WebSeitz/wiki

A 20th Century Economic Theory

From the Great Depression through now. 2 separate Economic Transitions. (A Brain Fart started in 2009.)

Prequel:

The Great Depression may have been triggered by monetary/economic/tariff BigGov policies, but it was probably caused by the loss of farm and manufacturing jobs (Economic Transition, Technological Revolutions And Financial Capital).

The Great Depression was not "solved" by the New Deal. In fact, the New Deal may have lengthened the depression (Great Duration). (On the other hand, it probably did reduce the number of people starving to death in the meantime.)

It was fixed by the combination of post-WorldWarII re-investment (creating demand/growth) combined with the peak in effectiveness of the Industrial Age and BigWorld scale.

This growth was sufficient that the overhead of New Deal redistribution was "affordable". This led to growth of the Middle Class. (Golden Age)

When economic growth slowed, as post-war rebuilding and resulting momentum had dissipated, and as Globalization spread, the cost of New Deal became more significant.

Also note

Any lessons for handling Credit Crisis 2008? Any hope to "save" the Middle Class, or are we doomed to Collapse?

Since then

Apr'2025 asking GenAI to generate a narrative from the bullets

Apr26 Claude

Okay, let's put on our slightly-more-optimistic-than-a-pure-cynic hat and squint at the 20th century through the lens Bill Seitz has kindly laid out. This isn't your textbook "And then Keynes saved the world, The End" narrative. It's messier, more structural, and frankly, more interesting if you like thinking about how systems actually work, rather than how we wish they did.

(Takes a sip of virtual coffee)

So, the standard story of the 20th century often feels like discrete acts: The Roaring Twenties! The Great Depression! The War! The Golden Age! Stagflation! Reagan! The Internet! The Great Recession! Roll credits.

Seitz's framework, drawing on folks like Carlota Perez, suggests we zoom out. Instead of just looking at the policy debates (important, yes, but maybe not the engine), look at the underlying economic transitions. Think tectonic plates shifting beneath the noisy surface of politics and finance.

Act I: The Farm-to-Factory Shuffle and the Big Crash

The prequel sets the stage: Gilded Age industrialization, Progressive Era attempts to grapple with it, the Fed gets created (important plumbing!). Then, boom, the Great Depression.

The usual suspects get trotted out: stock market crash, bank runs, maybe Smoot-Hawley tariffs, maybe the Fed messing up. Seitz argues, compellingly I think, that these were triggers, not the root cause. The root cause? A massive Economic Transition was already underway. Millions of people were leaving farms – jobs that had existed for millennia – for factories. This was a huge structural shift, creating dislocation and fragility. When the financial/policy triggers were pulled, the system, already stressed by this transition, collapsed hard.

The New Deal? Seitz frames it not as the solution that magically fixed the economy (he points to evidence it might have even prolonged the slump – the "Great Duration"), but more as massive social spending that kept people from literally starving. Necessary? Probably. Sufficient? No.

What did end it? World War II basically reset the board. Specifically, it left the US as the only major industrial power whose factories weren't rubble.

Act II: The Golden Age (Built on Unique Circumstances)

Post-WWII wasn't just "Keynesianism worked!" It was "America has the factories, everyone else needs stuff." Globalization, phase one, was heavily skewed in the US's favor. We sold finished goods, bought raw materials. Add to that, as Perez suggests (and Seitz highlights), deliberate policies like subsidizing homeownership. Owning a home means you need... stuff. Appliances, cars, furniture. Voila: a massive domestic demand engine kicks in, fueled by rising wages (because, again, US industry was king).

This unprecedented growth made the "overhead" of New Deal-era social programs and regulations seem easily affordable. The Middle Class boomed. This was the "Golden Age" – but it was built on a specific, temporary set of global circumstances and deliberate demand-stoking.

Act III: The System Starts Creaking (The 70s Turning Point)

What happened? The unique circumstances faded. Europe and Japan rebuilt (often with newer, better factories). Globalization started to mean competition for US industries. The post-war momentum dissipated.

Seitz points to a confluence of factors hitting around the early 1970s:

  • End of Cheap Domestic Oil: US Peak Oil hit in 1970. Hello, OPEC and oil shocks. Energy got expensive.
  • End of Bretton Woods (1971): The US couldn't maintain the gold standard with rising deficits (partly fueled by the Vietnam War and maybe, as Charles Hugh Smith suggests, buying Cold War allies via trade deficits). This introduced currency volatility.
  • Wage Stagnation: That upward escalator of real wages for the average worker started to sputter around this time (even accounting for benefits like health insurance, which started costing way more).
  • Political Realignment: The social changes of the 60s (Civil Rights) led to political shifts (Southern Strategy, Nixon).

The "affordable" New Deal consensus started to look expensive as growth slowed. The response wasn't just economic, it was ideological and political. We see the rise of think tanks advocating deregulation and lower taxes (Heritage, Cato), culminating in Reagan. Policies shifted: lower top tax rates, deregulation (Fairness Doctrine ends, Glass-Steagall eventually repealed, CFMA enabling derivatives). The narrative shifted towards "government is the problem." Debt (government and consumer) started being used more aggressively to paper over the cracks of slowing real wage growth.

Act IV: The Information Transition and the Next Crisis

Fast forward through the dot-com boom/bust (itself a classic Perez cycle feature – installation phase, bubble, crash). Then comes 2008.

Again, the easy story is "greedy bankers broke everything." And sure, there was fraud, recklessness, and regulatory capture. People should have gone to jail. But Seitz argues, consistent with the earlier framework, that Wall Street shenanigans were the trigger, not the deep cause.

The underlying cause? Another Economic Transition. This time, driven by Information Technology (IT) and networks. Software is eating the world, automating cognitive tasks, enabling global supply chains of unprecedented complexity, and creating winner-take-most dynamics. The "jobs problem" isn't just manufacturing leaving, it's potentially white-collar, information-processing jobs becoming automatable or globally competed. The "Middle Class" built on the industrial model is under structural pressure again.

