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The Optimistic Curmudgeon

People are getting richer. Not just the rich but most of us. I can hear many of your squeaky eyes rolling. You’ve seen protesters talking about only the 1 percent getting richer. You’ve heard Nancy Pelosi talk about the ‘crumbs’ being left to everyone except the rich business people. Let’s get a long-term perspective.

Mr. Peabody, have Sherman set the dials on the WayBack machine to 1817 and the place as Perry County, Indiana. We are on the farm of the Lincoln family. Mr. Lincoln, why does your son, Abe, read his books by firelight in the evening? Mr. Lincoln replies, “Because we can’t afford candles.” Artificial lighting was a luxury good in those days. An hour of work at the average wage in the early 1800’s would earn you enough to read by candlelight for 10 minutes. An hour of work at the average wage today earns you 300 days of reading light by a compact fluorescent bulb. Similar stories can be found for food, clothing and most other items we consume each day.

How did we do it? Mostly by innovation and trade. You all know about Thomas Edison’s inventions, personal computers, smart phones and the like. We also have developed ways to trade time doing what we do with millions of people doing what they do. The results have been miraculous.

The U. S. rate of poverty, as measured by the U. S Census Bureau, declined by almost half between 1959 and 2016, from 23.5 percent to 12.7 percent. The World Bank uses a definition of ‘extreme poverty’ as being people who lived on less that $1.90 per day. Worldwide, the number of people in extreme poverty has declined 35 percent since 1990. This means that almost 1.1 billion people moved out of extreme poverty between 1990 and 2013. The World Bank thinks it is a realistic goal to eliminate extreme poverty in the next 25 years.

There are legitimate complaints about the recent lack of real earnings increases. Since the recession of 2008 – 2009, economic growth was slow through 2016, averaging around 2 percent per year. Median Income per family member was $31,041 in 2016 vs. $24,837 in 2009, an increase of about 3.5 percent per year. Much of this increase was eaten up by increasing medical costs and health insurance payments. I agree that this is people getting richer very slowly. Recent news is better. The economy grew at a rate closer to 3 percent in 2017 and growth in the economy and wages has been even better in 2018.

What could derail this progress? I see two big dangers. The first is the number of people who are supporting socialism in their politics. Bernie Sanders calls himself a socialist and got more primary votes than Hillary Clinton did in 2016. We just saw a member of the Democratic Socialists of American from New York win a seat in congress.

Much progress in reducing world poverty has come since the collapse of the United Soviet SOCIALIST Republic. That progress can be reversed. If you need current evidence, look at Venezuela. A popular socialist president was elected in 1999 and ruled until he died in 2013. His successor removed the democratically elected congress and held sham elections for a rubber-stamp body. The economy has gone to ruin. Two years ago, there were reports in USA Today about the abandoned pets in Venezuela because their owners could not feed them. Many of these animals either starved or were killed for food. People now die from lack of basic medicines like antibiotics for infections. Venezuela’s congress reported that the annual inflation rate was 24,600 percent in May. This is opposite of progress if we want to improve the well-being of average people and of the poor.

The second danger is increasing trade barriers. The president and some of his advisors have said increased tariffs are a negotiating tool. We’ll see. If not, higher tariffs reduce the choices we have in trading our labor for the labor of others. They are tax increases that have always lowered economic growth and standards of living.

Supporters of the president need to encourage him to keep and expand trading options. Opponents of the president need to push back on the socialist tendencies that are growing within the Democratic party.

The world still has hundreds of millions of people living in extreme poverty and the U. S. still has citizens who live below the poverty line. We can make more progress on these problems with innovation, trade, free markets, smart government assistance and non-profit groups who help people in the greatest need. Trusting an all-powerful state to solve all our problems will not work any better for us than it did for the USSR or Venezuela.

– Rick Whitener has worked in information technology and banking. He has a degree in economics from Davidson College. He grew up a Tar Heel and has been a Hoosier since 1977. You may contact him at rick.curmudgeon@gmail.com.