Friday, November 27, 2015

A big sweeping theory of modern history

Here's a Big Sweeping Theory that I've been toying with. There are lots of theories 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.


  1. Now all you have to add is inflation and deflation and you will have Kondratieff. I expect it takes serious deflation to reach war though.

    1. Right. Kondratieff beat Noah to it.

      The fact is that any system with lags, momentum and negative feedback mechanisms which is subjected to random impulses will demonstrate some oscillating behavior. If you hit a bell it rings. If you hit an economy with a major change it will "ring". Sometimes a bunch of little waves will pile up into one big wave.

  2. For "war", don't we have Ukraine?

  3. "The normalization of the terms "fascist" and "socialist"."

    -This is a big one. It's clearly happening.

    And what economic slowdown was there just prior to WWI? Phase 5 doesn't seem to fit comfortably here in the ordering.

    1. Well, WW1 was motivated by geopolitical realignment (rise of Germany and Russia), and also by extremism (anarchists) that put pressure on governments to go to war. But it wasn't caused by an economic crash.

  4. Anonymous4:40 PM

    Interesting, as you say. But don't you think that nukes make a huge difference? During the outbreak WW1, it seems like people thought that the coming war would be a cakewalk, which in turn contributed to how willing they were to go to war. The same, albeit to a lesser extant, for the Axis powers at the outbreak of WW2. But doesn't the threat of global nuclear war make that kind of delusion waaaaaaay less tenable?

    1. Yep. And that's why I hope that even if this theory is right, great powers will be able to restrain themselves from going to war. That still leaves the threat of civil wars, though...

    2. Anonymous4:40 AM

      Unusual for an economist you bring in power into the discussion. Yes the WWi-WWII were crucial in reorganising power arrangements and ending the old unstable multi-polar system.

      The best guy when it comes to the 'big sweep' is Karl Marx. I am not suggesting you read Das Kapital, but it is worth reading summaries of it. Historian do not use theories or models to guide the analysis of their work for obvious reasons. But if there was a reference which most closely resembles the historian's big sweep it would have to be the Marxian Dialectic. There is no competition to this when it comes to explaining how capitalism emerges from feudalism. Also don't get into a neo-classical economist's mindset when it comes to technology and globalisation (just as you do not with free trade - both free trade and import substitution were important). In some ways European imperialism/globalisation was driving technological change as much as the reverse. It was linked, two way causation. But wars were crucial. Do you think your blog would be in English, or would still exist at all if Trafalgar had had a different outcome?

    3. Power is all well and good, but you have to specify how it works, or it just becomes a game of "label-the-residual".

      In this case, geopolitical power is pretty clearly related to tax revenue, since more $$ can buy more guns. And political power is related to the ability to spend money to influence elites.

    4. Anonymous11:26 PM

      Obviously, you need to 'specify' what power means, but that does not mean in mathematical form. Chances are you if do that you will trivialise what you are doing. Tax comes from power, as much as the reverse, of course. And there are many cases of rich countries being defeated by much poorer ones.

      You have to work as an historian doing these issues. No preconceptions. No models. The facts and nothing else frame your analysis. Like an investigator, you work from the ground up, and you put the pieces of the jigsaw together. And you do not make up stories to calibrate a model. You accept there are things you don't know.You do not hide the contradictions, but tell us what they are. What you have to tell us is out of what we can know, this is what we do know.

  5. Have you seen the play "The History Boys"?

    There's a point where the token anti-intellectual jock defines history as "one fucking thing after another". It gets a great condescending laugh, but I reckon the burden of proof is on the other side.

    There's no great theory of history. It's one fucking thing after another. You prove me wrong.

    1. (Best said in a Manchester accent - it's flat and down to earth)

  6. Good piece. The parallels are disturbing. The mess in Syria has gotten the world powers caught in a web of confusing alliances, and the South China Sea situation on the other side of the world could be much ado about nothing or the tinder that turns China from a frenenemy into much worse.

    1. The South China Sea is all about China's imperial ambitions. The United States has three choices: (1) ignore the whole thing and let China do a creeping conquest of the countries around it (like they did with Tibet and will eventually try with Taiwan); (2) wait until China gets into a shooting war with Vietnam or some other neighbor over borders; (3) push back over a bunch of uninhabited rocks in the middle of the ocean. Pushing back in the South China sea is probably the safest long term strategy.

  7. The problem is noah is using a single data point, great depression & ww2, for his argument.

  8. Anonymous5:01 AM

    It would be good if some political scientists and historians got involved in this blog. Some ecconomic historians are pretty good - Angus Maddison, Nick Craft and Thomas Piketty, but the real stuff goes on in history and political science departments. I would not write off China yet. Most Sinologists say that expansion in that economy still has a long way to go. But the biggest threat this time I think is similar to that which ended Classical civilisation: non-state actors - eg. Islamic State. The main worry is that the barbarians get their hands on WMDs/ WMD technology.

    Read Andrew Gamble. Economists are too busy doing what they always do - messing around with silly models.


  9. A theory of history? The other Karl (Popper) will be spinning in his grave.

  10. "The gains from opening to trade are estimated at 63% for the 10th percentile of the income distribution and 28% for the 90th percentile."

    Just as in the developed world, when more money goes to the bottom (when and if it does), more money tends to recirculate at the bottom.

