Kondratiev Cycles

From P2P Foundation
Jump to navigation Jump to search

Description

1. Cryppix:

"In the middle of 1920. N. Kondratiev noticed certain recurring patterns in the changes in the economic situation of developed countries, which he called Large cycles, as opposed to small (Kitschin cycles) and medium (Juglar cycles) economic cycles, which were studied before. N. Kondratiev came to the conclusion that Large cycles consist of two waves (or phases of development): the upward one, where the economy is growing rapidly, and the downward one, where short-term phases of growth are accompanied by long periods of crises and stagnation.

The nature of these cycles N. Kondratiev could not determine until the end, since by the time of his research only two complete large cycles had passed, but he noted certain regular features of them and was able to predict on this basis the further development of the world economic situation up to the Great Depression.

Further research in this direction by many scientists and especially the work of the eminent American economist J. Schumpeter, the German scientist G. Mensch, the Russian economist S. Menshikov made it possible to formulate a general theory of large K-cycles, the main role in which the latest technologies and innovations play.

A major contribution to the study of the nature of K-сycles was made by academician S. Glazyev, who developed the theory of technological structures (TS), recognized as a scientific discovery. In 1993, in his monograph “Theory of Long-Term Techno-Economic Development”, he showed that innovations and new technologies do not develop uniformly and evolutionarily, but by discrete beams or clusters of integral complexes of technologically coupled industries, which he called technological structures (TS).

The 1 TS, in which textile machines appeared in order to complete the Industrial revolution, demanded the formation of the 2 TS: a steam engine and the transition from natural energy resources (water and wind) to coal, since the necessary labour force was concentrated in cities, and the production based on water and wind was being created in rural areas. In addition, the steam engine was more efficient than wind and water. The industrial revolution was formed by the 3 TS, which ensured the production of steel, electricity and chemical production, and the 4 TS, which gave the internal combustion engine, conveyor production and the transition to oil as the main energy resource.


At present, the world passes from the 5-th TS (which began in 1970–1980 on the basis of microprocessor technology, personal computers, the Internet, mobile communications, etc.) to the 6-th TS, which will complete the victory of the Information and Communication Revolution.

On the downward wave of the K-cycle, when the growth potential of the previous TS is completely exhausted, a cluster of basic technologies of the new TS begins to form. The formation of a cluster of basic technologies is accompanied by the development of improving and complementary innovations that contribute to the transition from the downward to the upward wave of the K-cycle, which leads to a strong growth of the world economy, which lasts, as a rule, a quarter of a century.

It is the formation and introduction of a new TS into production that leads to rapid growth of the economy on the upward wave of the K-cycle, and the exhaustion of the growth potential of the TS leads to a slowdown in the economy on the downward wave and a state that G. Mensh called “technological stalemate”, when the introduction of new technologies is actually suspended, and real innovations leading to the use of new more effective technologies are replaced by pseudo-innovations.

At the turn of XX — XXI centuries G. Arrighi, based on research by the French historian F. Braudel and principles of the world-system analysis, developed the theory of Systemic Cycles of Capital Accumulation (SCCA). F. Braudel drew attention to the fact that the centers of capital accumulation are constantly changing their geographical “registration”. In the middle Ages they were in the North of Italy, in the XVII century they moved to Holland, from the beginning of the XIX century — in Britain, and in the 20th century to the USA. These studies F. Braudel served as an impetus for the development of the theory of SCCA by G. Arrighi.

Since the main thing for capitalism is the infinite accumulation of capital, it is precisely the qualitatively special cycles of this accumulation that, according to G. Arrighi, have become milestones in the development of this system. In his monograph “The Long XX century” G. Arrighi identified four SCCA: Genoese-Iberian (XV — early XVII century), Dutch (mid XVII — late XVIII century), British (early XIX century — early XX century) and American (from the beginning of the 20th century). In his last work, “Adam Smith in Beijing”, G. Arrighi predicted the completion of the American SCCA and the coming of the Asian SCCA to replace it." (https://medium.com/@cryppix/mission-possible-7fe2129214fa)


2. From the Wikipedia:

"Kondratiev waves (also called supercycles, great surges, long waves, K-waves or the long economic cycle) are hypothesized cycle-like phenomena in the modern world economy.[10] It is stated that the period of a wave ranges from forty to sixty years, the cycles consist of alternating intervals of high sectoral growth and intervals of relatively slow growth.

Such theories are dismissed** by most economists on the basis of econometric analysis which has found that recessions are essentially random events, and the probability of a recession does not show any kind of pattern across time.[ Despite frequent use of the term business cycles to refer to changes in an economy around its trend line, the phrase is considered a misnomer. It is widely agreed that fluctuations in economic activity do not exhibit any kind of predictable repetition over time, and the appearance of cycles is a result of pareidolia."

