Jul 31 2010

A Major Economic Boom by 2015? … The Lessons of Cleveland, Roosevelt, and Obama

Last week well-known futurist Bill Halal, founder of TechCast, emailed me that they are forecasting an economic boom in 2015. TechCast runs a continuous online Delphi Poll with numerous experts in a variety of key areas. He knew I’d be interested because 21stCenturyWaves.com also sees one then.

Our prediction is fundamentally based on spectacular societal pulses of activity (“Maslow Windows“) composed of great explorations, macro engineering projects, and major wars. They appear fundamentally driven by rhythmic, twice-per-century 1960s-style economic booms, over the last 200+ years. The last one began in the late 1950s with the Apollo Moon program, which, given a long wave of about 56 years, pointed to 2015 as the opening of the new international Space Age. Indeed, nearly 15 years ago in Space Policy, I forecasted that “the decade from 2015 to 2025 will be the analog of the 1960s …” (Cordell, 1996).

Does the World Columbian Exposition of 1893 — including Charles Ferris’ original wheel — actually point to a major boom by 2015? (Or is this just “circular” reasoning? :) )
Click .

More recently — since the NATO Advanced Workshop on Kondratieff Waves, Warfare, and World Security held in Portugal in 2005 — and especially since the crisis in September, 2008, we’ve identified a number of diverse trends that support a major economic boom beginning in 2015. A few of these are: 1) the financial panic of 2008 itself and its great recession, 2) growth of large non-space macro engineering projects, 3) accelerating global interest in exploration and development of the Moon, 4) excitement about new commercial suborbital space opportunities, and –perhaps most surprisingly — 5) stunning historical parallels that indicate the economic and political trends of ~100 years ago may be relevant to today.

Brief Philosophical Pause: It’s appropriate here to remind readers that 21stCenturyWaves.com uses an empirical, long-term approach to project what we think will happen, not necessarily what we want to occur. This is especially important in topics like this post that contain large political and economic content.

The World Columbian Exposition of 1893 was Ebullient
Life-long Chicago-area resident Mary Kulberg first alerted me to the extraordinary World Columbian Exposition, also known as the Chicago World’s Fair, that celebrated the 400th anniversary of Christopher Columbus’ arrival in America.

This was a world-class, watershed cultural event. It featured 200 new buildings of classical architecture that were visited for 6 months by over 27 million people. Highlights included the memorable “White City” and even Charles Ferris’ original 264 foot high Ferris Wheel with 36 cars, each of which held 60 people!

Most importantly, the Fair became a symbol of the growing feeling of American Exceptionalism. And it is impressive evidence for growing “ebullience” in 1893 — within a decade of the spectacular Peary/Panama/T. Roosevelt Maslow Window.

By comparison with today, significant evidence for an ebullient approach to the anticipated 2015 Maslow window is what, on July 12, 2007, Fortune Magazine called “the greatest economic boom ever.”

The Panic of 1893 Led to Prosperity
The bankruptcy of the Philadelphia and Reading Railroad on February 23, 1893 signaled the beginning of the Panic of 1893. It’s analogous to Lehman Brothers bankruptcy on September 15, 2008 that marked the onset of the Panic of 2008.

The Panic of 1893 began about 6 years before the extraordinary economic boom that triggered the early 20th century Maslow Window. Assuming a similar interval between the Panic of 2008 and the next Maslow WIndow, a large economic boom should appear by 2015.

1890s Unemployment Triggered “Coxey’s Army”
Although the Columbian Expo officially opened in October, 1892, people were not admitted until May 1, 1893, over 2 months after the Panic began. So, although the early effects of the 1890s great recession were severe, Expo attendance surged, much as it has at the current World Expo 2010 in Shanghai (started May 1, 2010) where attendance records are being set (~70 M expected visitors at current rate).

Nevertheless unemployment was above 10%, by current estimates, for most of the 1890s great recession. A protest march led by Jacob Coxey reached Washington, D.C. on April 30, 1894 with about 500 men. They demanded that President Grover Cleveland create jobs through public works programs.

Like Coxey’s Army, the Tea Party Movement is a national, grass-roots protest which began soon after the Panic of 2008, in February, 2009. However, Tea Party members have focused more on reducing big government, debt, and taxes, and are expected to be influential in mid-term elections this year..

Coxey’s Army didn’t die out in 1894. Another march successfully reached Washington, D.C. in 1914, shortly after the collapse of the Peary/Panama/T. Roosevelt Maslow Window and the start of World War I. One observer was L. Frank. Baum, which has led to Coxey-like interpretations of his book, the Wonderful Wizard of Oz.

The 1890s Great Recession Caused A Political Realignment
Because the Panic of 1893 resulted in wage cuts and job losses, it contributed to major labor unrest. The Pullman strike — the first national strike in U.S. history — eventually involved 250,000 workers in 27 states; tragically much of the Fair was destroyed by fire during the strike’s peak.

President Cleveland determined that the strike was a threat to public safety and the U.S. mail and sent 12,000 U.S. Army troops to assist U.S. Marshals in breaking it. Illinois governor John Altgeld was infuriated by Cleveland’s use of federal force and managed ultimately to keep him from being renominated at the Democratic convention of 1896.

Because of Cleveland’s inability to deal with the effects of the Panic of 1893, McKinley won the presidency in 1896 and presided over the return to prosperity. In 1901 McKinley’s successor, President Theodore Roosevelt led the U.S. into perhaps its most ebullient Maslow Decade in history.