    The Asian Tigers, China, South American when it stops listening to the IMF, eventually India will succeed -- then the rest of the underdeveloped world will follow in their developed wake.

    The way out of strife seems to be by whatever means (whatever drives Asians uniquely to spread the wealth of developing economies) to spread the wealth as widely as possible while growing up.

    Ultimately in the whole world -- when it the whole world is developed -- the equalizing agent will be, guess what: labor unions. That's Occam's Razor for you -- a little less hard to follow than all that above. :-)

    Just one example: today's students are trapped between unexpectedly mushrooming college costs and surprise at ever diminishing returns in the labor market they are supposed to pay college off with -- none of which would be happening in a world captured by labor unions -- that is by the interests of the average person.

  11. Noah, I do think there is elevated risk of war, for all the reasons you give and more. Are you familiar with Carlota Perez's work on cycles of technological change?

    However, I would add one more war that you haven't considered. We scared ourselves silly at Hiroshima and since then have done everything possible to avoid outright world war. But I would regard the Cold War as the last and greatest of the 20th Century wars. Eastern Europe was the front line, and it is still rebuilding after the economic, political and social destruction that losing the Cold War caused for the USSR and its satellites. War does not have to be fought with tanks, guns and bombs.

  12. Interesting, and thank you - but does it make any difference to the theory to note that most historians of pre-modern societies regard the idea of the rise and decline of empires as at best a ludicrous simplification and at worst a projection of modern anxieties and pre-conceptions onto the past? Of course nothing stays the same for ever, and no human political, economic or cultural system endures indefinitely without changing - but that's a long way from saying that there is a single process and underlying set of causes, repeated again and again.

    1. Yep, I am sure that theories of the rise and decline of empires are not only ludicrous simplifications, but also massive overfitting. As is my theory, most likely.

    2. Anonymous11:34 PM

      "the rise and decline of empires as at best a ludicrous simplification and at worst a projection of modern anxieties and pre-conceptions onto the past? "

      It is even worse among economists (including some very famous ones- I won't name them), who seem to think that history is totally linear process of continual progress! Look at the number of them that say we should not read the classics because we know more than they did!

      When it comes to issues like the use of the word 'civilisation' this is where critical theory comes in: what do these words mean and why have they come to mean what they mean. If we did not have civilisation, what would we have? An investigation reveals things like power relations and marginalisation.

  13. Piketty's history seems right to me. Inequality reigned until it drove civilization into disastrous war and depression. After World War II social democratic programs and fear of communism democratized the economy but back backsliding began almost immediately.

    Reagan/Thatcher and conservative lite Clinton/Blair stripped away New Deal programs and inequality is going back up again to historically high levels.

    Technology and globalization are just alibis for a political redistribution upwards.

    1. "Reagan/Thatcher and conservative lite Clinton/Blair stripped away New Deal programs"

      -Which ones? Social security? Medicare? The NHS? Public works? The FDIC? The paper dollar standard?

      And inequality didn't drive anyone into anything.

    2. Well, Glass-Steagall for one, and that is not trivial. And have you noticed the intense Republican interest in getting rid of SS and medicare? If an R wins in 2016 and they have control of both houses of Congress, both of those will be dead quickly. Does the huge decline in Union power since 1980 mean nothing in this context?

      What sort of major pubic works have you seen recently? How does austerity fit in this picture?

      If inequality didn't drive anything, what is your take on the French Revolution? Or the Russian one, for that matter?


    3. "And have you noticed the intense Republican interest in getting rid of SS and medicare?"
      -Yes. Which is why we got Medicare Part D under Obama. Oh, right...

      Naturally, the "intense Republican interest in getting rid of SS and medicare" is the stuff of sword-and-sorcery fantasy. Nowhere near the real world.

      "Does the huge decline in Union power since 1980 mean nothing in this context?"

      -The New Deal program giving the most power to unions (the NIRA) was repealed not by Reagan, and not by Clinton. It was repealed by the Supreme Court in the 1930s.

      The partial repeal of Glass-Steagall was a partial repeal of a law, not a program.

      "What sort of major pubic works have you seen recently?"

      -2009 porkulus.

      "How does austerity fit in this picture?"

      -It does not exist, and hasn't existed since the beginning of 2014.

  14. Shorter Noah: "Here is a summary of things to date, plus the paper on how excess finance seems to hurt developed countries, and a prediction of civil war between classes"

    Rebuttal: old people don't fight civil wars. Imagine octogenarians fighting.

    More likely, if Toynbee's observation that civilizations last about 200 years is correct (and since forever it seems that's the case, just look at any history timeline), then the USA will harmlessly peter out and some other power, possibly India or China, will take over for a couple of hundreds years.

    1. Old people aren't best for fighting wars, but they can do it. Cf., Ukraine.

      India is not a power. It's an Indian confederation with nuclear weapons.

  15. "But it's kind of interesting, isn't it? "


  16. This sweeping theory doesn't seem that interesting or compelling. Technological change increases, as opposed to oscillating. World War I and World War II were more about changing from a feudal society to a democracy. But once you've gone through that change, it's much harder to go through it again a second time.

    Moving from an agrarian to an industrial society is one disturbance that has occurred over and over again, but in different geographical regions at different times. Changing from an industrial society to a service economy is much less traumatic.

  17. Anonymous11:09 AM

    The Arrighi/world-systems story, in other words