-->

Type something and hit enter

On

Modern economies follow a cycle - exploding in crisis, only to reform and revive before dying out once again.

The likely timing and direction of change depends in part on where a country stands on the cycle of crisis, reform, boom and decay.

In general, the fortunes of a nation are 

  • most likely to turn for the better when a new leader rises in the wake of a crisis, and 
  • most likely to decline when a stale leader is in power.

This cycle explain why so few booms last long enough to vault developing economies into the developed ranks and why those that make the leap are called "miracles":  they have defied the natural complacency and decay that kills most long booms.


Deflecting popular revolt by creating the welfare state

The fact that crisis and revolt can force elites to reform has been clear at least since the early critiques of Marx, who thought capitalism would collapse in a series of increasingly violent attempts to defend the upper classes.  

Instead, leaders proved capable of reforming capitalism, deflecting popular revolt by creating the welfare state, starting in Germany and Britain.


Political complacency means economic "miracle" cases are rare.

The link between boom times and political complacency is well documented.  

  • Modern Japan and Europe are often described as too comfortably rich to push tough reform.  
  • What is less well recognized is that even in normal periods, the cycle turns, constantly reshaping economies for better or worse.

The cycle of crisis, reform, boom and decay, turns erratically, even in democracies where elections are regularly scheduled.  

Nations may wallow in complacency for years, which helps explain why the "lost decades" in Africa and Latin America lasted longer than a decade.  

On the other hand, strong-willed leaders have been known to keep pushing reform for decades - but only in the rare "miracle" cases, including Korea, Taiwan and Japan before it fell off the miracle path in the 1990.



http://myinvestingnotes.blogspot.com/2020/12/modern-economies-follow-cycle-of-crisis.html

Click to comment
Back to Top
Back to Top