The Reviewof EconomicStatisticsNOVEMBER, 1935VOLUME XVII NUMBER 6

THE LONG WAVES IN ECONOMIC LIFEN. D. KONDRATIEFF

FOREWORD

The editors of the REVIEW OF ECONOMIC STATISTICS are happy to be able to present in translation thepeculiarly important article by Professor Kondratiefi, which, under the title “Die langen Wellen der Konjunktur,”appeared in the Archiv fur Sozialwissenschaft und Sozialpolitik in 1926 (vol. 56, no. 3, pp. 573-609). The combiningcircumstances of an increasing interest in “long waves” and the difficulty of securing access to the original articlewould alone justify translation and publication of Kondratieff’s contribution to the theory of the trade cycle. Inaddition, the editors would take this means of indicating their intention from time to time of rendering available tothe English-using world outstanding articles in foreign periodicals.

This translation of Professor Kondratieff’s article was made by Mr. W. F. Stolper of Harvard University.Due to the limitations of space, the editors have taken the liberty to summarize certain sections of this translation.With the exception of a ten-page appendix of tabular material, however, all tables and charts have been included.

I. INTRODUCTION/ I 'HE idea that the dynamics of economic lifeA in the capitalistic social order is not of a

simple and linear but rather of a complex andcyclical character is nowadays generally recog¬nized. Science, however, has fallen far short ofclarifying the nature and the types of thesecyclical, wave-like movements.

When in economics we speak of cycles, we gen¬erally mean seven to eleven year business cycles.But these seven to eleven year movements areobviously not the only type of economic cycles.The dynamics of economic life is in reality morecomplicated. In addition to the above-mentionedcycles, which we shall agree to call “intermedi¬ate,” the existence of still shorter waves of aboutthree and one-half years’ length has recently beenshown to be probable.1

But that is not all. There is, indeed, reasonto assume the existence of long waves of anaverage length of about 50 years in the capital¬istic economy, a fact which still further compli¬cates the problem of economic dynamics.

to an inquiry into various problems connectedwith these long waves. Investigation here ismade difficult by the fact that a very long periodof observation is presupposed. We have, how¬ever, no data before the end of the eighteenthcentury and even the data that we do have aretoo scanty and not entirely reliable. Since thematerial relating to England and France is themost complete, it has formed the chief basis ofthis inquiry. The statistical methods used weresimple when no secular trend was present in theseries. If the series displayed a secular trend, aswas the case among physical series, the first stepwas to divide the annual figures by the popula¬tion, whenever this was logically possible, inorder to allow for changes in territory. Then thesecular trend was eliminated by the usual sta¬tistical methods applied to each series as a whole;and Kondratiefi refers specifically to the methodspresented by Dr. Warren M. Persons in thisREVIEW in 1919 and 1920. The deviations fromthe secular trend were then smoothed by a nine-year moving average, in order to eliminate theseven to eleven year business cycles, the shortcycles, and randomfluctuations possibly present.]

IV. THE WHOLESALE PRICE LEVELWhile the index of French prices goes back

only to the end of the 1850’s, the English andAmerican indices date back to the close of theeighteenth century. In order not to overburden

[ 105]

II-III. METHOD[Sections II and III of Kondratieff’s exposition

may be summarized as follows:The succeeding study is to be confined solely

1 Cf. J. Kitchin, “Cycles and Trends in Economic Factors,”REVIEW OF ECONOMIC STATISTICS [hereafter referred to as“this REVIEW”], V (1923), pp. 10-16.

THE REVIEW OF ECONOMIC STATISTICS106

CHART I. — INDEX NUMBERS OF COMMODITY PRICES*(.1901-10=100)

360380

+ 3603603403403603E0 France300300EGOEBO£60£60£40£40£50eeoEDO£00

1B0ISO il 16 016 D England.140 14 Qv

iso1£0Unite1stales1D0 100

BQ8060 60

17BG ’85 1730 ’95 151 ’55 1810 ’15 M ’£5 1838 ’35 1848 45 1&5B ’55 I860 ’85 1828 ’75 1800 ’85 1838 ’35 1900 ’05 1910 15 1980 ’85

* The French data are taken from the Annuaire Statistique [Statistique G6n6rale de la France], 1922, p. 341; the indexnumber has been recalculated on a gold basis through use of dollar-franc exchange rates.

For England, there is for r 782-1865 the index of Jevons; for 1779-1850, a new index number, computed by Silberlingand published in this REVIEW, V (1923); for the period after 1846, we have Sauerbeck’s index, which at present is carriedon by the Statist. Since Silberling’s index is based upon more complete data of the prices of individual commodities thanthat of Jevons, we have used the former for the period 1780-1846. From 1846 on we use Sauerbeck’s index number. Bothindices have been tied together on the basis of their relation during 1846-50, for which period they are both available; afterthis procedure, we have shifted the series to a new base, 1901-10. For the period 1801-20 and since 1914, in which periodsEngland was on a paper standard, the index numbers have been recalculated on a gold basis.

