, has been reminding us of just these sorts of data over the years. So we need to ask what the evidence is actually telling us, and that is what Wright’s book does.

Are we doing better financially? Wright says over the last decade — great; the last decade — just okay. Notice this: Since 1947, and these figures are adjusted for inflation, the average family income has gone up 240%. From the 1940s to the 1970s the numbers were dizzyingly good.

In the last 35 years male incomes are roughly the same; the big difference is in womens’ income: from 40% working to 75% working. In the last ten years, since 1999, American family income has stayed about the same. And fringe benefits — like insurance — have increased as well (roughly 1/3d better since the 1970s). Factor into this that families have gotten smaller, that money is actually more per person.

Bigger picture: from 1929 to 2004 “personal consumption” has grown (adjusted for inflation) from $5000 to $25000 per person.

The gender gap is lessening in income. Since the 70s it has shifted from women earning about 60% of what men earn to 77%. Wright discusses discrimination with finesse — yes, it’s clear, there is discrimination and some of the numbers are overdrawn and sometimes other factors are at work, but there are systemic issues in need of reparation. Wright’s big one: things are getting better.

Wright treats each of these claims this way. I can’t examine each since it would take pages and pages, and blogs aren’t supposed to be books. I want to mention briefly one other topic: income inequality.

Brad Wright’s conclusion:

America has “a Gini score of 40.8, which puts it right in the middle. It ranks 73 out of 142 countries based on data from the World Bank. Among wealthy countries, however, the U.S. has a relatively high level of inequality. Of the twenty-five richest countries in the world, the United States has the third highest level of inequality. Only Singapore and Hong Kong are wealthy countries with more inequality. This suggest that, overall, we Americans could distribute income more fairly (67).

OK, one more: to buy a Big Mac,

Americans work 12 minutes
Nairobi Kenyans work 158 minutes
Mexico City folks work 129 minutes.


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  • TJJ

    First Off, a disclaimer: By world standards are we an obscenely wealthy and prosperous country? Yes. And I mean obscene in the sense that it is obscene that as a society Americans live the lifestyle that we do while children die of famine and preventable disease in Africa and elsewhere on a large scale.

    But having made that point, it is also true that poverty is up to the highest levels in this country since 1994. Home foreclosure rates by percentage are the highest in over 5o years. That invloves real families, losing the homes they live in. Unemployment has been up at percentage levels the last three years which have not seen in this country since 1982.

    There is real economic pain being experienced by real people out across this nation. It is not all made up by the talking heads on CNN, FOX, or MSNBC. Many of us may not be directly feeling it personally, but it is real.

  • Adam Shieds

    I am not a conservative, but I think Wright’s type of writing (I read his last book, but niot this one) is useful. We need to be careful as Christians that we not pick the stat that most supports our cause of the minute, but the one that best shows that larger picture.

    Clearly there are people in economic pain. I have not had a raise in about 10 years and my wife’s income has dropped for the last five. But much of the housing problems were because people bought more than they could afford. Bad decisions are painful, but they were still bad decisions. Many of those bad decisions may have been encouraged by people that were outright lying, but the homeowners themselves still bought what they could not afford.

    ——
    Disclaimer, I know many people lose their jobs or have health problem and that is the cause of foreclosure, but the major problem is about too much house for your income.

  • Richard

    “From the 1940s to the 1970s the numbers were dizzyingly good.”

    I think this is the point for many that say things are getting worse. No one argues that things are worse than they were in the 20s, 30s, etc. The point is that the growth we enjoyed together through liberal economic structures and policies (i.e. tax code, etc) was a great lift for everyone. Since we began to remove those policies and structures in the late 70s, it has continued to grow leaps and bounds for those at the top while those at the bottom have stagnated. This is why Wright says that we have high income inequality.

    Does he account for the addition of women in the work force as a factor keeping household incomes relatively stable since the 70s? Families that made it before on one wage-earner now need two. How does he address this?

  • As much as I appreciate this news, I too have to caution that there is a greater number of people in poverty right now in the US than even just a few years ago. At my organization we saw almost 14% of the county come through our doors for assistance. Last month alone 288 families sought assistance at our food pantry. A few years ago 70 families was our record high.

    I really do appreciate that overall our lot is not doom and gloom but that is because the rich really are getting richer, the middle class is doing pretty well, but the poor and working poor are getting hit pretty hard. We could all scale back our lifestyles and alleviate some of this but then our economy would shrink because we’d be spending less.

  • DRT

    The only one on the list that I would quibble with is the one about the manufacturing jobs. The point is not really clear.

