By Euan Wilson | From the August 2013 Socionomist
“Whoever wishes to foresee the future must consult the past; for human events ever resemble those of preceding times. This arises from the fact that they are produced by men who ever have been, and ever shall be, animated by the same passions, and thus they necessarily have the same results.”
— Niccoló Machiavelli
The Democratic Peace Theory states that truly democratic societies almost never wage war on one another. The theory was first articulated in the 1960s, but its ideological foundations were laid long before. Thomas Paine’s 1776 pamphlet Common Sense pointed out that while the republics in Europe “are all (and we may say always) in peace,” absolute monarchies frequently engaged in conflagrations. In his 1795 essay Perpetual Peace, philosopher Immanuel Kant reasoned that a majority of self-interested people would never vote to subject themselves or their children to war except in self-defense; therefore, if all nations were republics, war would by definition cease, as there would be no initiators.
Other proponents of this theory propose that war’s unattractiveness means that conflicts among republics will be resolved diplomatically. “Publicly accountable statesmen are more inclined to establish diplomatic institutions for resolving international tensions,”1 and “Democracies conduct diplomacy differently and in a more conciliatory way compared to non-democracies,”2 two modern theorists write.
Yet history shows differently. We looked at numerous wars between democracies and found that even in the face of extensive diplomacy and a mutual popular desire to avoid armed conflict, when social mood turns sour, republics do initiate the beat of war drums. Let’s look at just one example.
The American Revolution (1775-1783)
It Was Not About the Taxes
U.S. history courses teach that the American Revolution was inevitable: The British Empire was relentless in its taxation and subjugation of its fledging colonies. Rebellion came only after the Navigation Act, Molasses Act, Sugar Act, Stamp Act, Quartering Acts and finally the Townshend Acts. Each act led to colonial anger, which led to more parliamentary crackdowns and further tax acts. These activities hurt the American economy, causing further distress.
When positioned in such a way, it seems perfectly clear why the colonists rebelled. But if we look deeper at the people and circumstances behind the run-up to the Revolution, it is far less clear that the tax acts were truly causal.
Britain had just come through the Enlightenment, also known as the Age of Reason, spawning such noted pragmatic political philosophers as John Locke, Adam Smith and David Hume. They influenced leaders William Pitt and George Grenville, capable prime ministers who were unlikely to recklessly drive away one of their choicest colonial prizes.
Across the pond, American colonists in the 18th century enjoyed what is believed to be the highest standard of living in the world—higher even than their British Isle counterparts3. According to American Revolution expert Jack P. Greene, author of Pursuits of Happiness: The Social Development of Early Modern British Colonies and the Formation of American Culture,
McCucsker and Menard estimate that the gross national product multiplied about twenty-five times between 1650 and 1770, increasing at an annual average rate of 2.7 percent for British America as a whole and 3.2 percent for British North America. This increase, they posit, may have represented a real annual per capita growth rate of 0.6 percent [in the American colonies], which was twice that of Britain and was “sufficient to double income” over that period.
By the time of the American Revolution, this vigorous economic growth had produced a standard of living that may have been “the highest achieved for the great bulk of the free population in any country up to that time.” In her massive study of the wealth of the continental colonies, Alice Hanson Jones has found that for the continental colonies as a whole in 1774, average per capita wealth—composed of land, slaves, livestock, nonagricultural productive goods, and consumer goods—was 60.20 pounds.
Let’s put that number into perspective: In 2010 money, 60.20 pounds comes to 87,800 pounds ($137,846) average for every man, woman and child. This is an incredible income for an entire population to be enjoying.
By comparison, the US’s per-capita income today in 2010 dollars is less than one-third that of colonial times: $39,791.
Why would a people who are living better than anyone else in the world rebel against their government? I propose that social mood is the real reason the colonists broke away from Britain.
To further develop our case, let’s first look at why the British passed their tax acts in the first place.
Taxing the Colonies
In Figure 1, we see that the American Revolution came after a Grand Supercycle decline in British stock prices that lasted more than 60 years. In 1720 British stocks suffered the notorious South Sea Bubble and crash (see label I). Then, from 1755 to about 1765, stocks declined to their lowest point since the crash. That big negative trend in social mood also spawned the Seven Years War, known in the colonies as the French and Indian War.
The French and Indian War pitted the British colonies against an alliance of French and Native American warriors in what is now the American Midwest. The British sent money, troops, supplies—basically doing everything a mother country normally would do to defend a territory from foreign aggressors. The war spread to theatres in Europe, India, West Africa and the Philippines. Eventually, the British won the Hydra-headed conflict since called the Seven Years War.
