Have We Been Wrong All Along?
Today we confront a rather distressing possibility — that this world may be in far better condition than we have previously supposed.
Details, grim details, to follow.
But we begin with a diagnosis:
The stock market is evidently down with a spell of altitude sickness…
The air at 28,000 proved too thin for the Dow Jones Industrial Average.
The index has retreated to the 27,800 elevation. There it presently rests, breathes and consolidates.
Both S&P and Nasdaq have also found sturdier footing beneath recent heights.
We suspect additional Federal Reserve “open market operations” will fill their lungs for the next assault upon the peaks.
But to return to today’s question:
Is this world in far superior condition than we have previously imagined?
Certainty in an Uncertain World
In our customary telling the world gutters along in steady ruin, botched beyond hope.
By day, by hour, by minute… it rots down inexorably and unerringly.
See, for example, the number of riots presently besieging many of the world’s cities. See, for example, the Israelis and Palestinians. See, for example, the economic stagnation that afflicts the globe.
See — for example — United States national debt.
They may be unpleasant realities, yes.
But they confirm our distrusting biases.
They offer us the reassuring warmth of certainty in an uncertain world… like a crackling fire on an arctic winter night.
But does the world actually exist in better condition than ever?
We must consider the possibility. Look first to warfare…
“The Most Peaceable Era in Our Species’ Existence”
The percentage of individuals violently slain in prehistoric and stateless societies ranges between 5% and 60%.
But by 2007 warfare accounted for a vanishing 0.04% of the world’s deaths.
And the present post-WWII era?
It is the longest without major power conflict since the Roman Empire.
Argues Steven Pinker, author of The Better Angels of Our Nature: Why Violence Has Declined:
“Today we may be living in the most peaceable era in our species’ existence.”
Thus he invites you to disbelieve your lying eyes and ears.
Just so, you say. But what about poverty? Is not much of the world sunk in deepest poverty?
The facts argue a drastically improving case…
“Extreme Poverty” Has Never Been Lower
In 1990, nearly 2 billion people wallowed in “extreme poverty,” as defined by the World Bank — or 36% of humanity.
Yet by 2015… that ironically fat figure dropped to a gaunt 10%.
In all, over 1 billion earthlings have stepped up from extreme poverty since 1990.
If it is progress you seek, here you are.
Next we come to a recently hatched economic theory — the theory of “time-prices.”
It is the work of economists Marian Tupy and Gale Pooley.
Time-prices simply calculate the amount of labor required to purchase commodities and products.
The “Time-Price” of Commodities Plunged 64.7% Since 1980
Here is what Tupy and Pooley’s researches reveal:
Time-prices have plunged nearly 65% since 1980.
That is, the world’s workers have had to slave less and less time to acquire the same wherewithal. In their words:
We [looked] at 50 foundational commodities covering energy, food, materials and metals. Between 1980 and 2017, the real price of commodities fell by 36% on average…
Commodities that took 60 minutes of work to buy in 1980 took only 21 minutes of work to buy in 2017. Put differently, the time-price of commodities fell by 64.7%.
Let us provide a cement example of time-prices…
How Long Must an Average Blue Collar Work to Pay for Thanksgiving Dinner?
Next Thursday is Thanksgiving Day. How much time must the average blue-collared American slave for this dinner?
In 1986 this serf toiled 32 minutes to pay for his turkey and all the victualry that attends it.
And now, in anno Domini 2019?
That same average blue-collared American will put in merely nine minutes of labor to pay for next Thursday’s enormity.
Nine minutes — down from 32 in 1986!
“Futurist” and technologist George Gilder has fallen upon time-price theory with a fearsome zeal… like a man newly converted to the One True Faith.
The Bright World Seen Through the Prism of Time-Prices
Subpar growth? Secular stagnation? Negative interest rates and the devil and all today’s bugaboos?
They vanish into nonexistence when you come at them with the time-price theory, argues Gilder:
We have simply failed the measure the actual GDP gains, consumer surplus, productivity rises and radical new value created by pervasive high technology…Time-prices make perfect sense of all these otherwise enigmatic ideas of “negative interest rates,” “secular stagnation,” “monetary black holes,” “sub-par rates of growth,” negative yield curves, missed inflation targets and bubbling asset prices”…
What is more:
The history of time-prices suggests that most of the deflation in free economies is a benign reflection of learning curves and entrepreneurial inventions…Time-prices tell us that the global economy is in the midst of a fabulous period of technological innovation.
Zero or negative interest rates, for example, fall to pieces under time-price theory.
Put on your time-price bifocals, says Gilder. You will then see today’s interest rates are healthily positive:
Interest rates have been normal when adjusted for plummeting time prices…Real interest rates, after all, are calculated by subtracting the rate of inflation from the nominal interest rate. If inflation is negative because learning curves around the world are radically reducing costs and prices, then you have to add the deflation rate to nominal interest…
Measured by the number of hours and minutes a blue-collar worker has to spend to buy the 50 commodities most vital for human survival, prices have been dropping at a rate of 3.4% per year. That means, in real terms of hours and minutes rather than dollars and cents, a zero-interest-rate translates into an utterly normal 3.4% rate.
We had better stop here… lest our cherished theories of doom endure additional battering.
Managing editor, The Daily Reckoning