Economics

In the days since the sweeping Republican victory in the US election, which gave the party control of the presidency, the Senate and the House, commentators have analysed and dissected the relative merits of the main protagonists – Kamala Harris and Donald Trump – in minute detail. Much has been said about their personalities and the words they have spoken; little about the impersonal social forces that push complex human societies to the brink of collapse – and sometimes beyond. That’s a mistake: in order to understand the roots of our current crisis, and possible ways out of it, it’s precisely these tectonic forces we need to focus on.The research team I lead studies cycles of political integration and disintegration over the past 5,000 years. We have found that societies, organised as states, can experience significant periods of peace and stability lasting, roughly, a century or so. Inevitably, though, they then enter periods of social unrest and political breakdown. Think of the end of the Roman empire, the English civil war or the Russian Revolution. To date, we have amassed data on hundreds of historical states as they slid into crisis, and then emerged from it.So we’re in a good position to identify just those impersonal social forces that foment unrest and fragmentation, and we’ve found three common factors: popular immiseration, elite overproduction and state breakdown.To get a better understanding of these concepts and how they are influencing American politics in 2024, we need to travel back in time to the 1930s, when an unwritten social contract came into being in the form of Franklin D Roosevelt’s New Deal. This contract balanced the interests of workers, businesses and the state in a way similar to the more formal agreements we see in Nordic countries. For two generations, this implicit pact delivered an unprecedented growth in wellbeing across a broad swath of the country. At the same time, a “Great Compression” of incomes and wealth dramatically reduced economic inequality. For roughly 50 years the interests of workers and the interests of owners were kept in balance, and overall income inequality remained remarkably low.View image in fullscreenThat social contract began to break down in the late 1970s. The power of unions was undermined, and taxes on the wealthy cut back. Typical workers’ wages, which had previously increased in tandem with overall economic growth, started to lag behind. Inflation-adjusted wages stagnated and at times decreased. The result was a decline in many aspects of quality of life for the majority of Americans. One shocking way this became evident was in changes to the average life expectancy, which stalled and even went into reverse (and this started well before the Covid pandemic). That’s what we term “popular immiseration”.With the incomes of workers effectively stuck, the fruits of economic growth were reaped by the elites instead. A perverse “wealth pump” came into being, siphoning money from the poor and channelling it to the rich. The Great Compression reversed itself. In many ways, the last four decades call to mind what happened in the United States between 1870 and 1900 – the time of railroad fortunes and robber barons. If the postwar period was a golden age of broad-based prosperity, after 1980 we could be said to have entered a Second Gilded Age.Welcome as the extra wealth might seem for its recipients, it ends up causing problems for them as a class. The uber-wealthy (those with fortunes greater than $10m) increased tenfold between 1980 and 2020, adjusted for inflation. A certain proportion of these people have political ambitions: some run for political office themselves (like Trump), others fund political candidates (like Peter Thiel). The more members of this elite class there are, the more aspirants for political power a society contains.By the 2010s the social pyramid in the US had grown exceptionally top-heavy: there were too many wannabe leaders and moguls competing for a fixed number of positions in the upper echelons of politics and business. In our model, this state of affairs has a name: elite overproduction.Elite overproduction can be likened to a game of musical chairs – except the number of chairs stays constant, while the number of players is allowed to increase. As the game progresses, it creates more and more angry losers. Some of those turn into “counter-elites”: those willing to challenge the established order; rebels and revolutionaries such as Oliver Cromwell and his Roundheads in the English civil war, or Vladimir Lenin and the Bolsheviks in Russia. In the contemporary US we might think of media disruptors such as Tucker Carlson, or maverick entrepreneurs seeking political influence such as Elon Musk alongside countless less-prominent examples at lower levels in the system. As battles between the ruling elites and counter-elites heat up, the norms governing public discourse unravel and trust in institutions declines. The result is a loss of civic cohesiveness and sense of national cooperation – without which states quickly rot from within. View image in fullscreenOne result of all this political dysfunction is an inability to agree on how the federal budget should be balanced. Together