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While the last few years of populism have been focused on the political, expect the next leg of change to be economic

While the last few years of populism have been focused on the political, expect the next leg of change to be economic

In an interesting correlation between today and the last great populist movement from the 20th century, each stage of the movement appears to be going in lockstep with what took place during the previous cycle of the 1920’s and 30’s.  And in a new study published by billionaire hedge fund manager Ray Dalio, that next step following the political unrest of a populist uprising is the pendulum swinging around for the people on the economic side.

Since the 1980’s the top 1% has been gaining wealth while the 99% has been losing ground.  And following the 2008 financial crisis where governments and central banks chose to ignore their populations and instead focus on bailing out the wealthy, one could easily pinpoint where this century’s populist movement began in the Occupy Wall Street event.  However for the most part following these protests, activism shifted towards the political with the rise of the Tea Party, the Ron Paul Revolution, Brexit, the election of Donald Trump, and the actual and potential changes in leadership occurring in nations such as Austria, Italy, and even Germany.

Which of course are the very same hotbeds of change that followed World War I and the ending of the Austro-Hungarian Empire, the empire of Fredrick the Great (Germany), and Mousolini’s takeover in Italy.

For the United States politically during this period, the country experienced the Progressive Era in politics up to 1920 when following their victory in World War I, the Roaring 20’s emerged not dissimilar to the mania we now call bubbles in certain sectors of the economy.  And it was at that time that the wealth disparity between the 1% and the 99% reached a peak, which then lead to a reset (Great Depression), and a top-down redistribution of wealth.

Look at the the chart below.

The red line is the share of US wealth owned by the bottom 90% of the population, and the green line is the share held by the top 0.1%.

Now they are about the same, but notice the trend. The wealthiest 0.1% has been increasing its share of wealth since the 1980s.  Meanwhile, the bottom 90% has been losing ground.

Looking back, we see a similar pattern in the 1920s—which dramatically reversed in the following decade. Then there was an almost 50-year period during which the masses gained wealth and the wealthy lost ground.

In the big picture, we see about a half-century when the net wealth gap widened in favor of the bottom 90%, followed by another 30 or so years in which the wealthiest gained ground while most of the population lost it.

It’s not a coincidence that populism emerged as a political force in both the 1920s–1930s and the 2010s.

In each case, people at the bottom could tell the economy wasn’t working in their favor. The best tool they had to do something about it was the vote, so they elected FDR then and Trump now.

The two are very different presidents, but both address the angriest voters of their eras.

The 10-year period in which the green line was above the red line included the Roaring 20s, the 1929 market crash, and the first part of the Great Depression. For the 0.1%’s share of the wealth, 1929 was roughly the high point.- Mauldin Economics

Part of this economic shift and emerging reset can be found in the rise of cryptocurrencies and the moves being made slowly by populations to simply leave the current financial systems they believe only work for a select few.  In addition to this are the nations of China, Russia, and even Saudi Arabia who are prepared to dump the Petrodollar system which would then make the dollar implode, and most dollar based assets worthless.

Wealth disparity, along with political/civil unrest, are the catalysts for change today just as they were 90-100 years ago.  And back then, just as today, the world is crying for a reset which will inevitably come by choice, or by force.

Kenneth Schortgen Jr is a writer for The Daily Economist, Secretsofthefed.com, Roguemoney.net, and Viral Liberty, and hosts the popular youtube podcast on Mondays, Wednesdays and Fridays. Ken can also be heard Wednesday afternoons giving an weekly economic report on the Angel Clark radio show.


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