By Alexander Perepechko
Published on October 28, 2016
In part 1 of this paper, we realized that public authority in the United States has likely been hijacked by special interests. The predominant part of the American elite stubbornly defends the dysfunctional status quo at its own peril. In a world of fundamental uncertainty, risks, and destabilizing forces, neither presidential candidate has formulated a strategy to implement his or her vision for America’s future. In this situation, we conjectured that the persistence of long wave-like cycles in economics and elites on the global and national scale might shed light on the current presidential election in the United States.
Long cycles fulfill a mostly strategic goal. Leaders who identify the current Kondratiev wave (K-wave) and current Pareto elite cycle are able to take the lead in economic and social development and to avoid revolutionary transformation of society…
What are the relationships between the current K-wave and current Pareto elite cycle in America? How might these relationships impact the current state and future development of the United States? Does the appeal to emotion of voters, negative campaigning, mutual accusation, and rivalries between political parties and groups echo the deeply troubled long wave-like tendencies in economics and elites in America? Perhaps troubled so badly that the presidential candidates have not spoken about their strategies at all…
The dynamics of political change in America
The elitologists Higley and Pakulski (2012) discerned and analyzed the last long elite cycle in the United States. World War II created very new elites in the United States. War veterans and heroes moved to the top management of corporations, trade unions, and expanded state bureaucracies.
During the upswing of the elite cycle, in 1945-1980 (Figure 32), the Keynesian state, the welfare state, and the “end” of ideology were central to the beliefs of governing and non-governing elites for Democrats and – to a certain extent – Republicans (see Higley & Burton, 2006). Both political parties used financial inducement in times of falling demand to maintain political peace. Until the mid-1960s, the elites efficiently ruled using persuasion and force. Between 1965 and 1980 (Figure 32), the governing elite made a few devastating mistakes. Firstly, the Vietnam War was disastrous. It was financed through governmental borrowing and caused serious financial difficulties. Secondly, the war on poverty was underfunded and often replaced by affirmative action measures. Thirdly, oil embargoes crippled the car industry and the petrochemical industry – the two industrial pivots of American economic power. Inflation and unemployment skyrocketed and a severe economic crisis hit America. Self-deception, grave miscalculations, and indecision of the governing elite resulted in major elite circulation and changed policy directions. Figure 32 illustrates that the first half of the 4th Kondratiev economic cycle, defined by industrial technical innovations in the petrochemical and car industries, and the upswing of the last Pareto long elite cycle are synchronized, with the elite cycle upswing lagging slightly.
Figure 32. Synchronization of Kondratiev economic cycles and Pareto’s long elite cycles (Source: Generated by the author based on Goldschmidt, 2004; Higley & Pakulski, 2012; Kondratieff, 2014; Nefiodow & Nefiodow, 2015; Pareto, 1984: 16; & Pareto, 1935).
During the downswing of the elite cycle, in 1980-2008, neo-liberal and socially conservative ideas – pertaining to deregulated markets, smaller government, and a more self-reliant citizenry – came into favor (Higley & Burton, 2006). In 1980-1992, the core of the governing elite was made up of tough-minded leaders with leonine proclivities (“lions”). Interest rates were reduced, taxes cut, welfare programs trimmed. At the same time, new weapon systems were developed and military forces expanded. These two factors caused a large budget deficit, which was partially reduced through major tax increases in 1993.
In the 1990s and early 2000s, American elites were enchanted by ideas of a missionary liberalism articulated by neo-conservatives. It seemed as though the collapse of the USSR and democratization of Eastern Europe, the economic liberalization of China, and new opportunities for American capital in these macro-regions indicated the end of history and beginning of American global domination… But China offered low cost labor and a market for American goods. Many American companies were short-sighted and swallowed the bait. More importantly, China appropriated key American technologies and offered short-term returns on American investments (Interview, 2012). One more time in its history, China’s rulers were able to efficiently create and command major policies affecting its huge territory and population – a lurching – in order to modernize the country (see Diamond, 2005: 373-374). Can American elites today reindustrialize on a similar scale and with similar efficiency? If not, can we infer that elites in an authoritarian state can be effective while elites in the American democratic state are dysfunctional?
