Kondratiev Wave
Also called Supercycles, surges, long waves or K-waves—are described as regular, sinusoidal-like cycles in the modern (capitalist) world economy. Averaging fifty and ranging from approximately forty to sixty years in length, the cycles consist of alternating periods between high sectoral growth and periods of relatively slow growth. Unlike the short-term business cycle which in various forms has been familiar since the nineteenth century, the long wave of this theory does not belong within current orthodox economics and is sometimes categorized as part of heterodox economics (a catch-all term for alternative ideas).
The Russian economist Nikolai Kondratiev (also written Kondratieff) was the first to bring these observations to international attention in his book The Major Economic Cycles (1925) alongside other works written in the same decade. Two Dutch economists, Jacob van Gelderen and Samuel de Wolff, had previously argued for the existence of 50 to 60 year cycles in 1913. However, the work of de Wolff and van Gelderen has only recently been translated from Dutch to reach a wider audience.
Nikolai Kondratiev 4 March 1892 - 17 September 1938 was a Soviet economist, but his economic conclusions were disliked by the Soviet leadership and upon their release he was quickly dismissed from his post as director of the Institute for the Study of Business Activity in the Soviet Union in 1928. His conclusions were seen as a criticism of Stalin’s intentions for the Soviet economy: as a result he was sentenced to the Russian Gulag and later received the death penalty in 1938.
Later, in Business Cycles (1939), Joseph Schumpeter suggested naming the cycles, "Kondratieff waves", in honor of the economist who first noticed them. In the 1950s, French economist François Simiand proposed naming the ascendant period of the cycle "Phase A" and the downward period "Phase B". Some market commentators divide the Kondratiev wave into four 'seasons', namely, the Kondratiev Spring (improvement or plateau) and Summer (acceleration or prosperity) of the ascendant period and the Kondratiev Fall (recession or plateau) and Winter (acceleration or depression) of the downward period.
Explanations of the cycle
Early on, four schools of thought emerged as to why capitalist economies have these long waves. These schools of thought centered on innovations, capital investment, war and capitalist crisis. According to the innovation theory, these waves arise from the bunching of basic innovations that launch technological revolutions that in turn create leading industrial or commercial sectors. Kondratiev's ideas were taken up by Joseph Schumpeter in the 1930s. The theory hypothesized the existence of very long-run macroeconomic and price cycles, originally estimated to last 50–54 years.
A rough schematic drawing showing the "World Economy" over time according to the Kondratiev theory
Most cycle theorists agree, with the "Schumpeter-Freeman-Perez" paradigm of five waves so far since the industrial revolution, and the sixth one to come. These five cycles are - The Industrial Revolution—1771
- The Age of Steam and Railways—1829
- The Age of Steel, Electricity and Heavy Engineering—1875
- The Age of Oil, the Automobile and Mass Production—1908
- The Age of Information and Telecommunications—1971
Period | Date | Innovation | Saturation point |
First Industrial Revolution | Circa 1800 – 1850 | Cotton based technology; spinning weaving, etc. | 1810 –end of Napoleonic Wars |
Second Industrial Revolution | Circa 1850 – 1900 | Age of steam; railways, shipping, heavy industry, iron and steel, etc. | 1870s |
Third Industrial revolution | 1908 – 1947 | Petrochemicals, internal combustion engine, electrification. | Inter-war slump 1920s and 30s |
Post-war Boom | 1947 – 1991 | Consumer goods, electronics, etc. | 1973 |
Contemporary Era | 1991 – present | Internet, wireless technology, biotechnology, etc. | 2010s |
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