I’ve had a number of readers note the gloomier tone of some of my recent columns.

That’s due, in part, to our new era of “administrative markets” where stock returns are affected as much by government policies as they are by economic growth and corporate profits.

This is not a good thing.

[ad#Google Adsense 336×280-IA]In the last few years, we’ve seen bailouts, fiscal stimulus, zero (and negative) interest rates, quantitative easing, heavy-handed regulation and sharply higher taxes on income, interest, dividends and capital gains.

Our corporate tax rate is the highest in the developed world.

This distorts markets… and holds back economic growth.

Yet the trend line for Western society on the whole is still positive. Heavy consumers of cable news will beg to differ.

Yet I find there is much they generally don’t consider.

For example:

  • The world is enjoying the longest period in its history free from general war. Armed conflicts tend to be local – not regional or global – and far less frequent, despite the gory images on the evening news. There has been no direct fighting between the major powers since 1945. That’s almost three-quarters of a century of precious – and precarious – peace.
  • Despite scenes from Chicago, Charlotte and a few other large metropolitan areas, our cities are safer, too. The Brennan Center for Justice reported last week that “the average person in a large urban area is safer walking on the street today than he or she would have been at almost any time in the past 30 years.” It’s safer on the other side of the pond, too. The homicide rate in hunter-gatherer societies was about 500 times what it is in Europe today.
  • One form of violence is indeed growing: terrorism. Yet – thanks to the 24-hour news cycle – we greatly overestimate how much of it there is. Americans are far more likely to be struck by lightning than killed by a terrorist. A European is 10 times more likely to die by falling down a flight of stairs.
  • The American economy – despite our current slow growth – is still a wonder. In 1950, our GDP was $2.2 trillion. Last year, in inflation-adjusted dollars, it was $16.3 trillion or seven times greater. Eliminate the effects of a bigger population – it has doubled since 1950 – and the economy is still four times larger.
  • Government statistics show that U.S. productivity is declining. If that doesn’t seem possible today with widespread smartphones, mobile data and Wi-Fi, you’re right. Productivity has become increasingly difficult to measure thanks to the digital revolution. Your email, social media, Twitter, Snapchat, Instagram, YouTube, newspapers and magazines, most apps, and much entertainment is now available online for free. It’s difficult to measure the value of things without a price tag. The result is the economy’s output is undercounted, and economic growth is actually stronger than official figures report.
  • We human beings are even getting smarter (despite copious evidence to the contrary). Americans scored, on average, 100 points on IQ tests just after WWII. Fifty-seven years later, the average score had risen to 118, with most of the improvement in abstract reasoning. (It’s called “The Flynn Effect,” after the man who discovered it.) Average IQs continue to rise throughout the developed world, and we aren’t sure why, although researchers credit better nutrition and education.

Polls show the majority of Americans believe life in the U.S. was better 50 years ago.

Life was simpler and less stressful then… and we were younger, healthier and better looking.

But set your nostalgia aside for a moment. By most objective measures, it simply isn’t true that life was better. (And it’s especially untrue if you happen to be a woman, black, handicapped or gay.)

As recently as 1987, only 48% of Americans approved of interracial dating. In 1964, the American Civil Liberties Union agreed that gays should be barred from government jobs. And if you were in ill health 50 years ago, you didn’t have many of the drugs, vaccines, and medical devices and procedures that would keep you alive today.

We are living longer, safer, richer, freer lives than any people in the history of the planet.

The shame is that – despite our higher IQs – the majority of us still don’t realize it.

Good investing,

Alex

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Source: Investment U