So, What Now? Lessons and Potential Paths

If Seitz's framework holds, simply trying to "fix finance" after 2008, while necessary to stop the bleeding, doesn't address the root cause – the ongoing IT-driven economic transition. It might even be counterproductive if it ossifies the old system.

The suggestions lean towards adapting to the new reality:

  1. Recognize the Transition: Stop pretending we can just tweak policy to get back to the 1950s Golden Age. That world is gone. We're in a Network Economy now.
  2. More Capitalists, Not Fewer: The problem isn't an excess of capitalism, but perhaps too much concentration. Power is centralized in BigGov and BigCo. Seitz suggests dismantling corporate welfare (e.g., farm subsidies favoring Big Ag) that makes it harder for SmallCo/individuals to compete and innovate. We need more people starting more things, leveraging the network.
  3. Resilience and Anti-Fragility: Instead of optimizing purely for efficiency (which often creates fragility), aim for systems (personal, local, national) that can withstand shocks. Less debt dependency (personal and governmental). More local production/consumption (LocalWorld, Slow World). Less consumerism as the primary engine.
  4. Rethink "Jobs": The old model of a stable, lifelong job with one big company might be fading for many. How do we build systems that support more flexible, networked, perhaps project-based work? This involves everything from benefits portability to education.

This isn't a simple left/right political prescription. It's a call to look at the deeper structural changes driven by technology and globalization, and to think about how we build a society that thrives in that reality, not the one that peaked fifty years ago. It requires acknowledging that massive economic transitions are painful and disruptive, and that simply blaming the proximate cause (bankers, politicians of the opposite party) misses the bigger picture. The challenge is to navigate this current transition more effectively, and perhaps more humanely, than the last big one.

Okay, let's connect the dots between the economic factors laid out in that essay and the rise of populist authoritarianism. Several threads intertwine:

  1. Wage Stagnation and Rising Inequality (Post-1970s): This is probably the most significant driver. When decades pass and the average person's real wages don't increase significantly, while simultaneously they see fortunes being made in finance and tech (the "elites"), it breeds deep resentment. People feel the system is rigged, that hard work no longer pays off like it did in the "Golden Age." Populist leaders thrive on this, promising to fight for the "forgotten" worker against corrupt elites who've hoarded the gains.

  2. Economic Dislocation from Transitions (Manufacturing & IT):

    • Manufacturing Decline: The loss of farm jobs earlier, and critically, the decline of manufacturing jobs due to automation and globalization (even if framed initially as Cold War strategy or later just efficiency), hollowed out entire communities. This wasn't just about lost income; it was about lost identity, pride, and social cohesion. People felt "left behind" geographically and economically. This creates fertile ground for nationalist narratives ("They took our jobs!") and leaders promising to restore past industrial glory.
    • IT Transition Anxiety: While creating new wealth, the IT revolution also creates anxiety about future job losses (automation) and contributes to the winner-take-most dynamic, further exacerbating inequality and the sense that the benefits aren't widely shared.

  3. The Fading "Golden Age" Narrative: The memory (or idealized myth) of the post-WWII boom creates a powerful contrast with current stagnation. Populists exploit this nostalgia, promising a return to that simpler, more prosperous time, often blaming specific groups (immigrants, globalists, elites) for its demise. The specific circumstances that enabled that age (US industrial dominance) are ignored; the feeling of loss is what matters politically.

  4. Financial Crises and Perceived Elite Failure/Impunity (e.g., 2008): When crises hit (like the Great Depression or the 2008 Credit Crisis), and the narrative takes hold that it was triggered by reckless elites (Wall St. bankers, perhaps enabled by government policy like the repeal of Glass-Steagall or the CFMA), and those elites largely escape consequences while ordinary people suffer foreclosures and job losses, it massively erodes trust in institutions. Populists step into this vacuum, railing against the "bailouts for the rich" and promising to punish the guilty parties and dismantle the "corrupt" system.

  5. Increased Debt (Consumer & Government): Using debt to paper over stagnant wages created fragility. When the debt cycle turns (as in 2008), the resulting pain is acute and fuels anger. Government debt also feeds narratives of wasteful elite spending, which populists can leverage.

  6. Globalization as a Scapegoat: While globalization brought benefits (cheaper goods), its downsides (job competition, shifting economic power) are easily targeted by populists. They can frame international trade deals and organizations as benefiting corporations and foreign countries at the expense of the nation's workers. This ties into nationalist and sometimes xenophobic appeals.

  7. Erosion of Trust in Traditional Institutions: The economic factors contribute to a sense that the established political parties, financial institutions, and even media haven't served the interests of ordinary people. The political events listed (like Citizens United fueling perceptions of money in politics, or perceived norm-breaking like the Garland nomination block) further erode this trust. Populist authoritarians thrive by positioning themselves as outsiders who will bypass these failing institutions and act directly on behalf of "the people."

In essence, the long-term structural economic shifts created widespread economic insecurity, inequality, and a sense of lost status for large segments of the population. Financial crises and specific policy choices exacerbated these feelings and eroded trust. Populist authoritarian leaders are adept at channeling this potent mix of grievance, nostalgia, and anger against perceived internal and external enemies, promising decisive action and restoration, often at the expense of democratic norms and institutions.

Populist authoritarianism emerges from a complex blend of economic, cultural, and political factors, many of which are traced in the provided essay and supported by research.

