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Kondratiev wave

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"K-wave" redirects here. For the Korean pop culture phenomenon, seeKorean Wave.
A rough schematic drawing showing growth cycles in the world economy over time according to the Kondratiev theory
Proposedeconomic waves
Cycle/wave name Period (years)
Kitchin cycle(inventory, e.g.pork cycle) 3–5
Juglar cycle(fixed investment) 7–11
Kuznets swing(infrastructural investment) 15–25
Kondratiev wave(technological basis) 45–60
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Ineconomics,Kondratiev waves(also calledsupercycles,great surges,long waves,K-wavesorthe long economic cycle) are hypothesized cycle-like phenomena in the modernworld economy.[1]The phenomenon is closely connected with thetechnology life cycle.[2]

It is stated that the period of a wave ranges from forty to sixty years, thecyclesconsist of alternating intervals of high sectoralgrowthand intervals of relatively slow growth.[3]

Long wave theory is not accepted by most academic economists.[4][better source needed]Among economists who accept it, there is a lack of agreement about both the cause of the waves and the start and end years of particularwaves.Among critics of the theory, the consensus is that it involves recognizing patterns that may not exist (apophenia).

History of concept[edit]

The Soviet economistNikolai Kondratiev(also written Kondratieff or Kondratyev) was the first to bring these observations to international attention in his bookThe Long Waves in Economic Life(1926) alongside other works written in the same decade.[5][6]In 1939,Joseph Schumpetersuggested naming the cycles "Kondratieff waves" in his honor. The underlying idea is closely linked toorganic composition of capital.[7]

Two Dutch economists,Jacob van GelderenandSalomon de Wolff,had previously argued for the existence of 50- to 60-year cycles in 1913 and 1924, respectively.

Since the inception of the theory, various studies have expanded the range of possible cycles, finding longer or shorter cycles in the data. TheMarxistscholarErnest Mandelrevived interest in long-wave theory with his 1964 essay predicting the end of thelong boomafter five years and in hisAlfred Marshalllectures in 1979. However, in Mandel's theory long waves are the result of the normalbusiness cycleand noneconomic factors, such as wars.[8]

In 1996, George Modelski and William R. Thompson published a book documenting K-Waves dating back to 930 AD in China.[9]Separately, Michael Snyder wrote: "economic cycle theories have enabled some analysts to correctly predict the timing of recessions, stock market peaks and stock market crashes over the past couple of decades".[10]

The historianEric Hobsbawmalso wrote of the theory: "That good predictions have proved possible on the basis of Kondratiev Long Waves—this is not very common in economics—has convinced many historians and even some economists that there is something in them, even if we don't know what".[11]

US economistAnwar Shaikhanalyses the movement of the general price level - prices expressed in gold - in the US and the UK since 1890 and identifies three long cycles with troughs ca. in 1895, 1939 and 1982. With this model 2018 was another trough between the third and a possible future fourth cycle.[12]

Characteristics of the cycle[edit]

Kondratiev identified three phases in the cycle, namely expansion,stagnationandrecession.More common today is the division into four periods with a turning point (collapse) between expansion and stagnation.

Writing in the 1920s, Kondratiev proposed to apply the theory to the 19th century:

  • 1790–1849, with a turning point in 1815.
  • 1850–1896, with a turning point in 1873.
  • Kondratiev supposed that in 1896 a new cycle had started.

The long cycle supposedly affects all sectors of an economy. Kondratiev focused onpricesandinterest rates,seeing the ascendant phase as characterized by an increase in prices and low interest rates while the other phase consists of a decrease in prices and high interest rates. Subsequent analysis concentrated on output.

Explanations of the cycle[edit]

Cause and effect[edit]

Kondratiev waves present both causes and effects of common events that have recurred in capitalistic economies throughout history. Although Kondratiev himself made little differentiation between cause and effect, understanding the cause and effect of Kondratiev waves is a useful discussion and academic tool.

The causes documented by Kondratiev waves primarily include inequity, opportunity and social freedoms. Often, much more discussion is made of the notable effects of these causes as well. Effects are both good and bad and include, to name just a few, technological advance, birthrates, populism and revolution—and revolution's contributing causes which can include racism, religious and political intolerance, failed freedoms and opportunity, incarceration rates, terrorism, etc.

