A critical review of End Times by Peter Turchin

There has been a growing feeling that something is wrong with the direction America is heading since the turn of the century. The idea that we live in a time of crisis has gained currency in recent times. America in Crisis is an analysis of the political and economic dynamics responsible for this feeling. I use a cyclical concept, not William Strauss and Neil Howe’s generational cycle referred to in the previous link, but Peter Turchin’s secular cycle, with corrections that address some of the issues raised in the cited review. I believe a major driver of society is cultural evolution and talk about it a lot. There is also quite of bit of political, economic and financial discussion as I believe these disciplines are also very important to understanding what is going on. I wrote up my analysis in a book with the same name as this substack. I cover some of the material in the book here, plus new insights as they occur to me. For easier comprehension it may help to read posts in sequential order so that when an older post is referenced there is some familiarity.

Peter Turchin’s new book End Times discusses the American Crisis, as I do here. Most of the book is an expanded narrative version of material from his earlier book Ages of Discord followed by commentary about where we go from here.

In his first chapter, Turchin introduces key concepts of his theory. One concept is elite overproduction, when there exist more elites than suitable positions for them, which he analogizes to a game of musical chairs. Another is popular immiseration, when the well-being of the broad population falls below that of previous generations. Immiseration is a result of the operation of a “wealth pump” through which elites suck wealth and well-being from working people in order to enrich themselves A third concept is counter elites, people who take advantage of discontent arising from elite overproduction and popular immiseration to challenge the existing order, using Trump, Lincoln, and Hong (leader of the Taiping Rebellion) as examples. Such individuals serve as signposts on the road to a general societal crisis.

Figure 1. Operation of the wealth pump in the modern (SP) economy.

I really like Turchin’s metaphor of the wealth pump because it describes exactly the situation depicted in Figure 1, which I presented in a previous post. The figure shows principal money flows in the SC versus SP economy. The diagram shows flows of money created by government deficit spending and bank lending flowing into the real economy (where the bulk of the population makes a living) and a flow out of the economy in the form of the trade deficit. Also shown are one (SC) or two (SP) flows out of the economy into the stock market. These are dividend payments and stock buybacks. Stock buybacks are only significant in the SP economy—the SEC adopted a rule enabling buybacks in 1982 after which buybacks grew in popularity. These flows of money into the stock market have swelled the stock market, resulting in increased market capitalization relative to GDP. This development is depicted in the figure by the bigger stock market box for the SP economy. Companies generally pay dividends to maintain a roughly constant yield, so total dividend payments rise with rising market capitalization. Thus, the dividend flow is larger in the SP economy, which is indicated by a thicker arrow in the figure.

Turchin’s wealth pump is the sum of the increased dividend and buyback flows, which are now pumping all economic profits out of the real economy and into the stock market (see Figure 2), leaving none for investment for growth and good job creation. Aggregate investment has remained unchanged, it is funded with debt. The wealth pump serves to create debt (assets for bond investors) in order to enrich stock investors. Corporate management becomes more about exquisite management of financial flows and less about the nuts and bolts of running a business, with operations formerly performed in-house outsourced to companies (often in low wage countries) willing to perform labor-intensive manufacturing, customer service and R&D operations for a low price. The replacement of higher-paid corporate employees with lower-paid labor may result in poorer customer service and less innovation, but if reduction in product or service quality is accompanied by lower prices, customers will often put up with it. After everyone has shifted to the new model, customers no longer have any alternative to crappy products and service while the labor cost savings are transmitted to investors. For workers, the result has been popular immiseration. Despite low unemployment, reflecting worker shortage (labor force growth over 1999-2019 was 0.8% compared to 1.4% over 1950-70), real unskilled wage growth is lower today: 0.5%, versus 2.3% for the two periods. This result shows the effects of the wealth pump in action.

Figure 2. Rising stock buybacks mean fewer profits available for investment and more corporate debt

I developed the analysis shown in Figure 1 as a tool for understanding inflationary dynamics. I noted that when the wealth pump is operating, money added to the economy through large deficits is rapidly sucked out of the real economy and there is no inflation. An exception happens when fiscal deficits are larger than financial flows, like what happened over 2020-21. Here money accumulated, producing an inflationary force that manifested as rising inflation as unemployment fell over 2021-22. Without the wealth pump, government deficits tend to remain in the economy and even fairly small ones can lead to inflation when unemployment is low. As I described in a previous post, it was the failure of governing Democrats neglecting a developing inflationary threat that destroyed the SC economy, or what Turchin calls the postwar elite consensus.

