IS IT BACK ?:
THE DEPRESSION THAT CAUSED 
THE CIVIL WAR
(AND THE AMERICAN REVOLUTION)


There are, in economics, several different business cycles that are described. One of these, 
the Kondratrieff Cycle, postulates the fluctuations of business activity around an approximately 
seventy-five year cycle. A variety of possible explanations are put forward for this cycle, but, 
whatever the reasons for it, there does appear to be a recurrent cycle at such time intervals 
throughout history. It is commonly accepted that an economic downturn of substantial enough 
depth occurred beginning at approximately 1872 or 1873, but that stagnation of the American 
economy actually began to make itself manifest in the 1850's, only to be forestalled with the 
economic activity generated around the Civil War. Specifically, the economic initiatives
of Abraham Lincoln to fund the war effort and industrialization stimulated the economy, 
and that lasted through the course of the war, and began to be undone by the huge contraction 
in money supply that occurred in the years after the conflict. 



But there were indications of economic contraction that began to appear in the country in the 
decade before the War Between the States began in 1861. The country, and particularly the South, 
began to experience a sagging price for cotton as the 1850's unfolded. (The political 'causes' of 
this economic downturn were clear even by 1837, following on the disguised interventionism
of the Jacksonian 'democracy' and Van Buren 'Regency'). The monetary contraction occurring
was somewhat mitigated by  the gold rush after 1849, but the political bungling of the 1840's and 
1850's wasted the opportunity that presented itself. The anti-technological and anti-industrial 
policies of the Polk, Pierce, and Buchanan Democrats condemned the nation to the conflict 
by which it was soon torn, although the economic crisis that evolved was a worldwide one 
(as was the conflict itself in many respects).



What eventually pulled the nation out of the stagnation was a combination of the expansion 
of money supply with the initiation by the banking industry of checking, etc. which amounted 
to a creation of new  'money,' and the huge spike in economic activity and wealth generation 
that occurred with the push of industrialization in the US with the Robber Barons. Technological 
innovation and the huge influx of immigration accompanying the developments also fueled the 
burst of economic activity which heralded the Gilded Age. 



This Kondratrieff Cycle actually coincides with some of the watermark periods of American history. 
The Great Depression of the 1930's occurred at about this interval of time after that of the mid and 
late 19th Century, and about seventy-five years prior to the Civil War  period there was an equally deep
contraction of economic activity which took place in the years leading up to the Revolution and 
afterwards as late as the creation of the Constitutional Order about 1789. Further, we are now 
once again at just about that same interval dating from the Great Depression of the 1930's. On this 
cycle alone, one might expect to see the same kind of economic collapse taking place around the 
turn of the century. 


			1770's			American Revolution crisis
			1850's			pre-Civil War Depression
			1930's			Great Depression
			2000+			Second Great Depression ?



Given that, it is perhaps not so surprising that we are witnessing conditions worldwide which have 
sent half of the population of the earth into an economic tailspin. Conditions in the US at the end 
of the 20th Century have seemed to place a sort of wall around this country as the rest of the world 
teeters on  the edge of the economic abyss. Not only is half of the world in the throes of an economic 
depression, but we are confronted with a mammoth problem of debt burden which is fueling that 
collapse. Whether the US can weather that storm somehow without being infected with a similar 
collapse is doubtful. 



Late in 1998, the stock market in the US began to reflect global stock market problems and may 
actually have moved into what is termed a 'bear' market late in the summer. A massive influx of money 
under Fed auspices seemed to have forestalled that impending disaster through November, but with the
worldwide depression and debt crisis, and the resultant depression of exports from the US has begun 
to bring that home. The Fed and other governmental forces positioned to try to counteract that collapse 
may be faced with the option of allowing the development of a deflationary depression to hit the nation 
or causing a massive influx of  money which will inevitably lead to hyperinflation and currency devaluation
returning to plague the United States. Neither option is particularly attractive, but the alternatives may 
be quite circumscribed. The political will and, indeed, savvy which would be necessary to avoid or fix the
impending crisis may not exist. 