When inequity is low and opportunity is easily available, peaceful, moral decisions are preferred and Aristotle's "Good Life" is possible (Americans callthe good life"theAmerican Dream"). Opportunity created the simple inspiration and genius of theMayflower Compact,for example. Post-World War II and thepost-California gold rush1850s exemplify times of great opportunity and low inequity, and both resulted in unprecedented technological and industrial advances. On the other hand, 1893's global economic panics were not met with sufficient wealth-distributing government policies internationally, and a dozen major revolutions resulted, which some argue were significant causes of World War I.[13]Few would argue against the assertion that World War II began in response to the economic strictures of World War I'sTreaty of Versaillesand the failure to create government policy that supported economic opportunity during theGreat Depression.

Technological innovation theory[edit]

According to the innovation theory, these waves arise from the bunching of basicinnovationsthat launchtechnological revolutionsthat in turn create leading industrial orcommercialsectors. Kondratiev's ideas were taken up byJoseph Schumpeterin the 1930s. The theory hypothesized the existence of very long-runmacroeconomicand price cycles, originally estimated to last 50–54 years.

In recent decades there has been considerable progress in historical economics and the history of technology, and numerous investigations of the relationship between technological innovation and economic cycles. Some of the works involving long cycle research and technology include Mensch (1979),Tylecote(1991), the International Institute for Applied Systems Analysis (IIASA) (Marchetti, Ayres),Freemanand Louçã (2001),Andrey Korotayev[14]andCarlota Perez.

Perez (2002) places the phases on alogisticorScurve, with the following labels: the beginning of a technological era as irruption, the ascent as frenzy, the rapid build out as synergy and the completion as maturity.[15]

Demographic theory[edit]

Because people have fairly typical spending patterns through their life cycle, such as spending on schooling, marriage, first car purchase, first home purchase, upgrade home purchase, maximum earnings period, maximum retirement savings and retirement, demographic anomalies such as baby booms and busts exert a rather predictable influence on the economy over a long time period. TheEasterlin hypothesisdeals with the post-war baby-boom.Harry Denthas written extensively on demographics and economic cycles. Tylecote (1991) devoted a chapter to demographics and the long cycle.[16]

Land speculation[edit]

Main article:Georgism

Georgistssuch asMason Gaffney,Fred FoldvaryandFred Harrisonargue that land speculation is the driving force behind the boom and bust cycle. Land is a finite resource which is necessary for all production and they claim that because exclusive usage rights are traded around, this creates speculative bubbles which can be exacerbated by overzealous borrowing and lending. As early as 1997, a number of Georgists predicted that the next crash would come in 2008.[17]

Debt deflation[edit]

Main article:Debt deflation

Debt deflation is a theory ofeconomic cycleswhich holds that recessions anddepressionsare due to the overall level of debt shrinking (deflating). Hence, thecredit cycleis the cause of the economic cycle.

The theory was developed byIrving Fisherfollowing theWall Street Crash of 1929and the ensuingGreat Depression.Debt deflation was largely ignored in favor of the ideas ofJohn Maynard KeynesinKeynesian economics,but it has enjoyed a resurgence of interest since the 1980s, both inmainstream economicsand in theheterodoxschool ofpost-Keynesian economicsand has subsequently been developed by such post-Keynesian economists asHyman Minsky[18]andSteve Keen.[19]

Modern modifications of Kondratiev theory[edit]

Inequity appears to be the most obvious driver of Kondratiev waves, and yet some researchers have presented a technological and credit cycle explanation as well.

There are several modern timing versions of the cycle although most are based on either of two causes: one on technology and the other on thecredit cycle.

Additionally, there are several versions of the technological cycles and they are best interpreted using diffusion curves of leading industries. For example, railways only started in the 1830s, with steady growth for the next 45 years. It was after Bessemer steel was introduced that railroads had their highest growth rates. However, this period is usually labeled the age of steel. Measured by value added, the leading industry in the U.S. from 1880 to 1920 was machinery, followed by iron and steel.[20]

Any influence of technology during the cycle that began in the Industrial Revolution pertains mainly to England. The U.S. was a commodity producer and was more influenced by agricultural commodity prices. There was a commodity price cycle based on increasing consumption causing tight supplies and rising prices. That allowed new land to the west to be purchased and after four or five years to be cleared and be in production, driving down prices and causing a depression as in 1819 and 1839.[21]By the 1850s, the U.S. was becoming industrialized.[22]

The technological cycles can be labeled as follows:

  • Industrial Revolution (1771)
  • Age of Steam and Railways (1829)
  • Age of Steel and Heavy Engineering (1875)
  • Age of Oil, Electricity, the Automobile and Mass Production (1908)
  • Age of Information and Telecommunications (1971)

