Does History Repeat Itself : The American Civil War
The American Civil War in the 19th Century almost destroyed America — I need not give a history lesson in this regard. What I do need to warn most about is that history may repeat itself yet again. There is an increased likelihood that an American Civil War could occur again because just as the Civil War served to solve the problem of slavery, so too will our current crisis need a resolution to solve a problem: that of wealth inequality.
Wealth Inequality
Wealth inequality is a problem that originates from the 1980s and remains a dire issue — it explains the surge in populism with the Trump election in 2016. As Ray Dalio has shown in this article comparing the wealth gap between the Top 40% and Bottom 60% in the US — terminology to categorize the income distribution quartiles I will use throughout this paper — the Bottom 60% real incomes — where most of their wealth stems from — has seen no growth since the 1980s’.[1] Among them, only one third have savings.[2] Within this Bottom 60% where the majority middle class is found, their total income (when transfers are included) have noticeably gone down, in line with the overall Bottom 60% grouping.[3]Since the 1980s’, there’s been 30 percent decrease in manufacturing jobs in the US with 14% of the decrease accounted for in the years 2008 and 2009 ( recall when the financial crisis occurred). [4]
Although the Global Financial Crisis exemplified bipartisan action of great effect to avoid a depression, it inadvertently caused greater wealth inequality. The financial meltdown of 2008 was solved by the Fed’s action of quantitative easing (QE). This consists of the creation of liquidity by the Federal Reserve’s of buying financial assets from commercial banks which creates excess reserves for the former — essentially cash the Fed had in hand that was not in circulation that was injected into the economy with their purchases. In 2008, the Fed bought for 1.4 trillion of financial assets raising their balance sheet tot 2.2. trillion, doubling their levels in 1 year alone.[5] In 2010, they implemented QE2 adding another 600 billion of assets on their balance sheet and then followed in 2012 with QE3, committing to buy 40 billion per year of mortgage backed securities.[6] Given that QE is the injection of liquidity in financial markets, it benefits solely those with financial assets, mostly the Top 40%.[7] This segment of the economy and society holds 41% of their wealth in financial assets with 27 % of it in stocks while the Bottom 60% retain only 25% of their wealth in financial assets with merely 12% in stocks.[8] QE has thus inadvertently added to wealth inequality.
Addressing Wealth Inequality?
It is not all doom and gloom. For the most part, the Covid-19 pandemic brought forth a massive coordination of society to shutdown and stop the spread of the virus. The all hands-on deck mentality that the virus triggered ushered in unparalleled cooperation and coordination in recent decades. Boomers and Gen Xers leaders demanded to halt economic activity; their generations obeyed and the Millennials followed orders in solidarity with ease. This collective action has extended beyond the fight of against the virus. The death of Michael Floyd at the hands of the Minneapolis police triggered nation wide protests with the Black Lives Matter movement. An issue dating back decades (if not centuries), the BLM protests have been unprecedented in size to their previous protests. A sense of community and collective action has flowed over into politics with local and state governments enacting police reforms and the democrats introducing police reform bill in the House of Representatives. Still experiencing gridlock, the Trump administration itself is set to implement an executive order for police reform. Corporations have also vowed for more diverse companies and curb discriminatory actions.
This growing sense of community remains promising and fragile. It must spillover into other policy areas to address a silent majority of economically distressed and poor Americans. Recall that the Trump campaign won because it was a direct response to globalization with a protectionist stance, resounding deeply with an underappreciated and acknowledged middle class who suffered job losses from globalization. With isolationist policies, Trump captured the Rust Belt states that had been democrat for decades as the Rust Belt was once a manufacturing hub of America. It was also with a rhetoric of ‘tougher’ immigration policy — with immigrants seen as taking American jobs as well — that Trump’s right-wing populism took hold. Just as it was in 2016, wealth inequality will remain the underlining force driving voting outcomes in the ballot box in November.
There remains a great is a great fear about the resolution: is not guaranteed nor does it hold any positive connotation for the entire society. Certainly, the American South in the 19th Century did not accept the notion of liberty for all peoples and hence, created tensions that triggered the American Civil War. We already have culture wars but other wars of various nature could emerge such as class, race, terrorist causing a hot war, just like in 1861. This possible American Civil War could either result in great civic achievements or disintegration.[9] The disintegration could be ripe for demagogues to seize political power and lead wars against its own people. Just as there is an gleeful embrace of collective action, this may veer to embrace demagogues or radical groups.