For the United, States, we use the following series, which have been tied together: for 1791-1801, H. V. Roelse (QuarterlyPublications of the American Statistical Association, December, 1917); 1801-25, A. H. Hansen {Hid., December, 1915); 1825-39,C. H. Juergens {ibid., June, 1911); 1840-90, Falkner (Report from the Committee on Finance of the United States SenateWholesale Prices, Wages, and Transportation, 52d Congress, 2d session, Report No. 1394, Part 1 [Washington: GovernmentPrinting Office, March 3, 1893]); since 1890, the B. L. S. index. All index numbers are on the base 1901-10. For the Green¬back period (1862-78), they have been recalculated on a gold basis. All data [except Silberling’s index] are taken from theAnnuaire Statistique, 1922 [which utilizes the sources above cited].

on

this study with figures, the statistical data arepresented exclusively in the form of charts.1

The index numbers of prices plotted on Chart 1

have been neither smoothed nor treated in anyother way. Nevertheless, a mere glance at thechart shows that the price level, despite alldeviations and irregularities, exhibits a succes¬sion of long waves.

The upswing of the first long wave embracesthe period from 1789 to 1814, i.e., 25 years; itsdecline begins in 1814 and ends in 1849, a period

1[Ten pages of tabular material were given by Kondratieffat the end of his article. The charts presented in this trans¬lation are not merely reproductions of those in the originalarticle but have been drawn anew from the data given in histabular appendix. A few slight discrepancies between thenew charts and those of Kondratieff were discovered, but inno case were the discrepancies significant.—Editors.]

of 35 years. The cycle is, therefore, completedin 60 years.2

The rise of the second wave begins in 1849 andends in 1873, lasting 24 years. The turningpoint, however, is not the same in the UnitedStates as in England and France; in the UnitedStates the peak occurs in the year 1866, but thisis to be explained by the Civil War and casts nodoubt on the unity of the picture which thecourse of the wave exhibits in the two continents.The decline of the second wave begins in 1873and ends in 1896, a period of 23 years. Thelength of the second wave is 47 years.

2 In the upswing, the English index exhibits several peaks,which fall in the years 1799, 1805, 1810, and 1814; but sinceafter the year i8t4 a distinctly downward tendency can beobserved, we regard this year as the turning point.

THE LONG WAVES IN ECONOMIC LIFE 107

The upward movement of the third wavebegins in 1896 and ends in 1920, its durationbeing 24 years. The decline of the wave, accord¬ing to all data, begins in 1920.

It is easily seen that the French prices afterthe close of the 1850’s move generally parallel tothe English and American prices. It is, therefore,very probable that this parallelism existed inthe preceding period as well.

We conclude, therefore, that three great cyclesare present in the movement of the price levelduring the period since the end of the 1780’s, thelast of which is only half completed. The wavesare not of exactly the same length, their durationvarying between 47 and 60 years. The first waveis the longest.

V. THE RATE OF INTERESTThe course of the interest rate can be seen most

conveniently from the movement of the discountrate and the quotations of interest-bearing secu¬rities. Because the latter depend less on randomfluctuations and reflect more accurately the influ¬ence of long-run factors, we use here only thequotations of state bonds.

CHART 2

QUOTATIONS OF INTEREST-BEARING SECURITIES

The quotations of interest-bearing securitiesmanifest, as is well known, a movement oppositeto that of general business activity and of theinterest rate. Therefore, if long waves are opera¬tive in the fluctuations of the interest rate, themovement of bond quotations must run in adirection counter to that of commodity prices.

Just this is shown in our chart, which exhibitsclearly the long waves in the movement of thequotations and consequently of the interest rate.

The chart starts only after the NapoleonicWars, i.e., about the time that the first long waveof commodity prices had reached its peak; itdoes not cover the period of the upswing of thelatter. Considering the data at hand, however,we may suppose that the quotations of statebonds took part in this movement also.

English consols actually manifest a decidedlydownward tendency between 1792 and 1813.Their quotation in 1792 is 90.04; in 1813, on theother hand, it is 58.81. Although they drop mostrapidly in the years 1797 and 1798, yet this steepdecline is only an episode, and the general down¬ward tendency from 1792 to 1813 stands outquite clearly.3

Accordingly, the period from the beginning ofthe 1790’s up to 1813 appears to be the phase ofrising interest rates. This period agrees perfectlywith that of the rising wave of commodity prices.

The wave of bond quotations rises after 18134— or the wave of the interest rate declines —even till the middle of the forties. (See thechart.) According to the unsmoothed data, con¬sols reached their peak in 1844; the Rente, in

1845. With this, the first great cycle in themovement of the interest rate is completed.

The downward movement of bond quotations(or the rise of the interest rate) during the secondcycle lasts from 1844-45 t0 1870-74.6 From thistime onward until 1897, the market price ofinterest-bearing securities rises again, and conse¬quently the interest rate goes down. With this,the second great cycle is completed.

