Despite the US’s economic success, income inequality remains breathtaking. But this is no glitch – it’s the system
The Chinese did rather well in the age of globalization. In 1990, 943 million people there lived on less than $3 a day measured in 2021 dollars – 83% of the population, according to the World Bank. By 2019, the number was brought down to zero. Unfortunately, the United States was not as successful. More than 4 million Americans – 1.25% of the population – must make ends meet with less than $3 a day, more than three times as many as 35 years ago.
The data is not super consistent with the narrative of the US’s inexorable success. Sure, American productivity has zoomed ahead of that of its European peers. Only a handful of countries manage to produce more stuff per hour of work. And artificial intelligence now promises to put the United States that much further ahead.
This is not to congratulate China for its authoritarian government, for its repression of minorities or for the iron fist it deploys against any form of dissent. But it merits pondering how this undemocratic government could successfully slash its poverty rate when the richest and oldest democracy in the world wouldn’t.
Debt is not part of the GDP directly but it does boost the GDP if it’s used to create what the Official GDP defines as “values” (a significant slice of which, as I pointed above, is bullshit).
Of course the really fun bit is that in the modern age it’s debt that creates most of the money in circulation (over 90%, at least in most countries in the West) - basically when banks make a loan, unlike in the old days when they could only lend depositor’s money, in the era of “money is just a number in a digital ledger” they literally create the money they’re lending, which they destroy when the loan gets repayed. All this is well recognized in Economics circles - you can read a Bank Of England’s paper on this from 2014 called Money Creation In The Modern Economy.
So in practice non-existing money is used to create value (for example when a loan to a company is used to buy machinery that increases their production) which adds to GDP because people are doing work for nothing and goods are being exchanged for nothing, only it’s not nothing, it’s trade tokens created out of thin air and the whole thing works as long as everybody believes it in the value those trade tokens represent, just like at one point they did about tulip bulbs.
The point being that a lot of this shit is done on top of an ever “taller and thinner” house of cards and the present day official “success numbers” like GDP are tied to the whole thing keeping on going: any country that pulls back on Debt will see less “money” being created, circulating and being used to create the value that gets listed in GDP so GDP goes down or not as fast up, so opposition politicians claim the party in power is “bad for the Economy”.
This thing then also feds into and out of speculative bubbles - for example a house “worth” more due to price speculation (i.e. with no improvement whatsoever hence no actual real value increase) when sold is neutral in direct money terms (money just moves from buyer to seller) but generally most of the money from the buyer to the seller is actually created from nothing in a loan so it not only do higher house prices incentivise more money being created but also, indirectly because buyers have access to more money to buy houses thanks to the availability of pretty much (there are some limits, such as bank capital requirements) infinite money for loans, more money for buying houses puts Buy-side pressure on that market which unbalances the Offer-Demand towards Demand hence house prices go up - in other words, it’s a positive feedback circle (which goes a long way to explain why there are house price bubbles in almost all Western countries).
Of course, the really funny bit is that ever less of such loaned money goes into things that do create real value (like my example of machinery used to increase a company’s production) and ever more goes into activities that destroy value (loans for consumption) or offsetting inbalances in the Economy (workers whose salaries are so low that need to get ever more in debt merelly to pay for food and shelter) and bidding up prices in speculative bubbles (for example, “realestate investors” using mainly loans to"invest" in properties or companies using debt to buy their own stock).
When this shit blows it’s going to be something else.