Abstract
This paper proposes a supplemental secular cycle formulation for a modern capitalist society that employs financial, economic, and political metrics in place of population and sociopolitical violence. It makes use of Thomas Piketty’s (2014) hypothesis that excess investment return relative to economic growth causes inequality. In a capitalist society, the investing class can be considered as a proxy for elites. Inequality as measured by the ratio of financial to wage gains over time agrees with other economic measures. Rising inequality led to a reduction in capital productivity (output per person per unit of capital). This created instability in financial markets that generated the 1929 stock market crash. Application of a simplified version of the demographic structural theory to inequality trends shows political stress peaking in 1929. The depression that began with the stock market crash in that year resulted in a devastating political defeat for the ruling party in 1932 which brought in the political coalition that engineered the inequality trend reversal. This series of events can be considered as a modern version of the state collapse and reconstitution that was typically a key feature of premodern secular cycles.
Highlights
Economic inequality in the United States has been a topic of rising academic interest in recent decades, as a Google N-gram for “income inequality” in American English reveals
This paper addresses the transition from the disintegrative phase of one secular cycle to the integrative phase of a new secular cycle
Why does a rising trend in inequality shift to a falling one? Turchin argues that immigration restriction in response to high levels of sociopolitical instability was the key policy that led to the trend change
Summary
Economic inequality in the United States has been a topic of rising academic (and political) interest in recent decades, as a Google N-gram for “income inequality” in American English reveals. Research over this time has shown that inequality underwent a dramatic decline from high levels before 1930 to a nadir around 1980, from which it has returned to its level in the twenties, suggesting that inequality may be cyclical (Piketty and Saez 2007; Saez and Zucman 2016). A trend change to falling inequality could happen again, the prospect of which is intriguing politically as well as academically
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