The Renaissance Academy, Florida Gulf State University, Marco Island, FL., April 4, 2008
ECONOMIC CYCLES AND trends in American political philosophy
Dr. Rodrigue Tremblay, Ph.D.
Emeritus professor of economics
University of Montreal
My talk today will be about economic and political cycles, with the most emphasis being placed on trends in political ideologies over time.
First, a few words about economic cycles, a subject I have studied a lot and wrote often about. To try to understand the economy or politics for that matter without having a knowledge of cycles is like sailing without a weather report or a GPS (Global Positioning System).
What makes things interesting for an economist like me is that we are living in a period where a cluster of cycles is about to reach their lows or their troughs.
There are four main economic cycles. There is the very short one, the inventory cycle (Kitchin) that lasts slightly less than four years. This cycle has become very much less pronounced in recent years for two reasons. 1) First, the service sector as a percentage of the entire economy is much larger than it was 100 or 50 years ago. In the United States, the service sector accounts for approximately three quarters of GDP. Today, four out of every five private sector non-farm jobs (80 percent) are in the economy's service (federal, state and local government, wholesale trade, retail trade, transportation, public utilities, construction, finance, insurance, real estate, telecommunications, computer and related services, energy services, distribution, express delivery and audio-visual services, etc.). —50 years ago, the service sector accounted for about 60 percent of U.S. output and employment. Today, the information age has generated new forces that have driven the shift to a more services-oriented economy.
For the U.S., services exports represent approximately 30 percent of the total value of America’s exports, and it is in surplus. This sector of the economy is much less volatile than manufacturing, agriculture or mining.
2) Second, over the years, businesses have embraced the use of the computer and the digital revolution to manage inventories. This has lead to the "Just-in-time" inventory management method, which has reduced considerably fluctuations in the inventory stocks of distributors, thus smoothing the production cycle of producers.
During the entire 20th century, as the economy has moved from agriculture and industry and more and more toward service industries, the volatility of the US economy became less and less pronounced. As a consequence, recessions have been more shallow and of shorter duration. And, of course, there has not been another economic depression, like the 10-year Great Depression that lasted from 1929 to 1939.
—There has been another structural development on the inflation side. Indeed, the internationalization of national economies has acted as a damper on price increases, as new low cost producers, like China and other emerging economies, have enter the markets. For instance, exports and imports used to represent 20 percent of the U. S. economy; nowadays, it is 30 percent.
—The other three main cycles, i.e. the 10-year technology cycle (Juglar), the 18-year real estate cycle (Kuznets) and the long 54 to 60-year Kondratieff cycle of inflation-disinflation-deflation are still very potent. Sometimes we measure these cycles from bottom to bottom, and sometimes from top to top. For the 10-year cycle, it often coincides with normal recessions. In the U.S., there were recessions, for example, in 1969, in 1973-75, in 1980 and 1981-82, in 1990-91 and in 2001, all within about a 9-10 year interval. According to this cycle, there could be a somewhat severe recession in 2010-11, possibly following the slowdown that most people expect this year.
What is of interest is that the real estate cycle (and its deflation of house prices) is also scheduled to bottom in this period. This is a cycle of about 12 years of price increases and of 5 or 6 years of price declines. The previous cycle, from top to top went from 1987 to 2005 (spring). A bottom would therefore be normally be expected sometime in 2010-11 and a future top way in the future, around 2022-23.
But the multi-generation Kondratieff cycle is maybe even more ominous in its influence on the economy. From bottom to bottom, this very long cycle began in 1949, when wartime prices were unfrozen, reached a top in inflation in 1980 at 13-14 percent levels, and is expected to bottom between 2003 and 2010, also coinciding with the deflation in prices in the housing sector. The current financial crisis and the credit crunch that accompanies it are the main players in this very long inflation-disinflation-deflation cycle.
As you see, the table is set up for an important economic bottom in the next two years. That is why I recommend being careful financially during this turbulent period.
OK. Let me switch now to even longer cycles in political ideas, ideologies and political philosophies.
