Peter Turchin’s structural-demographic theory posits that political instability is the inevitable result of two converging, long-term historical forces: popular immiseration (the decline in living standards for the majority) and elite overproduction (an excess supply of elite aspirants competing for finite positions of power and status).  Central to this theory is the “wealth pump” — a set of institutional arrangements that systematically transfers economic value from commoners to elites.  Turchin dates the start of the current American crisis cycle to the late 1970s.  Today, the Federal Reserve’s policies of persistently low interest rates and massive asset purchases since 2008 have served as a powerful, unintentional accelerator, effectively exerting dangerously high pressure on the wealth pump.

The Federal Reserve, through its modern monetary policy, dramatically intensifies the two core variables that define Turchin’s structural recipe for discord:

1. Accelerating Elite Overproduction through Asset Inflation

Elite overproduction describes the condition where the number of individuals with the credentials and resources to be considered “elite” far exceeds the number of actual high-status positions available.  This phenomenon is amplified by the Fed’s monetary stance:

2. Deepening Popular Immiseration through Debt and Cost

Popular immiseration is the flip side of the wealth pump, marked by stagnating real wages, rising debt, and the inability of the general population to secure a stable future.  The Fed’s policy choices act directly to depress the purchasing power and stability of the commoners:

In essence, the Federal Reserve’s reliance on monetary tools to manage the economy has introduced an enormous structural bias into the system.  Though intended to prevent deflation and financial collapse, the side-effect has been the relentless unequal distribution of economic benefits, making the rich richer and the poor and aspiring middle class poorer in relative and often absolute terms.

In Turchin’s model, a mass of frustrated, credentialed elites vying for power coupled with an economically precarious and disaffected populace is the necessary and sufficient condition for a major crisis.  The Fed’s policy of “cheap money” does not initiate the long-term cycle, but it acts as a turbocharger on the historical timeline, violently accelerating the engine of wealth inequality and creating an increasingly combustible social structure.  The unintended consequence of a central bank seeking stability through financial engineering may, in the context of Turchin’s structural theory, be the deepening of the foundations of political and social disintegration.

Below are some highly relevant Peter Turchin video interviews and lectures that cover the topics of elite overproduction, popular immiseration, and cliodynamics:

1. The “Decline” of Nations
2. Principles for Predicting Revolutions
3. Cliodynamics of End Times
4. Counter-Elites and the Path of Political Disintegration
5. Are We Living Through “End Times”?
6. Peter Turchin on Cliodynamics and End Times

David DeMay is a retired university professor.   

Image: CristianIS via Pixabay, Pixabay License.