Democracy and Economic Cycles

In 1776, Adam Smith’s Wealth of Nations was published and the U.S. Declaration of Independence was signed. This was no coincidence: Both were reactions to a widespread economic depression that had begun in the previous decades. England reacted to their economic distress with a series of efforts to raise revenue - the Stamp Act, the Townshend Acts, and the Tea Act (among others); the colonists reacted with the Boston Tea Party and the Declaration of Independence.

There was war and upheaval, and a new nation was born.

Fourscore (80) years later, Abraham Lincoln was a lawyer in private practice, working for the railroads. On August 12, 1857, he was paid $4800 in a check, which he deposited and then converted to cash on August 31. That was fortunate for Lincoln, because just over a month later, in the Great Panic of October, 1857, both the bank and the railroad were “forced to suspend payment.” Of the 66 banks in Illinois, The Central Illinois Gazette (Champagne) reported that by the following April, 27 of them had gone into liquidation. It was a depression so vast that the Chicago Democratic Press declared at its start, the week of Sept. 30, 1857, “The financial pressure now prevailing in the country has no parallel in our business history.”

Soon there was war and terrible upheaval: Four years later the nation was split asunder by the Civil War. A transformed and more powerful federal government emerged, changing forever our government’s role in managing the country.

Seventy-five years later the Great Depression bottomed out, and again: war and upheaval, on a greater scale than ever before, accompanied by dramatic transformations in the role and nature of our federal government.

Today we’re approaching that same interval, and people are nervous about another worldwide economic crisis - with good reason. Even beyond the economic consequences, depressions have led to huge political changes. They have ushered in the rise of fascism, the consolidation of communism, the overthrow of monarchy (the American and French revolutions, for example), and the creation of the new and experimental democratic republic of the United States of America. And they’ve almost always led to major wars, with massive suffering worldwide.

Unequal Protection: The Rise of Corporate Dominance and the Theft of Human Rights at Amazon