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A big sweeping theory of modern history

Author(s): Noah Smith

From Noahpinion:

Here's a Big Sweeping Theory that I've been toying with. There are lots of  of the cycle of rise and decline of empires in the agricultural, premodern world. I'd like to create a parallel theory of low-frequency cycles (or, more accurately, long-term impulse responses to stochastic technology shocks) in the modern, industrialized world.

It's possible to see the convulsions of the world wars and the great depression as a one-time event - part of the growing pains of the industrial revolution, not to be repeated. but what if some of the core features of those events are actually part of a cycle? here's a sketch of how that cycle might work: 

Phase 1: Technological Change. A huge burst of new stuff gets invented. Growth accelerates.

Phase 2: Globalization. New tech and growth create new global supply chains. Trade and migration accelerate.

Phase 3a: Inequality. New tech and globalization offer lots of opportunity for rich people to deploy their capital. New supply chains, products, and markets allow entrepreneurs to evade incumbents, vested interests, and governments. First movers make fortunes. Rich people deploy their wealth to restrain government attempts at regulation and redistribution, to keep the party going. Meanwhile, workers are forced to compete with foreigners and immigrants, and are also forced to pay the costs of reskilling in response to tech changes and globalization. Widespread inequality results.

Phase 3b: Cultural Change. New economic opportunities allow previously disempowered groups to gain power and status. Tech disrupts traditional family structures. Culture changes rapidly.

Phase 3c: Financialization. The need to finance new tech industries and new global supply chains expand the size of the finance sector. This results in large asset bubbles.

Phase 3d: Geopolitical Shifts. New supply chains and new tech mean some previously poor countries are now able to become rich. With wealth comes power. New great powers destabilize the geopolitical order.

Phase 4: Rise of Extremism. Economic inequality precipitates the rise of "leveling" (leftist) movements. Anger at cultural change and fear of competition with immigrants, mixed with displaced anger over inequality, precipitate the rise of reactionary (rightist) movements. Rightists and leftists feed off of each other, each portraying the other as an existential threat in order to frighten the populace into turning to the opposite extreme. Extremist politicians abuse veto points in political systems to paralyze governments and make countries effectively ungovernable.

Phase 5: Economic Slowdown. The collapse of a global bubble (from 3c) begins a protracted worldwide economic slowdown. For whatever reason - overhang of debt? extrapolative expectations? hysteresis? secular stagnation? some weird disruption to trade networks? - the economy does not recover quickly to previous growth rates. Because of extremist control of veto points, policy is unable to respond to the slowdown. Centrists on both the left and right are discredited and toppled. 

Phase 6: War. Extremists may fight each other in civil wars. Alternatively, geopolitical disruptions may lead to international conflict between new and incumbent powers. Extremists push their governments toward fighting external enemies, assassinating or toppling moderate leaders who refuse to fight. If a country is too weak to fight external enemies, or if no such enemies are close by, civil war results instead.

Phase 7: New Order. Out of the chaos and destruction of the wars emerges a new stable geopolitical order. Left-right extremist conflicts cause society to be exhausted by violence, and moderates slowly return to power. The exigencies of war cause governments to reestablish control over their economies, creating a new set of vested interests and protected incumbents. Inequality is dramatically reduced by destruction of wealth in wars. New incumbents provide a new "social model" that creates economic security for the masses.

This is basically a description of what happened in the late 19th and early 20th century, along with a number of assumptions about why it happened. Obviously there will never be enough data to confirm or refute this complex, slow, and sweeping of a theory - not in our lifetime, anyway. 

But it's interesting to think about recent events as possibly corresponding to this sort of cycle. Here's how the modern world fits into the pattern:

Phase 1: Technological Change. The IT revolution, computers, the internet, automation, mobile communication.

Phase 2: Globalization. The huge wave of global growth between 1990 and 2008. Globalized supply chains. A huge Latin American immigration flow into the U.S., and a huge Middle Eastern immigrant flow into Europe.

Phase 3a: Inequality. Rising income and wealth inequality everywhere. Stagnating wages in rich countries. An explosion in the number of billionaires. Soaring college tuition as workers desperately try to get skills. 

Phase 3b: Cultural Change. Greater economic opportunity and equality for women, due to the service economy. A rise in divorce and single parenthood, and a drop in marriage. Sex culture spreading via the Internet. The decline of religion.

Phase 3c: Financialization: The explosion of financial profits and output as percentages of the total.

Phase 3d: Geopolitical Shift: The rise of China and the recovery of Russia, and (most importantly) the de facto alliance between the two.

Phase 4: Rise of Extremism. The steady polarization of American politics. Skyrocketing use of the filibuster. The Tea Party. The debt ceiling crisis. Trump. Sanders. Fox vs. MSNBC. Le Pen. The British National Party. Syriza and Golden Dawn. The Zaitokukai. Campus anti-speech movements. Online wars between leftist "SJWs" and rightists (GamerGate, etc.). The normalization of the terms "fascist" and "socialist". Illiberalism on both sides of the political spectrum.

Phase 5: Economic Slowdown: The 2008 crisis and the Great Recession, the Euro crisis and the China slowdown and the emerging markets slowdown. 

Phase 6: War. Let's hope not...

I know this big sweeping theory, like all such theories, is untestable hand-waving and blatant overfitting. But it's kind of interesting, isn't it? And also disturbing.

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