The new decline of the quotations (rise in the3 Cf. N. J. Silberling, “British Financial Experience, 1790-

1830,” this REVIEW, I (1919), p. 289.4 The first years have disappeared from our chart because of

the use of the nine-year moving average.'5 According to the original data, consols actually reach their

lowest point in 1866, but the general tendency continues tobe one of decline until 1874. The slump of quotations in 1866is connected with the increase in the interest rate just preced¬ing the money-market crisis of that year, and with the Austro-Prussian War.

+E0French Rente;

40-Jt-'

d0 V A console V/-10 -10

-eo-ED T’15 1BE0 ’£5 1830 Ti 18# 15 1851 Ti I860 IS Iffl T) 188! ’85 1830 T5 M '05 1910 ’15 13£0 ’£5

Chart 2 shows the quotations of the FrenchRente1 and of English consols.2 Both have asecular trend during the period of observation.The chart shows the deviations from the seculartrend smoothed by means of a nine-year movingaverage.

1 Until 1825 the quotations of the five-per-cent Rente, afterthis the quotations of the three-per-cent Rente. In order toconnect both series, we have first computed relatives with thebase 1825-30 for both series. Then we shifted the base of thecombined series to 1901-10, in order to make them comparablewith the price curve. The original data are taken from theAnnuaire Statistique [Statistique G6n6rale de la France], 1922.

2 According to the data in William Page, ed., Commerce andIndustry, Vol. 2 (London, 1919), statistical tables, pp. 224-25.Relatives have been calculated from the figures, with the base1901-10.

THE REVIEW OF ECONOMIC STATISTICS108

rate of interest) lasts from 1897 to 1921. Thusthe existence of great cycles in the movement ofthe interest rate appears very clearly.1 Theperiods of these cycles agree rather closely withthe corresponding periods in the movement ofwholesale commodity prices.

VI-VII. WAGES AND FOREIGN TRADE[In Section VI, Kondratieff examines the

course of weekly wages of workers in the Englishcotton-textile industry since 1806 and of Englishagricultural laborers since 1789.2 The originalwage data are reduced to a gold basis and thenexpressed in the form of index numbers with1892 as the base year. Chart 3 presents these

For his foreign-trade series presented in Sec¬tion VII, Kondratieff takes the sum of Frenchexports and imports. The figures were first cor¬rected for population changes, and thereafter thesecular trend (in the form of a second-degreeparabola) was eliminated. The resulting devia¬tions, smoothed by use of a nine-year movingaverage, are presented in Chart 4. After an

CHART 4.— FRENCH FOREIGN TRADE

+40 +40

\+E0 +eo0 11s-eo -eo

N-40 -40-60 -60

1831 ’3S 104# ’45 1851 ’55 10E0 15 1871 ’15 1880 ’85 1830 ’35 1300 ’05 1310

examination of the chart, the author concludesthat the data on foreign trade also show theexistence of two great cycles, the periods ofwhich coincide with those observed in the otherdata.]

CHART 3.— WAGES IN ENGLAND

Scale lornScale tori+1511+30FH7h:

+80--/--k +1M-\

AhAjriculiural laBoren+5.0

0W-TV-.. VIII. THE PRODUCTION ANDCONSUMPTION OF COAL AND PIG IRON,

AND THE PRODUCTION OF LEAD

So far we have examined the movements onlyof such magnitudes, sensitive to changes in busi¬ness conditions, as possess either a purely valuecharacter, e.g., commodity prices, interest rates,and wages, or at least a mixed character such asthe data on foreign trade. Our study, however,would lose much of its force if we did not alsoanalyze the behavior of purely physical series.

For this purpose we choose English coal pro¬duction,3 and French consumption of coal,4 aswell as the English production of pig iron and oflead.6 We divided the original figures by thepopulation, and eliminated from the resultingseries the secular trends. The deviations fromthe lines of trend, after being smoothed by useof a nine-year moving average, were then ana¬lyzed. The results are shown in Chart 5.

Continuous data are available, unfortunately,only for the period after the 1830’s, in part evenonly after the 1850’s. Consequently, only oneand one-half to two great cycles can be shown,

but these appear with striking clarity in bothcharts.

3 According to the data of W. Page, op. cit.4 Annuaire Statistique, 1908 and 1922.6 According to British and Foreign Trade and Industry, and

the Statistical Abstract [for the United Kingdom].

'I-Gottm-lexiilE workersI I I I I I

L-IB -3.1n1731 15180tl 151811’MM151838 151841 ’45185115 1868 15 1878 15 1881 '15 1831 ’15 1311151311

wage figures as deviations from trend, smoothedby use of a nine-year moving average. Kon¬dratieff devotes the remainder of this section toa description of the series presented in Chart 3,

from which analysis he concludes that, despitethe scantiness of the available data, “long wavesare undoubtedly present in the movement ofwages, the periods of which correspond fairlywell with those in commodity prices and theinterest rate.”

