Examples of Inequality Trend Reversals

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* Article: Involvement of a Capitalist Crisis in the 1900-30 Inequality Trend Reversal. Michael A. Alexander. CliodynamicsVolume 8, Issue 1, 2017. doi

URL = https://escholarship.org/uc/item/42p5m46m

"This paper proposes a supplemental secular cycle formulation for a modern capitalist society that employs financial, economic, and political metrics in place of population and sociopolitical violence. It makes use of Thomas Piketty’s (2014) hypothesis that excess investment return relative to economic growth causes inequality. In a capitalist society, the investing class can be considered as a proxy for elites. Inequality as measured by the ratio of financial to wage gains over time agrees with other economic measures. Rising inequality led to a reduction in capital productivity (output per person per unit of capital). This created instability in financial markets that generated the 1929 stock market crash. Application of a simplified version of the demographic structural theory to inequality trends shows political stress peaking in 1929. The depression that began with the stock market crash in that year resulted in a devastating political defeat for the ruling party in 1932 which brought in the political coalition that engineered the inequality trend reversal. This series of events can be considered as a modern version of the state collapse and reconstitution that was typically a key feature of premodern secular cycles."


Michael A. Alexander:

"The transition between one agrarian secular cycle to the next was typically associated with state collapse or transformation, often through civil war or revolution. Nothing like this happened during the early twentieth century secular cycle transition, however. How did American elites in the middle third of the twentieth century come to accept a significant reduction in their income share, as falling inequality requires, without a civil war or revolution? Turchin proposes that a coalition of elites “implemented a series of formal reforms, supplemented by a number of informal measures” that reversed the pre-existing trends in inequality/well-being (Turchin 2016:171). The principal one of these was the restriction of immigration in the early twenties. This policy was undertaken primarily as a response to sharply rising sociopolitical instability in the second decade of the twentieth century (Turchin 2012), that if left unaddressed, might have led to the war or revolution associated with previous inequality trend reversals. By acting to forestall the loss of wealth and status a revolution would bring, elites ended up with it anyway."


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