Chapter two presents an overview of the secular cycle using narratives to illustrate what I presented in a very technical sense. My take is a little different than Turchin’s. He has two American cycles, while I have three, but the structure and the way immiseration and excess elites translates into crisis is the same. This cycle number difference has consequences that I will get to later.

Chapter 3 has a discussion of non-elites, developing his concept of popular immiseration, which he characterizes in terms of things like relative wage (wage/GDP per capita) and measures of biological well-being such as height and life expectancy. In Ages of Discord this material is covered by a series of graphs, while here it is presented in an engaging narrative form. All of these issues are various aspects of economic inequality, a plot of which I show in Figure 2 as the blue line.

Figure 3. Inequality, polarization, elite number and PSI over time

Chapter 4 is about how growth in elite numbers leads to rising competition, and eventually, conflict between elite factions. The growth in elite number is depicted in Figure 3 as the dotted line. The political stress index (PSI) is shown by the black line. It is a measure of the intensity of rising inter-elite conflict and its potential to spill over into state breakdown, revolution, or civil war. The mismatch between the children of elites seeking positions (elite aspirants) and the available positions, creates winners and losers among the elite population. The latter Turchin terms the precariat. Members of the precariat are a threat to social stability, with many revolutionaries coming from their ranks. Turchin identified teaching and particularly law as fields most fit for creating revolutionaries, noting that Hong, leader of the Taiping Rebellion, and Mao started out as teachers, while Robespierre, Lenin, and Castro were lawyers. He talks about how salaries for lawyers have moved from a single mode distribution to a bimodal one, with one large, low-salary peak and a smaller high-salary peak. That is, as the number of would-be lawyers emerging from law school increased, more ended up in the precariat. In another section he talks about how the intense competition for elite positions has unsurprisingly led to an increased incidence of cheating in school.

Rising competition and fragmentation among elites (political polarization) is typical of the period leading up to crisis eras, as is shown in Figure 3 as the red line. Turchin notes two great cycles in this indicator, one peaking in the first decade of the twentieth century and a second one now. This data and his data on well-being inform his belief that there have been two American secular cycles, not three as I maintain. I should note that inequality is an actual measure of inequality described in detail in Figure 2 in my 2017 paper, as is polarization, which is given by the DW-Nominate measure. The plot of elite number and PSI are calculated values obtained from models provided by Turchin in Ages of Discord. In his models, elite number and PSI are functions of inequality that apply to a single secular cycle.

Figure 3 is shows the three secular cycles I propose, each having its own peak in inequality, elite number, and PSI. Figure 4 presents Turchin’s well-being and PSI figure from Ages of Discord that shows two cycles. His PSI plot shows a discontinuity between the beginning of the Civil War, which obviously was a period of high discord, and the end of WW II, by which time PSI was reaching a minimum. In between there is no information, in which I believe there was another complete cycle.

Figure 4. Turchin’s secular cycle scheme (from Ages of Discord).

Regardless of the number of cycles, the issue today is on the right-hand side of Figures 3 and 4, where inequality, elite number and PSI have been rising for decades, creating a disaffected working class and a potentially revolutionary precariat.

Chapter 5 is about the ruling class. He introduces the ruling class with a vignette about a couple of fictional representatives of America’s current ruling class and a description of some historical ruling classes. He follows with a brief history of the American ruling class beginning with a mix of Southern plantation owners and northern commercial interests before the Civil War. The war destroyed the planation elite, and the rapid industrialization after the war quickly led to the creation of a rising class of wealthy industrialists, who eclipsed the remaining pre-war elites. Turchin describes how these rising elites, through things like the Social Register, the ca. 1900 merger mania, and the rise of the policy-planning network (think tanks), developed a class consciousness among elites as those charged with the governance of the country. This unified class of capitalist elites and their junior partners in government define what he calls a plutocracy. For Turchin this ruling class is the principal actor in how secular cycle crises, like now, play out. He finishes the chapter with a brief discussion on immigration and the traditionally opposing takes elites versus working class people have on the issue.

Chapter 6 is where my differences with Turchin appear. After giving a brief history of how America became a plutocracy (I have no issue with this) he then talks about the Progressive trend reversal. By trend reversal he means a shift from worsening to improving well-being that happened over 1900-1920 (see blue well-being line in Figure 4). As mentioned before these measures included things like average height, life expectancy, and relative age, but also things like relative age at first marriage. The idea is teenagers grow taller, marry younger, and people live longer during good times, that is, when wages are high or rising relative to living standards (proxied by GDP per capita). The shift from times getting worse to times getting better according to these measures happened over the first two decades of the twentieth century, that is, during the Progressive Era. As I noted earlier the polarization data support this turnaround date as well.