As the Fed works feverishly to try to counteract the apparent recurrence of a bear market in the waning 
days of 1998, the 'big boys' in the market have shown signs of moving rapidly out of such investment. 
And it is not altogether implausible that American citizens who harbor expectations of continued 
economic health may be in for something of a shock in rather short order. 



Such economic boom and bust cycles are not completely harmful in any event. There is much to 
Schumpeter's assessment that they are in part 'gales of creative destruction' and some segments 
of the economy may enjoy tremendous growth even as others wither as huge numbers of people 
are left destitute in the dislocation.



Each of the four major economic dislocations that mark American history have been accompanied by a 
tremendous shrinkage in the money supply. That is not accidental, but follows on conscious policy
pursuits of monetary authorities. It also differentiates these 'Kondratrieff' fluctuations from the other
'business cycles' which seem to occur with some regularity.


		Kondratrieff Cycle			@ + 75 year intervals
		Generational Cycle			@ + 20-25 year intervals
		Ordinary Business Cycle			@ + 7-10 year intervals
		Inventory Cycle				@ 3-5 year intervals



The conditions which spawned the Revolution were in good measure associated with the economic
travails, largely connected to British economic conditions after about 1763. One of the primary legislative
hallmarks of the collapse initiated by the British Empire was the Currency Act, but most of the policies
usually linked to the coming of the Revolution were grounded in the same crisis. To be sure, it involved
the oft touted 'taxation without representation' but it was not merely taxation of itself, but taxation which
was fostered by the economic straits of the British government which led to the enactment of the range
of taxation which they attempted to impose on the colonies which aggravated the crisis.  The Revolution
alone would not suffice to produce recovery, as witnessed by both Shay's Rebellion and the Whiskey
Rebellion, but the Constitutional order that proceeded did lay the groundwork for such recovery.



Economic events are not magical occasions. They have causes and proceed lawfully. There would not 
have to be anything inevitable about these 75 year cycles. The causes leading up to them could have been
altered and they could have therefore been at least variations on what they historically were. Had
industrialization progressed at a more accelerated pace than it did or had the array of political forces 
been other than they were, there might not have been the depression of the middle 19th century or 
the Civil War.  



Not only can much the same thing be said for the Depression of the 1930's, but had a different course 
been pursued other than the modified 'progressive' agenda of the New Deal and Great Society, economic
development could have far exceeded what we have experienced. If the US government had not undertaken 
the actions it did against RCA, had reparations not been extracted from Germany, had the Fed not done the
wrong things, had the Congress not raised taxes, had FDR not undertaken measures which deepened and
prolonged the depression, it need not have been of the duration it was.



It is entirely possible that the signs of economic travail we see at the end of the 20th century will 
not proceed along this course. There are reasons to put some validity in assessments of a continued 
long term boom as part of what has been called a third wave. That would require the potential of huge 
new wealth generation to be realized. It would also necessitate that the symptoms internationally and
domestically be responded to in ways which eliminate and solve the problems they proffer. The huge 
albatross of the public sector complex would have to be overcome. It also bears consideration that each 
of the previous 75 year cycles had connected with them tremendous bloodletting in the form of major 
conflict and general war.  The dangers are formidable and the consequences ominous. At this writing, 
the Clinton Administration had decimated the American military at the very time that strength may be 
the only remedy to forestalling escalating conflict. They have also pushed the Israelis into a box with 
regard to their  position. Israel has threatened to move to consolidate control over the west bank if the 
US goes ahead with its threats to unilaterally recognize an independent Palestinian state next spring. 
They have also been playing politics with the Iraqi threat, having squandered at least the prospect
of a better situation in that area which they inherited.  This alone could lead to a general conflagration 
in the Middle East, but its war on development has also left large populations from Russia  to Africa 
ripe for conflict, if its struggle against economic development has not aggravated the deepening 
global economic crisis. 



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