By Bill Bonner
Nothing much happened on Wall Street yesterday. The Dow rose 56 points. Gold was flat.
From the Daily Mail in London:
US sees highest poverty spike since the 1960s, leaving 50 million Americans poor…
The number of Americans living in
poverty has spiked to levels not seen since the mid-1960s, classing 20%
of the country’s children as poor.
It comes at a time when government
spending cuts of $85 billion have kicked in after feuding Democrats and
Republicans failed to agree on a better plan for addressing the national
deficit.
The cuts will directly affect 50
million Americans living below the poverty income line and reduce their
chances of finding work and a better life.
As President Barack Obama began his
second term in January, nearly 50 million Americans – one in six – were
living below the income line that defines poverty, according to the
bureau. A family of four that earns less than $23,021 a year is listed
as living in poverty.
The newspaper illustrates its bleeding-heart story with a
ridiculous example, taken from the streets of Baltimore. A Mr. Antonio
Hammond abandoned his children for 20 years… and stole copper pipes
and other things to support a full-time drug habit.
“All I wanted to do was to get high,” he told the Daily Mail.
Then Hammond kicked the habit and got a job at $13 per hour. Now he’s
a success story. And if you believe the Daily Mail, cuts to the federal
budget may make it harder for people like Hammond to escape from
poverty.
Seems much more likely to us that cuts to federal spending will help
people like Hammond get back on their own two feet; the feds won’t have
the funds to keep him in poverty.
Baltimore has been fighting poverty for the last 50 years – ever
since President Johnson declared a war on poverty in the 1960s. Spending
has gone up and up, blasting away at poverty with hundreds of billions
of dollars.
But now Baltimore has more poor people than ever – one in four residents is below the poverty line, according to the Daily Mail. And no wonder. When poverty pays, why take up something else?
No Brave New World
We wonder how come there are so many poor people? Wasn’t the Internet supposed to make us all rich?
Even Hammond can now go online and discover the secrets of business
and science. He can know as much about economics as Ben Bernanke. He can
know as much about politics as Nancy Pelosi. He can know as much about
journalism as Tom Friedman.
So how come they get the big bucks and he doesn’t? How come a man who
can know almost everything settles for just $13 per hour? Is that all
omniscience is worth?
Back at the end of the 1990s, we ran into people who thought the
Internet changed everything. With so much information at everyone’s
fingertips, they thought they saw a brave new world coming.
We would all have access to the information we needed to increase
productivity and add wealth. No one would be poor again. All they would
have to do is to go on the Internet to find out how to get rich.
We were suspicious of these claims back then. Information is cheap,
we pointed out. It’s wisdom that is precious, and you don’t get much of
that on the Internet. You have to pay for it… with bitter experience.
In fact, information – unless it is exactly what you need, exactly
when you need it – has negative value. It distracts you. It must be
applied. And stored.
How much good would it have done Napoleon – on his disastrous retreat
from Moscow – to have the plans for a nuclear weapon? Suppose Louis
XVI, mounting the scaffold to the guillotine, had had proof that Sacco
and Vanzetti were innocent! Imagine whispering to Hugo Chavez, as he lay
on his deathbed: “Studies show that people who eat less meat have less
cancer.”
No, dear reader, information is like manure. A little, at the right time, is a good thing. Pile up too much, and it stinks.
Productivity Falls
And now we have proof… that the Internet did not add to the wealth of the US… or apparently anywhere else. From The New Yorker:
For a time, the Labor Department’s
productivity figures appeared to support the idea of an Internet-based
productivity miracle. Between 1996 and 2000, output per hour in the
non-farm business sector – the standard measure of labor productivity –
grew at an annual rate of 2.75%, well above the 1.5% rate that was seen
between 1973 and 1996.
The difference between 1.5% annual
productivity growth and 2.75% growth is enormous. With 2.75% growth
(assuming higher productivity leads to higher wages), it takes about 26
years for living standards to double. With 1.5% growth, it takes a lot
longer – 48 years – for living standards to double…
Since the start of 2005, productivity
growth has fallen all the way back to the levels seen before the Web was
commercialized, and before smart phones were invented.
During the eight years from 2005-2012,
output per hour expanded at an annual rate of just 1.5% – the same as it
grew between 1973 and 1996. More recently, productivity growth has been
lower still. In 2011, output per hour rose by a mere 0.6%, according to
the latest update from the Labor Department, and last year there was
more of the same: an increase of just 0.7%. In the last quarter of 2012,
output per hour actually fell, at an annual rate of 1.9%. Americans got
less productive – or so the figures said…
If the sluggish rates of productivity
growth we’ve seen over the past two years were to persist into the
indefinite future, it would take more than a hundred years for
output-per-person and living standards to double.
How about that? The Internet. A big dud. A time waster, like television, not a wealth booster, like the internal combustion engine.
Regards,
Bill
To learn more about Bill visit his Google+ page or Bill Bonner’s Diary