1 The existence of these cycles is also confirmed by severalzur Geschichte des Zins-other studies: P. Wallich, “Beitrage

fusses von 1800 bis zur Gegenwart,” Jahrbiicher fur National-okonomie und Stalistik, m. Folge, Vol. 42, pp. 289-312;J. Lescure, “Hausses et Baisses Gcnerales des Prix,” Revued’Economic Politique, Nr. 4 (1912); R. A. Macdonald, “TheRate of Interest Since 1844,” Journal of the Royal StatisticalSociety, LXXV (1912), pp. 361-79; T. T. Williams, “The Rateof Discount and the Price of Consols,” ibid., pp. 380-400.Also ibid., pp. 401-11, the discussion of the last-mentionedstudies, especially the speech of E. L. Hartley, pp. 404-06.

2 [Earnings of cotton-textile workers for 1806-1906 are takenfrom G. H. Wood, The History of Wages in the Cotton Trade(London, 1910), p. 127; beginning with 1906, they are fromthe Abstract of Labour Statistics.

For agricultural laborers, wage data for 1789-1896 are fromA. L. Bowley, “The Statistics of Wages in the United King¬dom During the Last Hundred Years: Part IV, AgriculturalWages,” Journal of the Royal Statistical Society, Lxn (1899),

PP- SSS F- Thereafter, the figures are from Page, op. cit. Thedata refer to England and Wales.]

THE LONG WAVES IN ECONOMIC LIFE 109

There is a retardation in the increase of coal above, although several other series did notconsumption [in France] until the end of the show the cycles with the same clarity. Value1840’s, then the advance becomes more rapid series which show long waves are the depositsand reaches its peak in 1865, according to the and the portfolio of the Bank of France, andsmoothed curve (on the chart), and in 1873, deposits at the French savings banks; series ofaccording to the unsmoothed curve. In the latter a mixed (quantity x price) character are Frenchyear, English coal production also reaches a max- imports and English imports, and total Englishimum, according to the unsmoothed curve. Then foreign trade. As regards the movement of

indices of a physical character, the existence, oflong waves has been established in the coal pro¬duction of the United States, of Germany, andof the whole world; in the pig-iron production ofthe United States and of Germany and of thewhole world; in the lead and coal production ofthe United States; in the number of spindles ofthe cotton industry in the United States; in thecotton acreage in the United States and the oatacreage in France, etc.

It was absolutely impossible, on the otherhand, to establish long waves in French cottonconsumption; in the wool and sugar productionof the United States; and in the movement ofseveral other series.

CHART 5.— CONSUMPTION OF COAL IN FRANCE AND

PRODUCTION OF COAL, PIG IRON, AND LEAD IN ENGLAND

Coal production and coal consumptionScale tor France 3cale for England+4S +eoa

A«-l.....l-l- 1 1v Coal consumption/' v> \

„ \ France/ ;U sr- t~T ***

+100

0I :

\ /-CD -100

V Coal production,ÿI I England > J

-40 -EDO

-BO -3001S30 ’35 1840 ’45 1550 ’55 I860 Vi 1010 ’15 1880 *80 1830„ . , . Tig iron and lead production, in EScale tor pig iron

’35 1900 HO 1910- ”15nglani

5cal£toi+E0

X. STATISTICAL FINDINGSThe evidence we have presented thus far per¬

mits some conclusions.(i) The movements of the series which we

have examined running from the end of theeighteenth century to the present time show longcycles. Although the statistical-mathematicaltreatment of the series selected is rather compli¬cated, the cycles discovered cannot be regardedas the accidental result of the methods employed.Against such an interpretation is to be set thefact that these waves have been shown withabout the same timing in all the more importantof the series examined.

(2) In those series which do not exhibit anymarked secular trend — e.g., prices — the longcycles appear as a wave-like movement about theaverage level. In the series, on the other hand,the movement of which shows such a trend, thecycles accelerate or retard the rate of growth.

(3) In the several series examined, the turningpoints of the long waves correspond more or lessaccurately. This is shown clearly by Table i,

which combines the results of the investigationnot only of the data considered above but alsoof several other series.1

1 Table 1 enumerates tbe maxima and minima according tothe original data. The problem of the most accurate method

Li IXAtin +150

A-\Tfyiron--/TNt.

00O Leal

-10 -150

-2D -300

-450-301840 ’45 1851) ’55 I860 ’65 1818 75 1881 ’81 1890 ’95 1301 ’05 1910 75 1950

follows the decline, which comes to an end in1890-94, giving way to a new long upswing. Sowe observe in the data relative to the rapidity inthe increase of coal production and coal con¬sumption nearly the whole of two large cycles,the periods of which correspond closely to theperiods we have already found when consideringother series.

Similarly, English production of pig iron andlead indicates sufficiently clearly the existence ofone and one-half large cycles.