Economic Factors:

  • Wage Stagnation and Inequality: Stagnant wages and rising inequality since the 1970s have contributed to a sense of economic insecurity and perceptions that "elites" are benefiting at the expense of ordinary people, fueling resentment and distrust in established systems. While economic hardship alone is not always strongly correlated with support for populist authoritarianism, persistent inequality remains a significant background factor[2][5].
  • Economic Dislocation: The decline of manufacturing jobs (due to automation and globalization) and the anxiety around information technology-driven transitions have led to the erosion of stable, community-supporting employment. This economic change has left many feeling "left behind," providing fertile ground for leaders promising restoration and protection from external threats[1][2].
  • Financial Crises and Elite Impunity: Major financial shocks (such as the 2008 crisis) and the perception that financial elites caused hardship without consequence undermine trust in institutions and open space for anti-establishment figures[2][3].
  • Globalization: Trade deals and international competition are often blamed for local economic decline, allowing populists to rally support with nationalist and protectionist rhetoric[2][4].
  • Increased Personal and Public Debt: Debt used to offset stagnant incomes can create fragility and amplify discontent during downturns, further fueling anger towards perceived elite mismanagement[2].

Cultural and Political Factors (Critical Additions):

  • Cultural Backlash and Identity Politics: Research indicates that the rise of populist authoritarianism is just as strongly—if not more strongly—linked to cultural anxieties than to strictly economic factors. The expansion of rights for marginalized groups, increasing diversity, urban-rural divides, and shifts toward more progressive values have led to backlash among some traditional or majority groups who perceive their status as threatened[2][5]. Populist leaders frequently exploit these divisions, framing themselves as defenders of traditional values against rapid social change.
  • Scapegoating and Polarization: A hallmark of authoritarian populism is the creation of "enemies" or scapegoats, including immigrants, minorities, and other social groups. This friend-versus-enemy worldview is used to rally support and justify strongman tactics[2][4].
  • Erosion of Institutional Trust: Economic and cultural changes together diminish trust in political parties, the media, and other institutions, making people more receptive to leaders who promise to bypass or radically reform established systems[2][3][4].

Summary Table

| Factor | Role in Populist Authoritarianism | |------------------------------|-------------------------------------------------------------------| | Economic Insecurity/Inequality | Creates discontent and perceived elite betrayal | | Job/Economic Transitions | Causes loss of status and community, fosters nostalgia | | Financial Crises | Undermine trust, provide openings for anti-establishment leaders | | Globalization | Used as scapegoat for economic challenges | | Cultural Backlash | Drives polarization and defensive identity politics | | Erosion of Trust | Makes outsider, strongman appeals more attractive |

Conclusion:
While economic disruption (stagnation, inequality, and job loss) lays the groundwork, the research is clear that cultural shifts, demographic change, and perceived loss of status or identity are at least as important in driving the rise of populist authoritarianism. Populist leaders combine economic grievance with cultural and political appeals, exploiting divisions and promising to restore a sense of order, identity, and prosperity—often by targeting minorities, immigrants, or "out of touch" elites[2][4][5].

Apr27 ChatGPT

(not through chorus.sh - only the direct ChatGPT support web searching)

Steven Johnson | Pulitzer Center The Ghost in the Machine: Rethinking 20th Century Economics

In the grand theater of economic thought, the 20th century played host to a dramatic performance—a tale of models, markets, and the mechanization of man. Bill Seitz's reflections on "A20thCenturyEconomicTheory" serve as a critical lens, revealing the limitations of an era that sought to distill human complexity into elegant equations.

I. The Mechanistic Mirage

Seitz critiques the 20th-century economic paradigm for its reductionist tendencies. Economists, in their quest for scientific rigor, often modeled individuals as rational agents—homo economicus—whose behaviors could be predicted through mathematical formulations. This approach, while offering clarity, neglected the nuanced realities of human decision-making.

Christopher Coyne, Peter Boettke, and Peter Leeson echo this sentiment in their working paper, "Man as Machine," arguing that such models "eliminated the human element," replacing it with a "utility machine" devoid of the complexities inherent in human behavior. (Man as Machine: The Plight of 20th Century Economics - Working Paper | Mercatus Center)

II. Divergent Schools of Thought

The 20th century witnessed the rise of various economic schools, each grappling with the role of government and markets: (Economics in the Twenty-First Century: A Critical Perspective 9781442620179 - EBIN.PUB)

  • Keynesian Economics: John Maynard Keynes advocated for active government intervention to manage economic cycles, emphasizing fiscal and monetary policies to mitigate recessions. (Economic Ideologies and Theories)

  • Austrian School: Economists like Friedrich Hayek and Ludwig von Mises championed free markets and cautioned against central planning, emphasizing the importance of individual choice and spontaneous order. (Overview of Economic Theories and Influences | Coconote)

  • Chicago School: Led by Milton Friedman, this school emphasized monetarism, advocating for controlled money supply growth and minimal government intervention. (Economic Ideologies and Theories)

Despite their differences, these schools often relied on models that abstracted away the unpredictability and irrationality of human behavior.

III. The Missing Signified

A critical examination reveals that these models often overlooked the "signified"—the real-world implications and values underlying economic transactions. By focusing on abstract representations, economists risked detaching theory from practice. This detachment is evident in critiques of Ludwig von Mises' work, where the emphasis on market processes sometimes overshadowed the social and ethical dimensions of economics. (How the Signified Went Missing in Twentieth-Century Economic Theory: Mises, Hayek and Schumpeter and the Abolition of Value: New Political Science: Vol 44, No 2, Joseph Stiglitz | www.wenxuecity.com)

IV. Reintegrating Humanity into Economics

In response to these critiques, contemporary economists have sought to reincorporate human elements into economic theory:

  • Information Asymmetry: Joseph Stiglitz's work highlighted how unequal access to information can lead to market failures, challenging the notion of perfectly rational agents. (Joseph Stiglitz | www.wenxuecity.com)

  • Behavioral Economics: This field examines how psychological factors influence economic decisions, acknowledging that humans often deviate from rationality.