With the BLM protests, it has definitely reignited the culture wars with Trump literally ramping up attacks to sow division. The tearing down of statues of Civil War figures of the South may aggravated tensions within society for those who’ve held these figures as memories of their collective history — however egregious and wrong these historical figures were. As we have recently seen, the rise of populism brings with it the demagogues with authoritarians’ zealous ambitions. With the acts of the Trump administration evoking an obscure 18th Century law to allow military use against ‘unrest ’in Washington DC a few weeks ago and his continual attacks on the press, it could invite further demagogic acts that may encroach the rights of Americans. The country is as divided as ever. And there is an underlining phenomena causing the increased probability of another American Civil War. We must return to history to comprehend the likelihood of hot war in both cases.
Another American Civil War?
Americans like to point the separation of the branches of government as the strength and core of the United States democracy — and certainly it is. However, this was not the assessment by of one of the keenest and most succinct observers of American democracy, Alexis de Tocqueville. When the Frenchman traveled to America to understand this democracy success story in 19th century, Tocqueville saw civil society, the bonds and associations between all Americans, as the focal point that makes democracies flourish. Here is Tocqueville in his own words on the indispensability of a vibrant civil society and how tightly knit together it was:
“Americans of all ages, all conditions, all minds constantly unite. Not only do they have commercial and industrial associations in which all take part, but they also have a thousand other kinds: religious, moral, grave, futile, very general and very particular, immense and very small; Americans use associations to give fêtes. To found seminaries, to build inns, to raise churches, to distribute books, to send missionaries to the antipodes; in the manner they create hospitals, prisons, schools. Finally, if it is a question of bringing to light a truth or developing a sentiment with the support of a great example, they associate.”
It was these associations that Tocqueville saw as the strength to the individual wills that could band together at any moment to collectively defeat tyranny whenever the threat presented itself. Today, however, the situation is different. With people bowling alone (or if bowling at all), the social and moral capital reserves are at all time lows. Civil society is very weak, certainly if one also accounts for the discredited media — a key civil society player — along with social media exacerbating culture wars. There are glimmers of hope. A resolution on wealth inequality is still a likely outcome with the demonstrations of collective actions of the Covid-19 quarantine and BLM protests we have seen has cut through crippling gridlock. For the latter movement, there must be organized collective actions that moves beyond protests. Protests must shift to structured movements. Movements into civic and political organization for pressures to resolutions. In order for Americans to redistribute wealth, they will have to do what their ancestors did roughly two centuries ago: associate.
It was these associations that Tocqueville saw as the strength to the individual wills that could band together at any moment to collectively defeat tyranny whenever the threat presented itself. Today, however, the situation is different. With people bowling alone (or if bowling at all), the social and moral capital reserves are at all time lows.
With helicopter money governments have to drawn upon given a low interest rate and a maxed-out QE world, this fortunately reversed the potentially massive deflationary effects from the shutdown of businesses and collapse of supply chains. For the moment, these money handouts work to great effect and do address wealth inequality. Caution must be warranted. There may be temptations for the US government to continue this policy well after this Great Recession Part 2 will be over, then there will be the dangers of inflation. America could find itself in the same position as Germany in the 1920s: the debts from war reparations it had to pay forced them to print money and inflate their way out of debt. It makes populism ever more appealing and invites its extremes of fascism and communism into political institutions.
Remember: you cannot have a Hitler without the hyperinflation of the Weimar regime in the 1920s. Similarly to Hitler’s war machine, America’s war mongering may be geared towards internal conflicts.
Whether new civic and societal triumph or disintegration of America with a resolution, we cannot truly know the outcome, we do know that we are currently in a historical timeframe where we cannot disregard the possibility of another American Civil War.
Remember: “History doesn’t repeat itself, but it does rhyme.” — Mark Twain
References
[1] Dalio, Ray. “Why and How Capitalism Needs to Be Reformed (Parts 1 & 2).” LinkedIn. Birdgewater & Associates, April 5, 2019. https://www.linkedin.com/pulse/why-how-capitalism-needs-reformed-parts-1-2-ray-dalio/.
[2] Ibid.
[3] Ibid.
[4] Ibid.
[5] Ferguson, Niall. The Ascent of Money: A Financial History of the World: 10th Year Anniversary. 2nd ed. London etc.: Penguin Books, 2019. 355
[6] Ibid. 356
[7] Dalio, Ray. “Why and How Capitalism Needs to Be Reformed (Parts 1 & 2).” LinkedIn. Birdgewater & Associates, April 5, 2019. https://www.linkedin.com/pulse/why-how-capitalism-needs-reformed-parts-1-2-ray-dalio/.
[8] Ibid.
[9] Strauss, Howe. The Fourth Turning, 278
