Cycles, Waves, Paradigms, Hegemonic Transitions

The following is an annotated and hyperlinked bibliography, including brief statements on the general problematic and an introduction to each author. Full texts are provided whenever possible. The bibliography is intended as a shared resource, to be enlarged and improved by others as research continues.

Introduction

Beyond the usual business cycles of seven to ten years, generational memory and direct experience show that industrial capitalism goes through recurrent periods of expansion/contraction, with broad upswings and downswings lasting two or three decades each: from the Belle Epoque to the Great Depression of the 1930s, from the postwar boom to the stagflation of the 1970s, from the New Economy surge in the 1990s to the real-estate bust and derivatives crash of 2007-8. In fact the pattern seems to go all the way back to the beginning of the Industrial Revolution. The upswings are characterized by major investments in new productive technologies and means of transport and communication, often leaving a strong mark on the imagination: people speak about ages of steam, railroads, electricity, automobiles, computers. A more sophisticated approach to these periods tries to develop "paradigms," by pointing to self-reinforcing ties between various dynamics in a given period, including trends in science, art, labor organization, government policy, etc.

Theories of waves, cycles and paradigms are compelling in the midst of a development spurt or a major downswing, because they offer predictive power. However, the chronologies are hard to verify, because the statistics can be be cooked in many different ways. What's more, it's necessary to take account of major wars and transfers of hegemonic power on the geopolitical level, which affect the patterns of capital accumulation but don't fit smoothly into the growth cycles. Still the arguments are valuable because they open up a set of correlations between technological innovation, work organization, industrial expansion, consumption practices, governmental and geopolitical strategies, and most importantly, economic crises. The aim of the research is to extend these correlations into the present crisis and the immediate future.

Bibliography

--The notion of "business cycles" was first introduced by a French economist named Clément Juglar on the basis of empirical studies of data provided mainly by the central banks of France and England, in a book published in 1862. Today the "Juglar cycle" is considered to last from 7 to 11 years. When Marx published the first volume of Capital in 1867, he considered the existence of a decennal cycle to be common knowledge (cf. chapter 25). In volume II of Capital, chapter 9, he undertakes a specific analysis of cycle and crisis:

"As the magnitude of the value and the durability of the applied fixed capital develop with the development of the capitalist mode of production, the lifetime of industry and of industrial capital lengthens in each particular field of investment to a period of many years, say of ten years on an average. Whereas the development of fixed capital extends the length of this life on the one hand it is shortened on the other by the continuous revolution in the means of production, which likewise incessantly gains momentum with the development of the capitalist mode of production. This involves a change in the means of production and the necessity of their constant replacement, on account of moral depreciation, long before they expire physically.... During this cycle business undergoes successive periods of depression, medium activity, precipitancy, crisis. True, periods in which capital is invested differ greatly and far from coincide in time. But a crisis always forms the starting-point of large new investments. Therefore, from the point of view of society as a whole, more or less, a new material basis for the next turnover cycle."

Clément Juglar, Des Crises commerciales et de leur retour périodique en France, en Angleterre et aux Etats-Unis, Paris, 1862.

Karl Marx, Capital, vol. I, chapter 25, The General Law of Capitalist Accumulation
---- Capital, vol. II, chapter 9, The Aggregate Turnover of Advanced Capital, Cycles of Turnover

--The idea of a long wave was initially raised in a 1896 article by a Russian Marxist, Alexander Helphand (aka Parvus) in the Sachsische Arbeiterzeitung, later expanded in a 1901 brochure, Die Handelskrise und die Gewerkschaften. A similar idea was developed independently by a Dutch Marxist, J. Van Gelderen (aka J. Fedder), in articles written in 1913 in the periodical Die Nieuwe Tijd. Van Gelderen's ideas were praised by Karl Kautsky and developed further by Sam de Wolff in the article "Prosperitats- and Depressionsperioden," published in 1924 in a book called Der Lebendige Marxismus, Festgabe zum 70. Geburtstag von Karl Kautsky. No translations exist in English; see the discussion in Joshua Goldstein, Long Cycles, ch. 2, and in Ernest Mandel, Late Capitalism, ch. 4 (both below).