There are also, indeed, cycles in politics, and they sometimes coincide with economic cycles. For example, it would surprise no one to know that during the early inflationary phase of the Kondratieff cycle, a philosophy of government social spending will tend to prevail. In the U.S., this would be a period where the Democrats would be in power. When there is a need to fight inflation, a conservative philosophy of government would tend to prevail, and this would favor the Republicans. The Kennedy-Johnson administration of the 1960s is a case in point, while the Reagan-Bush Sr. administration is the other case in point.
My purpose today is to concentrate on three major cycles and sources of disagreement in American political philosophy, as I somewhat developed them in my book "The New American Empire" (a book which has also been published in French in Canada and in France and which has just been published in Turkish, in Ankara). I believe it is important to understand the sources of these trends to understand contemporary politics.
I must say that my interest for American politics goes a long way, to the days when a student at Stanford University, in California, as a Woodrow Wilson fellow, I was flown to Washington DC during the LBJ administration for a whole week of meetings with White House officials, Senators and Supreme Court Justices. That was in April 1966. –Much later, in 1988, I was President of the Committee of Canadian economists in favor of free trade between Canada and the US. Later, in 1989, I became a judge for the settlement of conflicts under the Free Trade Agreement, which came into effect on January 1st 1989. [It is only in 1994 that Mexico joined the US & Canada into NAFTA].
Political cycles in political philosophies and ideologies are even longer than economic cycles and they may last more than 100 years. Some people may live an entire life without encountering their more extreme occurrences. These are the very long trends I am dealing with here, when the pendulum swings from one extreme to another. What are these three major long trends in the American political sphere?
I- First, let's go back to the Mayflower in order to show the tensions that have existed in the U.S., since the very beginnings, between the religious view of the world and the business view of the world.
On November 10, 1620, a group of English families left Holland (where they had been living for 11 years after fleeing England where they had been persecuted for their religion) and they landed at what became Plymouth, Massachusetts. For them, American offered them a land of religious freedom where they could freely practice their religion and not be subjected to the exactions of a state-run official religion. — It is therefore no accident that nearly 200 years later, in the first amendment of the Founding Fathers' Bill of Rights, adopted two years after the 1787 Constitution, the government is expressly prohibited from infringing upon freedom of religion, among other freedoms, such as freedom of speech, freedom of the press, the right of assembly, and the right to petition the Government.
What is less well known is the fact that the 110 passengers (they called themselves "The Pilgrims") were divided into two near equal-size groups. *One group of 44 people was composed of the more religious ones. They called themselves the "Saints" and they called the other 66 passengers the "Foreigners" because these were people essentially interested in the economic opportunities that the new colony, they hope, would offer them.
During the trip, there were continuous quarrels between the two groups. This was settled by the signing of an agreement between the two, proclaiming equality among the colonists (whether religious or not), and the establishment of a "Civill body Politick", governed by "just and equall Lawes" (sic). This agreement, called the Mayflower Compact, represents the beginning of the American civil government. It is fundamentally a compromise between religion and business.
There was also another permanent European colony, which was established by the London Company in Jamestown, Virginia, on May 14, 1607, thirteen years earlier. Captain John Smith was the leader of 105 men, whose principal mission was to find gold and to get rich.
Therefore, among the first 210 Americans of European origin, about one fourth were deeply religious, but the other three quarters came here to get rich. —I sort of think that this is about the same thing today between the business-oriented people and the very religious people.
As to the right to free enterprise, it can be said that the 14th Amendment somewhat guarantees such a right since it is said "No State shall deprive any person of life, liberty, or property, without due process of law."
As to freedom of religion, this may explain why there is no official state religion in the United States. Even before the War of Independence, a majority of American colonists had been anxious to preserve freedom of religion, and they had revolted against British rule, when the British attempted to establish the Anglican Church as the state religion.