America was badly deindustrialized and China became the world leader in several key manufacturing industries. This was the first grave miscalculation of American elites in the 1990s and early 2000s. Secondly, during this period the American elites failed to formulate a grand strategy. According to the American strategist Edward Luttwak (2001: 209), the grand strategy involves interactions between levels of the military which yield results within the broad setting of international politics. Without the grand strategy, it is impossible to define clear priorities and to accept necessary sacrifices in the pursuit of national interest (Suri, 2009). During this period, American elites tried to promote democracy, free trade, and human rights around the world using clausewitzian warfare and new information technology. Thus leonine proclivities during this period were in great demand.
Insurgencies and hybrid tactics and aggressive gray zone strategies of local populations in Afghanistan, Iraq, and other parts of the world exposed the shortfalls of conventional military operations (see Brands, 2016). American foreign policy encouraged, in fact, inconsistency, uncertainty, and half-measures. The 1990s and early 2000s were lost years for the grand strategy: priority interests were not defined, the hierarchy of threats was not identified, means for protecting interests and thwarting threats were not nurtured (Mazarr, 2016; Suri, 2009).
The spectacular dotcom bubble of 1995-2001 revealed that new information technology was not an engine of the limitless economic growth. In 2003, George W Bush signed a law to cover drugs for the elderly. This act provided a strong push toward the psychosocial health cycle – the 6th Kondratiev wave, which had already started in the depths of the fading IT cycle (the 5th Kondratiev wave). The IT elite split: the “young” IT sector joined the “old bankers.” These globalists (see Fursov, 2013) turned toward the development of health services. Needless to say, these groups are among the strong supporters of Hillary Clinton.
Significantly relaxed economic and financial regulations during the 1980-2008 downswing of the elite cycle led to a huge housing bubble, its burst, and the severe financial crisis of 2008. During this period, the governing style, neo-liberal beliefs, and neo-conservative principles of the governing elite appeared to disregard rational and practical approaches and policies. Figure 32 suggests that during the elite cycle downswing the governing elite did not “react” to the phase shift and the overlap between the IT and health care long economic cycles! This figure shows that the 5th Kondratiev long economic cycle, defined by industrial technical innovations in IT, and the downswing of the Pareto long elite cycle were asynchronous.
Figure 32 also illustrates that a new Pareto long elite cycle started in 2008. Moreover, as the figure portrays, the upswing of this new elite cycle may become more and more synchronized with the new psychosocial health economic cycle. Innovations in the psychosocial health industry are the growth vehicle of the new K-wave – 6th Kondratiev cycle. The upswing of the new elite cycle occurs simultaneously with the fading IT long economic cycle (5th K-wave). It is reasonable to expect that the upswing of the new elite cycle, which began in 2008, will continue for some time, and that federal policies similar to those of 2008-2016 will persist at least until 2020 when the 6th Kondratiev wave is predicted to take a downturn.
Since 2008 the governing elite has been overrun by individuals with the skills and inclination to utilize legal and financial means and ideological persuasion. In Pareto’s language, these skills and proclivities are a deceitful and cunning craft. In “The Prince,” Niccolò Machiavelli (2006: ch. XVII) calls these politicians “foxes”: a fox can discover snares but cannot defend himself against wolves. Overrun by “foxes,” the governing elite may lose its political domination.
So, what is a corollary of these findings for the American elites?
Pareto’s circulation of elites, sticking points, and revolutionary transformation
It seems as though American society has arrived at a point where dysfunctional outcomes have been reproducing for an extended period of time. Pareto (1984) anticipated and explained this kind of situation, which he called a sticking point. The American elitologist Charles Powers (2012) thoroughly analyzed the phenomenon. Politicians and important functionaries, who operate mostly through institutionalized positions which they hold, at some point become excessively responsive to special interests. To hijack public authority, special interests utilize multiple techniques. Special interests largely control the information that political leaders receive, the application of ideological twists to that information, and campaign donations, for example. How do decision-makers interpret and react to such a “courtship”? To fulfill the needs of special interests, political decision-makers silently reconfigure their own activities, reshape institutionalized arrangements, and adjust governance mechanisms. As a result, when these decision-makers act in response to unfolding events, resource reallocations typically become suboptimal for society at large.
The situation in which costs exceed benefits for society as a whole might continue for awhile without warning signs (Powers, 2012). However, if the rich and powerful, who benefit most from the dysfunctional status quo, make no necessary changes, costs will accumulate. More and more resources are wasted and the social system stagnates at sticking points and becomes resistant to innovation.
