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Musings Report 2021-15 4-10-21 Will We Get a 4th Turning / Turchin Crisis or Not?
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Will We Get a 4th Turning / Turchin Crisis or Not?
I've been covering Peter Turchin's data-based work on socio-economic-political cycles since 2016.
In 2010, Turchin made a bold prediction in the pages of Nature, identifying 2020 as the turning point in a 50-year cycle he proposed based on historical data and three critical dynamics:
1. Decline in the standard of living due to the stagnation of wages
2. Overproduction of parasitic elites
3. Decay of government finances
There was very little mainstream coverage of Turchin's work from 2016 - 2019, but the upheavals of 2020 aligning so neatly with his prediction has attracted a surge of mainstream media coverage, the most recent being this article in The Atlantic (via longtime correspondent Cheryl A.):
The Next Decade Could Be Even Worse: A historian believes he has discovered iron laws that predict the rise and fall of societies. He has bad news.
Turchin's work aligns with David Hackett Fischer's earlier data-based cyclical work, which I've covered for over a decade:
Now Is the Winter of our Discontent: Our Era of Rising Discord (November 16 2016)
The idea that human civilizations follow cycles of expansion, stagnation and contraction has a long history; Sir John Glubb's lifecycles of empires offers an excellent example.
Fischer and Turchin's contribution was to seek data which quantifies expansion, stagnation and contraction, data which suggests what causal dynamics may be underlying every human civilization.
Conventional historians argue that human history is intrinsically specific and contingent, and so those claiming cycles are real dynamics are just cherry-picking data to support their theory.
While one can always make a case that a specific bit of human history stands alone in its uniqueness, this doesn't preclude there being forces which influence the human species, just as they influence other species.
In effect, historians who refuse to consider ecology-based analyses are claiming humans have godlike powers to escape all the real-world constraints that influence other species.
Both Fischer and Turchin present the case for ecology-based cycles in which humans consume all available resources (expanding population and per capita consumption), eventually overshoot available resources (stagnation), and then contract or collapse once resources actually decline.
This is a powerful model because we can observe it in other species, and it provides a natural model for the periodic crises that bring down human civilizations.
Put simply, a temporary decline in resources in the expansive phase can be handled by the human populace because they haven't yet expanded to the point of consuming all resources available. There are redundancies and adjustments that can be made to get through the crisis.
But once the civilization has reached overshoot and is consuming all resources available, then a decline cannot be managed because there is no alternative source of food and energy to draw upon at the scale needed to keep consumption at current levels.
On a systems basis, the expansive linear system decays very suddenly into a non-linear chaotic disintegration phase where all the sub-systems that were optimized for maximum consumption no longer work because maximum consumption is no longer possible.
Ecologist Howard Odum provided a profound insight into this dynamic of human expansion, stagnation and collapse. He argued that humans are wired to maximize power output (i.e. consumption) rather than maximum efficiency. (Thanks to longtime correspondent Don S. for pointing me to Odum's work.)
In other words, humans are wired to strip the tree of every ripe fruit and throw a party, have more children and use the surplus food to feed an army of conquest. Efficient use of resources is simply not part of Wetware 1.0, a set of tools that was selected and optimized for small hunter-gatherer tribes roaming an apparently near-infinite world.
Kondratieff's cycles of credit expansion, stagnation and decline align with this ecology-based model: if we understand credit (i.e. borrowing against some form of collateral) as a limited resource--limited because collateral is intrinsically limited--then humans gorge on credit in the expansion phase, run out of collateral to financialize in the stagnation phase and then the entire credit bubble collapses in the decline phase.
Once all the phantom wealth / bad debt has been written off, the cycle can begin anew.
Another key characteristic of Wetware 1.0 is humans are social animals, as our social capital is a core survival advantage. As human groups come under pressure from a decline in resources (or a sudden need to expand consumption when there are no more resources to consume), they respond in ways that are consistent across cultural boundaries.
