KONDRATIEFF  (or K-) WAVES

George Modelski

KONDRATIEFF WAVES (or, for short, K-waves) may be defined as a pattern of regularity characteristic of structural change in the modern world economy. Some 60 years in length, it consists of an alternation of periods of high sectoral growth with others, start-up periods of slower growth. The study of this pattern helps to trace the evolution of the global economy, and aids in politico-economic prediction.

Contents

·  The Concept

·  Characteristics

·  Kondratieffs and War

·  Kondratieffs and Global Leadership

·  Evolutionary Explanation

·  Implications

·  Suggested Reading


The Concept

Since the onset of the 20th century, students of the world economy have been drawing attention to certain long-term regularities in the behavior of the leading economies. The first to make this argument in a sustained manner was Nikolai Kondratieff (1984), a Russian economist writing in the 1920s. Statistical work on the behavior of prices, and some output series, for the United States and Britain since the 1790s, led him to conclude that the existence of long waves was quite probable.   He saw the capitalist world economy as evolving and self-correcting and, by implication, he denied the notion of an approaching collapse of capitalism then current among Marxist economists.

In the 1930s, Joseph Schumpeter endorsed this concept, and named the pattern the Kondratieff, a name that has since been attached to this phenomenon, even as its existence remained in contention in the years after 1945. Neo-classical economists have remained wary of it, and it is only in the 1970s, as the post-World War II expansion slowed down once again that attention was drawn to it, and new research especially on innovation moved the subject forward in an important manner.

 Characteristics

The emerging view now broadly characteristic of a significant body of scholarship (see in particular Rostow 1978, Van Duijn 1983, Freeman 1983, Berry 1991, Modelski and Thompson 1996) might be summarized as follows:

1.         K-waves are attributes of the world economy and are more visible in international production data than in those of individual national economies. They are processes characteristic first of all of a lead national economy (such as that of the United States, or Britain in the 18-19th centuries) and of world trade in products and services of leading sectors, hence of the global economy.

2. K-waves concern output, rather than prices, and sectoral output surges and infrastructural investment in the world economy rather than the general macroeconomic performance (e.g. GNP growth) of national economies. They should not be sought for in the ups and downs of such indicators as gross domestic product and must be distinguished from shorter-term business cycles and fluctuations in the economic conditions of individual countries. jHowever, high-growth periods for leading sectors tend to translate into general economic expansion and prosperity.

3. K-waves unfold as phased processes that imply S-shaped growth (or learning) curves, including for each particular sector, and over a period of some 50-60 years, a period of slow start-up, followed by fast growth, and ultimate leveling-off. That is why they are waves of economic activity, each wave different in kind from the last one, rather than cycles, seen as mechanical fluctuations in attainment of some uniform quantity. The start-up period of the next leading sector is also the period of flattening growth rates, declining profits, and severe competition for the previous lead industry; this transition between two leading sectors peak may be known as downswing, and takes the form of generalized slow-down and in the 1930s, of the Great Depression.

4.         K-waves arise from the bunching of basic innovations that launch technological revolutions that in turn create leading industrial or commercial sectors. In Schumpeter’s classic formulation, such innovations concern new products, services, and methods of production, the opening of new markets and sources of raw materials, and the pioneering of new forms of business organization. In that sense, K-waves are caused by the demand for solutions to new problems, and the supply of such solutions by innovative firms. Each such wave therefore has its own individual innovative character, and can be named accordingly (consult Table 1 for such a listing).

5.         K-waves have their own characteristic location in space and time. Britain’s cotton wave was centered on Manchester. The information K-wave is preferentially seen in such locations as Silicon Valley and Orange County in California. K-waves also have a clear location in time, and can be dated. There is no standard listing, but there is some agreement on the four or five most recent ones. Historians and world system theorists now extend such dating further into the past. Table 1 offers one recent scheme reaching all the way back to Sung China, and grounded in the argument that the origins of the contemporary global economy might be traced to that source one millennium ago. The dates shown next to each K-wave are for the hypothesized start-ups, and the transition period that follows, with the high growth peak reached only some 30-60 years later. All such dates must, of course, be regarded as approximate.

6. K-waves each have their own special character and specialization but each in its own way also changes the structure of the world economy; that is why a sequence of K-waves gives rise to structural transformations. Hall and Preston (1988) have shown that the three most recent K-waves (those that launched i.a. the telegraph and electric power, radio and electronics, and computers and the information industries) might jointly be seen as the carriers of the information revolution. Only in such an extended time-frame can truly long-term processes be properly observed.

 

Kondratieffs and War

Students of International Political Economy have had a long-standing interest in the relationship between K-waves and war. Indeed Kondratieff himself might be regarded as the originator of the hypothesized link between these two phenomena. In particular he observed that wars and revolutions were more likely to occur during what might be called the long start-up, or the transition period. A striking illustration was the Great Depression of the 1930s sandwiched between the two World Wars and between two K-wave peaks, of pre-1914 and post-1945 expansions.

In a thorough empirical study of that relationship in a long time frame Joshua Goldstein (1988) sees economic upswings associated with K-waves as increasing the probability of severe war. Brian Berry (1991) doubts such a connection, and is troubled by the notion of an inherent tendency to war in the global political system.

 

 Kondratieffs and Global Leadership

Goldstein also recognizes but a loose connection between long economic waves, and the fortunes of major powers in the modern world. An alternative view (Modelski and Thompson 1996) argues for a much closer tie in the important structural relationship between K-waves and global leadership. For if the series of K-waves shown in Table 1 can be seen as the rise and decline of successive globally-significant lead industries, then that same table also shows that the series is tightly linked to a parallel (and structurally similar) process, the rise and decline of world powers, hence lasting change in world political arrangements. That latter process is sometimes broadly referred to as the hegemonic cycle, or more precisely, as the long cycle of global politics.