This suboptimal strategy is dreadful. Failure to act today only delays the time when the growing problems must be solved. Change will come anyway. It will come when citizens refuse to absorb the costs of dysfunctional governance and when the decaying governing elite is no longer able to impose itself on the citizens. When this change finally comes, it will be, in all probability, dramatic, violent, and even cataclysmic. A dysfunctional democracy can lead to a revolution.
The slow circulation of elites is important in extending periods of dysfunctional sticking points. Recall that to identify the elite Pareto (1935) uses a measurement scale of superiority and inferiority. Activities and occupations are important and need to be ranked according to the level of each particular skill that they manifest. The elite can be defined as the top percentage of individuals engaged in specific activities: lawyers, diplomats, politicians, real estate entrepreneurs, television producers, actors, and more. So, the social elite comprises the collection of all specialized elites in a society. This overall elite can be divided into governing and non-governing sections. Individuals who directly or indirectly play a notable role in government comprise the governing elite. But to become a wealthy top professional is not enough to gain membership in the governing elite. According to a founding father of sociology, Max Weber, whose ideas sometimes resemble those of Pareto, the ability to govern involves qualities pertaining to power. These qualities – good and bad – allow one to impose his or her will even when opposed…
Membership in the governing elite shifts over time. People who occupy an elite status in business, media, education and culture can move into political and bureaucratic offices. With the passage of time the younger generation replaces politically powerful people who retire or die. Critically, new innovative sectors of the economy are eager to wrench power from the hands of those whose interests lie in declining economic and financial sectors. Also, when a racial, ethnic, or religious minority is mobilized and radicalized, its leaders sometimes join the elite.
Certainly, elites can disappear because of biological destruction (such as fertility rates below the replacement rate), psychological change in attitudes, decadence, and other reasons. But Pareto (1935) believes that there is constant circulation of individuals and families in and out of political power. The composition of the governing class constantly flows between those who govern and who are governed. Two types of movement are possible: 1) incremental change – a slow continuous infiltration of individuals from the governed class into the elite, and 2) fast, abrupt revolutionary replacement of a major part of the governing elite. Importantly, there is no movement into the elite where there is simply assimilation, co-optation, or a quota system (Busino, 2000).
Revolutionary transformation of the elite (see Nielsen, 2012) may occur in the following ways, among others.
A revolution may happen because the circulation of elites slows or even stops. The elite becomes unable to stay in power because the governing talents of those who once joined the governing class are not transmitted to their descendents or other family members. For instance, ideals and the ability to sacrifice – two important qualities of the elite, cannot be inherited. Those who have joined the elite achieved elite status through social mechanisms.
A. In contrast to other aspects of human life, the ability to govern cannot be transmitted through inheritance mechanisms. Nevertheless, a life of privilege protects the incapable from downward mobility. The incapable and privileged have a “membership card of the elite” (Pareto, 1965: 1-73): wealth, social connections, and residence in the most exclusive neighborhoods. Also, family upbringing and the system of elite colleges and universities play a role in grooming the children of the elite. Thus the advantages of elite social origin can be seen as a special case of corruption and members of stagnating elites are especially inclined to utilize it. Obviously, this has considerable impact on the social equilibrium (Matheve, 2010).
B. The second revolutionary scenario is characterized by the rapid circulation of elites: when new members of the governing elite are selected according criteria other than the criteria needed to maintain individuals in power (Pareto, 1935; Nielsen, 2012). The fact that about one third of representatives are new members of a legislature (no more than two years of experience in the legislature) does not necessarily mean that this renewal is beneficial for the circulation of the elite. These newly elected politicians might simply ally with owners or labor leaders of, say, a protected industry such as the car industry or banking sector…
In both cases – the slow and rapid circulation of the elites – a revolution occurs because an outside elite seduces, radicalizes, and organizes a considerable segment of society to remove from power the ruling elite and to take the wheel of the society. This outside elite usually includes plenty of leaders endowed with radical religious, political, or racial ideology – “lions.” The outside elite is often made up of disaffected members of the old elite. These individuals declare that they represent the interests of the majority. Crucially, the outside elite is ready to use force to grab power.
Thus, the balanced circulation of elites is a delicate matter. Several considerations pertaining to this delicate balance should be kept in mind.
1) The elite is capable when it is continuously renewed, eliminates degenerated members, and accepts new elements in certain proportions. Circulation between the upper and lower layers of society (social mobility) must primarily be vertical and upward, with some downward movement.