Wars, however, are not cheap, and the British incurred a substantial debt. Britain’s pre-war debt was £74 million, and by the end of the war, it had doubled to £150 million. That’s roughly £236 billion ($370 billion) in today’s money.4
The British did not expect the colonists to pay this entire cost. In fact, of the £200,000 it cost annually to defend the colonies, Parliament expected the colonies to provide only £78,000,5 or, just over half a million pounds total for the full Seven Years War. That is a paltry percentage of Britain’s expenditures on the war.
In fact, taxes were so low in the American colonies that colonists paid as little as one-fiftieth of what British subjects in the homeland paid.
Low tax rates or not, shortly after the stock market low in 1765, negative mood drove colonists to begin protesting Parliament’s tax acts.
Mood then turned decidedly positive, fueling a bear-market rally in stock prices. During this period, Parliament repealed most of its tax acts. By 1770, it drove an already-low Colonial tax rate to almost zero. The table below demonstrates that all the tax acts the American colonists later objected to were repealed before 1770, while social mood was trending more positively. This period of positive mood trend had the British Parliament feeling good enough to concede to colonial demands for lower taxes. After Supercycle degree mood turned negative, however, the conciliatory posture ceased.
The Decline from 1770 through 1785: The War against Better Tea
The final market decline prior to the American Revolution began around 1770 (see Figure 1). The war that resulted would change the world.
After 1770, one provision within the Townshend Acts remained: the Tea Act. It was designed to aid the British East India Company, which was a major source of income and trade for Britain but was now in financial straits. The Tea Act shifted the taxes on tea from the East India Company to consumers, allowed the company to bypass the British Home Isles when distributing its tea and further enabled the company to sell tea already housed in Britain without paying further taxes. This substantially lowered costs for the company.6
Parliament believed the cost breaks and incentives would enable the company to sell higher quality tea to American colonists, and others, at lower prices. In turn, this would help cut down on the American smuggling trade as well.
But social mood was trending negatively, and the Tea Act was branded in the American colonies as an attack on colonial trade and an attempt to control the colonies through taxation. So the Americans revolted with the Boston Tea Party and tar-and-feather attacks on tax collectors. Shortly thereafter, the American Revolution began.
Events or Mood?
To review: American colonists likely had the highest standard of living in the world. Their government rushed to their defense in the French and Indian War. They paid a fraction of the taxes that British home isle citizens paid. And they had the promise of higher quality, less expensive tea. The British government had even listened to American protests, negotiated with American leaders and repealed many unpopular Parliamentary Acts. These conditions and events hardly justify all-out rebellion. In a period of positively trending social mood, they would be cited as engendering loyalty.
But a negative-mood trend has the opposite effect: It inspires people to cast events and conditions in a negative light. Anger erupts whether it is justified or not. Once the colonial rebellion began, the British gave in to their negative social mood and sent one army after another with orders to destroy the revolutionary armies and restore British rule through martial law. The war drove apart friends, families and countrymen. Like any war, it had its share of atrocities and brutal engagements.
In times of positive social mood, society focuses on positives and tries to avoid war. In times of negative social mood, the opposite occurs. In the case of the American Revolution, both sides took actions expressing the rage that had been brought on not by conditions but by a prolonged decline in social mood.
1Archibugi, D. (2008). The global commonwealth of citizens: Toward cosmopolitan democracy. Princeton, NJ: Princeton University Press.
2Weart, S.R. (1998). Never at war. New Haven, CT: Yale University Press.
3Greene, J. (1988). Pursuits of happiness: The social development of early modern british colonies and the formation of american culture. (p. 137). Chapel Hill, NC: The University of North Carolina Press.
4Souter, G. (2006). The founding of the united states. (1st ed.). New York, NY: Presidio Press.
5Miller, J. (1943). Origins of the american revolution. (1st ed.). Palo Alto, CA: Stanford University Press.
6Unger, H. (2000). John hancock: Merchant king and american patriot. (1st ed.). Hoboken, NJ: Wiley.
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Most economists, historians and sociologists
presume that events determine society’s mood. But socionomics hypothesizes
the opposite: that social mood regulates the character of social events. The
events of history—such as investment booms and busts, political events,
macroeconomic trends and even peace and war—are the products of a naturally
occurring pattern of social-mood fluctuation. Such events, therefore, are not
randomly distributed, as is commonly believed, but are in fact probabilistically
predictable. Socionomics also posits that the stock market is the best available
meter of a society’s aggregate mood, that news is irrelevant to social
mood, and that financial and economic decision-making are fundamentally different
in that financial decisions are motivated by the herding impulse while economic
choices are guided by supply and demand. For more information about socionomic
theory, see (1) the text, The
Wave Principle of Human Social Behavior © 1999, by Robert Prechter;
(2) the introductory documentary History's
Hidden Engine; (3) the video Toward
a New Science of Social Prediction, Prechter’s 2004 speech before
the London School of Economics in which he presents evidence to support his
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