dailyreckoning.com.au / By Bill Bonner / October 23rd, 2012
The internet was fully functioning in America in 2000. Since then, it seems to have added nothing to GDP. It’s not really a game-changing innovation… at least not in that sense. It changes peoples’ lives…they can now travel, learn, live, and work in different ways. But it does not seem to do much for GDP.
US real output – the goods and services produced by the private sector, for the private sector – has gone nowhere in the last ten years.
And now the tech stocks – the major pillars of the internet economy – seem to be giving way. Damn! Young people were counting on them.
What does this mean?
We explained it to an audience in London last week. The economy of oil, coal… turbines and machines…is the economy we grew up with. It was phenomenally successful at making things and moving them around.
In two generations, the US economy went from one mostly powered by animal muscle to one mostly powered by machines. This economy was developed before we were born, and fully realised by the time we were young adults.
By the 1980s, there were more cars than drivers…more televisions than eyes to watch them…and more hamburgers than we could possibly eat.
Today, young people learn how to work with software programs…Twitter…and the cloud. But when we were young, we were bent over, under the hood of a ’58 Chevy, trying to rebuild the carburetor or clean the points. ‘Grease’ was the word.
Living standards…and GDP per person…rose sharply during our lifetimes. More stuff meant more wealth. At least, that’s how we saw it. And that’s how economists measured it.
And governments, businesses, and households came to rely on more wealth. The ’58 Chevy was replaced by the ’59 Chevy…and then by sleeker, faster cars from Europe.
Progress! Improvement! Wealth! We figured that it would always be that way. Next year, we expected to be richer than we were the year before. That’s the way it had been for generations. We saw no reason it shouldn’t continue.
And so, we soon got used to spending wealth even before we earned it.