Kondratieff Cycle Wave Primer

Long before Nikolai Kondratieff, it has been observed in other fields of study that history consists of repetitive patterns of human behaviour. These observations hardly stirred controversy anywhere and were accepted as facts of human history back then and they continue to be taught and accepted as facts of human history today. But it was in the arena of economics, a subset of social science, where Kondratieff presented his thesis that controversy erupted and has continued for the last 100 years.

Kondratieff lived in the newly formed Marxist regime of Russia following the Russian revolution where ideology trumped reason, especially in the area of economics, and all economic theories were to follow the Marxist line. Kondratieff’s papers showing the repetitive nature of capitalist economies moving from periods of prosperity to depression and back to prosperity again went against the Marxist ideology of the self-destructiveness of capitalism. His Marxist colleagues rejected his thesis altogether. But there remained the data that had to be explained away.  Capitalist economies returned to prosperity, Marxists argued, because every so often, there were accidental discoveries of some new sources of wealth or other that brought the economy back to life. Without these accidental discoveries, capitalism would die a revolutionary death. Kondratieff’s work had anticipated the Great Depression of the 1930s by about a decade.

Kondratieff was barely known in the West when John Maynard Keynes published his theory on economics. Before Keynes, business cycles were well accepted in economics where Kondratieff’s work would have been able to set a foundation. And before the Great Depression, Keynes was a Malthusian who believed that population growth must be kept in check so that it does not overrun the food supply. But as the severity of the economic downturn progressed, Keynes changed his mind and thought that the depression was caused by the low birthrate. When he saw how Germany’s economy recovered during WWII however, Keynes parted from those thoughts and formulated how government policies could bring back economic prosperity. Keynes’ work promised something that Kondratieff and business cycle theorists did not. Keynes gave governments tools to alter the course of the economy so that we may no longer be subjected to the turbulent ups and downs of economic uncertainty, so it was believed. With the new course in history set, Kondratieff waves and demographic analysis in economics virtually disappeared. Malthusianism also, became a forgotten notion in history until the 1960s

When the economy sprang back to prosperity in the 1940s and 1950s, coinciding with the Baby Boom, there was great optimism that humans were beginning to be masters their own destiny. No longer were they to be subjected to unknown forces of economic decline and poverty. But by the end of the 1960s it was realized that Keynesian economics did not possess the ability to foresee and control the emerging economic turbulences as was believed. By the 1980s, Keynesian economic theory was dispossessed by a new group of monetary economists. With the ongoing economic turbulence, Kondratieff’s theory re-emerged also, and has been gaining more traction as Keynesian, monetarist and other economic theories continue to show their limitations, especially as we have now entered the greatest economic downturn in more than 70 years

This website is about how demographics has altered our economic and social life. Demographics is the source of the Kondratieff wave. Demographics is the source of Nobel prize economist Simon Kuznets’ Long-swings or Long-cycles also. It was Kuznets’ work on economic data that helped fuel the Keynesian revolution and the field of econometrics. Kuznets work on National Income contributed to the development of the measure of economic activity called the Gross National Product (GNP), the precursor to the Gross Domestic Product (GDP), which clearly shows that, despite all the economic manipulations advocated by changing economic theories over the last 70 years, the Kondratieff Long-wave is still in operation. The relationship between Kuznets Swings and Kondratieff Long-waves was obscured in part because those that looked at Kondratieff waves did not look at demographics and Kuznets work concentrated on a much shorter time-span than Kondratieff. It is now known that Kondratieff Long-waves and Kuznets Long-swings are, in fact, different views of the same data. Consumer spending makes up sixty to seventy percent of GDP. Economic theories that do not look at demographics and do not use long-term correlative constructs such as the Kondratieff wave cannot formulate the appropriate responses needed to meet the challenges of economic change. Our demographic composition determines our economic and social future.

The following are some of the basics of demographics and the Kondratieff wave covered in Baby Boomers, Generation X and Social Cycles: North American Long-waves.

Click on the following links to learn more about demographics and the Kondratieff wave:

Demographics and Economics

Violent Crime

… please be patient – there’s more to come.

Health and Health Care

Pensions

Stock Market