Some argue that this logic can be extended. The custom of classifying periods of human development by its dominatinggeneral purpose technologyhas surely been borrowed from historians, starting with theStone Age.Including those, authors distinguish three different long-term metaparadigms,each with different long waves. The first focused on the transformation of material, includingstone,bronze,andiron.The second, often referred to asindustrial revolutions,was dedicated to the transformation of energy, includingwater,steam,electric,andcombustion power.Finally, the most recent metaparadigm aims at transforminginformation.It started out with the proliferation ofcommunicationandstored dataand has now entered the age ofalgorithms,which aims at creating automated processes to convert the existing information into actionable knowledge.[23]

Several papers on the relationship between technology and the economy were written by researchers at theInternational Institute for Applied Systems Analysis(IIASA). A concise version of Kondratiev cycles can be found in the work of Robert Ayres (1989) in which he gives a historical overview of the relationships of the most significant technologies.[24]Cesare Marchetti published on Kondretiev waves and on the diffusion of innovations.[25][26]Arnulf Grübler's book (1990) gives a detailed account of the diffusion of infrastructures including canals, railroads, highways and airlines, with findings that the principal infrastructures have midpoints spaced in time corresponding to 55-year K wavelengths, with railroads and highways taking almost a century to complete. Grübler devotes a chapter to the long economic wave.[27]In 1996,Giancarlo Pallavicinipublished the ratio between the long Kondratiev wave and information technology and communication.[28]

Korotayevet al. recently employedspectral analysisand claimed that it confirmed the presence of Kondratiev waves in the world GDP dynamics at an acceptable level of statistical significance.[3][29]Korotayev et al. also detected shorter business cycles, dating the Kuznets to about 17 years and calling it the third harmonic of the Kondratiev, meaning that there are three Kuznets cycles per Kondratiev.

Leo A. Nefiodow shows that the fifth Kondratieff ended with the global economic crisis of 2000–2003 while the new, sixth Kondratieff started simultaneously.[30]According to Leo A. Nefiodow, the carrier of this new long cycle will be health in a holistic sense—including its physical, psychological, mental, social, ecological and spiritual aspects; the basic innovations of the sixth Kondratieff are "psychosocial health" and "biotechnology".[31]

More recently, the physicist and systems scientistTessaleno Devezasadvanced a causal model for the long wave phenomenon based on a generation-learning model[32]and a nonlinear dynamic behaviour of information systems.[33]In both works, a complete theory is presented containing not only the explanation for the existence of K-Waves, but also and for the first time an explanation for the timing of a K-Wave (≈60 years = two generations).

A specific modification of the theory of Kondratieff cycles was developed byDaniel Šmihula.Šmihula identified six long-waves within modern society and the capitalist economy, each of which was initiated by a specific technological revolution:[34]

  1. Wave of the Financial-agricultural revolution (1600–1780)
  2. Wave of the Industrial revolution (1780–1880)
  3. Wave of the Technical revolution (1880–1940)
  4. Wave of the Scientific-technical revolution (1940–1985)
  5. Wave of the Information and telecommunications revolution (1985–2015)
  6. Hypothetical wave of the post-informational technological revolution (Internet of things/renewable energy transition?) (2015–2035?)

Unlike Kondratieff and Schumpeter, Šmihula believed that each new cycle is shorter than its predecessor. His main stress is put on technological progress and new technologies as decisive factors of any long-time economic development. Each of these waves has its innovation phase which is described as a technological revolution and an application phase in which the number of revolutionary innovations falls and attention focuses on exploiting and extending existing innovations. As soon as an innovation or a series of innovations becomes available, it becomes more efficient to invest in its adoption, extension and use than in creating new innovations. Each wave of technological innovations can be characterized by the area in which the most revolutionary changes took place ( "leading sectors" ).

Every wave of innovations lasts approximately until the profits from the new innovation or sector fall to the level of other, older, more traditional sectors. It is a situation when the new technology, which originally increased a capacity to utilize new sources from nature, reached its limits and it is not possible to overcome this limit without an application of another newtechnology.