with the loss of trust and legitimacy, that accelerates the breakdown of state capacity. It’s notable that a collapse in state finances is often the triggering event for a revolution: this is what happened in France before 1789 and in the runup to the English civil war.How does this landscape translate to party politics? The American ruling class, as it has evolved since the end of the civil war in 1865, is basically a coalition of the top wealth holders (the proverbial 1%) and a highly educated or “credentialed” class of professionals and graduates (whom we might call the 10%). A decade ago, the Republicans were the party of the 1%, while the Democrats were the party of the 10%. Since then, they have both changed out of all recognition.The recasting of the Republican party began with the unexpected victory of Donald Trump in 2016. He was typical of political entrepreneurs in history who have channelled popular discontent to propel themselves to power (one example is Tiberius Gracchus, who founded the populist party in late Republican Rome). Not all of his initiatives went against the interests of the ruling class – for example, he succeeded in making the tax code more regressive. But many did, including his policies on immigration (economic elites tend to favour open immigration as it suppresses wages); a rejection of traditional Republican free-market orthodoxy in favour of industrial policy; a scepticism of Nato and a professed unwillingness to start new conflicts abroad.It seemed to some as though the revolution had been squashed when a quintessentially establishment figure, Joe Biden, defeated Trump in 2020. By 2024 the Democrats had essentially become the party of the ruling class – of the 10% and of the 1%, having tamed its own populist wing (led by the Vermont senator Bernie Sanders). This realignment was signalled by Kamala Harris massively outspending Trump this election cycle, as well as mainstream Republicans, such as Liz and Dick Cheney, or neocons such as Bill Kristol, supporting the Harris ticket.The GOP, in the meantime, has transformed itself into a truly revolutionary party: one that represents working people (according to its leaders) or a radical rightwing agenda (according to its detractors). In the process, it has largely purged itself of traditional Republicans.Trump was clearly the chief agent of this change. But while the mainstream media and politicians obsess over him, it is important to recognise that he is now merely the tip of the iceberg: a diverse group of counter-elites has coalesced around the Trump ticket. Some of them, such as JD Vance, had meteoric rises through the Republican ranks. Some, such as Robert F Kennedy Jr and Tulsi Gabbard, defected from the Democrats. Others include tycoons such as Musk, or media figures, such as Joe Rogan, perhaps the most influential American podcaster. The latter was once a supporter of the populist wing of the Democratic party (and Bernie Sanders in particular).The main point here is that in 2024, the Democrats, having morphed into the party of the ruling class, had to contend not only with the tide of popular discontent but also a revolt of the counter-elites. As such, it finds itself in a predicament that has recurred thousands of times in human history, and there are two ways things play out from here.One is with the overthrow of established elites, as happened in the French and Russian Revolutions. The other is with the ruling elites backing a rebalancing of the social system – most importantly, shutting down the wealth pump and reversing popular immiseration and elite overproduction. It happened about a century ago with the New Deal. There’s also a parallel in the Chartist period (1838–1857), when Great Britain was the only European great power to avoid the wave of revolutions that swept Europe in 1848, via major reform. But the US has so far failed to learn the historical lessons.What comes next? The electoral defeat on 5 November represents one battle in an ongoing revolutionary war. The triumphant counter-elites want to replace their counterparts – what they sometimes call the “deep state” – entirely. But history shows that success in achieving such goals is far from assured. Their opponents are pretty well entrenched in the bureaucracy and can effectively resist change. Ideological and personal tensions in the winning coalition may result in it breaking apart (as they say, revolutions devour their children). Most importantly, the challenges facing the new Trump administration are of the particularly intractable kind. What is their plan for tackling the exploding federal budget deficit? How are they going to shut down the wealth pump? And what will the Democrats’ response be? Will their platform for 2028 include a new New Deal, a commitment to major social reform?One thing is clear: whatever the choices and actions of the contending parties, they will not lead to an immediate resolution. Popular discontent in the US has been building up for more than four decades. Many years of real prosperity would be needed to persuade the public that the country is back on the right track. So, for now, we can expect a lasting age of discord. Let’s hope that it won’t spill over into a hot civil war. More