Based on the historical data painstakingly assembled by Fischer and Turchin, these include:
-- Ever higher prices for what I call the FEW Essentials, food, energy and water, as well as essential services such as childcare, healthcare, education and local government services.
-- Ever larger government deficits which end in repudiation of debts/accelerating debasement of the currency/inflation.
-- Rising property/violent crime and illegitimacy.
-- Rising interest rates (until very recently this was considered "impossible").
-- Rising income inequality in favor of capital/privilege over labor.
-- Rising volatility of prices due to shortages.
-- Rising political unrest and turmoil (see my recent posts on "Cultural Revolution").
-- Wars that do not end in quick, complete victory but drain the nation of resources.
In Turchin's view, we've entered the disintegrative phase in the cycle, a projection that aligns with Howe and Strauss's proposed 80-year cycle described in their 1996 book The Fourth Turning: What the Cycles of History Tell Us About America's Next Rendezvous with Destiny.
The Fourth Turning is more a sociological/generational analysis than a resource based cycle. The basic idea is that once all the humans who lived through the previous existential crisis have died (hence the 80-year cycle), the experiential "capital" to deal with the next crisis has been lost.
In my own view, the value of the Fourth Turning idea is less about generations and more about the idea that whatever was identified in the previous crisis as the solution to crises no longer works in the new crisis.
Since the solution--policies, strategies, etc.--worked so well to resolve the previous crisis, the current crop of elites (the political, financial, cultural leadership) respond to the deepening crisis by doing more of worked so well in the past.
But since this solution is a misreading of the current crisis, the leaders are doing more of what will fail. Only when the failure is undeniable as the resources to do more of what's failed run out is a new solution possible.
From my perspective, every existential crisis is a large-scale problem-solving process.
We are now in a very interesting juncture of history. The conventional status quo is claiming that all the old tools--borrowing and spending money, i.e. fiscal stimulus, tweaking existing policies, repeating narratives to reassure the public everything is under control, etc.--are working just fine and the return to the world of 2019 is well under way.
Thus the projection of Jamie Dimon and other financial leaders is for a great boom fueled by massive government deficit spending that will last into 2023 and beyond.
In this rosy view, there's nothing actually wrong with the global economy and America's socio-political status quo that can't be fixed with a few trillion dollars of (borrowed) stimulus every year and a few minor policy tweaks.
In this context, Kondratieff's financial cycle appears to be playing out: credit is exploding higher, not because collateral is actually increasing, but because the value of existing collateral is being inflated beyond its real-world value.
Could the boom Dimon and other foresee fit into a soaring-inflation scenario predicted by the cycles-based historians? Perhaps.
The unprecedented levels of debt and fiscal stimulus are already sparking inflation, so it's not too difficult to foresee inflationary expectations becoming embedded in the decision-making of households and enterprises.
Once everyone anticipates rising inflation and acts accordingly, those behaviors tend to fuel inflation, creating a self-reinforcing feedback loop.
The only way to limit inflation is to tighten credit and raise interest rates, moves that are widely understood to be catastrophic to a global economy that's now totally dependent on near-zero interest rates.
The first domino that will fall as rates rise are risk-on assets such as stocks, which have soared partly because capital earns so little interest that everyone has been pushed into risk assets as they chase a real return above zero.
A collapse in overleveraged, over-valued risk assets (stocks, bonds, housing, etc.) would eventually suppress "the wealth effect," the willingness to borrow and spend more based not on an increase in income but on the bubbling value of collateral such as the family home, 401K retirement accounts, etc.
Interestingly, even hyper-bullish Jamie Dimon felt obligated to note that "Americans know that something has gone terribly wrong, and they blame this country’s leadership: the elite, the powerful, the decision makers - in government, in business and in civic society. But populism is not policy, and we cannot let it drive another round of poor planning and bad leadership that will simply make our country’s situation worse."
JPMorgan's Dimon Admits "Something Has Gone Terribly Wrong" In America.