  • Institutional Economics: Economists like Daron Acemoglu emphasize the role of institutions in shaping economic outcomes, recognizing that rules, norms, and governance structures profoundly impact markets. (Economics in the Twenty-First Century: A Critical Perspective 9781442620179 - EBIN.PUB)

V. The Path Forward

Seitz's reflections serve as a call to action, urging economists to embrace models that reflect the complexities of human behavior. By acknowledging the limitations of mechanistic models and integrating insights from psychology, sociology, and political science, economics can evolve into a more holistic and human-centric discipline.

In the spirit of Steven Johnson's narrative style, this exploration underscores the importance of interdisciplinary thinking and the need to view economic phenomena through a multifaceted lens. Just as Johnson weaves together stories from diverse fields to illuminate complex ideas, so too must economists draw from a rich tapestry of human experience to inform their theories.

Note: For a more in-depth exploration of these themes, readers are encouraged to visit A20thCenturyEconomicTheory and related discussions on Bill Seitz's wiki.

The post-World War II economic boom in the United States, often termed the "Golden Age of Capitalism," has been attributed to a confluence of factors. While your page, "A20thCenturyEconomicTheory," critiques the mechanistic and reductionist models of 20th-century economics, it's insightful to juxtapose this perspective with other prevailing theories that explain this period of prosperity.

1. Keynesian Economic Policies

Overview: The adoption of Keynesian economics, emphasizing government intervention to manage economic cycles, is often credited for post-war prosperity. Policies included increased government spending, tax cuts, and public works programs to stimulate demand.

Comparison: Your critique aligns with this theory to the extent that both acknowledge the role of government policy. However, while Keynesianism operates within a framework of rational agents and aggregate demand management, your perspective challenges the foundational assumptions of such models, advocating for a more nuanced understanding of human behavior. (The Post World War II Boom: How America Got Into Gear | HISTORY)

2. Pent-Up Consumer Demand and Industrial Expansion

Overview: During WWII, consumer goods production was limited, leading to suppressed demand. Post-war, this pent-up demand, combined with industrial expansion and technological advancements, fueled economic growth. (Overview | The Post War United States, 1945-1968 | U.S. History ...)

Comparison: This theory focuses on tangible factors like consumer behavior and industrial capacity. Your critique would likely point out that while these factors are significant, models explaining them often neglect the complex motivations and behaviors of consumers, reducing them to predictable agents.

3. The G.I. Bill and Human Capital Development

Overview: The G.I. Bill provided returning veterans with access to education and housing, leading to a more skilled workforce and increased homeownership, which in turn stimulated economic activity. (How Is an Economy Formed and Why Does It Grow?)

Comparison: This theory underscores the importance of social policy in economic outcomes. Your critique complements this by emphasizing that economic models should account for such social policies and their impacts on human behavior, rather than relying solely on abstract equations. (Great Responsibilities and New Global Power | New Orleans)

4. Global Economic Position and Trade

Overview: Post-WWII, the U.S. emerged as a global economic leader, with its industries intact and a significant share of global production. This dominance facilitated favorable trade conditions and economic growth.

Comparison: While this theory highlights structural advantages, your critique would argue that models focusing solely on structural factors may overlook the dynamic and often unpredictable nature of human and institutional behavior in shaping economic outcomes.

5. Institutional Developments and Labor Unions

Overview: The strengthening of labor unions and the establishment of institutions like the Council of Economic Advisors played roles in stabilizing the economy and promoting equitable growth. (The Post World War II Boom: How America Got Into Gear | HISTORY, Economic history of the United States)

Comparison: Your perspective would likely support the inclusion of institutional factors in economic models but would caution against oversimplifying their effects without considering the complex interplay of human motivations and institutional dynamics.

Conclusion

While traditional theories offer valuable insights into America's post-WWII economic boom, your critique in "A20thCenturyEconomicTheory" serves as a reminder of the limitations inherent in models that prioritize mathematical elegance over the messy realities of human behavior. Incorporating a more holistic understanding of economic actors and institutions can lead to more robust and applicable economic theories.

The unraveling of America's post-WWII economic "Golden Age" in the 1970s marked a pivotal shift in economic paradigms. While your critique in "A20thCenturyEconomicTheory" highlights the limitations of mechanistic economic models, the 1970s economic backslide underscores the complexities and multifaceted nature of economic downturns.

I. The Onset of Economic Decline

The early 1970s signaled the end of sustained post-war prosperity. The 1973–1975 recession, characterized by stagflation—a combination of stagnant growth and high inflation—challenged traditional economic theories that assumed an inverse relationship between inflation and unemployment . (What Is Stagflation, What Causes It, and Why Is It Bad?)

II. Contributing Factors to the Economic Downturn

  1. Oil Crises and Energy Shocks

    • The 1973 oil embargo by OPEC led to a quadrupling of oil prices, triggering widespread inflation and economic stagnation . (BOOM AND CRASH)

  2. Monetary Policy Missteps

  3. Fiscal Pressures from War and Social Programs

  4. Breakdown of the Bretton Woods System

    • The collapse of the Bretton Woods system in 1971 led to currency instability and further economic uncertainty . (1970s energy crisis)

  5. Global Competition and Industrial Decline

    • The rise of industrial competitors like Japan and Germany eroded America's manufacturing dominance, leading to job losses and economic restructuring .

III. Comparative Analysis with "A20thCenturyEconomicTheory"

Your critique emphasizes the shortcomings of economic models that reduce human behavior to predictable equations. The 1970s economic crisis exemplifies these limitations:

  • Stagflation Defied Existing Models: Traditional Keynesian models could not account for simultaneous high inflation and unemployment, revealing the need for more nuanced approaches .

  • Policy Responses and Human Behavior: Efforts to control inflation through austerity measures often overlooked the social and psychological impacts on the populace, leading to public discontent and policy resistance .