(https://en.wikipedia.org/wiki/Social_cycle_theory)

( ** For empirical data in favour of the existence of cycles see: * Article: A Spectral Analysis of World GDP Dynamics: Kondratieff Waves, Kuznets Swings, Juglar and Kitchin Cycles in Global Economic Development, and the 2008–2009 Economic Crisis 2010. By Korotayev, Andrey V ;Tsirel, Sergey V. Structure and DynamicsVolume 4, Issue 1 doi [1] )


3. Investopedia:

" Kondratiev Wave is a long-term economic cycle in commodity prices and other prices, believed to result from technological innovation, that produces a long period of prosperity alternating with economic decline. This theory was founded by Nikolai D. Kondratiev (also spelled "Kondratieff"), an agricultural economist who noticed agricultural commodity and copper prices experienced long-term cycles. Kondratiev believed that these cycles involved periods of evolution and self-correction." (https://www.investopedia.com/terms/k/kondratiev.asp)


Characteristics

From the Wikipedia:

"Characteristics of the cycle

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

(https://en.wikipedia.org/wiki/Kondratiev_wave)

Status

Cycle theories:

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 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)



Discussion

Leo and Simone Nefiodow:

"The third Kondratieff was the first long cycle that was carried by the prac­tical application of scientific knowledge. The discovery of the electro-dyna­mic principle by Werner von Siemens enabled the conversion of mecha­nical energy into electrical energy, and the findings on the composition of matter through quantum physics imparted the knowledge of manipulating material – the foundation of modern chemistry.


The third Kondratieff ended with the global economic crisis of the late 1920s and early 1930s. The new upswing, the fourth Kondratieff, came with the automobile and petrochemistry. It marked the height of the industrial society and brought mass transit to the streets and to the air. The fourth Kondratieff drew to a close with the massive crude oil price increases by OPEC in the late 1970s.


The fifth Kondratieff began in the early 1950s. Its driving force originated in computer-based information technology. With constantly increasing speed, information technology permeated all areas of society and turned the world into a global village of information. During the fifth Kondratieff, the industrial society changed over into an information society. Since then, economic growth is primarily defined as growth in the information sector.


The fifth Kondratieff ended at the turn of this century. At the same time it ended, the sixth Kondratieff cycle began. The carrier of this new Kondratieff cycle will be health in a holistic sense.


The Sixth Kondratieff: At first glance, this statement may come as a surprise. Can health expenditures, which are economically classified as pure expenses and as something negative that should thus be avoided if possible, take on the role of a locomotive for growth and employment in the future?


At this point, we should recall the results of modern growth theory. Machi­nery, capital or jobs are only ostensibly the most important sources for economic growth. The main source for economy growth is productivity pro­gress. The sixth Kondra­tieff is carried by an improved productivity in handling health (a more detailed description of the sixth Kondratieff can be found on this homepage)."

(https://www.kondratieff.net/kondratieffcycles)


Daniel Smihula's Long Wave Theory

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

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").

(https://en.wikipedia.org/wiki/Kondratiev_wave)


Review of the evidence

From the Wikipedia:

"Since the inception of the theory, various studies have expanded the range of possible cycles, finding longer or shorter cycles in the data. The Marxist scholar Ernest Mandel revived interest in long-wave theory with his 1964 essay predicting the end of the long boom after five years and in his Alfred Marshall lectures in 1979. However, in Mandel's theory there are no long cycles, only distinct epochs of faster and slower growth spanning 20–25 years.

In 1996, George Modelski and William R. Thompson published a book documenting K-Waves dating back to 930 AD in China. 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".

The historian Eric Hobsbawm also 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".

US-economist Anwar Shaikh analyses 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.

...

Some argue that this logic can be extended. The custom of classifying periods of human development by its dominating general purpose technology has surely been borrowed from historians, starting with the stone age. Including those, authors distinguish three different long-term metaparadigms, each with different long waves. The first focused on the transformation of material, including stone, bronze, and iron. The second, often referred to as industrial revolutions, was dedicated to the transformation of energy, including water, steam, electric, and . Finally, the most recent metaparadigm aims at transforming information. It started out with the proliferation of communication and stored data and has now entered the age of algorithms, which aims at creating automated processes to convert the existing information into actionable knowledge.]

Several papers on the relationship between technology and the economy were written by researchers at the International 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. Cesare Marchetti published on Kondretiev waves and on the diffusion of innovations. 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.[25] In 1996, Giancarlo Pallavicini published the ratio between the long Kondratiev wave and information technology and communication.

Korotayev et al. recently employed spectral analysis and claimed that it confirmed the presence of Kondratiev waves in the world GDP dynamics at an acceptable level of statistical significance.[3][27] 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. 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".

More recently, the physicist and systems scientist Tessaleno Devezas advanced a causal model for the long wave phenomenon based on a generation-learning model[30] and a nonlinear dynamic behaviour of information systems.[31] 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).

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 new technology.

For the end of an application phase of any wave there are typical an economic crisis and economic stagnation. The financial crisis of 2007–2008 is 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 as James Bradfield Moody and Bianca Nogrady who forecast that it will be driven by resource efficiency and clean technology.[33] On the other hand, Šmihula himself considers the waves of technological innovations during 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.[34] It means he believes that we can find long economic cycles (analogical to Kondratiev cycles in modern economy) dependent on technological revolutions even in the Middle Ages and the Ancient era. (https://en.wikipedia.org/wiki/Kondratiev_wave)

More information

  1. Graph 1: Previous Kondratiev waves: [2]
  2. Graph 2: Succession of core cities: [3]
  • For empirical data in favour of the existence of cycles see: * Article: A Spectral Analysis of World GDP Dynamics: Kondratieff Waves, Kuznets Swings, Juglar and Kitchin Cycles in Global Economic Development, and the 2008–2009 Economic Crisis 2010. By Korotayev, Andrey V ;Tsirel, Sergey V. Structure and DynamicsVolume 4, Issue 1 doi

[4]