That may explain why, after the War of Independence (1776 to 1783), the leaders of the new nation chose to establish a fundamentally lay republic, which is expected to remain neutral on matter of religion. The Preamble to the 1787 United States Constitution states clearly that the new constitution and the state were to promote secular political objectives, not religious ones: "We, the people of the United States, in order to form a more perfect Union, establish justice, insure domestic tranquility, provide for the common defense, promote the general welfare, and secure the blessings of liberty to ourselves and our posterity, do ordain and establish this Constitution for the United States of America." There is no reference to religion there. And, for good measure and to be clearly understood, the Founding Fathers added Article VI to the Constitution, which says expressly that there should be no religious litmus test to occupy any public function in the United States.
That is why, unlike the constitutions of some other countries, the U.S. Constitution makes no reference whatsoever to a deity. In Canada, which remained within the British Empire much longer, our constitution makes a direct reference to God, declaring that our constitution is based upon "the supremacy of God and the rule of law".
The United States Constitution is much closer to the French Constitution, which expressly defines France as a secular nation: "France is an indivisible, secular, democratic, and social Republic, assuring equality before the law of all citizens without distinction of origin, race, or religion, and respecting all beliefs."
The two constitutions, both the American and the French, derive their inspiration from the same democratic principle of government "of the people, by the people, and for the people". Indeed, in a democracy, the right to vote and to engage in political activity changes the balance of power in a country and it opens the door for the establishment of a government, in Lincoln's words, "of the people, by the people, and for the people."
The French and the American constitutions have brought democracy to the world because they proclaim the important religion-neutral principle that all political power emanates from the consent of the people, and that, consequently, it is not in the government's domain to concern itself with religious matters. This is the principle of the neutrality of the state in matter of religion.
This is the fundamental difference between a "government of men and of theocrats "and a "government of laws for all."
While less explicit than the French Constitution, the United States Constitution implies, at least, the principle of secularism in the First Amendment (the Establishment Clause) that I have already mentioned, where it is said: "Congress shall make no law respecting an establishment of religion, or prohibiting the free exercise thereof." Indeed, to make things clear enough, President Thomas Jefferson, on New Year's Day, 1802, explained in a widely known official letter that the Establishment Clause meant that there should be “a wall of separation between church and state,”—not a door—a wall.
President James Madison (1751 - 1836) made it even clearer, stating that there should be a total separation between church and state: “The number, the industry, and the morality of the priesthood, and the devotion of the people have been manifestly increased by the total separation of the Church from the State.” Thus, for James Madison and other American founders, the separation of church and state was not only a requirement of political freedom, it was also a means to safegard religion from being encroached upon by politics and politicians. More recently, another great American president, President John F. Kennedy (1917 - 1963), laid out eloquently his philosophy of government, when he declared, “I believe in an America where the separation of church and state is absolute––where no Catholic prelate would tell the President (should he be Catholic) how to act, and no Protestant minister would tell his parishioners for whom to vote–– where no church or church school is granted any public funds or political preference––and where no man is denied public office merely because his religion differs from the President who might appoint him or the people who might elect him”. (speech of September 12, 1960)
In the past, American courts have interpreted this amendment and Jefferson's explanation as an obligation, on the part of the government, not to get involved in churches' activities, not to spend public money on religions and not to favor any one religion over another.
The courts have also referred, for example, to the 1797 Treaty of Tripoli. In the Treaty of Tripoli, initiated by president George Washington (1732-1799) and signed into law by president John Adams (), it is officially proclaimed that: " the Government of the United States of America is not, in any sense, founded on the Christian religion; as it has in itself no character of enmity against the laws, religion, or tranquility, of Mussulmen; and, as the said States never entered into any war, or act of hostility against any Mahometan nation, it is declared by the parties, that no pretext arising from religious opinions, shall ever produce an interruption of the harmony existing between the two countries."
Treaty of Tripoli, Article XI, 1797.
Finally, in the U.S., and this since 1954, there is a law [1954 Revenue Act, 501 (c)(3)] that states that tax-exempt religious organizations cannot get involved in partisan politics without losing their privileged tax-exempt status.
