Inequality went up in both the US and Europe. This was followed by a rise in unemployment in Europe from the 1980s. Russia crashed 10 years later. In the US unemployment went up a little initially but then rather was on a falling trend. In Japan the unemployment went up after the 1990 stock crash and the following slump. Pre-crisis the inequality in the US was at least followed by a lowering of the unemployment.
In psychology we saw the demise of the behaviorism paradigm and in macroeconomics Lucas and Sargent introduced rational expectations. The original Phillips curve where inflation is inversely proportional to unemployment did not work anymore and had to be changed to the new version that correlated change of inflation with unemployment. Nixon and Kissinger ended the Vietnam War. Did the psychology of man change during the 1970s?
The question is if the financial crisis together with the rise of China and state capitalism has changed human psychology again? In the US they start talking about merging with European welfare lore at the same time as this paradigm seems to become unaffordable. Europe seems unable to put people back into something constructive with its high unemployment whereas the US has turned the tide and if unemployment data from 1948 is consulted it is evident that all surges in unemployment are short lived so far.
It is therefore reassuring to see that Mitt Romney, to optimal republican presidential candidate is gaining some momentum again after being challenged by the more social conservative Rick Santorum. It seems like the positive data from the economy that surfaced not long ago led to the surge of Santorum which weakened Romney. Possibly a repeat of the earlier surges performed by almost all other candidates.
Romney’s motto is “Believe in America” and this is what seems to be the best bet for the West right now when a reignition under the same regime is necessary rather than going left ward as also seems to be a trend in Sweden and France, although Sarkozy is also regaining momentum recently.
So, I don’t think we are in for a second change in psychology. We just have to believe in the most dynamic survivor from the paradigm of the 1970s.