IX. OTHER SERIESFor the sake of brevity, we break off here the

systematic analysis of the long waves in thebehavior of individual series. We have alsoexamined other data, some of which likewiseshowed the same periods as those mentioned

THE REVIEW OF ECONOMIC STATISTICSno

TABLE I

Third cycleSecond cycleFirst cycle

Country and seriesBeginning of Beginning of

rise declineBeginning of

riseProbable

beginning ofdecline

Beginning of Beginning ofdeclinerise

Francei. Prices2. Interest rate

3. Portfolio of the Bank of France4. Deposits at the savings banks. .5. Wages of coal miners6. Imports

7. Exports8. Total foreign trade

9. Coal consumption10. Oat acreage1

18961873 192019211914

1816*18x0*

18941872184418731851 1902

1892189S

1874184418741849

189618801848 191418941848 1872 191418961848 1872 1914189618731849

1850*1914

1892187s 1915

England1. Prices2. Interest rate3. Wages of agricultural laborers4. Wages of textile workers5. Foreign trade6. Coal production7. Pig iron production8. Lead production

United States1. Prices2. Pig iron production3. Coal production4. Cotton acreage

1896187318491789 l8l4 1920192118971816 1844 18741790

188918441812-171810*1810*

18751790x85ot1842}

1850*

1890187418941873 191418931873 1914

1871§ 1891 191418921870 1914

189618661814 1849 1920192019181915

17901875-80 1900

189618931892-951874-81

GermanyCoal production

Whole world21. Pig iron production2. Coal production. . .

1873II 1895 1915

1872H 1894 191418961873 1914

(0S,'1 Reversed cycles.2 The data which refer to the whole world have not been corrected for population changes.* Approximate dates.f Another minimum falls in the year 1835.t Other minima lie in the years 1837 and 1855.§ Another maximum falls in the year 1881.|| Another maximum falls in the year 1883.If Another maximum falls in the year 1882.

It is easy to see from this table that there is avery close correspondence in the timing of thewave movements of the series in the individualcountries, in spite of the difficulties present in thetreatment of these data. Deviations from the

general rule that prevails in the sequence ofthe cycles are very rare. It seems to us thatthe absence of such exceptions is more remark¬able than would be their presence.

(4) Although for the time being we considerit to be impossible to fix exactly upon the yearsthat marked the turning points of the longcycles, and although the method according towhich the statistical data have been analyzed

for the determination of the maxima and minima woulddeserve a special analysis; at present we leave this questionopen. We believe only that the indicated turning points arethe most probable ones.

(

THE LONG WAVES IN ECONOMIC LIFE HI

permits an error of 5-7 years in the determination (1) The long waves belong really to the sameof the years of such turnings, the following limits complex dynamic process in which the interme-of these cycles can nevertheless be presented as diate cycles of the capitalistic economy with theirbeing those most probable: principal phases of upswing and depression run

their course. These intermediate cycles, how¬ever, secure a certain stamp from the very exist¬ence of the long waves. Our investigation

2. The decline lasted from 1810-17 demonstrates that during the rise of the longuntil 1844-51.

1. The rise lasted from the end of the1780’s or beginning of the 1790’suntil 1810-17.First long wave

waves, years of prosperity are more numerous,I. The rise lasted from 1844-51 until whereas years of depression predominate during

the downswing.1(2) During the recession of the long waves,

agriculture, as a rule, suffers an especially pro-1. The rise lasted from 1890-96 until nounced and long depression. This was what

happened after the Napoleonic Wars; it hap¬pened again from the beginning of the 1870’sonward; and the same can be observed in the

(5) Naturally, the fact that the movement of year® after the World War.2

the series examined runs in long cycles does (3) During the recession of the long waves, an

not yet prove that such cycles also dominate the especially large number of important discoveries

movement of all other series. A later examina- and inventions in the technique of productionand communication are made, which, however,

1870-75.2. The decline lasted from 1870-75

until 1890-96.

Second long wave

1914-20.2. The decline probably begins in the

years 1914-20.

Third long wave

tion with this point especially in mind will haveto be made to show which ones of these share are usually applied on a large scale only at the

beginning of the next long upswing.(4) At the beginning of a long upswing, gold

production increases as a rule, and the world

the described wave-like movement. As alreadypointed out, our investigation has also extendedto series in which no such waves were evident.On the other hand, it is by no means essential market [for goods] is generally enlarged by the

that the long waves embrace ah series. assimilation of new and especially of colonial

(6) The long waves that we have established countries.

above relative to the series most important ineconomic life are international; and the timing long waves> i-e-> during the Period of high tenslon

of these cycles corresponds fairly well for Euro- m the expansion of economic forces, that, as a

pean capitalistic countries. On the basis of the the most disastrous and extensive wars and

data that we have adduced, we can venture the revolutions occur.

statement that the same timing holds also forthe United States. The dynamics in the develop- these recurring relationships an empirical char-

ment of capitalism, however, and especially the acter only, and that we do not by any means

timing of the fluctuations in the latter country hold that they contain the explanation of the

may have peculiarities. long waves-

(5) It is during the period of the rise of the

It is to be emphasized that we attribute to

XII. THE NATURE OF LONG WAVES

Is it possible to maintain that the existence of

of statistical series characterizing the movement long cycles in the dynamics of the capitalist

of the capitalist economy. From another point economy is proved on the basis of the preceding

of view, the historical material relating to the statements? The relevant data which we were

development of economic and social life as a able to quote cover about 140 years. This period

whole confirms the hypothesis of long waves, comprises two and one-half cycles only. Although

We neither can nor shall undertake here an anal- the period embraced by the data is sufficient to

ysis of this material. Nevertheless, several

XI. EMPIRICAL CHARACTERISTICSWe were led to these conclusions by the study

1 Cf. A. Spiethoff, “Krisen,” (Eandworterbuch der Staatswis-

' general propositions which we have arrived at senschaften, 4th edition).

concerning the existence and importance of long J2JaÿG.’F wSen a™ A. person, 7h?AgriZtumlwaves may be presented. Situation (New York, 1924).