--The first major debate on long waves occurred in the USSR in the context of the worldwide crisis of 1920-21. After an early treatment in a book on "The World Economy and Economic Fluctuations in the War and Postwar Period" (Moscow, 1922), the economist Nikolai Kondratiev developed a statistical analysis of long economic cycles lasting from forty-seven to sixty years, which he presented in a 1925 article. By using data on prices, interest rates, wages, foreign trade and other indicators in France, England and the USA, as well as figures for total coal and pig-iron production in the entire world, he was able to identify three long waves: rising from 1789 to a peak in 1814, then declining until 1848; rising again to a peak in 1873, then declining until 1896; rising again to a peak around 1920. Kondratiev obtained his curves by using a nine-year moving average to smooth out the variations of the typical seven- to eleven-year business cycle, which he called an "intermediate cycle." As he wrote: "The long waves really belong to the same complex dynamic process in which the intermediate cycles of the capitalistic economy with their principal phases of upswing and depression run their course. These intermediate cycles, however, secure a certain stamp from the very existence of the long waves. Our investigation demonstrates that during the rise of the long waves, years of prosperity are more numerous, whereas years of depression predominate during the downswing." He observed that an esepcially large number of technological inventions tended to be made during the downswings, but only applied at a large scale during the rising cycle; and also that "the most disastrous and extensive wars and revolutions" on the upswing, "during the period of high tension in the expansion of economic forces." For Kondratiev, "the long waves arise out of causes that are inherent in the essence of the capitalistic economy."

In his report to the Third Congress of the Communist International in June 1920 (below), Trotsky independently developed a similar picture of business cycles nested within long waves, which allowed him to sketch out various possible developments of the current crisis. As he said: "It is necessary to determine the general condition of the capitalist organism by the specific way in which it breathes, and the rate at which its pulse beats." He identified almost exactly the same dates as Kondratiev, but attributed the turning points to external rather than inherent factors. In a 1923 text called "The Curve of Capitalist Development" he directly critiqued Kondratiev: "The absorption by capitalism of new countries and continents, the discovery of new natural resources, and, in addition, significant factors of a 'superstructural' order, such as wars and revolutions, determine the character and alteration of expansive, stagnating or declining epochs in capitalist development." In a book published in 1928, Kondratiev responded by explaining the cycles as the result of major investment in the heaviest and most costly infrastructures of fixed capital after a long period of depreciation. Trotsky considered Kondratiev to be a bourgeois economist, undoubtedly because his theory did not predict any end of capitalism. It must be recalled that Kondratiev was imprisoned in 1930 and liquidated in Stalin's Great Purge of 1938; but then again, Trotsky himself was assassinated by an NKVD agent in 1940.

Nikolai Kondratieff, "Long Waves in Economic Life" (1925)
---- The Long Wave Cycle (1928), English translation New York: Richardson & Snyder, 1984. [WE NEED A COPY OF THIS!!!!!]

Leon Trotsky, "Report on the World Economic Crisis and the New Tasks of the Communist International" [Part II], June 23, 1921
---- "The Curve of Capitalist Development", April 1923

Richard Day, "The Theory of the Long Cycle: Kondratiev, Trotsky, Mandel," in New Left Review 99, 1976

--The next big debate on long cycles took place in America, when the Austrian economist Joseph Schumpter wrote the book Business Cycles in 1939, which drew a response from the American economist Simon Kuznets. Schumpter's main contribution is an insistence on the entrepreneur's capacity to transform existing technological inventions into effective business innovations at the start of a long cycle. His ideas on entrepreneurial creativity are a key source for later work on "innovation systems." Schumpeter conceived an elaborate system including Kondratiev long technological cycles of forty-five to sixty years, Juglar fixed investment cycles of seven to eleven years, and Kitchin inventory cycles of three to five years. Kuznets wanted to dump the Kondratiev and add his own infrastructural investment cycle of fifteen to twenty-five years! Very recently (in 2010) researchers using the techniques of spectral analysis have tried to find all these cycles in the existing long-run data, generating a very interesting set of graphs.

