Chapter 9: Cycles: America’s Past, America’s Future
The changes that have occurred in the United States since its founding have been extraordinary. Indeed, when you look at any fifty year block of American history, the changes that have taken place are stunning. Just think about the changes in America since 1950: the rise of the suburbs, the collapse of the New Deal coalition, the advent of the personal computer, the rise of feminism. The list is endless, but if you pause and think about just the last fifty years, you start to see the revolutionary nature of American society. Take any fifty year block, and you’ll see how quickly America changes. And increasingly, as America changes, the world changes with it.
The United States had major crises, culminating in critical elections five times in its history: 1789, 1828, 1876, 1932 and 1980. If we call them by the pivotal President, then it would be the Washington, Jackson, Hayes, Roosevelt and Reagan cycles. If that rhythm holds, and it appears to be, it would mean that the 2020s will be a period of intensifying crises, followed by a defining election in 2028 and 2032, and another crisis should occur in the 2070s. There is nothing mechanical in this process. But there is a logic at work that has to be understood.
Every fifty years or so, the United States has been confronted with a defining economic and social crisis. The problem emerges in the decade before it becomes a crisis. A pivotal Presidential election is held that changes the political landscape of the country over the next decade or so. The crisis is solved and theUnited States flourishes. Over the next generation or so, the solution to the old problem generates a new one that intensifies until there is a crisis and the process repeats itself. Sometimes the defining moment is not readily apparent until later, sometimes it can’t be missed. But it is always there.
Major wars do not define the crises. They are driven by the forces we described in America’s grand strategy. But since war is something that’s common in the United States, most eras—the cycle taken as a whole—have at least one major war that takes place during the cycle. The wars interact with the era, obviously, shaping and intensifying the cycles that are underway. Think of the effect that World War II had on the Roosevelt Presidency and the entire era that began in 1932.
So far, the United States has had four such complete cycles and is currently at about the mid-point of its fifth. The cycles usually begin with a defining Presidency and end in a failed one. So Washington ends with John Quincy Adams. Jackson ends in Ulysses S. Grant. Hayes ends in Herbert Hoover. FDR ends in Jimmy Carter. Underneath the politics, the crises are defined by the struggle between a dominant class and economic model falling into decline, and being replaced by an emergent class and a new economic model. Each represents a radically different way of viewing the world, a different definition of what it means to be a good citizen, and very different ways of making a living. As usual, we have to go back into the past in order to forecast the future, because the crises of the 21st century will be rooted in what came before.
The First Cycle: From Founders to Pioneers
America was founded in 1776, with the Declaration of Independence. From that moment on it had a national identity, a national army and a governing body. But it did not have a regime that would endure, and it could not manage the country it had won from Britain. The territory was not only the thirteen colonies, but included the vast western territories ceded by Britain to the United States, as well as the rest of the continent.The key problem facing the United Stateswas the nature of the nation and the nature of the state.
The founders consisted primarily of a single ethnic group—English with a smattering of Scots. These were prosperous men whose political and economic lives were meant to be separate. Their moral project consisted of maintaining the wall between public duty and private interest. Above all, they saw themselves as the guardians of the regime and different in character from the un-landed and un-monied masses and certainly from the despised African slaves. Moral teachings were reflected in the regime they created and their personal values were reflected in the social order they supported. Moral exemplars of the first American era were men like Washington or Jefferson. Regardless of political party, these were wealthy, educated men who emulated the aristocratic virtues of Europe while espousing its radical principles.
But they couldn’t build the country by themselves.Pioneers were needed to move the country forward and settle the land in and over the Alleghenies. These pioneers were men completely unlike Jefferson or Washington.Typically they were poor, uneducated immigrants, mostly Scots-Irish, who were searching for small parcels of landto clear and farm. They were men like Daniel Boone, who owned no property and no slaves, were not gentlemen but who were badly needed to develop the nation. After Jefferson secured the LouisianaTerritory this was even more the case. The United States needed tough pioneers if it was to conquer and hold the continent west of the Alleghenies.
At this stage there were now two very different classes: the founding elite, bound to the eastern seaboard and the pioneers, forcing the mountains. They had very different outlooks and interests and we seeAmerican politics divided into two camps in the twenty years after the Louisiana Purchase. One, led by Henry Clay, wanted to sell land in the west in large, expensive blocks and use the money to build north-south roads and canals in the original thirteen colonies. It was a plan that was faithful to the founder’s vision of a Republic of virtue. It was also crazy. There was limited appetite for the opportunity to serve as share croppers on estates owned by absentee landlords.