  • Shift Towards Neoliberalism: The crisis paved the way for neoliberal policies emphasizing deregulation and market liberalization, reflecting a departure from models that failed to predict or mitigate the downturn . (That '70s Crisis | Dollars & Sense)

IV. Conclusion

The economic backslide of the 1970s serves as a testament to the complexities of economic systems and the dangers of overreliance on simplified models. Your critique in "A20thCenturyEconomicTheory" aligns with this historical lesson, advocating for economic theories that embrace the intricacies of human behavior and institutional dynamics.

Apr'2025 asking GenAI to generate a narrative from the bullets

Apr26 Claude

Okay, let's put on our slightly-more-optimistic-than-a-pure-cynic hat and squint at the 20th century through the lens Bill Seitz has kindly laid out. This isn't your textbook "And then Keynes saved the world, The End" narrative. It's messier, more structural, and frankly, more interesting if you like thinking about how systems actually work, rather than how we wish they did.

(Takes a sip of virtual coffee)

So, the standard story of the 20th century often feels like discrete acts: The Roaring Twenties! The Great Depression! The War! The Golden Age! Stagflation! Reagan! The Internet! The Great Recession! Roll credits.

Seitz's framework, drawing on folks like Carlota Perez, suggests we zoom out. Instead of just looking at the policy debates (important, yes, but maybe not the engine), look at the underlying economic transitions. Think tectonic plates shifting beneath the noisy surface of politics and finance.

Act I: The Farm-to-Factory Shuffle and the Big Crash

The prequel sets the stage: Gilded Age industrialization, Progressive Era attempts to grapple with it, the Fed gets created (important plumbing!). Then, boom, the Great Depression.

The usual suspects get trotted out: stock market crash, bank runs, maybe Smoot-Hawley tariffs, maybe the Fed messing up. Seitz argues, compellingly I think, that these were triggers, not the root cause. The root cause? A massive Economic Transition was already underway. Millions of people were leaving farms – jobs that had existed for millennia – for factories. This was a huge structural shift, creating dislocation and fragility. When the financial/policy triggers were pulled, the system, already stressed by this transition, collapsed hard.

The New Deal? Seitz frames it not as the solution that magically fixed the economy (he points to evidence it might have even prolonged the slump – the "Great Duration"), but more as massive social spending that kept people from literally starving. Necessary? Probably. Sufficient? No.

What did end it? World War II basically reset the board. Specifically, it left the US as the only major industrial power whose factories weren't rubble.

Act II: The Golden Age (Built on Unique Circumstances)

Post-WWII wasn't just "Keynesianism worked!" It was "America has the factories, everyone else needs stuff." Globalization, phase one, was heavily skewed in the US's favor. We sold finished goods, bought raw materials. Add to that, as Perez suggests (and Seitz highlights), deliberate policies like subsidizing homeownership. Owning a home means you need... stuff. Appliances, cars, furniture. Voila: a massive domestic demand engine kicks in, fueled by rising wages (because, again, US industry was king).

This unprecedented growth made the "overhead" of New Deal-era social programs and regulations seem easily affordable. The Middle Class boomed. This was the "Golden Age" – but it was built on a specific, temporary set of global circumstances and deliberate demand-stoking.

Act III: The System Starts Creaking (The 70s Turning Point)

What happened? The unique circumstances faded. Europe and Japan rebuilt (often with newer, better factories). Globalization started to mean competition for US industries. The post-war momentum dissipated.

Seitz points to a confluence of factors hitting around the early 1970s:

  • End of Cheap Domestic Oil: US Peak Oil hit in 1970. Hello, OPEC and oil shocks. Energy got expensive.
  • End of Bretton Woods (1971): The US couldn't maintain the gold standard with rising deficits (partly fueled by the Vietnam War and maybe, as Charles Hugh Smith suggests, buying Cold War allies via trade deficits). This introduced currency volatility.
  • Wage Stagnation: That upward escalator of real wages for the average worker started to sputter around this time (even accounting for benefits like health insurance, which started costing way more).
  • Political Realignment: The social changes of the 60s (Civil Rights) led to political shifts (Southern Strategy, Nixon).

The "affordable" New Deal consensus started to look expensive as growth slowed. The response wasn't just economic, it was ideological and political. We see the rise of think tanks advocating deregulation and lower taxes (Heritage, Cato), culminating in Reagan. Policies shifted: lower top tax rates, deregulation (Fairness Doctrine ends, Glass-Steagall eventually repealed, CFMA enabling derivatives). The narrative shifted towards "government is the problem." Debt (government and consumer) started being used more aggressively to paper over the cracks of slowing real wage growth.

Act IV: The Information Transition and the Next Crisis

Fast forward through the dot-com boom/bust (itself a classic Perez cycle feature – installation phase, bubble, crash). Then comes 2008.

Again, the easy story is "greedy bankers broke everything." And sure, there was fraud, recklessness, and regulatory capture. People should have gone to jail. But Seitz argues, consistent with the earlier framework, that Wall Street shenanigans were the trigger, not the deep cause.

The underlying cause? Another Economic Transition. This time, driven by Information Technology (IT) and networks. Software is eating the world, automating cognitive tasks, enabling global supply chains of unprecedented complexity, and creating winner-take-most dynamics. The "jobs problem" isn't just manufacturing leaving, it's potentially white-collar, information-processing jobs becoming automatable or globally competed. The "Middle Class" built on the industrial model is under structural pressure again.

So, What Now? Lessons and Potential Paths

If Seitz's framework holds, simply trying to "fix finance" after 2008, while necessary to stop the bleeding, doesn't address the root cause – the ongoing IT-driven economic transition. It might even be counterproductive if it ossifies the old system.