The principles here are very clear and limpid. They are the principles of equality, of fairness and of freedom of conscience that require, in a democracy, that the public place be open to all citizens, whatever their personal beliefs or philosophies. This means that in a democratic constitutional order, there is no place for religious preference or for religious intolerance of people according to their conscientious beliefs. All people should be treated equally and no religion-based litmus test should ever be applied and used as a criterion for anyone to get involved in public life or to be under the protection of the constitution and of the law.
It is paradoxical that in Canada, where the head of state is simultaneously the head of a church (the Church of England), we have a tradition and a political culture which are decidedly more secular that those of the United States, especially as it has been witnessed in recent years in the US with the establishment of faith-based public programs and in the speeches of American politicians.
Enough of this Church and state stuff. My coming book (The Code for Global Ethics) will deal in much deeper details with this topic.
II- The second important political cycle in the U.S. is the differences and tensions that prevailed between the Thomas Jefferson and Alexander Hamilton regarding their political philosophies of a democratic rule versus an aristocratic rule.
Just as some wanted to establish a theocracy in early America, the early American leaders were divided on the question of democracy, and as whether a popular and decentralized democratic republic was better than a centralized aristocratic republic.
on the question of democracy vs. aristocracy, the two American polar personalities were Thomas Jefferson (Secretary of State in the first Washington government) and Alexander Hamilton (Secretary of the Treasury in the same government). Both were followers of two opposite British political philosophers.
Jefferson (who became the 3rd US President) was a disciple of both the French political thinker Montesquieu (1689-1755), ("The Spirit of the Laws", 1748), and of the British philosopher John Locke (1632 - 1704). In his classic book ("Second Treatise of Government", 1690), Locke refuted the divine right of kings and who argued that people were sovereign and had the right overthrow their governments. This was of course the credo of most of the 55 "Founding Fathers" who supported and fought the War of Independence again royalist Great Britain and George the 3rd and who signed the US Constitution.
And, when came the time to write a constitution, they did not want absolute power concentrated into one man or into one branch of government, but rather they want a decentralization of power to protect individual rights from government, with checks and balances within government, first between the states and the federal government (federalism), but also with checks and balances between the Judiciary, the Legislative and the Executive.
— For example, they introduced a clause in the Constitution that only Congress could declare a war (Art. I, Sect. 8- cl. 11); that the Right of Habeas Corpus cannot be suspended except for cause (Art. I, Sect.9-cl. 2); that the President, Vice President and all civil Officers of the United States, can be removed from Office by Impeachment (Art. II, Sect. 4) and that "no religious Test shall ever be required as a Qualification to any Office or public Trust under the United States." (Art. VI, cl. 3).
On the other hand, there were those, like Alexander Hamilton, who were weary of so much power being given to the people. They feared that the government would be weak and unstable. They were followers of the British political philosopher Thomas Hobbes (1588 - 1679). Hobbes did not believe in democratic rule as such, but rather defended the right of kings and aristocracies to rule the masses for their better good. For instance, Hobbes wrote that people have no right to revolt again the government, no matter how oppressive, but they should instead, and I quote him, "expect their reward in Heaven.” Thus, long before Lenin, the idea that religion was the opiate of the masses was clearly expressed by Hobbes.
For Jefferson, Hamilton was a "monarchist" at heart and an aristocrat. Indeed, Hamilton had argued in favor of a President elected yes, but for life, and a Senate modeled on the British Chamber of Lords, also elected for life. In his plan, the President would have an absolute veto. Only the House Representatives would have had to be elected.
*If Hamilton were alive today, he would be an ally of President George W. Bush and of Vice President Dick Cheney and he would be in favor of the notion of a Unitary Executive or of an "imperial presidency", i.e. a president with de facto dictatorial powers and a subservient Congress. (Hamilton even proposed also the abolition of the state governments and the federal government should appoint that State governors.)
Hamilton, if no democrat, had other qualities: he fostered the development of capital markets, he encouraged commerce, and he stood for sound fiscal policy. On the whole, he was more interested in the economy than in politics per se.