Joseph Schumpeter, Business Cycles: A Theoretical, Historical and Statistical Analysis of the Capitalist Process, 1939

Simon Kuznets, "Schumpeter's Business Cycles," 1940

Andrey V Korotayev and Sergey V. Tsirel, "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

--The last important Marxist theorist of long waves (so far at least) was the Belgian revolutionary, Ernest Mandel, who used the concept to predict the end of the postwar boom as early as 1964. In his major work, Late Capitalism, he extends the cycles indicated by Kondratiev and Trotsky into the postwar period, identifying a falling wave beginning in 1914, a rising wave in 1940/45 and a new downswing in 1967. An expansion should therefore have come sometime around 1992 -- which appears to have been the case. To determine the character and intensity of an upswing, Mandel brings into play not only technological innovations, but also the questions of class conflict and the geographical expansion or contraction of the world market. In an article written in 1981 he makes a remark about the intensity of an upswing based on computers: "The idea that innovation creates more or less automatically an expansionary long wave, if only it is broad and sustained enough, is utterly misleading. Large-scale innovation only creates a long wave of sustained and increased growth if there is simultaneously a significant broadening of the market, and a rate of growth which leads towards a high level of employment. But innovation can lead to increased unemployment and thereby a stagnating market for final consumer goods and stagnant overall investment. According to David Foster, a computer which it takes 350 men/years to produce replaces 4 000 men/years in the service industry. Surely, all things remaining equal, such types of innovation will not lead to sustained high levels of economic growth." However, all things did not remain equal. There was a huge expansion of the world market after 1989 and a doubling of the capitalist labor force through the integration of Eastern Europe, China and India as manufacturing and service providers, at the same time as employment continued to stagnate in Europe and now in the United States. Mandel's emphasis on the size of the market and labor's relation to the kinds of technology being deployed should be brought into play under these new conditions.

Ernest Mandel, "The Economics of Neo-Capitalism," 1964
---- Late Capitalism, 1972 (English translation 1976)
---- Long Waves of Capitalist Development: The Marxist Interpretation (Cambridge University Press/Editions de la Maison des Sciences de l'Homme, 1980) [WE SHOULD GET A COPY OF THIS!!!]
---- "Explaining Long Waves of Capitalist Development," 1981

--Long waves in relation to bursts of technoscientific innovation is the concern of a more recent group of researchers, beginning with Christopher Freeman and Luc Soete. In The Economics of Industrial Innovation (1974, rewritten in 1999) they argue that at the outset of long waves, leading or paradigm changing technologies, appearing in pairs or clusters, start to reshape key industries and so provide an incentive for changing the whole economic system. What matters for their analysis is the diffusion of technologies in society, not the date when they were invented. They establish the following periods: the Industrial Revolution 1780-1840 was founded on factory production of textiles; the second long wave 1840-1890 was based on steam and railways, the third 1890-1940s was the age of electricity and steel, the fourth 1940s-1990 was the age of mass production of automobiles and synthetic materials, and in the 1990s began the age of microelectronics and computer networks. They maintain that at around 1890 a step change happened in industrial innovation: the majority of innovations came no longer from inspired individuals, highly motivated private experimentors, experienced mechanics and so on, but from organized research within large firms. This type of observation is what leads other researchers on to the analysis of Schumpeterian "innovation systems" and their embeddedness within supporting institutional frameworks, for instance, Giovanni Dosi. In a later book, entitled As Time Goes By: From the Industrial Revolutions to the Information Revolution, Freeman and Francisco Louça make what looks like the most sophisticated use of the Kondratiev model. They maintain the statistical apparatus but attempt to purge it of all simple formalism, to replace it within irreversible historical time and to specify the full range of institutional interactions that lead to the preeminence of a certain technology set. As Richard Nelson remarks in the Foreword: "The authors see the economic institutions of a country as having an integrity of their own, but also as being intertwined with other major social subsystems and institutions: those concerned with technology, science, politics and culture more broadly. The authors develop the argument that the central reason why certain countries have been the leaders in different economic eras is that the various subsystems there fit together to better provide a supporting overall structure for the key technologies." At this point, long-wave theory comes very close to the Regulation Approach.