The suggestions lean towards adapting to the new reality:

  1. Recognize the Transition: Stop pretending we can just tweak policy to get back to the 1950s Golden Age. That world is gone. We're in a Network Economy now.
  2. More Capitalists, Not Fewer: The problem isn't an excess of capitalism, but perhaps too much concentration. Power is centralized in BigGov and BigCo. Seitz suggests dismantling corporate welfare (e.g., farm subsidies favoring Big Ag) that makes it harder for SmallCo/individuals to compete and innovate. We need more people starting more things, leveraging the network.
  3. Resilience and Anti-Fragility: Instead of optimizing purely for efficiency (which often creates fragility), aim for systems (personal, local, national) that can withstand shocks. Less debt dependency (personal and governmental). More local production/consumption (LocalWorld, Slow World). Less consumerism as the primary engine.
  4. Rethink "Jobs": The old model of a stable, lifelong job with one big company might be fading for many. How do we build systems that support more flexible, networked, perhaps project-based work? This involves everything from benefits portability to education.

This isn't a simple left/right political prescription. It's a call to look at the deeper structural changes driven by technology and globalization, and to think about how we build a society that thrives in that reality, not the one that peaked fifty years ago. It requires acknowledging that massive economic transitions are painful and disruptive, and that simply blaming the proximate cause (bankers, politicians of the opposite party) misses the bigger picture. The challenge is to navigate this current transition more effectively, and perhaps more humanely, than the last big one.

Okay, let's connect the dots between the economic factors laid out in that essay and the rise of populist authoritarianism. Several threads intertwine:

  1. Wage Stagnation and Rising Inequality (Post-1970s): This is probably the most significant driver. When decades pass and the average person's real wages don't increase significantly, while simultaneously they see fortunes being made in finance and tech (the "elites"), it breeds deep resentment. People feel the system is rigged, that hard work no longer pays off like it did in the "Golden Age." Populist leaders thrive on this, promising to fight for the "forgotten" worker against corrupt elites who've hoarded the gains.

  2. Economic Dislocation from Transitions (Manufacturing & IT):

    • Manufacturing Decline: The loss of farm jobs earlier, and critically, the decline of manufacturing jobs due to automation and globalization (even if framed initially as Cold War strategy or later just efficiency), hollowed out entire communities. This wasn't just about lost income; it was about lost identity, pride, and social cohesion. People felt "left behind" geographically and economically. This creates fertile ground for nationalist narratives ("They took our jobs!") and leaders promising to restore past industrial glory.
    • IT Transition Anxiety: While creating new wealth, the IT revolution also creates anxiety about future job losses (automation) and contributes to the winner-take-most dynamic, further exacerbating inequality and the sense that the benefits aren't widely shared.

  3. The Fading "Golden Age" Narrative: The memory (or idealized myth) of the post-WWII boom creates a powerful contrast with current stagnation. Populists exploit this nostalgia, promising a return to that simpler, more prosperous time, often blaming specific groups (immigrants, globalists, elites) for its demise. The specific circumstances that enabled that age (US industrial dominance) are ignored; the feeling of loss is what matters politically.

  4. Financial Crises and Perceived Elite Failure/Impunity (e.g., 2008): When crises hit (like the Great Depression or the 2008 Credit Crisis), and the narrative takes hold that it was triggered by reckless elites (Wall St. bankers, perhaps enabled by government policy like the repeal of Glass-Steagall or the CFMA), and those elites largely escape consequences while ordinary people suffer foreclosures and job losses, it massively erodes trust in institutions. Populists step into this vacuum, railing against the "bailouts for the rich" and promising to punish the guilty parties and dismantle the "corrupt" system.

  5. Increased Debt (Consumer & Government): Using debt to paper over stagnant wages created fragility. When the debt cycle turns (as in 2008), the resulting pain is acute and fuels anger. Government debt also feeds narratives of wasteful elite spending, which populists can leverage.

  6. Globalization as a Scapegoat: While globalization brought benefits (cheaper goods), its downsides (job competition, shifting economic power) are easily targeted by populists. They can frame international trade deals and organizations as benefiting corporations and foreign countries at the expense of the nation's workers. This ties into nationalist and sometimes xenophobic appeals.

  7. Erosion of Trust in Traditional Institutions: The economic factors contribute to a sense that the established political parties, financial institutions, and even media haven't served the interests of ordinary people. The political events listed (like Citizens United fueling perceptions of money in politics, or perceived norm-breaking like the Garland nomination block) further erode this trust. Populist authoritarians thrive by positioning themselves as outsiders who will bypass these failing institutions and act directly on behalf of "the people."

In essence, the long-term structural economic shifts created widespread economic insecurity, inequality, and a sense of lost status for large segments of the population. Financial crises and specific policy choices exacerbated these feelings and eroded trust. Populist authoritarian leaders are adept at channeling this potent mix of grievance, nostalgia, and anger against perceived internal and external enemies, promising decisive action and restoration, often at the expense of democratic norms and institutions.

Populist authoritarianism emerges from a complex blend of economic, cultural, and political factors, many of which are traced in the provided essay and supported by research.

Economic Factors:

  • Wage Stagnation and Inequality: Stagnant wages and rising inequality since the 1970s have contributed to a sense of economic insecurity and perceptions that "elites" are benefiting at the expense of ordinary people, fueling resentment and distrust in established systems. While economic hardship alone is not always strongly correlated with support for populist authoritarianism, persistent inequality remains a significant background factor[2][5].
  • Economic Dislocation: The decline of manufacturing jobs (due to automation and globalization) and the anxiety around information technology-driven transitions have led to the erosion of stable, community-supporting employment. This economic change has left many feeling "left behind," providing fertile ground for leaders promising restoration and protection from external threats[1][2].
  • Financial Crises and Elite Impunity: Major financial shocks (such as the 2008 crisis) and the perception that financial elites caused hardship without consequence undermine trust in institutions and open space for anti-establishment figures[2][3].
  • Globalization: Trade deals and international competition are often blamed for local economic decline, allowing populists to rally support with nationalist and protectionist rhetoric[2][4].
  • Increased Personal and Public Debt: Debt used to offset stagnant incomes can create fragility and amplify discontent during downturns, further fueling anger towards perceived elite mismanagement[2].

