7 bad signs for 2015

January 6, 2015 12:09 PM

By nature I’m an optimist. I love stories like this one from Vox, entitled “26 charts and maps that show the world is getting much, much better.” And it’s true—crime, poverty, war and disease, humanity’s main nemeses, are all way down, even as technology continues to make the world a better place.

But optimism is a dangerous drug. Too much of it, and we can lose the will to fight the problems that still exist. Focusing on the good can distract us from areas that need work. So even though the world is getting better overall, here is a list of seven worrying trends that could use some attention:

1. Democracy is on the back foot

In 1992, Francis Fukuyama published “The End of History and the Last Man,” declaring that capitalism and democracy had won the battle of ideas. And until the mid-2000s, history seemed to be obliging—the percentage of democracies in the world rose and rose.

Then it stopped rising. Since 2007, the think tank Freedom House reports that the number of “free countries” in the world has fallen. In middle-income countries such as Turkey, Hungary, Thailand and Russia, a fusion of quasi-capitalism and authoritarianism has gained currency at the expense of the values espoused by the West during the Cold War. Meanwhile, in rich countries such as the U.S. and Japan, there have been worrying increases in executive power and government secrecy.

2. Household income is still way down in rich countries

Median household income isn't a perfect measure of standard of living. Household size decreases as people have fewer children and as fewer people get married. Also, advances in technology make life better in ways that the official numbers don’t capture, because these improvements are not counted in the official inflation rate. Finally, an influx of low-skilled immigrants changes the composition of the workforce. But even so, it is a worrying sign that real median household income in the U.S. is way down since the late 1990s:

Progress in American living standards is probably continuing, but at a much slower pace than in the 20th century. Meanwhile, in Japan and much of Europe, the situation is worse.

3. The rate of new business formation is falling

In a landmark 2014 paper, economists Ryan Decker, John Haltiwanger, Ron Jarmin and Javier Miranda showed that there has been a serious decline in business dynamism in the U.S. Simply put, fewer and fewer Americans are starting new businesses. Here is a graph from their paper:

Until about 2000, the drop was mainly caused by a reduction in small, family owned stores, driven by the expansion of chains and franchises. But in the past 15 years, the rate of new tech and high-growth businesses has been declining. This can only bode ill for the U.S. economy. Whether this is the result of increased regulation or the natural result of a technological slowdown remains to be seen.

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