September 7, 2018

Economic collapse, a catalyst for realignment that forges a new dominant coalition

To continue the series on parallels between now and just before the First Civil War, it's worth looking at the role played by the state of the economy in the transition from one political era to another.

Recall that the only time when there have been two -- rather than only one -- disjunctive, end-of-an-era terms before realignment was right before the Civil War. Pierce and Buchanan hailed from the dominant Jacksonian Democrats, before the Lincoln Republicans ushered in a whole new political era in 1861. Usually these frustrating, impotent, do-nothing phases of the cycle last only one term -- how much stagnation can the people, or more relevantly the elites, tolerate before a new dominant coalition is formed to shut down the crumbling old way and inaugurate a new way?

My hunch is that these realignments take twice as long to work out when the climate is so polarized on partisan lines, since realignment requires the old opposition party to steal away a large chunk of the old dominant party's electoral base, and more relevantly elite power sectors. If it's only temporarily winning them over, it's just a win for the opposition party -- not a realignment that makes them the ones who set the framework and dictate terms. It has to be a medium-to-long-term shift in allegiances.

That process is far more difficult on both sides when they are so polarized -- the chunk of the old dominant coalition that wants to break away hesitates because they'd be joining those scum from the other party, and the old opposition party cringes at accepting so large a chunk of those scum from the other party, giving them something big that they want, and sticking by them for the next several decades. Icky, disgusting defilement of our party's purity!

However, we have to be somewhat cautious since we only have one other period of intense polarization that we're comparing to the present. There could have been some other reason that the pre-Civil War disjunctive phase lasted two terms rather than just one, and that this cause will not happen in the current disjunctive phase, meaning the Reagan coalition will get kicked out for good in 2020 instead of 2024.

Since political coalitions form in order to advance the material interests of the sectors of society that use the party as their vehicle, we have to make economic factors central in the model of the rise and fall of political regimes. A widespread and severe economic collapse would shock the various elite sectors into re-evaluating their choice of coalition members, and the broad goals pushed by their parties.

Recessions and downturns happen more frequently than realignments of political coalitions, so they are not sufficient. Otherwise, we'd see major shake-ups every decade, when they only happen every 30 to 50 years. But looking over the history of economic collapses in America, it is a necessary condition for there to be a major economic panic, depression, or crisis to serve as a catalyst for realignment of coalitions.

I'm not going to go in-depth on the nature of each of these collapses, how they reflected and revealed the weaknesses of the dominant coalition's major goals, and how the elites (and people) felt as though only a major realignment of coalitions could end the crisis and usher in a whole new era of stability and prosperity. Right now I'm just going to list them, to establish their central role in breaking down the dominant coalition and inviting a new coalition to become dominant, before returning to the parallels between the First Civil War and today.

At the end of the Federalist era, there was the Panic of 1796-97 under Washington and Adams. In 1800, the Jeffersonian coalition took their place as the dominant party.

At the end of the Jeffersonian era, there was the Panic of 1825 under John Quincy Adams. In 1828, the Jacksonian coalition took their place.

At the end of the Jacksonian era, there was the Panic of 1857 under Buchanan. In 1860, the Lincoln coalition took their place.

At the end of the Lincoln era, there was the Panic of 1893 under Cleveland. He was an opposition Democrat president, so he didn't discredit the dominant Republican coalition, but it did discredit the laissez-faire framework of the Lincoln era, and forced the Republicans to realign under McKinley in 1896 toward the Progressive era.

At the end of the McKinley era, there was the Great Depression under Hoover. In 1932, the FDR coalition took their place.

At the end of the FDR era, there was the 1979 oil crisis and Early 1980s recession under Carter, as well as stagflation left over from the 1973 oil crisis and 1973-75 recession. In 1980, the Reagan coalition took their place.

So, perhaps the reason that the disjunctive phase of the Jacksonian era lasted two terms instead of one was because the first term, under Pierce, was not subjected to a major economic collapse that catalyzed a new coalition to replace Jacksonianism.

Economic downturns happen about once a decade, but not necessarily once every four years -- so Pierce dodged a bullet, and although the people and the elites were getting really fed up with the Jacksonians' extension of slavery (the 1854 Kansas-Nebraska Act), they didn't feel enough acute pain to get them angry enough to form a revolutionary coalition. The inevitable struck Buchanan, though, limiting him to be the last of the Jacksonians. If it had struck Pierce's term first, maybe the anti-slavery Republicans would have assumed dominant party status in 1856 instead of 1860.

We will soon be able to tell which of these two factors is more important, since there is a major collapse coming under Trump's term. It will not be a minor downturn that receives party-neutral blame -- during this end of the Reagan era, it will be seen as the culmination of their fundamental framework.

To wit: deregulation mania has allowed speculative bubbles to form time after time, "greed is good" has led to off-shoring our manufacturing sector to cheap labor colonies and left us with precious little productive capacity back home (and fewer taxes to collect from it), slashing taxes across the board has deprived the government of a way to pay for its programs, and the soaring military budget on behalf of permanent global occupation has sent the cost of those programs into the stratosphere.

We are not just facing the end of yet another speculative bubble (Tech Bubble 2.0), but a sovereign debt crisis. That's going to leave so ugly of a stain on the Reagan coalition that the power sectors of society will shake up their alliances, and suddenly a Bernie-style coalition will take the place of the Reaganites.