We all know that Hamilton was killed in a duel by Vice President Aaron Burr on July 12 1804, and has his portrait is on the $10 bill.
Jefferson died the same day as John Adams on July 1, 1826 and he has his portrait appears on the $2 bill and on the 5 cents nickel. Jefferson is also on Mount Rushmore.
III- Americans have also been divided regarding isolationism in international affairs versus active foreign interventionism and it is also a recurrent cycle in American politics.
This is the third big trend and dilemma in American political philosophy.
On the whole, America's Founding Fathers tended to be isolationists and did not want to get involved in the games that European empires (the British, the French, the Portuguese, the Spaniards which all had so-called colonies) were playing around the world. For example, George Washington (1732-1799) would say: "It is our true policy to steer clear of permanent alliances with any portion of the foreign world." Besides, they were too busy developing the Louisiana Territory that Jefferson had bought from Napoleon in 1806 for $ 15 million [$11,250,000 plus cancellation of debts worth $3,750,000]. This was a territory, East of the Rockies and located on both sides of the Mississippi that went from New Orleans to the Canadian border. That's 23 percent of the territory of the United States today.
This began to change in 1823 with the Monroe Doctrine, when President James Monroe declared that the USA would not tolerate any European nation trying to establish a colony in the Americas, This had the effect of placing the entire South American continent under American influence.
This was followed by the U.S.-Mexican War of 1846 to 1848, after the U.S. had annexed the independent state of Texas in 1845, under President James K. Polk under the emerging doctrine of "Manifest Destiny."
Most of the Republicans (then called Whigs) in the North and South, including then Congressman Abraham Lincoln, opposed the war on the ground that Texas was a Mexican province, but most of the Democrats in the South supported it. In the 19th century, this will be the main feature of American politics that Republicans would tended to be isolationists, while Democrats tended to be more interventionists in foreign affairs.
This all changed at the turn of the 20th century when the Republican administration of William McKinley (1841-1901), a very religious man. McKinley, and one of his principal secretaries, Teddy Roosevelt, crafted an imperialist foreign policy on the commonly held belief that it was America's duty as a Christian republic to spread democracy throughout the world. Armed with this new ideology, they launched the first American foreign war of aggression against Spain, in 1898.
This was the Spanish-American war that the U.S. launched after the U.S.S. Maine incident in the port of Havana, when an explosion in the visiting battle ship killed 256 American sailors. The explosion took place on February 15, 1898. Although this was most likely an accident, the media empires of Hearst and Pulitzer stoked the fire of war against Spain, and there was a war, even if the pretext was somewhat flimsy. The Spanish-American war allowed the United States to de facto annex the island of Cuba, the Island of Puerto Rico and the Island of the Philippines. In 1903, the Teddy Roosevelt administration took over the country of Panama.
Therefore, we can say that the first part of the 20th century saw the triumph of the ideology of foreign intervention, especially in Central and South America and in the Caribbean. After the McKinley administration, which had openly an imperialistic foreign policy, the Woodrow Wilson administration tried to abandon the previous administrations' imperialist foreign policy by promoting the right of self-determination for all peoples throughout the world and that the people in every country should have the right to choose their own governments. This was the famous Wilsonian idealistic and progressive American foreign policy that many successive administrations would try to adhere to, the last one in line being the Bill Clinton administration (1992-2000).
But even for President Wilson, events that took place in other countries forced him to embark upon foreign interventions to "make the world safe for democracy." For example, Mexico fell into a bloody revolution in 1913 when Mexican general Victoriano Huerta overthrew and assassinated the duly elected Mexican President Francisco Madero. The year after, Wilson sent troops to Mexico, and peace with Mexico was only achieved in 1916, through complex negotiations.
Wilson also intervened in Nicaragua to fight rebels, and the same happened in Haiti and in the Dominican Republic and American troops ended up occupying these Caribbean islands for many years.