Cultural and Political Factors (Critical Additions):

  • Cultural Backlash and Identity Politics: Research indicates that the rise of populist authoritarianism is just as strongly—if not more strongly—linked to cultural anxieties than to strictly economic factors. The expansion of rights for marginalized groups, increasing diversity, urban-rural divides, and shifts toward more progressive values have led to backlash among some traditional or majority groups who perceive their status as threatened[2][5]. Populist leaders frequently exploit these divisions, framing themselves as defenders of traditional values against rapid social change.
  • Scapegoating and Polarization: A hallmark of authoritarian populism is the creation of "enemies" or scapegoats, including immigrants, minorities, and other social groups. This friend-versus-enemy worldview is used to rally support and justify strongman tactics[2][4].
  • Erosion of Institutional Trust: Economic and cultural changes together diminish trust in political parties, the media, and other institutions, making people more receptive to leaders who promise to bypass or radically reform established systems[2][3][4].

Summary Table

| Factor | Role in Populist Authoritarianism | |------------------------------|-------------------------------------------------------------------| | Economic Insecurity/Inequality | Creates discontent and perceived elite betrayal | | Job/Economic Transitions | Causes loss of status and community, fosters nostalgia | | Financial Crises | Undermine trust, provide openings for anti-establishment leaders | | Globalization | Used as scapegoat for economic challenges | | Cultural Backlash | Drives polarization and defensive identity politics | | Erosion of Trust | Makes outsider, strongman appeals more attractive |

Conclusion:
While economic disruption (stagnation, inequality, and job loss) lays the groundwork, the research is clear that cultural shifts, demographic change, and perceived loss of status or identity are at least as important in driving the rise of populist authoritarianism. Populist leaders combine economic grievance with cultural and political appeals, exploiting divisions and promising to restore a sense of order, identity, and prosperity—often by targeting minorities, immigrants, or "out of touch" elites[2][4][5].

Apr27 ChatGPT

(not through chorus.sh - only the direct ChatGPT support web searching)

Steven Johnson | Pulitzer Center The Ghost in the Machine: Rethinking 20th Century Economics

In the grand theater of economic thought, the 20th century played host to a dramatic performance—a tale of models, markets, and the mechanization of man. Bill Seitz's reflections on "A20thCenturyEconomicTheory" serve as a critical lens, revealing the limitations of an era that sought to distill human complexity into elegant equations.

I. The Mechanistic Mirage

Seitz critiques the 20th-century economic paradigm for its reductionist tendencies. Economists, in their quest for scientific rigor, often modeled individuals as rational agents—homo economicus—whose behaviors could be predicted through mathematical formulations. This approach, while offering clarity, neglected the nuanced realities of human decision-making.

Christopher Coyne, Peter Boettke, and Peter Leeson echo this sentiment in their working paper, "Man as Machine," arguing that such models "eliminated the human element," replacing it with a "utility machine" devoid of the complexities inherent in human behavior. (Man as Machine: The Plight of 20th Century Economics - Working Paper | Mercatus Center)

II. Divergent Schools of Thought

The 20th century witnessed the rise of various economic schools, each grappling with the role of government and markets: (Economics in the Twenty-First Century: A Critical Perspective 9781442620179 - EBIN.PUB)

  • Keynesian Economics: John Maynard Keynes advocated for active government intervention to manage economic cycles, emphasizing fiscal and monetary policies to mitigate recessions. (Economic Ideologies and Theories)

  • Austrian School: Economists like Friedrich Hayek and Ludwig von Mises championed free markets and cautioned against central planning, emphasizing the importance of individual choice and spontaneous order. (Overview of Economic Theories and Influences | Coconote)

  • Chicago School: Led by Milton Friedman, this school emphasized monetarism, advocating for controlled money supply growth and minimal government intervention. (Economic Ideologies and Theories)

Despite their differences, these schools often relied on models that abstracted away the unpredictability and irrationality of human behavior.

III. The Missing Signified

A critical examination reveals that these models often overlooked the "signified"—the real-world implications and values underlying economic transactions. By focusing on abstract representations, economists risked detaching theory from practice. This detachment is evident in critiques of Ludwig von Mises' work, where the emphasis on market processes sometimes overshadowed the social and ethical dimensions of economics. (How the Signified Went Missing in Twentieth-Century Economic Theory: Mises, Hayek and Schumpeter and the Abolition of Value: New Political Science: Vol 44, No 2, Joseph Stiglitz | www.wenxuecity.com)

IV. Reintegrating Humanity into Economics

In response to these critiques, contemporary economists have sought to reincorporate human elements into economic theory:

  • Information Asymmetry: Joseph Stiglitz's work highlighted how unequal access to information can lead to market failures, challenging the notion of perfectly rational agents. (Joseph Stiglitz | www.wenxuecity.com)

  • Behavioral Economics: This field examines how psychological factors influence economic decisions, acknowledging that humans often deviate from rationality.

  • Institutional Economics: Economists like Daron Acemoglu emphasize the role of institutions in shaping economic outcomes, recognizing that rules, norms, and governance structures profoundly impact markets. (Economics in the Twenty-First Century: A Critical Perspective 9781442620179 - EBIN.PUB)

V. The Path Forward

Seitz's reflections serve as a call to action, urging economists to embrace models that reflect the complexities of human behavior. By acknowledging the limitations of mechanistic models and integrating insights from psychology, sociology, and political science, economics can evolve into a more holistic and human-centric discipline.