Champion of the Scots-Irish settlers was Henry Clay’s political enemy, Andrew Jackson, who was born east of the Alleghenies but finally settled west, in Tennessee. Jackson was himself Scots-Irish and was champion of the American heartland. He became the spokesman for Americans west of the pioneering immigrants, those who would ultimately settle the continent. Throughout the 1820s, a political battle raged between these two factions, which the founding elite generation could not win. Immigration and demographics ran against them, as did the geopolitical reality of the continent. If they had won, the result would have been disastrous.
Second Cycle: From Pioneers to Small TownAmerica
Jackson, elected President in 1828, 52 years after the founding, presided over the redesign of the United States. He followed the failed Presidency of John Quincy Adams who had tried to preserve the society the founders left. Under Jackson, Americabecame a society of pioneer-farmers. To be more precise, the old class remained intact, but the balance of power shifted from them to the poorer but much more numerous pioneers heading west. Jackson’s predecessors had favored a stable currency to protect investors. Jacksonchampioned cheap money to protect debtors.
Jackson did not transform America – it was the crisis of the 1820s, the tension between the founding generation and the immigrants that transformed America. If Clay had won, the United States would have collapsed. Jackson simply followed the logic of the situation and presided over the creation of a new era. For the next fifty years, the most dynamic social class in the United States was the pioneer-farmer who founded and created the states west of the Appalachians.
Where Washington was the hero of the first generation, Abraham Lincoln was the hero of the second. Born in a log cabin in Kentucky, moving west to Illinois, fighting Indians, clearing land and opposing the system of slavery that was the economic foundation of many of the founders, Lincoln embodied the highest perceived virtues of the second generation.Lincoln was held in moral contempt—as Jackson had been—by those who were nostalgic for the founding generation, particularly in the South. But in many ways, Lincoln was the highest point and affirmation of the Jackson era. The Civil War was, in one sense, the pioneer fighting and destroying the Virginia gentleman.
Lincoln’s presidency was followed by two massively failed presidencies—Andrew Johnson and Ulysses S. Grant. Apart from personal shortcomings, the problem they faced was the logical conclusion of the second American period. Pioneering immigrants, now including Germans and Scandinavians, had moved west, cleared the lands and had produced a system of agriculture that went well beyond subsistence. The west was no longer hard scrabble subsistence farming by first generation pioneers. By 1876farmers not only owned their land, but they also were making money at farming. That was a radical change in how agriculture worked. It also transformed the landscape by creating small towns. Jacksonian principles were no longer relevant and were even harmful.
Small towns had grown up around the country to serve increasingly prosperous farmers. Lawyers, funeral homes, churches and banks flourished, along with merchants and grain brokers. Small towns were built to service the surplus wealth thrown off by agrarian America. Banks took the farmers’ deposits and invested the money on Wall Street, which in turn invested the financial surplus in the railroads and industries that were surging in the United States after the end of the Civil War. These small towns became the central feature of American life. They embodied the virtues of thrift, sobriety and hard work. Over the next fifty years, small town America would become as iconic as the pioneer or the founding father had been.
But there was a huge problem hindering the growth of the small towns. The cheap money policies that had been followed for fifty years might have helped the pioneers, but they were now a declining class. These same policies were hurting their children, who had turned the farms of the west into businesses. By the 1870s the crisis of cheap money had become unbearable.Low interest rates were making it impossible to invest the profits from the farms—or from the businesses that were serving the farmers.
A strong, stable currency was essential if America was to grow. In 1876, Rutherford B. Hayes was elected President, 100 years after the Declaration of Independence and 48 years after Andrew Jackson. Hayes—or more precisely his Secretary of the Treasury John Sherman, a significant figure in U.S. history--championed money backed goldwhich limited the money supply, limited inflation, raised interest rates and made investment more attractive. Smaller and poorer farmers were hurt as were urban workers, at least in the short run. Wealthier farmers and ranchers, and their small town bankers, were helped. In the long run, this financial policy fueled the industrialization of the United States. It gave incentives to saving and those savings were invested in the railroads, mines and steel mills in which waves of primarily Catholic immigrants worked.