Perhaps agriculture will desert the GOP over tariffs / trade war, not to mention the colossal waste on the military occupation of the whole world that works wonders for the military and energy sectors of the Reagan coalition but leaves agribusiness out in the cold. (The farm-state Kochs are fairly anti-war, for being such powerful Reaganite players, and are also not in lockstep over the law-and-order authoritarianism that benefits the armed force sector of their coalition.)

Regardless of how it unfolds, we'll get to see how strong the role of economic collapse is, relative to hyper-polarization. If economic collapse is stronger, then the realignment will sweep in the Bernie revolution in 2020, after the widespread and severe recession coming under Trump. If it's secondary to the obstinacy of realignment per se, during a climate of intense partisan polarization, then not even a major economic collapse will shake up the coalitions by 2020, and it'll have to wait until 2024.

I wish we had more cases to examine, so we could resolve the ambiguity and make a clear prediction for the current era -- will the disjunctive phase last the usual one or the unusual two terms? Unfortunately, we are going to be the guinea pigs in this historical experiment.


  1. My initial reaction is that that's a credible interpretive framework. I'm not sure it matters much for the little guy, but for the political players is will be a serious restructuring without any real fundamental change. At some point fundamental change can't wait. At some point. Hard to predict when this all goes belly up. I must decent on this: "...slashing taxes across the board has deprived the government of a way to pay for its programs..." lol Government programs are never deprived for a way to pay. They have the printing and electronic press and the superlative thug force. All that Social Security surplus that was never saved.

    There were plenty of Democrats with power during the Reagan-made coalition. And what is a Republican if not a Democrat of ten years ago? Such stout traditionalists they are. And if we look at your interpretive framework, and see the repetition, they and the 'Liberals' really are traditionalists, just elitist ones.

  2. Read again: it says slashing taxes deprives the govt of "a way" -- not all ways -- to finance their spending. Obviously by not paying from money they collect through taxes, they finance govt spending through debt.

    After stable natl debt and trade deficits under the New Deal, the Reagan coalition sent both of them off into outer space. That continues right through today under the Trump admin, showing that it is not a realignment but business as usual.

    Democrats are the Republicans of 10 years ago, not the other way around. GOP is the dominant party in the Reagan era, Democrats have to adapt to what works for their dominant rivals. With Trump voters and elite sectors wanting a major break from Reaganism -- but not getting it from the party elites -- that means the Democrats must now offer a major break from Reaganism, if they want to survive.

  3. agnostic, the US has always had serious issues collecting more than 20% of GDP in taxes at the Federal level

    Its colloquially called Hauser's Law and and appears to be a function or our society and the Laffer Curve

    You just aren't getting more than that under any regime so you have to borrow or mint.

    I'll note the few decades of ultra taxation (90% plus) didn't last long and weren't to raise revenue, They were intended to close the gap between the wealthy and the rest making sure they couldn't opt out on policy, They did not do this however as they just ended up as a barrier to entry to new money which was unwise. You can only "level" like that if you seize property and assets which was not possible.

    As for the D?R split, both parties are in essence the same, Globalist, Corporate Property and Socially Liberal

    Its the worst of both worlds

    There are differences in who gets wealth redistribution (D, favor social spending R, Military Keynesianism ) but its just the same team with different jerseys

    Alas I don't think the Bernie/Warren wing or the Pat Buchanan/Trump wing has successors or will be allowed political power

    The Reds that have run recently Alexandria Ocasio-Cortez and the others are typical Latin American Socialists and won't fix anything if they can get power which is far from certain.

  4. "The decline in birthrates since the 1970s, coupled with later and later entry into the workforce, reduces the number of workers to each retiree. During the 2020s this trend will intensify. It is not so much that workers will be supporting retirees, although that will be a factor. The problem will be that retirees, drawing on equity in homes and retirement funds, will still be consuming at high rates. Therefore, workers will be needed to fill their demand. With a declining workforce, and steady demand for goods and services, inflation will soar because the cost of labor will go through the roof. It will also accelerate the rate at which retirees exhaust their wealth."

    "Retirees will divide into two groups. Those lucky or smart enough to have equity reserves in houses and 401(k)s will be forced to sell those assets. A second group of retirees will have few or no assets. Social Security, under the best of circumstances, leaves people in abject poverty. The pressure to maintain reasonable standards of living and health care for the baby boomers will be intense, and it will come from a group that will continue to retain disproportionate political power because of their numbers. Retirees vote disproportionately to other groups, and the baby boomer vote will be particularly huge. They will vote themselves benefits"

    "Governments around the world - this won't only be happening in the United States - will be forced to either increase taxes or borrow heavily. If the former, they will be taxing the very group that would be benefiting from the increased wages necessitated by the labor shortage. If there is increased borrowing, the government will be entering a shrinking a shrinking capital market at the same time that boomers are withdrawing capital from that market, further driving up interest rates and, in a replay of the 1970s, increasing inflation due to a surging supply of money. Unemployment is the only thing that won't echo the 1970s. Whoever can work will have a job - at high wages - but those wages will be badly squeezed by taxes or inflation."

  5. We still don't know whether hyper-partisanship or economic collapse is a larger factor in political realignment, because there was no economic collapse in Trump's time in office. The people in power managed to stave off economic collapse until Trump was kicked out of office by the Democrats in 2020.


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