by Charles Hugh Smith, DailyReckoning:
How would you describe the social mood of the nation and world?
Would anti-Establishment, anti-status quo, and anti-globalization be a good start? How about choking on fast-rising debt? Would stagnant growth, stagnant wages be a fair description? Or how about rising wealth/income inequality? Wouldn’t rising disunity and political polarization be accurate?
These are all characteristics of the long-wave social-economic cycle that is entering the disintegrative (winter) phase. Souring social mood, loss of purchasing power, stagnating wages, rising inequality, devaluing currencies, rising debt, political polarization and elite disunity are all manifestations of this phase.
There is a template for global instability, one that has been repeated throughout history…
Historian Peter Turchin explores the historical cycles of social disintegration and integration in his new book Ages of Discord.
Turchin finds 25-year cycles that combine into roughly 50-year cycles. These 50-year cycles are part of longer 150 to 200-year cycles that move from cooperation through an age of discord and disintegration to a new era of cooperation.
That we have entered an era of rising instability and uncertainty is self-evident. There will always be areas of instability in any era, but instability and uncertainty are now the norm globally.
Turchin’s model identifies three primary forces in these cycles:
An over-supply of labor that suppresses real (inflation-adjusted) wages
An overproduction of essentially parasitic Elites
A deterioration in central state finances (over-indebtedness, decline in tax revenues, increase in state dependents, fiscal burdens of war, etc.)
These combine to influence the broader social mood, which is characterized in eras of discord by fragmented loyalty to self-serving special interests (disintegration) and in eras of cooperation by a desire and willingness to cooperate and compromise for the good of the entire society (integration).
Rising discord can be quantified in a Political Stress Index. Do we find evidence of Turchin’s disintegrative forces in the present era?
Stagnating real wages due to oversupply of labor: check.
Overproduction of parasitic Elites: check.
Deterioration in central state finances: check.
Is it any wonder that political stress, however you want to measure it, is rising?
Cycles are the result of the interaction of complex dynamics, and so they are not entirely predictable in terms of pinpointing the exact moment of crisis or the outcome of a systemic crisis.
These long cycles parallel the cyclical analysis of David Hackett Fischer, whose masterwork The Great Wave: Price Revolutions and the Rhythm of History.
In Fischer’s well-documented view, there is a grand cycle of prices and wages which turn on the simple but profound law of supply and demand; all else is detail.
As a people prosper and multiply, the demand for goods like food and energy outstrips supply, causing eras of rising prices.
Long periods of stable prices (supply increases along with demand) beget rising wages and widespread prosperity. Once population and financial demand outstrip supply of food and energy — a situation often triggered by a series of catastrophically poor harvests — then the stability decays into instability as shortages develop and prices spike.
These junctures of great poverty, insecurity and unrest set the stage for wars, revolutions and pandemics.
It is remarkable that the very conditions so troubling us now were also present in the price rises of the 13th, 16th and 18th centuries.
Unfortunately, those cycles did not have Disney endings: the turmoil of the 13th century brought war and a series of plagues which killed 40% of Europe’s population; the 16th century’s era of rising prices tilled fertile ground for war, and the 18th century’s violent revolutions and resultant wars can be traced directly to the unrest caused by spiking prices.
(The very day that prices for bread reached their peak in Paris, an angry mob tore down the Bastille prison, launching the French Revolution.)
After a gloriously long run of stable prices in the 19th century — prices were essentially unchanged in Britain between 1820 and 1900 —the 20th century was one of steadily increasing prices.
Fischer challenges the notion that all inflation is monetary; the supply of money (gold and silver) rose spectacularly in the 19th century but prices barely budged. In a similar fashion, eras of rising prices have seen stable money supplies.
Monetary inflation can lead to hyper-inflation, of course, but there are always mitigating factors in those circumstances. Fischer argues the long wave is not one of hyper-inflation but of supply and demand imbalances undoing the social order.
Americans are inherently suspicious of anything which seems to threaten constraint of the American Dream; thus it is not surprising that cycles of history are largely unknown in the U.S. As Fischer explains:
This collective amnesia is partly the consequence of an attitude widely shared among decision-makers in America, that history is more or less irrelevant to the urgent problems before them.
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