Monday, 18 November 2002 8:30 am
To make sense of events around us we need models or theories.  Good models help us put current events into the context of history - when we detect a pattern we have seen before in history, it helps us figure out what may happen next.  

Here is one model that I have used in the past, and that may be useful in the present circumstances.  It is a fairly simple model, perhaps too simple, but it is a useful substitute when the more usual trend-based models fail, as now appears to be the case.  

To construct the model, I take all human organizations or institutions in the world and group them into four major groupings. 

In the first group I include all of the leaders of governmental institutions.  Members of this first group define their power by the geographic territory they govern.  Their primary task is to maintain order both within their territory and with respect to other territories.

In the second group I include all of the leaders of commercial enterprises.  Their primary task is to create the wealth of the world by conducting trade and business. 

In the third group I include all of the religious leaders of the world.  Their primary task is to define morality, ethics, and meaning, which they codify into dogmas. 

In the fourth group I include the leaders of the academe, the letters and the press.  Their task is to record events, report them, interpret them, and comment on them.

What becomes immediately apparent is that these four basic groups of world leaders, in addition to competing with themselves, compete with each other for power. At any given time one of groups is preeminent.  The arbiters as to who is preeminent are the people of the world, who implement their will either via the ballot box or through insurrections or threats of insurrection (peaceful protest).  Invariably, given sufficient time, whichever group is preeminent takes things to excess, which leads the arbiters (the people) to invoke a shift of power to one of the other groups.

When using this model to analyze history, one finds that the third and fourth groups (religion and the academe/press) rarely gained the preeminent position in recent times (i.e. post middle ages).  Instead, the leaders of those two groups worked out de facto and de jure arrangements with whichever of the other two groups was preeminent to allow them sufficient autonomy and protection (e.g. separation of church and state laws, freedom of speech laws, tenure).  In return, they generally supported the preeminent group.

The battle for power between the first and second groups (government and business) appears to define most of the great cycles of recent history.  When the government leaders took their territorial ambitions to excess, the result was horrific death tolls and widespread destruction, and the arbiters became disillusioned with governmental power, reigning it in and shifting control to “the private sector”.  When the leaders of commerce and business took their ambitions for wealth to excess, stock markets crashes, bankruptcies, depressions, and unemployment caused the arbiters of power (the people) to demand that the government leaders intercede and take back control.  In the 1920’s, for example, the second group (business) was in full power and took things to sufficient excess to cause the 1929 crash and the 1930’s depression.  That shifted the power to the first group (Roosevelt’s administration in the US, Hitler's in Germany, Franco's in Spain, Mussilini’s in Italy, Stalin's in Russia, etc.), who initially straightened things up in their respective territories, but eventually started the Second World War.  After that war, the arbiters worked hard throughout the world to limit the power of government. The government leaders attempted to prevent this by creating a fake war (the Cold War).  Once it was clear that the Cold War would not develop into a real war, the arbiters almost everywhere “liberalized their economies”, shifting the power to the business leaders.  That period appears to have ended with the excesses evident in the 2001/2002 worldwide stock market crashes and aftermath that we are experiencing now.

Currently the arbiters worldwide appear to be in the process of a shifting power back to the first group (the government leaders).  Interestingly, the third group (religious leaders) appears to be attempting to make a claim for power in the Mid East, causing the governments of the world (the first group) to unite under the UN in belligerent opposition.  Leaders in the fourth group (the press and academe) meanwhile are uncharacteristically docile, presumably waiting until it is clear which group will be preeminent.  Governments (the first group) have also been recently exercising their punitive powers, quite publicly, against the leaders of the second group (business), to demonstrate their new preeminence.

I use this model for analyzing events by looking for patterns, similar to a stock chartist's model for analyzing stock patterns.  This model is distinguished from most other models used for this purpose in that it is not based on trend analysis.  It is therefore most useful at turning points, when trend-based models fail.  

In the next column I will use this model to attempt to peer into the future and see what what it predicts for business and the economy, in the spirit of "making sense of it all".