The economic cycle of civilization

In the Long Run We Are All Dead: Keynesianism, Political Economy, and Revolution (PDF, 362 pages) by Geoff Mann, 2017.

Geoff Mann, from page 49 in his book:

Keynesians are ... certain that neither civilization nor capitalism is natural; if left to self-regulate, things will not take care of themselves.

That's Mann's definition of "Keynesians", not mine. But it is true that economists often talk about equilibrium as if it was the natural state of the economy. It isn't. In the natural state, as in Eden, there is no economy. In Eden, and in the Dark Age.

We are often told that the troubles of our economy arise due to government interference. This is largely true. I, for one, am always pointing out flaws in policy and suggesting improvements. (Hey, I don't want to change everything. I only want to fix two or three things. I'm "always" pointing out flaws because the same two or three things come up all the time.)

But the fact that some of our troubles arise from flawed policy does not mean that all of our troubles arise from flawed policy. Some of them arise from a lack of policy because our trust in self-regulation is too strong, and because "things" really don't take care of themselves.

(Oh, our economy does take care of itself, when conditions are good. That's when we get a "golden age" or "seven good years". But when we fail to promote the general welfare by proper management of economic conditions, we get the "seven bad years" or the "lost decades", or insurrection or revolution or a Dark Age.)

According to the José Ortega y Gasset quote I posted the other day -- also from the Geoff Mann book -- civilization "is not self-sustaining. It is artificial, and demands an artist or artisan." I'm retelling that story today.

According to A.J. Toynbee, civilization faces challenges but continues to advance as long as each challenge is met with a successful response. I'm retelling that story today.

Looking at "civilization" as one massive business cycle, I can see that Keynes was right to compare the Great Depression to the Dark Age. And I understand that the peak of the cycle occurred some time around 1776, with our Declaration of Independence, and Adam Smith's Wealth of Nations, and Gibbon's Decline and Fall of the Roman Empire first seeing daylight that year. 

It is ironic that Gibbon's book on the fall of Rome was published at the peak of the next cycle. But I do love irony. 

The irony gets deep when we realize that Smith's book is capitalism's handbook, and that capitalism drives the decline and fall. You can see this if you look. Geoff Mann, who knows what to look for, says on page 10: "I cannot help but see [it] everywhere I look".

I should say, I never said "capitalism drives the decline and fall" until today. I think I'm adopting the wording from Geoff Mann. (And my, hasn't my story changed since 14 March!) But don't forget: My version of "capitalism drives the decline and fall" goes more like this:

The cycle of civilization is a cycle of dispersion and concentration of wealth.

We are in the stage of civilization where capitalism-as-cause-of-decline is easy to see. Concentration of wealth is easy to see. Mergers and acquisitions are everywhere. Amazon owns MGM, for crying out loud.

During the rise of civilization, wealth increases faster than it concentrates. During the fall, wealth increases more slowly than it concentrates. As the end draws near, fewer and fewer owners remain. The rest of us, if we are lucky, get to be serfs.

The only acceptable alternative that I can see is to prevent decline. Fortunately, the cycle of civilization is an economic cycle, so policy can stop the decline and restore the rise, if we commit to doing so -- and if we get the policy right, and dally not.