    No question our manufacturing jobs are going over seas in a lot of cases. But, the companies are not shifting our “high paying” jobs over seas, they are getting lower wage people to do the jobs. The high paying part of the manufacturing jobs is simply disappearing in the US in many cases.

    And, we are not condemned to be a nation of burger flippers, but if we don’t have manufacturing it definitely means that we are going to have to specialize in service jobs and not manufacturing jobs (duh).

    Manufacturing adds diversity into our infrastructure and complements the work force. We need manufacturing jobs.

  • Larry Barber

    It seems to me that the author is skewing the figures by using averages. Average income may be increasing, but if all the increase is in the top 1% or so of the population I wouldn’t consider that desirable, although the average income would still be increasing. If you must use a single figure for characterizing income it seem to me that median income is a better measure.

    Also, using data from the end of WWII until 1970 tends to mask what has been happening since the 70’s. Conditions were far different in the 50’s and 60’s than they are now, some better, some worse, but definitely different. The top marginal tax rate in the 50’s was 90%, for example.

  • EricG

    Does Wright talk about what has happened to consumer debt levels? That is a big, important part of the equation that isn’t included in the description above of his book. American consumers are in debt up to their ears, which is a big part of the economic problems we have. And it means many are not well off, despite the figures he cites.

  • I looked at a chart of total debt to income and on average for renters it ranged from 23% to 30% from 1980 to 2011. Right now it is toward the bottom at 23.85%

    For home owners the total debt with consumer and mortgage ranged from 13.4 to 17.55%. Right now it is at 14.84% When you look at just consumer debt the ranges are showing about the same we are at close to the bottom of the last 30 years.

    Yes some people have very serious levels of debt, but the majority of people do not.

  • Sorry I misread the chart. It is not debt to income it is, minimum or required payments on all debt (including auto leases and with required homeowner or renter insurance) to disposable (after tax) income.

  • EricG

    Adam — Hmmm, looks like you are correct, based on these stats from the Fed: http://www.federalreserve.gov/releases/housedebt/
    Seems to run contrary to the message I’ve been hearing.

  • It’s too late in my time zone for me to be up, but some of the debunking of the supposed myths just doesn’t ring true to the economics sources I read. So, I did just a bit of checking on just the #2 item. The economics data that I’ve seen shows widening income inequality which contradicts that. So, I checked on the economists Cox & Alm. It turns out Alm is *not* an economist w/ the Fed, but a business reporter, and Cox is “a Federal Reserve economist and adviser to the CATO institute”, according to Cox’ own website: http://wmichaelcox.com/books/ A number of economists (& I, as a used-to-be economics researcher w/ the Fed) disagree w/ the Cato Institute’s co-opting & manipulation (in our opinions) of economics. Suffice it to say that Cato is the go-to place for economists’ opinions for Fox, and I’ve heard some whoppers. Furthermore, the book Cox & Alm wrote was published in 1999. The data of the last 12-15 years may grey their rosy picture.

  • The more I dig, the less I agree w/ Wright’s conclusion that those myths are all false. Some may be distortions of truth, but there are some that are just plain true. At least a few of those “myths” set up false causalities which are easily deconstructed, but which deconstruction proves just about zilch.

    For instance, in his conclusion, he quoted a Gini coefficient of 40.8. That figure is from 1997 data, and what is remarkable – especially given the sheer size of the US economy – is the shift in the years from 1997-2007. The Gini coefficient is now at 45, means that income inequality has widened, according to CIA data. https://www.cia.gov/library/publications/the-world-factbook/fields/2172.html

    I didn’t take the time to check the history of the data on income differentials between women/men, white/minorities; however, the demographic info from the Census data released in 2006 seen in a table, Median Personal Income x Demographic, here http://en.wikipedia.org/wiki/Income_inequality_in_the_United_States#cite_note-CIA._.28June_14.2C_2007.29._Field_Listing_-_Distribution_of_family_income_-Gini_index._.27.27Factbook.27.27-12 does not seem to indicate justice prevails. So, if women & minorities aren’t falling further behind, does that mean they’re treated equally? Clearly, the answer is no.

    Regarding corporate executives’ pay levels and the devious practices used to enrich themselves and others, it’s quite apparent that their increasing wealth came at the expense of the workers. A recent book, Retirement Heist, by Ellen Schultz (a WSJ investigative reporter) examines how executive pay increased with, it seems, legalized “theft” by accounting changes to corporate pension funds and union contracts. http://www.nytimes.com/2011/09/18/business/when-retirees-are-shortchanged-for-corporate-profits.html