Altogether, it has been estimated that between 1898 and 1934, the United States intervened four times in Cuba, five times in Nicaragua, seven times in Honduras, four times in the Dominican Republic, twice in Haiti, once in Guatemala, twice in Panama, three times in Mexico and four times in Columbia.”
During the other two thirds of the 20th century, the United States was involved somewhat defensively in the two World Wars against Germany and in the Cold War
Against the Soviet Union, until the later collapsed in 1991.
And that brings us to the 21st century.
The Bush-Cheney administration that came into power on January 2001 is a direct successor to the McKinley-Roosevelt (Teddy) administrations, of one hundred years earlier, with its 2002 so-called "Bush Doctrine" of unilateral foreign interventionism and its self-proclaimed right to launch "preventive wars" against other countries, notwithstanding international law or international institutions such as the United Nations. With the "Bush Doctrine", we are today back one hundred years in international relations. In my book "The New American Empire", I delve more deeply into this issue. Of course, the title is somewhat misleading, because the Bush-Cheney's empire building efforts of today are not new in American history: They only represent the old McKinley-Roosevelt imperial foreign policy cloaked in new cloths.
My general conclusion, therefore, is that for two thirds of the 20th century, various U.S. administrations, beginning with the Franklin D. Roosevelt administration (1932-1945) which was mainly responsible for establishing the United Nations, in 1945, have built a reputation for the United States as a protector of international law, of the right for peoples to self-determination and of international peace. For example, the United States has opposed the Soviet Union when it invaded Hungary in 1956 and Czechoslovakia in 1968 under what came to be known as the "Brezhnev Doctrine".
When the Bush-Cheney administration invaded Iraq on March 20, 2003, under a similar "Bush Doctrine" and without the United Nations' authorization, this had the effect of a shock to a lot of people around the world.
This goes a long way in explaining why President George W. Bush is presently the most unpopular politician around the world that the U.S. has ever had in modern times.
A recent Harris Poll taken in Europe gave these dismal figures about Mr. Bush's approval rating in five representative countries: In Italy: 8 percent of approval; In the UK: 7 percent; In Spain, 7 percent; In Germany, 5 percent; In France, 3 percent.
Considering these figures, maybe some American politicians would do well to meditate about what Benjamin Franklin called his seven "great virtues" that politicians should practice in public affairs. They are:
-aversion to tyranny; -support for a free press; -a sense of humor; -humility; -idealism in foreign policy; -and, tolerance and respect for compromise.
I leave you to be the judge if many contemporary politicians meet Ben Franklin's standards.
What is more is the fact that the three fundamental influences that are observed throughout history in American politics seem to be following a very long cycle of occurrence. In fact, they seem to confirm British historian Arnold Toynbee's one hundred years cycle. Indeed, Toynbee has identified what he called a century-long cycle of colonial or imperialist-like wars over time. And, indeed, in this regard, the beginning of the 21st century look like a duplicate of the beginning of the 20th century: then, Great Britain was involved in the Boers War in South Africa while the U.S. was involved in the Spanish-American War. Today, both countries are involved in the Middle East wars, the Afghanistan war and the Iraq war. It may not be a complete coincidence that such periods, marked by colonial zeal, are also periods when the religious sentiment is running high. And, since wars require a concentration of power, it may not be a coincidence either that this is during such periods that political theories about the need for a strong presidency and the Unitary Executive abound.
Therefore, the question seems to be obvious: To what extent the three tendencies that I have observed in American politics tend to reinforce each other at certain periods? This is a question that political scientists and historians should investigate further.
Rodrigue Tremblay is professor emeritus of economics at the University of Montreal and can be reached at firstname.lastname@example.org
He is the author of the book 'The New American Empire'
Visit his blog site at: www.thenewamericanempire.com/blog.
Author's Website: www.thenewamericanempire.com/
Check Dr. Tremblay's coming book "The Code for Global Ethics" at: www.TheCodeForGlobalEthics.com/
 For a study of study of the American tradition of religious freedom, see, Martha Nussbaum, Liberty of Conscience: In Defense of America's Tradition of Religious Equality, 2008.