This Study & How I Came to Do It
One study lead to another that led me to do this study. More specifically:
Studying money and credit cycles throughout history made me aware of the long-term debt cycle (which
typically lasts about 50-100 years), which led me to view what is happening now in a very different way than
if I hadn’t gained that perspective. For example, before interest rates hit 0% and central banks printed money
and bought financial assets in response to the 2008-09 financial crisis, I had studied that happening in the
1930s, which helped us navigate that crisis well. From that research, I also saw how and why these central
bank actions pushed financial asset prices and the economy up, which widened the wealth gap and led to an
era of populism and conflict. We are now seeing the same forces at play in the post-2009 period.
In 2014, I wanted to forecast economic growth rates in a number of countries because they were relevant to
our investment decisions. I used the same approach of studying many cases to find the drivers of growth and
come up with timeless and universal indicators for anticipating countries’ growth rates over 10-year periods.
Through this process, I developed a deeper understanding of why some countries did well and others did
poorly. I combined these indicators into gauges and equations that we use to produce 10-year growth
estimates across the 20 largest economies. Besides being helpful to us, I saw that this study could help
economic policy makers because, by seeing these timeless and universal cause-effect relationships, they could
know that if they changed X, it would have Y effect in the future. I also saw how these 10-year leading
economic indicators (such as the quality of education and the level of indebtedness) were worsening for the
US relative to big emerging countries such as China and India. This study is called “Productivity and
Structural Reform: Why Countries Succeed and Fail, and What Should Be Done So Failing Countries
Succeed.”
Soon after the Trump election in 2016 and with increases in populism in developed countries becoming more
apparent, I began a study of populism. That highlighted for me how gaps in wealth and values led to deep
social and political conflicts in the 1930s that are similar to those that exist now. It also showed me how and
why populists of the left and populists of the right were more nationalistic, militaristic, protectionist, and
confrontational—and what such approaches led to. I saw how strong the conflict between the
economic/political left and right could become and the strong impact this conflict has on economies, markets,
wealth, and power, which gave me a better understanding of events that were and still are transpiring.
From doing these studies, and from observing numerous things that were happening around me, I saw that
America was experiencing very large gaps in people’s economic conditions that were obscured by looking
only at economic averages. So I divided the economy into quintiles—i.e., looking at the top 20% of income
earners, the next 20%, and so on down to the bottom 20%—and examined the conditions of these populations
individually. This resulted in two studies. In “Our Biggest Economic, Social, and Political Issue: The Two
Economies—The Top 40% and the Bottom 60%,” I saw the dramatic differences in conditions between the
“haves” and the “have-nots,” which helped me understand the greater polarity and populism I saw emerging.
Those findings, as well as the intimate contact my wife and I were having through her philanthropic work
with the reality of wealth and opportunity gaps in Connecticut communities and their schools, led to the
research that became my “Why and How Capitalism Needs to Be Reformed” study.
At the same time, through my many years of international dealings in and research of other countries, I saw
huge global economic and geopolitical shifts taking place, especially in China. I have been going to China a
lot over the last 35 years and am lucky enough to have become well-acquainted with its top policy makers.
This has helped me see up close how remarkable the advances in China have been and how excellent the
capabilities and historical perspectives that were behind them are. These excellent capabilities and
perspectives have led China to become an effective competitor with the US in production, trade, technology,
geopolitics, and world capital markets.
By the way you can read these studies for free at www.economicprinciples.org.
So, what you are now reading came about because of my need to understand important things that are now
happening that hadn’t happened in my lifetime but have happened many times before that. These things are the
result of three big forces and the questions they prompt.