If all the sources of social, economic and political discord are basically background noise that can easily be resolved by fiscal stimulus, then perhaps there will be no existential crisis this decade: if printing/borrowing/spending lots of money is the solution to all problems, then annual rounds of stimulus (in the trillions of dollars) will be all that's needed to resolve all problems.
But if the problems are of the type that cannot be solved by borrowing/spending trillions, or even worse, the type of problems made worse by borrowing/spending trillions, then the existential crisis will only be accelerated by doing more of what worked in the past.
The case laid out by the data-based historians is persuasive, and as stability unravels on multiple fronts, even skeptics are being forced to revisit their projections and data.
It's very easy indeed to quibble with such sweeping conclusions--are today's Ivy League graduates really the equivalent of lesser nobility in pre-Revolutionary France?--but as with all data, the preponderance of evidence, not the quibbles, is what's ultimately persuasive or not.
Now that we're in the era of stagnation, rising discord and the increasing application of past solutions, we can track the preponderance of evidence in real time.
If we look at energy consumption data (stagnant), credit and collateral (classic bubble expansion of credit/phantom wealth), extremes of wealth inequality and social discord, that we're in the disintegrative stage of the problem-solving cycle seems undeniable.
Understood as a problem-solving experience, cycles are not the end of the world, they are just another example of selection/adaptation: whatever no longer works is selected out, whatever works better spreads rapidly.
The default setting of doing more of what worked in the past becomes the problem--a problem that can only be made worse by continuing to do more of what worked in the past.
My own work on CLIME (community labor integrated money economy) is all about presenting solutions that might work much better in a resource-constrained world than the current infinite growth on a finite planet model of using credit expansion to solve all problems.
The next set of solutions will require efficient use of resources rather than maximizing consumption of resources. That will destabilize every system that optimizes expansion of consumption and credit.
Highlights of the Blog
Podcasts:
AxisOfEasy Salon 41: Can't get you out of my head (58 min)
Posts:
Is a Cultural Revolution Brewing in America? 4/9/21
What Could Go Awry? 4/7/21
What's Changed and What Hasn't in a Tumultuous Year 4/5/21
Best Thing That Happened To Me This Week
Tough to choose between homemade strawberry shortcake or these rhododendron flowers in our yard.
From Left Field
Innovative investment could help solve the world's water crisis – here's how -- or not... World Economic Forum at work...
How 10 billion people could live well by 2050 – using as much energy as we did 60 years ago -- per my Musings on 1906 San Francisco...
The US vs. John Lennon (1:39 hrs) (via Laserlefty) -- nothing more dangerous than a rock star...
Love Me Do? ‘Quite good’, wrote John Lennon in revealing cache of Beatles letters -- which are being auctioned off...
Lake Pinaroo fills for first time in 10 years as Far West NSW welcomes heavy rains
Fruit Walls: Urban Farming in the 1600s - fascinating low-tech solution...
Searching for Lady Kung Fu (NYT from 2016, discovering 1970s martial arts star Angela Mao running a restaurant in Queens)
US Navy ship sunk nearly 80 years ago reached in world's deepest shipwreck dive -- this ship's dramatic history is covered in the book The Last Stand of the Tin Can Sailors: The Extraordinary World War II Story of the U.S. Navy's Finest Hour, which resonated with me as my grandfather served on a U.S. Navy tin-can (destroyer) in 1919-1920...
Children now playing 'huge role' in spread of COVID-19 variant, expert says
Woman Discovers Her Son's Bride is Her Long Lost Daughter -- file under truth is stranger than fiction...
California is on the brink of drought – again. Is it ready? -- short answer--it thinks it's ready but it isn't....
The Case Is Building That COVID-19 Had a Lab Origin (via J.F.) -- but if you said this a year ago you were banned for so-called misinformation...
"I don't paint loneliness, I describe the absence of sociality between individuals." Edward Hopper
Thanks for reading--
charles |
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