THE REVIEW OF ECONOMIC STATISTICS112

decide the question of the existence of long waves,it is not enough to enable us to assert beyonddoubt the cyclical character of those waves.Nevertheless we believe that the available dataare sufficient to declare this cyclical character tobe very probable.

We are led to this conclusion not only by theconsideration of the factual material, but alsobecause the objections to the assumption of longcyclical waves are very weak.

It has been objected that long waves lack theregularity which business cycles display. Butthis is wrong. If one defines “regularity” asrepetition in regular time-intervals, then longwaves possess this characteristic as much as theintermediate ones. A strict periodicity in socialand economic phenomena does not exist at all

— neither in the long nor in the intermediatewaves. The length of the latter fluctuates atleast between 7 and n years, i.e., 57 per cent.The length of the long cycles fluctuates between

48 and 60 years, i.e., 25 per cent only.If regularity is understood to be the similarity

and simultaneity of the fluctuations of differentseries, then it is present to the same degree inthe long as in the intermediate waves.

If, finally, regularity is understood to consistin the fact that the intermediate waves are aninternational phenomenon, then the long wavesdo not differ from the latter in this respect either.

Consequently, there is no less regularity in thelong waves than in the intermediate ones, andif we want to designate the latter as cyclical,we are bound not to deny this characterization tothe former.

It has been pointed out [by other critics] thatthe long waves — as distinct from the interme¬diate ones which come from causes within thecapitalistic system — are conditioned by casual,extra-economic circumstances and events, suchas (1) changes in technique, (2) wars and revolu¬tions, (3) the assimilation of new countries intothe world economy, and (4) fluctuations in goldproduction.

These considerations are important. But they,too, are not valid. Their weakness lies in the factthat they reverse the causal connections and takethe consequence to be the cause, or see an acci¬dent where we have really to deal with a lawgoverning the events. In the preceding para¬graphs, we have deliberately, though briefly,considered the establishment of some empirical

rules for the movement of long waves. Theseregularities help us now to evaluate correctly theobjections just mentioned.

1. Changes in technique have without doubt avery potent influence on the course of capitalisticdevelopment. But nobody has proved them tohave an accidental and external origin.

Changes in the technique of production pre¬sume (1) that the relevant scientific-technicaldiscoveries and inventions have been made, and(2) that it is economically possible to use them.It would be an obvious mistake to deny the cre¬ative element in scientific-technical discoveriesand inventions. But from an objective view¬point, a still greater error would occur if onebelieved that the direction and intensity of thosediscoveries and inventions were entirely acci¬dental; it is much more probable that such direc¬tion and intensity are a function of the necessitiesof real life and of the preceding development ofscience and technique.1

Scientific-technical inventions in themselves,however, are insufficient to bring about a realchange in the technique of production. They canremain ineffective so long as economic conditionsfavorable to their application are absent. This isshown by the example of the scientific-technicalinventions of the seventeenth and eighteenthcenturies which were used on a large scale onlyduring the industrial revolution at the close ofthe eighteenth century. If this be true, then theassumption that changes in technique are of arandom character and do not in fact spring fromeconomic necessities loses much of its weight.We have seen before that the development oftechnique itself is part of the rhythm of the longwaves.

2. Wars and revolutions also influence thecourse of economic development very strongly.But wars and revolutions do not come out of aclear sky, and they are not caused by arbitraryacts of individual personalities. They originatefrom real, especially economic, circumstances.The assumption that wars and revolutions acting

compelling arguments for theassumption that scientific and technical inventions and dis¬coveries are not made accidentally but are intimately con¬nected with the needs of practical life is given by the numerous

e inventions and discoveriesat the same time at differentof one another. Cf. the longSocial Change (New York, 1924), p. 90. Cf. also Dannemann,Die Naturwissenschaften in ihrer Entmckelung und in ihrem.Zusammenhange (Leipzig, 1923).

1 One of the best and most

madeplaces and entirely independentlylist of such cases in W. F. Ogburn,

cases in which the sam

THE LONG WAVES IN ECONOMIC LIFE 113

from the outside cause long waves evokes thequestion as to why they themselves follow eachother with regularity and solely during theupswing of long waves. "Much more probable isthe assumption that wars originate in the accel¬eration of the pace and the increased tensionof economic life, in the heightened economicstruggle for markets and raw materials, and thatsocial shocks happen most easily under the pres¬sure of new economic forces.

