Welcome to Our Age of Reckoning

What happens when the institutions we trust fuel their own collapse? It's time to take The Sniff Test.

The Disruptor-in-Chief

Nicholas Nassim Taleb made a career from betting that unlikely events would happen. His reasoning was that we are so bad at imagining change, even people paid to put a price on it were undercharging. As these people work at big banks, we have to bail them out every time the likes of Taleb are proved correct.

One thing we can say for Trump is that he is helping us think the unthinkable. Perhaps the dollar won’t always be the global currency. Maybe NATO isn’t the best way to defend 32 countries. Possibly, allowing big food and pharma companies to fund medical schools and political campaigns, does not result in the healthiest population.

If you spend time researching finance or geopolitics you will come across the idea of the Fourth Turning. This is from Strauss and Howe’s Generational Theory, which divides Anglo-American history into cycles of four generations. Passing from one generation to the next is called a turning and at the end of the cycle lies the Fourth.

We are living through such a turning today. Throughout history they are marked by conflict, institutional change, spiritual revival and a deep sense of uncertainty as individuals struggle for purpose. Every Fourth Turning has a crises when society faces an existential threat.

Adapted from Strauss and Howe

These crises are long and drawn out. They are often international, because fighting an external threat makes domestic differences disappear. In the end, nations are united and transformed, either in victory or defeat.

Today we’ll look at the anatomy of Fourth Turnings. Next week we’ll examine whether the theory is global, before returning to Britain to think the unthinkable about an upheaval in what it means to be middle class.

What is the Fourth Turning?

Is it credible to believe we are in a similar situation to Elizabethan England, or Revolutionary America? People then did not stress about global warming, obesity and whether artificial intelligence would take their jobs. They did, however, face uncertainties beyond the normal struggle to stay alive, caused by politics, religious division and the threat of war. There was fierce debate over what it meant to be English and American, what to believe, and how to be governed. These are the recurring themes of Fourth Turnings.

There is conflict throughout our society. Boomers battle millennials over wealth and power, left and right can barely converse, and the genders divide in their political and religious affiliations. That’s before debating what gender means. A lack of social mobility, the cornerstone of capitalism, results from over emphasis on university degrees, insufficient housing, and the strong sense that nothing will change. These pressures build until the point where everything changes.

When the solutions from within a system fail to solve its problems, then the system must break to bring about change. For three turnings the baton of wealth, power and culture passes between the generations with minimal disruption. In the fourth, urgency creates desperation.

What’s the solution for climate change? How is mounting government debt to be resolved? What does being dependent on China mean for freedom?

The trigger events of Fourth Turnings are existential threats. These are times when individuals become more conservative and societies take more risks. There is comfort in collective action and a growing belief that, after all, we are in this together.

The Glorious Revolution, the one largely peaceful Fourth Turning, was an urgent response to James II refusing to accept the result of generations of religious turmoil. The American Civil War was the breaking point of Northern tolerance of Southern slavery, which was shackling the nation’s industrial destiny. Today’s conflicts play out against the slow burn of demographic decline in the West and the touch paper of immigration that is both wound and salve.

Fourth Turnings unite nations. The people find the common cause that is lacking in many societies today. Wealth alone does not bind a nation and there must a sense of shared purpose, a narrative we tell ourselves about what it means to be us. It is a long time since Americans or British knew what that was. We will find it again, once problems are solved by facing an existential threat.

Imagining Institutional Change

Fourth Turnings uproot institutions. Change comes fast, while its consequences unfold slowly. Looking back, future generations see an inevitable path, but it never feels that way at the time. Right now it seems impossible to escape the long arm of government, the failure of public services, and the control the largest corporations exert over our lives. Let’s imagine.

Congress may take back its power over government finances. Trump is heading for a showdown with the Supreme Court. He is challenging the unelected bureaucracies created in the First Turning of this cycle, which administer an unprecedented level of debt. His medical appointments are people who understand health is about food, exercise and prevention, rather than managing conditions with lifelong prescriptions. Trump rides roughshod over behavioural norms, because the entrenched opposition within the system is too great.

In the UK, the government questions the ruling of the Supreme Court over transgender rights. Financial markets are curtailing the ability to spend and government may push the problem of failing schools, health and social care onto strengthened regional authorities. The two party system faces its biggest challenge in a hundred years. Institutional change in politics is not too hard to picture.

Europe faces the bill for its own defence. Howe argues Israel’s crises began with October 7, and drone warfare has extended clashes between India and Pakistan beyond normal border disputes. International conflict is not hard to envisage.

Now imagine life without your iPhone. For decades big government and crony capitalism walked hand in hand. While regulators and politicians are lapdogs for pharma, food and finance companies, Apple sustains a different government altogether. China’s.

Patrick McGhee is the FT’s San Francisco correspondent. His book Apple in China is just out. In it, he describes how the company hires the best engineers in the US, and sends them to China to build the world’s most sophisticated supply chain. He argues Apple created what China is today and unwittingly handed it control over electronics from phones and cars to weapon systems. He likens the technology transfer to the Industrial Revolution and its consequences to the fall of the Berlin Wall. Those were epoch making events.

Apple’s cofounder Steve Jobs is a legend among marketers. His chief designer, Jony Ive, was knighted in his native Britain. The cuddly face of homespun investment, Warren Buffett, was Apple’s champion for a decade. For eleven years after Tim Cook succeeded Jobs, Apple’s worth grew on average by $700 million a day. Apple is the corporate institution that defines America.

Now imagine everyone involved in that being considered a traitor. Taiwan is in China’s hands, the few surviving US aircraft carriers are pushed back to the third island chain, and Europe sings the praises of Chinese authority because it has no other choice. The witch hunt is on, and Silicon Valley and Wall Street’s embrace of China’s exploitative form of capitalism is exposed. Imagine this and you have an idea of what a Fourth Turning might look like.

The Inevitability of Change

This week

Mark Tinker

revisited his red versus blue team theory. He sees the US swapping soft global power for a harder alliance of like-minded countries. He dates this strategy back to at least Obama, but Trump is the man of action. This quote is straight from the Fourth Turning lexicon.

“Team Trump is circumventing the existing ‘system’, which is so tied up with lobbyists and lawyers as to make it almost impossible to change the status quo.” - Market Thinker

Who guides this policy behind the scenes? Trump’s first term purge of the intelligence services and the recent rout of the Department of State, disrupted two of the usual suspects in the search for deep state actors. I guess being unknown is the job description. Mark tells us why the deep state is not the titans of industry.

He believes tariffs take aim at US multinationals. Strip away what US companies ship home from Europe and trade between the continents is in balance. If it’s US policy to do this, then Europe need only sacrifice the low tax regimes in small countries like Ireland, to restore most favoured nation status. Apple, with its European headquarters in Cork, would be among the victims.

Fourth Turnings are times of chaos, which history presents as expressions of the inevitable. The 1930s was such a period. FDR’s New Deal after 1932 is remembered today as a Keynesian expansion of the state that enabled a long period of prosperity. It was, in fact, a case of throwing everything against the wall to see what sticks. It almost failed when the stock market fell 50% in 1937 and the “Roosevelt Recession” came a year later. It was rearmament ahead of entry into the crisis of World War II that restored sustained growth to America, with fascinating echoes for Germany today.

In 20 years our children and grandchildren will write the academic theories that explain the inevitable course of the current Fourth Turning. We might laugh at their naivety, before thinking back and realising that many things did have to change. That is the nature of Fourth Turnings.

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