A Japanese-style Decade?
Although we see many intriguing historical parallels, it’s still not obvious how the story will play out.
For example, the 1890s Great Recession (1893-99) was a “double-dip.” Will our current recovery falter similarly?

Everyone agrees the recovery has slowed, and the signs are not good. Commerce Department reported today that the U.S. economy grew at only 2.4% annualized in the 2nd quarter, down from 3.7% in the first. According to the New York Times (7/30/10), “Many economists expect growth rates under 2 percent for the remainder of the year.” Even more ominous is a recent warning (New York Times, 7/29/10) from James Bullard, president of the Federal Reserve Bank of St. Louis, that current policies put America at risk of “a Japanese-style deflationary outcome within the next several years.” This might eclipse the 1890s contraction.

A weakening recovery, unemployment near 10%, record deficits, etc. are dragging President Obama’s job approval ratings to the low 40’s; and Congressional approval is much lower. White House Press Secretary Robert Gibbs recently suggested Republicans could retake the House this year. Others believe the Senate is also vulnerable. Some are even openly suggesting that Hillary Clinton will challenge Obama for the presidential nomination in 2012.

A Continuing Political Realignment?
Like its 1893 counterpart, the Panic of 2008 triggered a political realignment with the election of President Obama and Democratic supermajorities in Congress. Given current economic trends, it’s likely that Republicans will experience significant Congressional gains in November, and may continue the political realignment — but this time in their favor.

Although the presidential election of 2012 seems far away, few economists are forecasting dramatic improvements in economic growth and unemployment prior to that time. And current trends are consistent with an 1890s-style replay, including Hillary winning the Democratic presidential nomination in 2012, Obama becoming a 1-term Cleveland-like victim of the Panic of 2008, and Hillary losing to a prosperity-oriented Republican in the style of McKinley in 1896 — whose eventual successor was the ultra-ebullient Theodore Roosevelt — who would beome the leader of the 2015 Maslow Window.

Although current history is not necessarily hostage to an 1890s-style replay, one thing seems likely: the drive for prosperity in the form of a major economic boom commencing by 2015. Over the last 200+ years, this stage in the long business cycle (the “long wave”) consistently features a major economic boom that drives unprecedented, ebullient exploration and technology programs immersed in a Camelot-like zeitgeist.

One response so far

One Response to “A Major Economic Boom by 2015? … The Lessons of Cleveland, Roosevelt, and Obama”

  1. Billon 21 Nov 2010 at 7:08 pm

    …The wars of the 1960s were political and rational gambles on the part of the Vietcong: annihilation or victory. However, they had the backing of the PRC and for a while the USSR. It was a proxy war between the US and the USSR that was politically motivated–meaning secular. Iran’s leadership is not motivated by rational calculation. For them it is death that ends in Paradise. Victory or Loss has no meaning in that context! In this context, you may be correct in your guess … that 2015 will be a decade of great prosperity …

    … The 1960s economy, while certainly a peak of economic waves, rested on real wealth: cheap oil because the USA controlled it; Cheap money because of Bretton Woods; Cheap manufactured goods … The USA has none of this type of control in the present era …
    Bill Jacobks..

    Hi Bill,
    Thanks for your comments, which I welded together here.

    It may surprise you, but I don’t disagree with much of what you say, but I think you’ve missed the point of 21stCenturyWaves.com — probably because it’s a somewhat different way at looking at economic, technology, and geopolitical history. You’ve given standard poli sci/econ reasoning for previous wars and economic situations, but you’ve missed the big picture. That’s not surprising either because almost nobody — certainly not the media, politicians, or most academics — talks about it, and yet this is where the answer to the future is.

    21stCenturyWaves.com offers a fundamentally empirical account of rhythmic, twice-per-century pulses of great explorations, macro engineering projects, and major wars over the last 200+ years. These pulses (called Maslow Windows) are correlated with a long (56-year) business cycle discovered in 1989 and very well documented. (BTW, the long business cycle (actually based on energy use data) is also correlated with Strauss and Howe generational cycles.)

    The theory being explored here has two parts: 1) that the long business cycle fundamentally drives key Maslow Window activities, and 2) that the “punctuated equilibrium” character of the pulses indicates the system is governed by self organized criticality; i.e., a Maslow Window is a short-lived “critical state” that is quite unlike intervening decades (i.e., the 1960s vs. 1970s through the present).

    So if you’re an economist or historian you might say that long-term trends in the economy create conditions conducive to certain types of behavior and events (e.g., wars, great technology projects, explorations) at certain times relative to the long wave. And if you’re a physicist you might say the the global system self-organizes toward a 1960s/Camelot-style critical state every 55 to 60 years. Within this context the explanations you were describing above may be realistic descriptions of past realities … BUT they aren’t the fundamental drivers. Those go much deeper and extend back at least 200 years.

    This approach is what makes scientific, multi-year or even multi-decade forecasting possible in technology and space, and in many other arenas. The trick is to keep in mind what is unchanging over decades: human nature and the fundamental laws of economics. And to continually factor in what actually is changing: mainly technology and also geopolitics.

    I hope this will encourage you to explore this website more. Try using keywords or look under specific categories (e.g., economics) for things that interest you.

    Best regards,
    Bruce

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