2) The circulation of elites consists of long periods of incremental change and short periods of revolutionary replacement.
3) There is no mobility when there is simply assimilation or co-optation of previously non-elites. A racial, ethnic, or religious minority leader who is allowed to join the elite based on his or her identity might lack the qualifications necessary for successful membership in the elite.
4) Both the rapid and slow circulation of elites may lead to revolutionary transformation of the elite.
5) To enter or stay in the elite, incapable individuals use inheritance, social origin, wealth, corruption, and other techniques. Keeping the most degenerated members in the elite and preventing gifted people from entering the elite leads to dynasties and an aristocratic form of government, to failure of the old elite, and to revolutionary overthrow of the old elite. “[History is] a graveyard of aristocracies,” famously stated Pareto.
6) Rapid circulation of the elite can be dangerous when new members of the governing elite are selected according to criteria other than the criteria needed to maintain individuals in power.
7) Special interests can hijack the governing elite by controlling the flow of information between this elite and its environment and by making use of ideological blind spots of the elite’s advisers. In doing so, these special interests create a “sticking point” situation and block any reforms necessary for the whole society.
8) If the ruling elite wants to stay in power, it at times has to use force against the outside elite. But before using force, the passive consensus of the governed is needed.
9) It is highly desirable to have the right balance of “foxes” (those who prefer to govern by means of ideological persuasion) and “lions” (those who rely heavily on force) in the governing elite. There are plenty of “lions” in the outside elite. One must be a fox to discover the snares and a lion to terrify the wolves (Machiavelli, 2006: ch. XVII).
Conclusion
In terms of Kondratiev and Pareto cycles, the upswing of the current long elite cycle started in 2008. This upswing tends to become more synchronized with the new long economic cycle, defined by innovations in the psychosocial health industry. This is the good news. The fact that about one third of representatives are new members of a legislature (with no more than two years of experience) probably also benefits the circulation of the elite.
The bad news is that American elites are losing their lead in the development of the psychosocial health sector, the growth vehicle of the 6th Kondratiev wave, to Europe, Japan, and China. The Obama administration saved the car industry, which was the growth vehicle of the 4th Kondratiev cycle. This cycle’s time passed long ago. Saving the industry was a pay-off for votes of the Rust Belt (Ohio, Michigan and other regions) in 2008 for the Democratic Party candidate. At the same time, reforms pertaining to the health legislation known as Obamacare stalled. From 2008 to 2015, research and development (R&D) spending as a percentage of revenue in the American health industry declined from 12% to 9% (The Global, 2016). During the same period, this indicator in Japan remained at about 16%, fluctuated between 14% and 16% in Europe, and in the Chinese health sector R&D jumped from 0% to 9%! Do these numbers matter? Or should American elites simply ignore the new long economic cycle and psychosocial health as the engine of economic growth?
Hillary Clinton promises to increase funding for scientific research at agencies like the National Institutes of Health and the National Science Foundation. If elected, would she deliver?
Beyond Hillary Clinton and Donald Trump
The striving for power in humans is the impetus of creative performance. Rather than a motor of social-economic and cultural development, the desire of Hillary Clinton and Donald Trump for power is without doubt dangerous, since this is an open-ended drive. Special interests have saddled this desire for power at a moment of fundamental uncertainty, risk, and destabilizing forces in the United States and in the world. Postmodernist media and social networks make open, honest nationwide discussion about the future of this country next to impossible.
These days, a growing imbalance in elite circulation comes together with increasing risk in socio-economic development. These two dangerous factors loom behind the carnival of the current presidential election, which is marked by displays of excess and grotesquery. It seems as though Hillary Clinton and Donald Trump are confused and even frightened by reality – from which they are both distant.
This raises the question of whether any strategy is possible in the United States because to develop such strategy requires consensus among elites. After the end of the Cold War, the governing elites made several serious miscalculations. And one of the most devastating mistakes was the de facto prohibition of the grand strategy.
As for the current carnival of presidential nominees in the United States, let’s recall the work of the great elitologist Gaetano Mosca. Analyzing the classic book “Persian Letters” by the French philosopher Charles de Montesquieu, Mosca (1972: 156-157) emphasized that only a weak ruling class doubtful of its legitimacy tolerates being caricatured. But at the same time, this political carnival allows diverse voices to be heard (see Bakhtin, 2009). This setting promotes a new perspective and new order of things, by showing the relative nature of all that exists…
Vilfredo Pareto went to his final resting place, in Geneve, in 1923. He forecasted, in fact, the current mess in the United States. Indeed, democracy can be fragile and a democratic government can be inefficient. Pareto can sleep the sleep of the blessed.