Wars and revolutions, therefore, can also befitted into the rhythm of the long waves and donot prove to be the forces from which these move¬ments originate, but rather to be one of theirsymptoms. But once they have occurred, theynaturally exercise a potent influence on the paceand direction of economic dynamics.

3. As regards the opening-up of new countries

for the world economy, it seems to be quite obviousthat this cannot be considered an outside factorwhich will satisfactorily explain the origin of longwaves. The United States have been known fora relatively very long time; for some reason orother they begin to be entangled in the worldeconomy on a major scale only from the middleof the nineteenth century. Likewise, the Argen¬tine and Canada, Australia and New Zealand,were discovered long before the end of the nine¬teenth century, although they begin to beentwined in the world economy to a significantextent only with the coming of the 1890’s. It isperfectly clear historically that,in the capitalisticeconomic system, new regions are opened forcommerce during those periods in which thedesire of old countries for new markets and newsources of raw materials becomes more urgentthan theretofore. It is equally apparent that thelimits of this expansion of the world economy aredetermined by the degree of this urgency. Ifthis be true, then the opening of new countriesdoes not provoke the upswing of a long wave.On the contrary, a new upswing makes theexploitation of new countries, new markets, andnew sources of raw materials necessary and pos¬sible, in that it accelerates the pace of capital¬istic economic development.

4. There remains the question whether thediscovery of new gold mines, the increase in goldproduction, and a consequent increase in the goldstock can be regarded as a casual, outside factorcausing the long waves.

An increase in gold production leads ultimately

to a rise in prices and to a quickening in thetempo of economic life. But this does not meanthat the changes in gold production are of acasual, outside character and that the waves inprices and in economic life are likewise caused bychance. We consider this to be not only unprovedbut positively wrong. This contention originatesfrom the belief, first, that the discovery of goldmines and the perfection of the technique of goldproduction are accidental and, secondly, thatevery discovery of new gold mines and of tech¬nical inventions in the sphere of gold productionbrings about an increase in the latter. Howevergreat may be the creative element in these tech¬nical inventions and the significance of chancein these discoveries, yet they are not entirelyaccidental. Still less accidental — and this is themain point — are the fluctuations in gold pro¬duction itself. These fluctuations are by nomeans simply a function of the activity of inven¬tors and of the discoveries of new gold mines.On the contrary, the intensity of inventors’ andexplorers’ activity and the application of techni¬cal improvement in thesphereof gold production,as well as the resulting increase of the latter,depend upon other, more general causes. Thedependence of gold production upon technicalinventions and discoveries of new gold mines isonly secondary and derived.

Although gold isa generally recognized embodi¬ment of valueand, therefore, is generally desired,it is only a commodity. And like every com¬modity it has a cost of production. But if thisbe true, then gold production — even in newlydiscovered mines — can increase significantlyonly if it becomes more profitable, i.e., if therelation of the value of the gold itself to its costof production (and this is ultimately the pricesof other commodities) becomes more favorable.If this relation is unfavorable, even gold minesthe richness of which is by no means yet ex¬hausted may be shut down; if it is favorable, onthe other hand, even relatively poor mines willbe exploited.

When is the relation of the value of gold tothat of other commodities most favorable forgold production? We know that commodityprices reach their lowest level toward the end ofa long wave. This means that at this time goldhas its highest purchasing power, and gold pro¬duction becomes most favorable. This can beillustrated by the figures in Table 2.

THE REVIEW OF ECONOMIC STATISTICS114

Gold production, as can be seen from these the time when the relation of the value of goldfigures, becomes more profitable as we approach to its cost becomes more unfavorable than there-a low point in the price level and a high point in tofore, the need for technical improvements inthe purchasing power of gold (1895 and the fol- gold mining and for the" discovery of new mines

necessarily becomes more urgent and thus stim¬ulates research in this field. There is, of course,

TABLE 2. — SELECTED STATISTICS OE GOLD MINING IN a time-lag, until this urgent necessity, thoughTHE TRANSVAAL, 1890-1913* already recognized, leads to positive success. In

reality, therefore, gold discoveries and technicalimprovements in gold mining will reach theirpeak only when the long wave has already passedits peak, i.e., perhaps in the middle of the down¬swing. The available facts confirm this supposi¬tion.1 In the period after the 1870’s, the follow¬ing gold discoveries were made: 1881 in Alaska,1884 in the Transvaal, 1887 in West Australia,1890 in Colorado, 1894 in Mexico, 1896 in theKlondike. The inventions in the field of gold¬mining technique, and especially the most impor¬tant ones of this period (the inventions for thetreatment of ore), were also made during the1880’s, as is well known.

Gold discoveries and technical improvements,if they occur, will naturally influence gold pro¬duction. They can have the effect that theincrease in gold production takes place somewhatearlier than at the end of the downswing of thelong wave. They also can assist the expansionof gold production, once that limit is reached.This is precisely what happens in reality. Espe¬cially after the decline in the 1870’s, a persistent,though admittedly slender, increase in gold pro¬duction begins about the year 1883;2 whereas, inspite of the disturbing influences of discoveriesand inventions, the upswing really begins onlyafter gold has reached its greatest purchasingpower; and the increased production is due notonly to the newly discovered gold fields but in aconsiderable degree also to the old ones. This isillustrated by the figures in Table 3.

