An Independence Day Reflection: America’s Next Challenge
Is the United States on the verge of a major civil transition?
June 30, 2008
The roots of current U.S. difficulties reach deep into the middle of the past century. Decisions made in the 1950s to pursue consumption-led growth as part of the U.S. Cold War strategy led directly to current problems — and have created unsustainable civil imbalances among its citizens.
The U.S. policy to exhaust year-by-year its own savings and then depend more and more on the savings from other countries is unsustainable. The government budget conditions that resulted from this policy — and the civil relationships they represent — are also unsustainable.
Government budgets define relationships among citizens. They define who gets what, who pays for what — and who owes what. As budgets are steadily shaped by legislators over decades, their provisions come to define relationships of benefit and obligation among citizens.
Yes, these relationships are economic — but they are also civil because they involve expectations about what citizens are going to do for each other based on law and custom. A surprise breakdown in these expectations is politically more disruptive than a surprise shift in economic conditions.
Overlays of economic and civil relationships are all around us, though we often do not notice them or their effects. For example, if oil supply and demand conditions change and drive up heating oil prices, your local dealer may have to raise his prices more than you can pay. As a result, you have a cold house — but the cause is economic.
However, if the dealer promised to deliver heating oil to you no matter what, and failed to deliver, you still have a cold house — but the cause is civil. Yes, your main problem is the same — your house is cold. But the source of the problem is different, and most likely your emotional response is a lot different.
When you saw the dealer as caught in supply-demand conditions outside his control, you knew you could not rightfully ask him to sell you heating oil at a loss and put his own family at risk. You may have been disappointed, but you were not angry.
When you felt he was breaking an agreement, it was a different matter. The dealer put himself forward as an expert on heating oil and a reliable businessman. You trusted his judgment and his commitment to provide you what you needed. As a result of the breach, you were disappointed and angry.
At the national level, economic problems occur when supply and demand conditions outside a country’s control send it into a downturn. Civil problems occur when a country’s government disappoints citizen expectations based on national ideals, customs and law. Economic problems can send consumer confidence surveys into the basement.
Civil problems can trigger deep citizen reactions leading to political movements — and even war. If the civil relationships embedded in a national budget (and all their obligations, benefits and expectations) are unsustainable because national budgets are unrealistic and unsustainable, there will be voter disappointment and anger.
The source of the anger is the breach of trust and disruption of relationships. In the 1700s, British colonialists in America viewed themselves as worthy of full British rights, and particularly membership in the British parliament. The most educated were fully aware of British traditions and common and statute law.
Denied representation in the parliament, they could see full well that Britain’s capacity to tax them was unlimited. This “taxation without representation” flew squarely in the face of British ideals and threatened the economic security of the families of the colonialists.
On the other side of the Atlantic, British political leaders could easily see that if they permitted American membership in the parliament, the lines of voting power would eventually cross — and American economic and population growth would mean majority control of the British parliament would shift to American hands.
The result was an imbalance between American and British citizenship. Per se, citizen imbalances are not a problem. They become a problem when they are inconsistent with citizen expectations based on custom and law and threaten family and economic security.
When this happens, the imbalances have to be corrected by one means or another.
The Southern states in the 1850s faced a similar situation. They could see the North’s steady economic and population growth — and knew that in time voting control in the U.S. House of Representatives and Senate would shift to Northern anti-slavery hands.
In this instance, the civil imbalance was between free and enslaved Americans. The Civil War was the way that imbalance was corrected.
The process of correction seems to be associated with transitions from one phase of history to another. Transitions from sustainable civil balance, to unsustainable and intolerable imbalance, and back to sustainable balance again, frequently mark points in time historians use to note turning points. To mention just a few: the French and Communist “revolutions,” the two World Wars — and the end of the Cold War and the fall of Communism.
In the domestic United States, the larger the civil imbalances were, the more painful and politically explosive the transitions. In the current situation, as we will see, the federal budget imbalance is unsustainable — meaning the relationships it reflects are unsustainable.
If the breach of expectations is severe enough, citizen outrage will mirror the sentiments that led to the American Revolution, the Civil War, the women’s voting rights movement and the civil rights movement.
In hindsight, all four of America’s major civil transitions seem avoidable. The paths from bearable to unbearable conditions were very slow. Whether we are talking about late 1700s British tax policy or the erosion of southern congressional dominance, the “crossing of the lines” was clear many years before the crises.
Looking back, it seems there was plenty of time to prevent the American Revolution, the Civil War, the long struggle for women’s voting rights and the turmoil of the civil rights movement. Why were people at the time unable to anticipate the inevitable and act accordingly?
The answer, of course, is the near-term costs of giving up civil advantage by favored citizens were simply greater than the longer-term benefits. But maybe this time, U.S decision makers will manage to put aside short-term economic gains in favor of long-term civil stability — and avoid having history repeat itself once again.
Economic problems occur when supply and demand conditions send the economy into a downturn. Civil problems occur when the government disappoints citizen expectations.
Citizen imbalances become a problem when they are inconsistent with citizen expectations and threaten family and economic security.
If the breach of expectations is severe enough, citizen outrage will mirror the sentiments that led to the Civil War or women's voting rights movement.
The federal budget imbalance is currently unsustainable — meaning the relationships it reflects are also unsustainable.
Transitions from sustainable civil balance to unsustainable and intolerable imbalance mark points in time historians use to note turning points.
Robert H. Dugger
Managing Director, Tudor Investment Corporation For the past 15 years, Rob Dugger has been a managing partner and director of the Washington office of Tudor Investment Corporation, a global asset management company responsible for approximately $18 billion of investor funds. Mr. Dugger is an expert on government policy assessment and the effects of policy on […]