All this goes back to observations made by the Venezuelan researcher and consultant Carlota Perez in 1983: "We propose that the capitalist system be seen as a single very complex structure, the subsystems of which have different rates of change. For the sake of simplicity we can assume two main subsystems: on the one hand a technoeconomic, and on the other a social and institutional, the first having a much faster rate of response than the second. The long waves would be successive phases in the evolution of the total system or, as we have termed them, successive modes of development. The root cause of the dynamics of the system would be the profit motive as generator of innovations in the productive sphere... Each mode of development would be shaped in response to a specific technological style understood as a kind of paradigm for the most efficient organization of production." In a recent book on Technological Revolutions and Financial Capital, Perez likens the common sense or "rules of thumb" that prevail in a given period to Thomas Kuhn's notion of "normal science," which eventually has to be supersceded by a radical shift: "As in Kuhn's model of 'revolutionary science,' breaking the trend and searching in new directions is fostered and facilitated by the confrontation of limits and crises in the established paradigm." To show how the paradigm installs itself to produce the norms of business practice, she sketches an idealized chronology of the "great surges" of techno-economic development, which she divides into four characteristic phases: irruption, frenzy, synergy, maturity. Between the first and second half of the great surge she places a decisive financial crisis, which is the real subject of the book: "At the‌ crossroads of the turning point in the surge, the outcome is very much determined by politics, ideologies and relative power." This is an appeal for government intervention and other forms of regulation in the present, as she makes clear in a subsequent article on "The Double Bubble of the Turn of the Century."

The problem is, Perez doesn't follow the Kondratiev chronology: she interjects a very short "Age of Electricity, Steel and Heavy Engineering" from 1875 to 1908, and makes Fordism into a single period stretching from 1908 to 1971. She also tends to portray the New Deal and postwar Keynesianism as a typical phase of techno-economic development. Does her model become misleading for these reasons? Or is it in fact a better model? A strict comparison with the chronologies proposed by Freeman and by Mandel and a study of the reasons Perez had for adopting her schema would probably yield a lot of insight into technopolitics.

Christopher Freeman and Luc Soete, The Economics of Industrial Innovation (3rd edition, 1999) [WE NEED A COPY OF THIS!!!!]

Christopher Freeman and and Francisco Louça, As Time Goes By: From the Industrial Revolutions to the Information Revolution, 2002

Giovanni Dosi, Innovation, Organization and Economic Dynamics: Selected Essays, 2000

Carlota Perez, "Structural Change and the Assimilation of New Technologies in the Economic and Social Systems," 1983
---- Technological Revolutions and Financial Capital: The Dynamics of Bubbles and Golden Ages (Cheltenham, Edward Elgar, 2003), several chapters available here.
---- "The Double Bubble at the Turn of the Century: Technological Roots and Structural Implications," 2009

--Finally, an attempt to cumulate the existing research on long cycles was made in 1998 by an American professor, Joshua Goldstein. In particular, Goldstein tries to correlate the Kondratiev waves with the outbreak of wars and the larger question of hegemonic transitions. A 2004 article assesses the predictive power of his analyses made in the late 1980s. It would be most interesting to compare his work with the definitive world-systems theory of hegemonic transition, published by Giovanni Arrighi, Beverley Silver and their collaborators in 1999. This would open the door to another crucial issue: the role that will be played by technopolitical development in China over the next twenty years.

Joshua Goldstein, Long Cycles: Prosperity and War in the Modern Age, 1988
---- "The Predictive Power of Long Wave Theory, 1989-2004"

Giovanni Arrighi, Beverley Silver, et al, Chaos and Governance in the Modern World-System, 1999
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