1 Berridge, loc. cit., p. 181.2 Cf.Statistical Abstract of the United States, 1922, pp. 708-09.

lowing years).

ProfitCost of productionYear

Per ton of gold

7 sh. 2 d.11 sh. 11 d.14 sh. 3 d.14 sh. 11 d.11 sh. 6 d.

9 sh. 10 d.

42 sh. 2 d.33 sh. s d.28 sh. o d.24 sh. 9 d.22 sh. 2 d.17 sh. 11 d.

1890I89S1899190319061913

* Cf. W. A. Berridge, “The World’s Gold Supply,” thisREVIEW, n (1920), p. 184.

It is clear, furthermore, that the stimulus toincreased gold production necessarily becomesstronger the further a long wave declines. We,therefore, can suppose theoretically that goldproduction must in general increase most mark¬edly when the wave falls most sharply, and viceversa.

In reality, however, the connection is not assimple as this but becomes more complicated,mainly just because of the effect of the changesin the technique of gold production and the dis¬covery of new mines. It seems to us, indeed,that even improvements in technique and newgold discoveries obey the same fundamental lawas does gold production itself, with more or lessregularity in timing. Improvements in the tech¬nique of gold production and the discovery ofnew gold mines actually do bring about a low¬ering in the cost of production of gold; theyinfluence the relation of these costs to the valueof gold, and consequently the extent of gold pro¬duction. But then it is obvious that exactly at

TABLE 3. — GOLD PRODUCTION, 1890-1900{Unit: thousand ounces)

Canada Mexico IndiaUnited States Australia RussiaWorld total Transvaal

6s1,5892,2553,437

1,5882,3564,46i

1890. 73714351,3881,072

95,7499,615

14,838

4401895 2302,017

3,638101 290

1,029 411 4121900,

Source: Berridge, loc. cit., p. 182

THE LONG WAVES IN ECONOMIC LIFE US

From the foregoing one may conclude, it seemsto us, that gold production, even though itsincrease can be a condition for an advance incommodity prices and for a general upswingin economic activity, is yet subordinate to therhythm of the long waves and consequently can¬not be regarded as a causal and random factorthat brings about these movements from theoutside.

development, but this development obviouslyproceeds not only through intermediate wavesbut also through long ones. The problem of eco¬nomic development in toto cannot be discussedhere.

In asserting the existence of long waves andin denying that they arise out of random causes,we are also of the opinion that the long wavesarise out of causes which are inherent in theessence of the capitalistic economy. This nat¬urally leads to the question as to the nature ofthese causes. We are fully aware of the difficultyand great importance of this question; but in thepreceding sketch we had no intention of layingthe foundations for an appropriate theory of longwaves.1

11 arrived at the hypothesis concerning the existence oflong waves in the years 1919-21. Without going into a specialanalysis, I formulated my general thesis for the first timeshortly thereafter in my study, The World Economy and Eco¬nomic Fluctuations in the War and Post-War Period (Mirovojechozjajstvo i jego konjunktury vo vremja i posle vojny [Moscow,1922]). During the winter and spring of 1925, I wrote aspecial study on “Long Waves in Economic Life” (“Bol’schijecykly konjunktury”), which was published in the volume ofthe Institute for Business Cycle Research, Problems of Eco¬nomic Fluctuations (Voprosy konjunktury, Vol. 1). Only at thebeginning of 1926 did I become acquainted with S. de Wolff’sarticle “Prosperitats- und Depressionsperioden,” Der lebendigeMarxismus, Festgdbe zum 70. Geburtstage von Karl Kautsky.De Wolff in many points reaches the same result as I do. Theworks of J. van Geldems, which de Wolff cites and whichhave evidently been published only in Dutch, are unknownto me.

XIII. CONCLUSIONSThe objections to the regular cyclical character

of the long waves, therefore, seem to us to beunconvincing.

In view of this circumstance and consideringalso the positive reasons developed above, wethink that, on the basis of the available data, theexistence of long waves of cyclical character is veryprobable.

At the same time, we believe ourselves justi¬fied in saying that the long waves, if existent atall, are a very important and essential factorin economic development, a factor the effects ofwhich can be found in all the principal fields ofsocial and economic life.

Even granting the existence of long waves, oneis, of course, not justified in believing that eco¬nomic dynamics consists only in fluctuationsaround a certain level. The course of economicactivity represents beyond doubt a process of

The Long Waves in Economic LifeAuthor(s): N. D. Kondratieff and W. F. StolperSource: The Review of Economics and Statistics, Vol. 17, No. 6 (Nov., 1935), pp. 105-115Published by: The MIT PressStable URL: http://www.jstor.org/stable/1928486Accessed: 26/10/2009 16:51

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