US Economic History and the Social Cycle

"Societies pass through three eras; sometimes, the military dominates society, sometimes the intellectuals including priests, and sometimes the wealthy."

It will be a massive understatement to say that today's world is surrounded by great uncertainty, gloom and doom. More than a year of coronavirus has sapped our energy and generated vast poverty around the globe. In this milieu of darkness, we need an idea that exudes confidence and optimism. That is where a theory called the law of social cycle comes in. This theory has been authored by my late teacher, Shrii Prabhat Ranjan Sarkar, a man of numerous talents and skills. He was a great philosopher, musician, historian as well as an economist. Because of his vast knowledge in many areas, he was able to devise a new philosophy of history that covers all aspects of life and is consistent with human psychology, needs and aspirations. 

Sarkar argues that civilized societies pass through three eras; sometimes the military dominates society, sometimes the intellectuals including priests, and sometimes the wealthy. He calls this theory the law of social cycle because societies pass through these three phases again and again. Just like patterns of weather that occur with regularity, cycles of civilizations also occur with regularity in the long run.

Shrii Prabhat Ranjan Sarkar

Homo sapiens started out as primitive societies and lived in villages. There were then no organizations, cities and laws. Life was chaotic, and there were no marriages among people. People lived in groups, but children did not know who their father was. But everyone knew the mother, and so motherhood was well appreciated.

Hence primitive societies were governed by Group Mothers. The group mother phase gradually evolved into the rule of warriors in which strong and muscular women became queens. In this phase, something like the institution of marriage took place among women and men, and then children began to recognize both their mothers and fathers.

The age of warriors began with motherhood, but since fathers were more muscular than mothers, men gradually replaced women as rulers. Villages evolved into cities, laws were passed, and various organizations came into being. To keep the article short, that is how civilizations were born, and then history began to follow a discernible pattern. 

As stated above, the age of warriors moved into the age of priesthood, wherein priests were dominant. Shrii Sarkar calls such eras the era of intellectuals. This was followed by the rule of landlords in which the rich men dominated society. Such a society is known in history as feudalism. Historians can confirm that the rule of the wealthy initially occurred in the form of feudalism in every nation. 

Social Cycle

Where are we today? The answer should be obvious. Today, money dominates almost every nation. Except for China and Russia, the rule of money prevails in virtually every society, whereas Iran is one major nation where intellectuals dominate in the guise of priests. Yet Muslim society as a whole, of which Iran is a part, is in the age of the wealthy.

Most historians would agree that warriors, intellectuals and the wealthy have been dominant in almost every nation at some point or the other, but they disagree that these three groups come to power in a discernible cycle. And that is where Shrii Sarkar's contribution differs. What he says is essentially that history moves like weather. The patterns of weather are clear-cut. Every year winter gives way to autumn, then to spring and finally to summer. How can history be like weather? The idea seems to be outlandish. But Sarkar argues that the social cycle occurs over a long, confusing time, but that does not mean the pattern of history does not exist. 

Who is right—the incredulous viewpoint of Shrii Sarkar or the almost universal disdain of traditional historians against patterns of society?

                             Figure 1: The Cycle of WPI Inflation in the United States: 1750s – 1990s 

Here are three graphs that lend credence to Shrii Sarkar's view. Figures 1 and 2 illustrate a remarkable property of U.S. economic history. The United States has been in the age of the wealthy throughout its short history that started in 1776 when 13 independent colonies formed a pact and declared independence from the foreign, British rule. The two figures are not cycles of a civilization, but they do show how patterns actually form in history when the relevant data exist. 

Figure 2: The Cycle of PPI Inflation in the United States: 1900s – 2010s

They deal with the concept of long-run inflation. Normally, inflation is measured by the consumer price index (CPI), but the CPI does not go back far enough to portray decennial inflation, which is the inflation rate per decade. However, another index called WPI, the wholesale price index, dates back to the 1750s and reveals an astounding property of the U.S. economy. It so happens that the inflation rate per decade peaks every 30 years. The first peak of this cycle occurs in the 1770s, followed by peaks in the 1800s, 1830s, and 1860s. At this point American economy and society were devastated by the Civil War, so nothing remained normal, including the cycle. But normalcy returned, the resumed its unusual course from the 1880s on.

In the post-Civil War period, inflation peaks occurred in the 1910s, 1940s, 1970s, and 2000s. This information is presented in Figure 2, where the behavior of PPI, the producer price index, is illustrated. The PPI is similar to WPI except that the PPI also includes service industries, which the WPI excludes. The broader index simply mimics the behavior of its WPI cousin. 

                                 Figure 3: The Cycle of Money Growth in the United States:1750s-2010s
Source: Ravi Batra, Common Sense Macroeconomics, World Scientific Publishing Co., New Jersey, 2020

Inflation is said to be a monetary phenomenon. So it is not surprising that almost parallel to the cycle of inflation is the cycle of money growth, as illustrated in Figure 3. Money growth per decade also follows the same trajectory as decennial inflation. The establishment of the Federal Reserve, the U.S. central bank since 1914, has done nothing to disrupt this cycle. So much for the concept of the FED being in control. These three graphs clearly illustrate that history follows a pattern, provided the data are available.

What about the disruption of the cycle that follows the devastation of the Civil War, which was the most cataclysmic in U.S. annals. Nothing was normal during that period, so the cycle had a break, but the pattern made a comeback once normalcy returned. How then should we look at such disruptions?

According to Shrii Sarkar, when a nation's history moves in resonance with the cycle, there is social evolution, but there is counter evolution when a short disruption occurs. Perhaps these counter evolutions make the social cycle difficult to follow, but they are short, and the normal pattern soon returns.

At the beginning of this article, I made a statement that the law of social cycle has a message that counters the atmosphere of gloom and doom prevalent in the world today. This is because, towards the end of the rule of money, an uncanny wealth disparity prevails, which creates hunger and poverty. Nations then revert to nearly primitive societies. It is an open secret that virtually every corner of the world is now plagued by unprecedented inequality. History reveals that at this point, the age of the wealthy ends in a social revolution followed gradually by a golden age. This is the basis of my prediction that we are about to move into a period of major economic chaos and poverty that will wake up people to overthrow the rule of money in society in a ballot-box revolution. For instance, feudalism was the last such age in India and the West. It was violently overthrown during the 13th and 15th centuries as feudal landlords brutally exploited serfs and sought to turn them into slaves.

During the era of the wealthy, society sinks so low that a huge uplift has to follow. Then comes a long period of golden age marked by peace, prosperity and ethical and moral values. 

Author : Ravi Batra

Dr. Ravi Batra, a professor of economics at Southern Methodist University, Dallas, is the author of five international best sellers. He was the chairperson of his department from 1977 to 1980. In October 1978, because of dozens of publications in top journals such as the American Economic Review, Journal of Political Economy, Econometrica, Journal of Economic Theory, Review of Economic Studies, among others, Batra was ranked third in a group of “superstar economists,” selected from all the American and Canadian universities by an article in the learned journal, Economic Enquiry. In 1990, the Italian prime minister awarded him a Medal of the Italian Senate for writing a book that correctly predicted the downfall of Soviet communism, fifteen years before it happened.

 Dr. Batra has been written up in major newspapers and magazines, such as the New YorkTimes, Washington Post, USA Today, Time, Newsweek, the U.S. News and World Report, and appeared on all major networks including CBS, NBC, CNN, ABC, CNBC, among others.  In 2009, Batra received the Pratina and Navin Doshi Award for his contributions to economic analysis.

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