The Storm Before the Calm: America's Discord, the Coming Crisis of the 2020s, and the Triumph Beyond

by George Friedman

The problem is solved over time, a new common sense is put into place, and America flourishes—until it is time for the next economic and social crisis and the next cycle.

In 1981, Ronald Reagan replaced Jimmy Carter as president, changing economic policy, political elites, and the common sense that had dominated the United States for the fifty years since Roosevelt replaced Herbert Hoover.

due for its next socioeconomic shift in about 2030. But well before that, the underlying exhaustion of the old era will begin to show itself.

When the crisis matures, it concludes with someone who will be regarded as a failed president and with the emergence of a new president who does not create the new cycle but rather permits it to take place.

This would be the president after biden, if elected this year.

The system is pushing politics. Roosevelt and Reagan didn’t found their eras. The era was in crisis, and that crisis could not be solved in conventional ways. A break with the past was essential, and Roosevelt and Reagan presided over what was necessary.

But the revolution was odd in that it was a revolution fomented and controlled by the dominant class, which remained in place and in control after the revolution.

During the first socioeconomic cycle, the United States was content with its geography, between the Atlantic and the Appalachians, and it was content with its social and ethnic structure.

England continued to be a threat to the newly formed nation because the United States remained economically locked into trade with England, and England’s growing wealth allowed it to build a navy that dominated the Atlantic.

However, industrialization required a greater capital base and population, and they both had to precede industrialization. The only way to do this was to exploit the land west of the Appalachians.

As the Scots-Irish came to make a home across the Appalachians, they quickly became resentful at the way land in the West was apportioned and sold.

New immigrants were essential to the development of the United States, attracted to its

democratic and even anarchic elements, and viewed those who governed the thirteen original states with the same contempt as the elite regarded them.

Alexander Hamilton had created the First Bank of the United States. It was privately owned but designed to manage a stable currency.

The wealth of the earlier settlers surged, while new settlers were forced out of the land market.

Then, in Europe in 1819, a financial panic occurred. Banks and businesses had borrowed heavily during the Napoleonic Wars, and a wave of defaults and bankruptcies led to a depression lasting until 1821. The crisis involved the United States because eastern bankers in New York and Boston had invested in European debt, so default heavily damaged the banking sector.

Even more at issue was their heavy investment in Europe rather than in making credit available to new settlers in America.

Part of the change was geopolitical: the land west of the Appalachians had to be settled. Part was ethnic: a new wave of immigrants brought with it a different culture. Part was economic: the approach to the financial policy of the first era could not support new economic realities.

His standpoint derived from the Jackson era, which was always focused on land and modestly inflating currency. The problem was that the country consisted no longer of settlers clearing the land but of small towns

Hayes, far from the icons Washington and Jackson were, repeated what they did. None of them created a new cycle, but they presided over it.

Backing the currency with silver would have stabilized it without making it inflexible.

Hayes’s problem was a currency that had lost all confidence at a time when investment in industrialization was essential.

gold standard introduced rigidity, but it also instilled confidence. As the government repaid the war debt with gold-backed dollars, older gold-backed currency came back into circulation, no longer to be saved against impending collapse.

Poorer farmers were being forced out, and wealthier farmers and small-town businessmen were able to acquire foreclosed farms at a discount.

The gold standard was generating massive investment. By 1900, the United States was producing half the manufactured goods in the world.

a decline in employment and the decline of demand for manufactured products. As sales went down, employment went down. Therefore demand went down, and sales went down further,

The industrial plant of the United States outstripped the ability of the American and global markets to consume what it produced.

Factories produced goods at spectacular rates, but that production could only go forward if there were customers.

The ideology of frugality, the interests of factory owners, and the availability of surplus labor via immigration inevitably suppressed wages.

With wages stagnant and production increasing, the system went out of balance and finally, in 19...

It was assumed that unemployment was the result of the lack of work ethic of the jobless and if that was fixed they would go back to work.

maintaining a balanced budget and restraining the money supply were the prudent things to do. The problem, of course, was that these two things reduced what wages there were, undermined demand, and left the economy in a worse condition. The

Herbert Hoover joined John Quincy Adams and Ulysses S. Grant as the final, fai...

The United States went from having a labor surplus to having a labor shortage. The war achieved what the New Deal intended to achieve. It eliminated unemployment and brought factories to full production.

The war also created a tremendous amount of pent-up demand, because civilian goods were in short supply or not being produced at all.

Home mortgage lending was available in the early twentieth century, but it frequently required onerous terms. Credit for other goods was severely limited.

A technocrat is someone who has expertise in a certain area and credentials to certify that he has that expertise.

He rose because he had the expertise needed to do his job, whatever that might be, in public or private life.

his only ideology was expertise—knowing something well.

the principle of efficiency. The technocrats represented a moral principle, however nonideological they wished to appear.

Thus, a class grew out of the relatively limited notion of the technocrat that arose in the Roosevelt era, a class that became powerful in the Reagan era.

That action accelerated both inflation and the process of economic deterioration.

Wealthy investors, calculating risk, saw little reason to invest when success would cost 70 percent of the gain.

His response, of course, was drawn from the Roosevelt era. That era opened on the Depression, and part of the solution to the Depression was to increase taxes on the investing class and put money into the hands of consumers. Carter followed the same plan.

Reducing taxes on the upper, investor class freed up money for investment and also made taking the risk of investing more attractive.

Alongside this came a burst of entrepreneurial activity, heavily focused on the microchip.

Those who found new jobs started at the bottom of the escalator and found themselves tossed off time and time again. Median household income did not grow at all in fixed dollars.

Ironically, this deterioration occurred during one of the major booms in American history. GDP started growing faster than median household income in the early 1990s,

Owning a home and two cars and taking an annual vacation have

been the definition of middle-class life and of the American dream. In the 1950s and 1960s, this was possible for the lower-middle class as well as the middle class.

Total wealth had increased, but it flowed away from the industrial workers and toward those who worked in finance, technology, and other areas that now constitute the upper-middle class.