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Cycles of History

A new economic superpower undermines established economic leaders. The collapse of complex financial instruments turn a boom into a bust. Banks fail in waves. Unemployment reaches up to 25% in some areas. A global depression holds on for more than two decades. Class warfare breaks out. Transportation networks stall -- along with industries dependent upon them -- as the main "fuel" for transportation disappears. Pandemic disease exacts a terrible toll. Religious fundamentalism skyrockets. Totalitarianism rises around the world.

I'm describing the 1870s-1890s. Hopefully, I'm not also describing the next couple of decades.

Historian Scott Reynolds Nelsen argues in the Chronicle of Higher Education that today's financial crisis bears a much closer resemblance to the Panic of 1873 and the resulting Long Depression than to the more familiar Great Depression of 1929. He writes:

But the economic fundamentals were shaky. Wheat exporters from Russia and Central Europe faced a new international competitor who drastically undersold them. The 19th-century version of containers manufactured in China and bound for Wal-Mart consisted of produce from farmers in the American Midwest. [...] The crash came in Central Europe in May 1873, as it became clear that the region's assumptions about continual economic growth were too optimistic. [...]

As continental banks tumbled, British banks held back their capital, unsure of which institutions were most involved in the mortgage crisis. The cost to borrow money from another bank — the interbank lending rate — reached impossibly high rates. This banking crisis hit the United States in the fall of 1873. Railroad companies tumbled first. They had crafted complex financial instruments that promised a fixed return, though few understood the underlying object that was guaranteed to investors in case of default. (Answer: nothing).

Among the results of the 1873 Panic & Long Depression (lasting until 1896) were the labor movement and religious fundamentalism in the US, modern anti-semitism in Europe, and (according to Hannah Arendt) the origins of totalitarianism.

As for transportation networks and pandemic, they were actually connected issues. In 1872, equine influenza took hold in the US, infecting close to 100% of all horses, with a mortality rate ranging from 1-2% to 10%. The "Great Epizootic of 1872" froze horse-drawn transportation (even leaving the US cavalry on foot), which in turn stalled trains because of the lack of coal transport.

As a preview of peak oil it's admittedly shallow, but the similarities are there. The damage to transportation and industry in 1872 was a significant multiplier to the financial crisis; a modern collapse of transportation -- even if equally temporary -- would be potentially even more devastating.

Our understanding of and tools for managing the global economy are better now than in the 1870s, and there are enough divergent drivers to make the overall parallel more instructive than spooky. But while we may be missing some of the factors that made the Long Depression so bad, we have plenty new elements that threaten to make the current situation even worse: climate disaster, networked terrorism, and much more deeply-linked economic interdependence between states.

If we generalize a bit from the 1870s-1890s, a handful of key issues emerge as likely to have echoes today:

  • Aggressive self-interest on the part of states, despite clear potential to damage the overall economic/political structure;
  • Desperate need to find scapegoats;
  • Embrace of religious extremism as a way of finding support and solidarity;
  • Heightened conflict between economic classes and political movements.

    None of these will be particular surprising to observers of our present condition. Those of us in the foresight game have included some or all of these in many of our more unpleasant scenarios. Nonetheless, it's sobering to see stark evidence that a previous, similar economic crisis had these exact kinds of results.

  • Comments

    Tangential link to title - ecologist Peter Turchin has been attempting to quantify historic cycles -


    Uhm, no ... religious fundamentalism in the United States was NOT a result of the 1873 bust ... the United States has an nearly uninterrupted history of religious fundamentalism.

    One could even go so far as to make a good case that the history of the United States up to the 20th century has been one of religious fundamentalism. Do a quick search on the phrase "burnt over district" for starters and then consider that the first colonists in New England were religious separatists (one could also suggest that the Spanish explorers were religious radicals, given what the Inquisition-driven explorers did while they were there).

    It didn't just appear in the late 1800's ... it had been there since the beginning.

    Alfonso, it's certain that hardcore religiosity has long been a part of the American experience, but it's evolved (um, as it were). What we call the fundamentalist evangelical movement really had its roots in the late 19th century, bringing a new populism into US religious life.

    Jamais, WADR, no ... what you describe as "hardcore religiosity" is, in fact, evangelicalism and reaches back further than you are attributing it (Jonathan Edwards, George Whitfield, the New Lights, First Great awakening, in both the US and Great Britain, 1730-1740). The "fundamentalist" aspect came later ... in fact the term "fundamentalist" wasn't applied until the 20th century, some 200 years later. Further, the movements you refer to are also called the "Third" Great Awakening.

    Seriously, it was all there from the beginning. What happened in the late 19th century that is holding your attention is the sheer rapidity with which the technologies of the time allowed it to propagate and the blatant co-mingling of "political" behavior. The Burnt Over District was, of course, a hotbed of socio-political experimentation. It was also known as being at the center of the "Second" Great Awakening ... but having a "second" means having an historical precedent. A closer look at the social dimensions of the "First" Great Awakening make it clear that there was a link between the religious behavior and the socio-economic events of the time, not the least of were questions of social control. These conditions were certainly resonating in the events of the Third Great Awakening.

    A close read of the history of religion in Europe and the US will show that there were actually numerous external links to both the Second, and the First, Great Awakenings here in the US. The US in the 19th century was very much a nation of immigrants and the roots of our own flavor of fundamentalism has external roots, in particular Western Europe and the UK.

    Marx did not make his famous quote about religion=opiate in a vacuum and he made the quote in 1843. There is some evidence that he himself may have been building off of earlier comments in Sade's Juliette ... which dates from 1797. This date, of course, follows the date of the First Great Awakening of fifty years earlier ...

    I grant that the populism was a new thing for the 19th century, but the psychological groundwork was already in place long before, the soil well-prepared for the seed that was to be spilled. We are far too reluctant to admit that religion=social control=politics=social control=religion in a nasty little cycle.

    Oh, well. Gives us something to blog about, eh?


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