In the past, most historians who have seen a connection between economic events and political or social events have considered it to be a material one. When viewed from this mechanistic perspective, there is a rational explanation for even the most seemingly irrational actions. Japan's decision to attack the much more powerful United States during World War II is therefore explained by her need for South Pacific oil, while the present U.S. democratic imperialism is either driven by the desire to control Iraqi oil fields or defend the reserve status of the dollar.
There is much to recommend this historical perspective; it is certainly more credible than conventional Great Man theory. But it also makes the same mistake that neoclassical economics makes with regard to economic actors in that it incorrectly ascribes rational action to nations and governments. Consider the two examples previously cited. The obvious risk to Japanese wealth in challenging American naval supremacy in the Pacific was much greater than the potential reward of controlling the oil from the Dutch East Indies, even when one takes President Roosevelt's 1941 oil embargo into account.
And the $144 billion annual cost of maintaining a military occupation force in Iraq could not possibly justify the $16 billion in oil imports from Iraq, even if the United States were taking the oil for free rather than paying for it. Nor could it make sense to defend the dollar by selling trillions of dollars worth of Treasury bonds to China when the nation is already insolvent by any traditional accounting measure.
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But there is a different means of connecting what is taking place in the economy with current events, one that offers a better explanation for what appear to be increasingly awful events that are taking place with increasing regularity around the country. From the attempted assassination of Rep. Gifford in Arizona to the Mexican beheadings threatening to spill across the border and the White House's assertion of its right to murder American citizens without arrest or trial, the social mood appears to be darkening.
Socionomics is predicated on the idea that social mood is the primary driver of economic growth and contraction. This is broadly consistent with Keynesian macroeconomic theory, which relies upon "animal spirits," or in modern Neo-Keynesian parlance, "consumer confidence" as the primary engine of employment and the economy. However, unlike Keynesianism, it is based on historical analysis and observation rather than mystical Freudian logic, and it offers a predictive model that can be tested.
According to the theory, economic growth is accompanied and driven by a positive social mood. Conversely, economic contraction is accompanied by a negative social mood. This explains why economic recessions and depressions so often take place during periods of war, famine, disease and social unrest.
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The ominous thing is that just as the economic crisis of 2008 led socionomists such as Robert Prechter and others to predict that the negative social mood of the sort we are now seeing was developing, the extent to which the mood remains negative and even worsens tends to indicate that the slim rays of hope offered by the improving macroeconomic statistics are a mirage. The shooting of the Arizona congresswoman and others is tragic, to be sure, but it is also a warning of more such madness that is likely to come on a global scale.
Few Americans realize that the European Union is already on the verge of breaking down as Portugal and possibly Italy look to be going the way of Iceland, Ireland and Greece. Once their governments are forced to accept bailouts and austerity measures at the behest of the European Central Bank and the International Monetary Fund – and Italy's will almost surely collapse in the grand Italian tradition that has seen some 59 governments in the post-war period – Spain is likely to follow. And Spain is too big to bail out. This will likely bring about the beginning of the end of the Euro, and after that, the European Union.
China, too, is fast approaching a state of turmoil as its gargantuan real-estate bubble is showing signs of instability. The same is true of Australia while Japan enters its third lost decade. To expect that vast changes in four large markets that represent America's most important trading partners will not have a significant effect, most likely for the worse, is irrational.
The modern, secular West has insisted that it no longer requires God now that it enjoys science, technology and wealth. It increasingly appears that Americans are going to be given the chance to discover if that is actually true. If the socionomic perspective is correct, even the faithless would do well to pray that the economy recovers in a manner that shows up in the lives of everyday Americans, rather than the statistics and the stock market. Because if it does not, what happened in Arizona and Acapulco this weekend is only going to be a harbinger of things to come.