While the precise conditions of that process remain a matter of debate, the existence of a succession of world powers in modern world politics is now taken for granted, and the similarities in the several approaches are now greater than the differences. All of the participants in that debate, including Robert Gilpin, Immanuel Wallerstein, and Paul Kennedy recognized the role of economic growth in that process (see discussion in Thompson 1988,Ch.2-3,6-8). We can also show that the world powers, that served as foci of world politics, accounted for the major proportion of economic innovations.

The left-hand column in Table 1 lists the powers that exercised global leadership (and contended with successive challenges from i.a. Spain, France, and Germany) in the past five hundred years; for the earlier era, it, too, starts with Sung China, and adds the two Italian republics, Genoa and Venice, that might be regarded as prototypical of later oceanic powers, at a time when the Mongols, and then Timur, held sway over Eurasia.

The rise of each such power is seen to be coordinate with K-waves in two ways: in space, in as much as each K-wave is largely located in the world power of that period, and in time, in as much as the timing of these two processes of change is synchronized. What is more, a lead economy, that succeeds in launching lead industrial sectors, is a necessary condition in attaining global leadership; in turn, attainment of global leadership creates the political framework of a global economic order.

In that way, each long cycle of global politics has been matched, in the experience of the modern world, by two Kondratieffs  (for a rigorous test of an early case see Devezas and Modelski 2006).. The first of these serves to establish the necessary conditions for global leadership (as when the late 19th century industrial expansion in steel, chemistry, and electric power laid the foundation for the United States role in the 20th century) and the second is put in place as the result of that attainment of that leadership (as when the settlement of 1945 paved the way for the economic expansion of the post-war years, led by autos, oil, and electronics). The location of the (odd-numbered) K-wave therefore serves as leading indicator of next global leadership,

These considerations throw light on the question of endogenous and/or exogenous nature of these processes. At one level, the K-wave might be seen as an endogenously generated response to problems facing the world economy: basic innovations as responses to system problems, such as railroads as meeting the demands of a rising industrial economy. At the next level, though, as just shown, K-waves in turn determine, and are determined by, structural changes in world politics: they help determine the selection to global leadership, and they are determined by the political framework that leadership has established. In that sense, K-waves are exposed not to random shocks, as some economists have called wars, but to predictable influences that make them coordinate with global political change.

Evolutionary Explanation

A prominent explanation of K-waves relies on the role of basic innovations leading a succession of socio-technical paradigms. The drivers of that evolution are large and small firms, often fresh start-ups launching innovative products that are, or are not, selected by consumers/ buyers in the marketplace, and when selected, are diffused until they reach saturation in their respective markets. The selective pressure is that of markets, but these markets might include large buyers, such as governments whose demands, and research, can stimulate innovation. This economic process coevolves with the political one of rise and decline of world powers. This is a Kondratieff-Schumpeter type of explanation of the change in the global economy, and it might best be described as evolutionary.

Implications

The study of K-waves has predictive value because it helps to define the long-term development tendencies characteristic of the time and place. It is now quite widely agreed that the leading sectors of the late 1990s are the information industries (see also Hall and Preston 1988), and that the K-wave 19 has now moved into higher gear, for a period likely to extend for some two-three decades, into the 2020s. The United States seems to be on the leading edge in most segments of this large sector. If leadership in this, the 19th, K-wave is a leading indicator of future global leadership, then the United States is well positioned for it. Others countries recently prominent in the information industries, including China, Europe, India and Japan, are also well placed in these processes. Most generally, the lowering of the cost of information that results from this trend has a large positive impact on the world-wide spread of democracy.

(Based on article in the Routledge Encyclopedia of International Political Economy)

References and suggested reading

Berry, Brian (1991) Long-wave Rhythms in Economic Development and Political Behavior, Baltimore: Johns Hopkins University Press.

Devezas, Tessaleno C.  ed.  (2006)   Kondratieff Waves, Warfare, and World Security, Amsterdam:  IOS Press.

­­­_______ and  G. Modelski (2006)   "The Portuguese as System-builders"   Globalizations, Vol.3(4), 507=524.

Freeman, Christopher (editor) (1983) Long Waves in the World Economy, London: Frances Pinter. A survey of recent research.

Goldstein, Joshua (1991) Long Cycles: Prosperity and War in the Modern Age, New Haven: Yale University Press.

Hall, Peter and Paschal Preston (1988) The Carrier Wave: New Information Technology and the Geography of Information 1866-2003, London: Unwin Hyman

Kleinknecht, Alfred, Ernest Mandel and Immanuel Wallerstein (1992) New Findings in Long-Wave Research, New York: St. Martin’s. Another survey of recent work, includes Marxist approaches.

Kondratieff, Nikolas D. (1984) The Long Wave Cycle, (tr. Guy Daniels), New York: Richardson and Snyder. Kondratieff’s own basic text.

Modelski, George and William R. Thompson (1996) Leading Sectors and World Powers: The Coevolution of Global Economics and Politics, Columbia: University of South Carolina Press.

Thompson, William R. (1988) On Global War: Historical-Structural Approaches to World Politics, Columbia: University of South Carolina Press Rostow, Walt W. (1978) The World Economy: History and Prospect, Austin: University of Texas Press.

Van Duijn, J.J. (1983) The Long Wave in Economic Life, London: George Allen and Unwin. A baseline for recent K-wave studies.