At the end of an application phase of any wave there is typically an economic crisis andeconomic stagnation.Thefinancial crisis of 2007–2008is a result of the coming end of the "wave of the Information and telecommunications technological revolution". Some authors have started to predict what the sixth wave might be, such asJames Bradfield Moodyand Bianca Nogrady who forecast that it will be driven byresource efficiencyandclean technology.[35]On the other hand, Šmihula himself considers the waves of technologicalinnovationsduring the modern age (after 1600 AD) only as a part of a much longer "chain" of technological revolutions going back to the pre-modern era.[36]It means he believes that we can find longeconomic cycles(analogical to Kondratiev cycles in modern economy) dependent on technological revolutions even in theMiddle Agesand theAncient era.

Criticism of Kondratiev theory[edit]

Kondratiev waves associated with gains in IT and health with phase shift and overlap, Andreas J. W. Goldschmidt, 2004

Long wave theory is not accepted by many academic economists. However, it is important for innovation-based,developmentandevolutionary economics.Yet, among economists who accept it, there has been no formal universal agreement about the standards that should be used universally to place the start and end years for each wave. Agreement of start and end years can be +1 to 3 years for each 40- to 65-year cycle.

Health economist and biostatisticianAndreas J. W. Goldschmidtsearched for patterns and proposed that there is a phase shift and overlap of the so-called Kondratiev cycles of IT and health (shown in the figure). He argued that historical growth phases in combination with key technologies do not necessarily imply the existence of regular cycles in general. Goldschmidt is of the opinion that different fundamental innovations and their economic stimuli do not exclude each other as they mostly vary in length and their benefit is not applicable to all participants in a market.[37]

See also[edit]

References[edit]