Hayes’ reforms were attacked by people like William Jennings Bryant, who condemned the gold standard as immoral. Bryanspoke for the devastated south and on behalf of a nostalgic recollection of the small subsistence farmers. Just as Jackson was condemned by the wealthy easterners as championing the illiterate, brawling Scots-Irish, now the nostalgic champions of past era condemned the narrow self-interest of the small town businessman, the wealthy farmer and, above all, of the Wall Street that took their savings and turned it into explosive industrial growth. For fifty years it drove the American economy in an extraordinary expansion, until it cut its own throat through its own success, just as the two earlier eras had.
Third Cycle: Hayes to FDR
Just as Daniel Boone was celebrated long after his day was done, so were the virtues of small town American life. Movies portray scenes like those found in ‘It’s a Wonderful Life’ and the Andy Hardy series were as mythical and nostalgic as stories about Davy Crockett and Daniel Boone were in late 19th century America.
Small town virtues were seen as neighborliness, religiosity, sobriety, thriftiness and ethnic homogeneity. The small towns were guarding America against the anonymity of big cities, their loose moral standards, drunkenness, profligacy and above all, the ethnic hodge-podge that overwhelmed the country. Just as the founders and pioneers were seen as exemplars of virtue, the small towns were seen as the epitome of American goodness.
But Americaunderwent changes precisely because of the success of the small towns. Sobriety and thrift had built a vast industrial plan. Millions of immigrant workers had been imported to work in the mines and factories. Few were English or Scots-Irish. They were mostly Irish, Italian, and eastern European, the majority was Catholic andthere were a fewJews. These immigrants were completely different from anything seen in the United Statesbefore and were regarded with suspicion and hostility by small town America. Big citiesbecame viewed as the center of an alien and corrupt force. However, the city was also essential to America, since it was the center of industrialism.
Small town values now started to work against America. The financial system had run on tight money since the late 1870s. It encouraged savings and investment but limited consumption and credit. As the population of the cities exploded—both from high birth rates and immigration—low wages pressed on the new immigrants. In the end, as investment grew, the ability of the workers to buy the products they produced was severely limited. A crisis that Karl Marx had forecast occurred, the crisis of over-production and under-consumption. The factories were capable of producing more than consumers were able to buy.
The result was the Great Depression, in which consumers had no money to buy the things they needed, and factories unable to find customers laid workers off, in a seemingly endless cycle. The solution appeared to be to impose small town virtues more rigorously, by tightening money even further. But the problem wasn’t a lack of virtue. It was a lack of consumer credit. Of course, consumer credit was the incarnation of evil in small town America—borrowing money to buy things to consume was the antithesis of America to this point.
In 1932, 56 years after Hayes, 104 years after Jackson and 156 years after the founding, Franklin Roosevelt replaced the failed presidency of Herbert Hoover. Roosevelt proceeded to reverse the principles of the preceding period by looking for ways to increase consumption through transfers of wealth from investors to consumers. This “something for nothing” policy was seen as morally reprehensible, violating the core principles of prudence and sobriety of small town America. It was also seen as supporting the cities and Catholic immigrant workers rather than the more virtuous small town Protestants. Getting rid of prohibition seemed to symbolize the vice that had been let loose on the country.
All of this may have been true, but the only way to solve the crisis was to increase the money in the hands of the unemployed workers in America’s big cities, swollen by the population explosion even after immigration slowed down. Roosevelt tried any number of solutions, mostly built around make-work jobs that were effectively used to transfer wealth. But while the transfer of wealth kept people alive, it did not solve the basic crisis.
Roosevelt’s New Deal did not, by itself solve the problem. World War II solved it by allowing the government to borrow massive amounts of money to build factories and hire workers. The war sucked young people into the military and off the streets. It broke the back of small-town America’s opposition to the deficit financing that was needed to break the depression, by making it a patriotic requirement in order to win the war.
The aftermath of World War II was even more decisive in ending the depression. After the war ended, a series of laws were created that allowed returning soldiers to buy homes on credit, get a college education and become professionals. Laws called for building an interstate highway system that opened up the areas around cities for residential construction and so on. These reformsconstituted a vast transfer of wealth, created full utilization of factories and then maintained that utilization after the war. This is what created the American middle class. Roosevelt’s reforms—repackaged by World War II--were aimed at supporting the urban working class. They turned the ethnic working classes’ children into middle class suburbanites.