Submitted by Marc Faber via The Daily Reckoning blog,
I think it is remarkable that, despite the growth the US has enjoyed since the 1960s, the poverty rate has barely changed. Writing for the Wall Street Journal last month under the title “How the War on Poverty Was Lost”, Robert Rector notes that: “Fifty years and $20 trillion later, LBJ’s goal to help the poor become self-supporting has failed.” He writes further:
On Jan. 8, 1964, President Lyndon B. Johnson used his State of the Union address to announce an ambitious government undertaking. “This administration today, here and now,” he thundered, “declares unconditional war on poverty in America.”
Fifty years later, we’re losing that war. Fifteen percent of Americans still live in poverty, according to the official census poverty report for 2012, unchanged since the mid-1960s. Liberals argue that we aren’t spending enough money on poverty-fighting programs, but that’s not the problem. In reality, we’re losing the war on poverty because we have forgotten the original goal, as LBJ stated it half a century ago: “to give our fellow citizens a fair chance to develop their own capacities.”
…LBJ promised that the war on poverty would be an “investment” that would “return its cost manifold to the entire economy.” But the country has invested $20.7 trillion in 2011 dollars over the past 50 years. What does America have to show for its investment? Apparently, almost nothing: The official poverty rate persists with little improvement.
My impression is that there are far more “poor” people today as a percentage of the population than there were in the 1960s, because lower middle-class and middle-class people have moved into the ranks of the poor. (Since 2007, the bottom 50% by wealth percentile lost more than 40% of their net worth and their debts are up 16%.) This may be a factor that explains the still muted consumer confidence at a time when stock investors’ sentiment is at its highest level since 1987.
Large corporations can hire an army of accountants, lawyers, tax consultants, and lobbyists in order to reduce their tax burden. But, what about the small business owner?
He is at the mercy of some tax collector who can waste his time endlessly with repeated audits. The same goes for other regulatory requirements, which lead to less competition and favour large business groups.
Many of my friends who own independent small money management firms are being forced to close down their businesses, merge, or sell to larger financial institutions because of increased regulation. The more regulation there is, the more likely it becomes an inhibiting factor for innovation.
Furthermore, I am certain that the secular stagnation hypothesis is another attempt by the government to justify more interventions with fiscal and monetary policies into the free market.
The question is, of course, who are the governments? Will Durant opined in The Age of Louis XIV that the “men who can manage men manage the men who can only manage things, and the men who can manage money manage all”. In Lessons of History, he wrote:
…the bankers, watching the trends in agriculture, industry, and trade, inviting and directing the flow of capital, putting our money doubly and trebly to work, controlling loans and interest and enterprise, running great risks to make great gains, rise to the top of the economic pyramid.
From the Medici of Florence and the Fuggers of Augsburg to the Rothschilds of Paris and London and the Morgans of New York, bankers have sat in councils of governments, financing wars and popes, and occasionally sparking a revolution. Perhaps it is one secret of their power that, having studied the fluctuations of prices, they know that history is inflationary, and that money is the last thing a wise man will hoard.
I suppose that one solace for poor people, in view of this rather sobering fact, may be these words of Frank McKinney Hubbard:
“It’s pretty hard to tell what does bring happiness; poverty and wealth have both failed.”