  1. ^The termlong waveoriginated from a poor early translation oflong cyclefrom Russian to German. Freeman, Chris; Louçã, Francisco (2001) pp 70
  2. ^Ayres, Robert U. (1988)."Barriers and breakthroughs: an" expanding frontiers "model of the technology-industry life cycle".Technovation.7(2): 87–115.doi:10.1016/0166-4972(88)90041-7.
  3. ^abSee, e.g.Korotayev, Andrey V.;Tsirel, Sergey V. (2010)."A Spectral Analysis of World GDP Dynamics: Kondratiev Waves, Kuznets Swings, Juglar and Kitchin Cycles in Global Economic Development, and the 2008–2009 Economic Crisis".Structure and Dynamics.4(1): 3–57.
  4. ^Skwarek, Shane (3 November 2015)."Kondratieff Wave".CMT Association.Retrieved2018-12-20.
  5. ^Vincent Barnett,Nikolai Dmitriyevich Kondratiev,Encyclopedia of Russian History,2004, atEncyclopedia.com.
  6. ^Erik Buyst,Kondratiev, Nikolai (1892–1938),Encyclopedia of Modern Europe: Europe Since 1914: Encyclopedia of the Age of War and Reconstruction,Gale Publishing,January 1, 2006.
  7. ^"Kondratieff Wave - CMT Association".Retrieved2024-02-12.
  8. ^Mandel, Ernest (1995).Long waves of capitalist development: the Marxist interpretation(2nd ed.). New York: Verso. pp. 16–21.ISBN978-1-85984-037-5.
  9. ^Thompson, William (1996).Leading sectors and world powers: the coevolution of global politics and economics.Univ of South Carolina Press.ISBN9781570030543.
  10. ^Snyder, Michael (2014-05-12)."If Economic Cycle Theorists Are Correct, 2015 To 2020 Will Be Pure Hell For The United States".The Economiccollapseblog.com.RetrievedDecember 1,2016.
  11. ^Hobsbawm (1999), pp. 87f.
  12. ^Anwar Shaikh2016:Capitalism.Oxford University Press. P. 749.
  13. ^"Economic causes of the first World War".Socialist Party of Britain.Retrieved2014-08-01.
  14. ^Korotayev, Andrey; Zinkina, Julia; Bogevolnov, Justislav (2011)."Kondratieff waves in global invention activity (1900–2008)".Technological Forecasting and Social Change.78(7): 1280.doi:10.1016/j.techfore.2011.02.011.
  15. ^Perez, Carlota (2002).Technological Revolutions and Financial Capital: The Dynamics of Bubbles and Golden Ages.UK: Edward Elgar Publishing Limited.ISBN978-1-84376-331-4.
  16. ^Tylecote, Andrew (1991).The Long Wave in the World Economy.London: Routledge. pp. Chapter 5: Population feedback.ISBN978-0-415-03690-0.
  17. ^"Fred Foldvary".Foldvary.net. Archived fromthe originalon 2008-10-19.Retrieved2013-03-26.
  18. ^Minsky, Hyman (1992). "The Financial Instability Hypothesis".Jerome Levy Economics Institute Working Paper No. 74.SSRN161024.
  19. ^Keen, Steve (1995). "Finance and Economic Breakdown: Modelling Minsky's Financial Instability Hypothesis".Journal of Post Keynesian Economics.17(4): 607–635.doi:10.1080/01603477.1995.11490053.
  20. ^Table 7: Ten leading industries in America, by value added, 1914 prices (millions of 1914 $'s)
  21. ^ North, Douglas C. (1966).The Economic Growth of the United States 1790–1860.New York, London: W. W. Norton & Company.ISBN978-0-393-00346-8.
  22. ^See:Joseph Whitworth'squote underAmerican system of manufacturing#Use of machinery.
  23. ^Hilbert, M. (2020). Digital technology and social change: The digital transformation of society from a historical perspective. Dialogues in Clinical Neuroscience, 22(2), 189–194.https://doi.org/10.31887/DCNS.2020.22.2/mhilbert
  24. ^Ayres, Robert(1989)."Technological Transformations and Long Waves"(PDF).
  25. ^Marchetti, Cesare (1996)."Pervasive Long Waves: Is Society Cyclotymic"(PDF).Archived fromthe original(PDF)on 2012-03-05.
  26. ^Marchetti, Cesare (1988)."Kondratiev Revisited-After One Cycle"(PDF).
  27. ^Grübler, Arnulf (1990).The Rise and Fall of Infrastructures: Dynamics of Evolution and Technological Change in Transport(PDF).Heidelberg and New York: Physica-Verlag.
  28. ^Giancarlo Pallavicini "La teorizzazione dei cicli lunghi dell'economia, secondo Kondratiev, e l'informatica e la comunicazione", Agrigento, 1996, Accademia Studi Mediterranei, Agrigento,http://www.giancarlopallavicini.it/cultura/accademia-studi-mediterranei
  29. ^Spectral analysis is a mathematical technique that is used in such fields as electrical engineering for analyzing electrical circuits and radio waves to deconstruct a complex signal to determine the main frequencies and their relative contribution. Signal analysis is usually done with equipment. Data analysis is done with special computer software.
  30. ^Nefiodow, Leo A. (2014)."Health: The Economic Growth Engine of the 21st Century".healthmanagement.org.
  31. ^See: Nefiodow, Leo; Nefiodow, Simone (2014): The Sixth Kondratieff. A New Long Wave in the Global Economy. Charleston 2014,ISBN978-1-4961-4038-8.
  32. ^Devezas, Tessaleno (2001). "The biological determinants of long-wave behavior in socioeconomic growth and development".Technological Forecasting & Social Change.68:1–57.doi:10.1016/S0040-1625(01)00136-6.
  33. ^Devezas, Tessaleno; Corredine, James (2002). "The nonlinear dynamics of technoeconomic systems - An informational interpretation".Technological Forecasting and Social Change.doi:10.1016/S0040-1625(01)00155-X.
  34. ^Šmihula, Daniel (2009)."The waves of the technological innovations of the modern age and the present crisis as the end of the wave of the informational technological revolution".Studia Politica Slovaca.2009(1): 32–47.ISSN1337-8163.
  35. ^Moody, J. B.; Nogrady, B. (2010).The Sixth Wave: How to succeed in a resource-limited world.Sydney: Random House.ISBN9781741668896.
  36. ^Šmihula, Daniel (2011)."Long waves of technological innovations".Studia Politica Slovaca.2011(2): 50–69.ISSN1337-8163.
  37. ^Goldschmidt, Andreas JW[in German];Hilbert, Josef (2009).Health Economy in Germany - Economical Field of the Future (Gesundheitswirtschaft in Deutschland - Die Zukunftsbranche).Germany: Wikom Publishing house, Wegscheid. p. 22.ISBN978-3-9812646-0-9.

Further reading[edit]

External links[edit]

Library resourcesabout
Kondratiev wave
  1. ^Béla Sipos: Empirical research of long-term cycles
  2. ^Béla Sipos: Analysis of long-term tendencies in the world economy and Hungary
  3. ^Sipos, Béla (1987)."Empirical Research and Forecasting Based on Hungarian and World Economic Data Series".The Long-Wave Debate.Berlin, Heidelberg: Springer. pp. 119–126.doi:10.1007/978-3-662-10351-7_10.ISBN978-3-662-10353-1.
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