Turchin notes that sometimes elites function selfishly and sometimes not. When they act selfishly crisis resolution is violent, but violence may be avoided when elites are not selfish. He argues that “the key role in such (unselfish) trend reversals is played by long periods of persistent political instability. Sometimes they ended in social revolutions, state collapses, or bloody civil wars. But in other cases, the elites eventually become alarmed by incessant violence and disorder.” Elites may decide to act to reduce the factors leading to the disorder. This is what Turchin thinks happened over the Progressive era. He gives examples of violence seen during the creedal passion period around 1920 to illustrate disorder that were followed by efforts to reduce inequality (the driver of instability) during the Great Compression era beginning in the 1930’s (see Figure 2). Turchin does not say what elites did to make this trend change happen. In Ages of Discord he was more explicit, it was restriction of immigration in 1924 that was the key policy.

I note that disorder rapidly dissipated after 1920, while inequality and the PSI it spawns recovered from lows around 1920 as shown in Figure 3. The authorities responded to the violence Turchin described through mass arrests of suspected radicals, some of whom were deported. Republicans returned to power in the 1920 election campaigning on a “return to normalcy.” By the end of the decade, they had largely achieved this result: top 1% income share had returned to prewar levels, unrest and inflation had dissipated, and strike frequency was down 85% from its high in the previous decade. Figure 3 shows a long-term decline in inequality followed the 1929 crash, not the 1920 instability peak (nor the 1924 immigration restriction). I note that my inequality measure uses top 1% income share along with inverse relative wage, so while Turchin sees rising relative wage after the 1910’s, my combined measure suggests the inequality trend change really didn’t happen until after 1929. The financial collapse caused by the crash and depression created a financial problem for elites that they needed to solve, for they had lost over 80% of their equity wealth and economic theory said that unless they acted they stood to lose most of the rest stashed in bonds. I argue it was elite mishandling of the crisis (from their point of view) that led to falling inequality, not altruism nor fear of violence from a defeated Left. Elites in 1929 were people and just as self-serving as people have always been. Strong evidence for this is when the 2008 crisis struck, elites did not mishandle it as they did in 1929, and inequality has remained high and even advanced further.

Chapter 7 begins with an illustration of state breakdown with a tale of the end of Emperor Nero’s regime (and life).  Turchin then provides potted histories of three culturally similar countries (Belarus, Russia and Ukraine) in the aftermath of the Soviet breakup, one of which (Ukraine) saw state collapse. In Belarus, Alexander Lukashenko established a dictatorship in 1994 representing administrative-military elites which prevented the rise of the “oligarchs” that happened in the other two countries. Oligarchs ruled Russia in the 1990’s until they were displaced by an administrative-military elite led by dictator Vladimir Putin. Ukraine likewise came under oligarch rule in the form of a plutocracy structured as a democracy through which oligarchic factions competed, making it similar in some ways to the US. Because the oligarchs failed to establish a coherent elite identity, Ukraine experienced state breakdown when president Yanukovich abruptly lost support, and finding himself in Nero’s position, fled to Russia. With the start of the Russo-Ukraine war, the current president Zelensky has an opportunity to seize control from the oligarchs on behalf of a military-administrative elite in a state structured as a democracy. Turchin ends this chapter with an assertion that America is no Ukraine, the American ruling class is unified, and has in the past acted against its narrow selfish interests for the sake of common well-being.

Chapter 8 talks about the current situation in America and introduces his MPF model to characterize the sociopolitical dynamics of a crisis era like now.  He sees the wealth pump as resulting for an oversupply of workers, which has depressed wages, leading to rising inequality, which in turn leads to rising elite number, which together produce rising political stress (see Figure 3). If the wealth pump was caused by oversupply of workers, then since labor force growth today is less than it was in the 1950’s and 1960’s and unemployment is lower, wage growth should be higher today. It is not, as I mentioned earlier. Leaving this aside, we can start with the fact that inequality/immiseration is high today and leave the cause unsettled.