Bakhtin, M. (2009) Rabelais and His World. Bloomington: Indiana University Press.
Brands, H. Paradoxes of the Gray Zone. FPRI, February 5, 2016. Available at http://www.fpri.org/article/2016/02/paradoxes-gray-zone/ [Accessed October 13, 2016].
Busino, G. (2000) The Signification of Vilfredo Pareto’s Sociology. Revue européenne des sciences socials, T. 38, No. 117.
Diamond, J. (2005) Collapse: How Societies Choose to Fail or Succeed. New York: Viking.
Fursov, A. [Itogi stoletia FRS – Razval Rossiiskoi imperii, razrushenie SSSR i nachalo novoi voiny] One hundred years of the FRS – a breakup of the Russian empire, a collapse of the USSR, and a beginning of a new war]. nakanune.ru, November 27, 2013. Available at http://www.nakanune.ru/articles/18360/ [Accessed October 14, 2016].
Goldschmidt, A. J. W. (2004) Kondratiev waves associated with gains in IT and health with phase shift and overlap. Trier: Universität Trier. Available at http://ihci.de/forschung.html [Accessed August 23, 2016].
Higley, J. & Burton, M. (2006) Elite Foundations of Liberal Democracy. Lanham: Rowman & Littlefield Publishers.
Higley, J. & Pakulski, J. (2012) Pareto’s Theory of Elite Cycles: A Reconsideration and Application. In J. V. Femia & A. J. Marshall (eds) Vilfredo Pareto: beyond disciplinary boundaries. Burlington: Ashgate. Pp. 111-130.
Interview with Francis Fukuyama : “Where Is the Uprising from the Left?” Der Spiegel, January 2, 2012. Available at https://groups.google.com/forum/#!msg/clipping-do-arthur/cEqHq9M6dGQ/g3gnXIkiW90J [Accessed October 10, 2016].
Kondratieff, N. D. (2014) The Long Waves in Economic Life. Eastford: Martino Fine Books.
Luttwak, E. N. (2001) Strategy. The Logic of War and Peace. Cambridge: Harvard University Press.
Machiavelli, N. (2006) The Prince. EBook #1232. Available at http://www.gutenberg.org/files/1232/1232-h/1232-h.htm
Matheve, N. Power and impotence: elites versus democracy in scholarly theories. Politicologenetmaal, May 27, 2010.
Mazarr, M. J. The World Has Passed the Old Grand Strategies By. War on the Rocks, October 5, 2016. Available at http://warontherocks.com/2016/10/the-world-has-passed-the-old-grand-strategies-by/ [Accessed October 11, 2016].
Mosca, G. (1972) A Short History of Political Philosophy. New York: Thomas Y. Cromwell Company.
Nefiodow, L. & Nefiodow, S. (2015) The Sixth Kondratieff: The new Log Wave in the Global Economy. Sankt Augustin: Verlag
Nielsen, F. (2012) Talents and Obstacles: Pareto’s Morphological Schema and Contemporary Social Stratification Reearch. In J. V. Femia & A. J. Marshall (eds) Vilfredo Pareto: beyond disciplinary boundaries. Burlington: Ashgate. Pp. 21-46.
Pareto, V. (1984) The transformation of democracy. New Brunswick: Transaction Books.
Pareto, V. (1965) Les systèmes socialistes. Genève: Librairie Droz S. A.
Pareto, V. (1935) The Mind and Society. New York: Harcourt, Brace. Vols. 1-4.
Powers, C. (2012) The Role of Sticking points in Pareto’s Theory of Social Systemes. In J. V. Femia & A. J. Marshall (eds) Vilfredo Pareto: beyond disciplinary boundaries. Burlington: Ashgate. Pp. 45-72.
Suri, J. American Grand Strategy from the Cold War’s End to 9/11. Orbis, Fall 2009. Available at http://jeremisuri.net/doc/2009/03/orbis-article-fall-2009.pdf [Accessed October 11, 2016]
The Global Innovation 1000: Comparison of R&D Spending by Regions and Industries. Strategy &. Available at http://www.strategyand.pwc.com/global/home/what-we-think/innovation1000/rd-intensity-vs-spend-2015 [Accessed October 20, 2016].