In the spirit of Steven Johnson's narrative style, this exploration underscores the importance of interdisciplinary thinking and the need to view economic phenomena through a multifaceted lens. Just as Johnson weaves together stories from diverse fields to illuminate complex ideas, so too must economists draw from a rich tapestry of human experience to inform their theories.

Note: For a more in-depth exploration of these themes, readers are encouraged to visit A20thCenturyEconomicTheory and related discussions on Bill Seitz's wiki.

The post-World War II economic boom in the United States, often termed the "Golden Age of Capitalism," has been attributed to a confluence of factors. While your page, "A20thCenturyEconomicTheory," critiques the mechanistic and reductionist models of 20th-century economics, it's insightful to juxtapose this perspective with other prevailing theories that explain this period of prosperity.

1. Keynesian Economic Policies

Overview: The adoption of Keynesian economics, emphasizing government intervention to manage economic cycles, is often credited for post-war prosperity. Policies included increased government spending, tax cuts, and public works programs to stimulate demand.

Comparison: Your critique aligns with this theory to the extent that both acknowledge the role of government policy. However, while Keynesianism operates within a framework of rational agents and aggregate demand management, your perspective challenges the foundational assumptions of such models, advocating for a more nuanced understanding of human behavior. (The Post World War II Boom: How America Got Into Gear | HISTORY)

2. Pent-Up Consumer Demand and Industrial Expansion

Overview: During WWII, consumer goods production was limited, leading to suppressed demand. Post-war, this pent-up demand, combined with industrial expansion and technological advancements, fueled economic growth. (Overview | The Post War United States, 1945-1968 | U.S. History ...)

Comparison: This theory focuses on tangible factors like consumer behavior and industrial capacity. Your critique would likely point out that while these factors are significant, models explaining them often neglect the complex motivations and behaviors of consumers, reducing them to predictable agents.

3. The G.I. Bill and Human Capital Development

Overview: The G.I. Bill provided returning veterans with access to education and housing, leading to a more skilled workforce and increased homeownership, which in turn stimulated economic activity. (How Is an Economy Formed and Why Does It Grow?)

Comparison: This theory underscores the importance of social policy in economic outcomes. Your critique complements this by emphasizing that economic models should account for such social policies and their impacts on human behavior, rather than relying solely on abstract equations. (Great Responsibilities and New Global Power | New Orleans)

4. Global Economic Position and Trade

Overview: Post-WWII, the U.S. emerged as a global economic leader, with its industries intact and a significant share of global production. This dominance facilitated favorable trade conditions and economic growth.

Comparison: While this theory highlights structural advantages, your critique would argue that models focusing solely on structural factors may overlook the dynamic and often unpredictable nature of human and institutional behavior in shaping economic outcomes.

5. Institutional Developments and Labor Unions

Overview: The strengthening of labor unions and the establishment of institutions like the Council of Economic Advisors played roles in stabilizing the economy and promoting equitable growth. (The Post World War II Boom: How America Got Into Gear | HISTORY, Economic history of the United States)

Comparison: Your perspective would likely support the inclusion of institutional factors in economic models but would caution against oversimplifying their effects without considering the complex interplay of human motivations and institutional dynamics.

Conclusion

While traditional theories offer valuable insights into America's post-WWII economic boom, your critique in "A20thCenturyEconomicTheory" serves as a reminder of the limitations inherent in models that prioritize mathematical elegance over the messy realities of human behavior. Incorporating a more holistic understanding of economic actors and institutions can lead to more robust and applicable economic theories.

The unraveling of America's post-WWII economic "Golden Age" in the 1970s marked a pivotal shift in economic paradigms. While your critique in "A20thCenturyEconomicTheory" highlights the limitations of mechanistic economic models, the 1970s economic backslide underscores the complexities and multifaceted nature of economic downturns.

I. The Onset of Economic Decline

The early 1970s signaled the end of sustained post-war prosperity. The 1973–1975 recession, characterized by stagflation—a combination of stagnant growth and high inflation—challenged traditional economic theories that assumed an inverse relationship between inflation and unemployment . (What Is Stagflation, What Causes It, and Why Is It Bad?)

II. Contributing Factors to the Economic Downturn

  1. Oil Crises and Energy Shocks

    • The 1973 oil embargo by OPEC led to a quadrupling of oil prices, triggering widespread inflation and economic stagnation . (BOOM AND CRASH)

  2. Monetary Policy Missteps

  3. Fiscal Pressures from War and Social Programs

  4. Breakdown of the Bretton Woods System

    • The collapse of the Bretton Woods system in 1971 led to currency instability and further economic uncertainty . (1970s energy crisis)

  5. Global Competition and Industrial Decline

    • The rise of industrial competitors like Japan and Germany eroded America's manufacturing dominance, leading to job losses and economic restructuring .

III. Comparative Analysis with "A20thCenturyEconomicTheory"

Your critique emphasizes the shortcomings of economic models that reduce human behavior to predictable equations. The 1970s economic crisis exemplifies these limitations:

  • Stagflation Defied Existing Models: Traditional Keynesian models could not account for simultaneous high inflation and unemployment, revealing the need for more nuanced approaches .

  • Policy Responses and Human Behavior: Efforts to control inflation through austerity measures often overlooked the social and psychological impacts on the populace, leading to public discontent and policy resistance .

  • Shift Towards Neoliberalism: The crisis paved the way for neoliberal policies emphasizing deregulation and market liberalization, reflecting a departure from models that failed to predict or mitigate the downturn . (That '70s Crisis | Dollars & Sense)

IV. Conclusion

The economic backslide of the 1970s serves as a testament to the complexities of economic systems and the dangers of overreliance on simplified models. Your critique in "A20thCenturyEconomicTheory" aligns with this historical lesson, advocating for economic theories that embrace the intricacies of human behavior and institutional dynamics.

Edited:    |       |    Search Twitter for discussion

Made with flux.garden