Turchin integrates PSI with his social contagion model (which predicts creedal passion periods) to identify periods ripe for secular cycle resolution. Since 1920 was a peak in the social contagion model and it occurred during a period of high PSI, a secular cycle resolution should have happened around then that led to declining inequality, elite number and PSI. This is what Turchin believes, and since 2020 has seen a repeat of these things, he expects a resolution to the current crisis should happen in the near future, and if it doesn’t, we will need to wait under 50 years for the next creedal passion era. As noted above, I do not see the 1920’s as the time when the last secular cycle crisis was resolved, so I do not think there is any reason to believe that a crisis resolution in the 2020’s is any more likely than one at another time. This idea is easily testable. If an inequality reduction does not happen in this decade, but does before the next creedal passion period, then this combination of social contagion and PSI would be disproved.

Turchin then discusses the situation today. Resolution of the crisis will require action contrary to the interests of the present ruling class. The two pools of discontent from which opponents of the current regime would come are the immiserated working class and the precariat. He notes that the former have no organization and so cannot act on their own in this capacity, which leaves the precariat. We can see the role of the Left-leaning members of the precariat in popular protests such as Black Lives Matter and in advocating for other cultural issues, but no coherent movement addressing economic issues. Turning to the Right he argues that the Republican party is gradually evolving from a party of the 1% to a party of right-wing populism, suggesting such figures as Tucker Carlson and Josh Hawley as possible counter elites around whom an effective opposition to the ruling class could form. To me, Carlson and Hawley seem to be fairly senior members the “red” faction of the ruling class, not members of the precariat at all, so I have a hard time seeing them serving as counter elites, rather than “policy entrepreneurs” for the red faction. Turchin appears to believe that a plutocratic elite is necessarily monolithic, which I do not see. It seems obvious to me that there are “red” and “blue” elite factions today, such as those which existed before and during the Civil War. The relation between labor power growth and Democratic rule strongly indicates the existence of pro- and anti-Labor elite factions during and after the Progressive trend reversal. Elite factions are normal and divisions between them intensify with rising PSI.

Chapter 9 presents two historical examples of countries going through turbulent times who managed to avoid revolution, civil war, or state collapse. These provide examples of how a crisis period can be handled without these extreme events happening. The first example is what he calls the Chartist period in England (1819-1867). This period includes the crisis and resolution phases of what I call the mercantile secular cycle (1690-1870) in Britain. Turchin notes that Britain avoided the revolutions and civil wars that plagued the continent (and also the US). Figure 2 of this article presents the data relevant to Turchin’s analysis. Inequality (measured by inverse relative wage) peaked around 1800, with price (another secular cycle proxy) peaking around 1815. These data suggest the downtrend in the mercantile secular cycle got underway shortly after 1800. As the crisis period intensified political unrest did as well as shown by Figure 7 in the same paper. These data support Turchin’s idea of the successful handling of this crisis period by British elites happening over the period between the Reform Act in 1832 and the expansion of suffrage in 1867.

I see the period Turchin discusses as a successful resolution of the British mercantile cycle, beginning a new cycle. But I also see the American Civil War as a resolution of an American secular cycle that began with the American Revolution. Both the Chartist period and the Civil War saw the eclipse of agrarian elites by rising capitalist elites. Britian had begun its industrial revolution before the US, but the peaceful resolution of their cycle took multiple decades while that of the US was settled by four years of bloody warfare. The result was both countries began a new secular cycle led by capitalist elites at about the same time. From a mechanistic point of view, the Civil War accomplished the same reduction in elites numbers as happened during the Wars of the Roses, which Turchin acknowledges as the resolution of the Plantagenet secular cycle in England. The transformation of millions of people from property to free people must be considered as a reduction in inequality and can be seen as such in Figure 3. A sharp drop in instability is also evident as a result of the Civil War, by 1880 instability hit levels not inconsistent with values seen in other periods between creedal passion periods.

Turchin also discusses the Russian reform period over 1855-81 during which Czar Alexander II freed the serfs. The period was one of violence, which had subsided by 1890. Yet revolution came just 15 years later and was followed 12 years later by state collapse. I see this episode as analogous to the Progressive era in America, during which elites responded to secular crisis-generated instability in a way that restored order, but did not resolve the issue as seen by what had happened to them 2-3 decades later. Both were actions that delayed a cycle resolution and inequality trend reversal. In contrast, both the British Chartist era and the American Civil War and Reconstruction era served as true resolution periods, beginning new secular cycles, which is why I see America as having three rather than two secular cycles.

Despite my technical differences with Turchin’s theorical development, I recommend End Times to readers of America in Crisis substack because of its illustrations of the concepts I discuss here that can make these ideas more comprehensible to a non-technical audience.