Kondratieff and the Long Wave

Money and Sustainability: Appendix G

In 1926, Nicolai Kondratieff (1892-1938), at that time the head of Russias Economic Research Institute in Moscow, published a technical paper in a German statistical journal documenting the discovery of a 60-year long wave in modern economies, starting in the eighteenth century. 1 On this basis, he forecast a depression period for the 1930s, at the completion of the third Kondratieff wave. Although a communist himself, he opposed the Stalinist elimination of the market mechanism, resulting in him being sent to Siberia and executed for anticommunist agitation.2 Joseph Schumpeter, and Nobel laureates Simon Kuznets and Jan Tinbergen have substantiated the validity of Kondratieffs findings. It has also become clear that the Kondratieff cycle is not just an economic phenomenon, but is driven by technological and societal shifts. Figure 7.2 represents schematically the five waves already experienced so far, as well as the sixth, expected to play out over the next decades.3 Each long wave relates to a technological breakthrough called a core innovation initially working itself through the economy as a powerful growth carrier. As its effect on the economy wears out, an economic downturn occurs and the impact of the next core innovation begins to manifest. Starting around 1800, the first Kondratieff wave was triggered by the steam engine and textile machinery automation and bottomed out around 1850. The second wave relates to steel and railroads shortly followed ending in 1890 and so on. (See Figure G.1.) Leo Nefiodow, one of todays foremost researchers on the long cycle, forecasted the peaking-off of
1 2 3

Kondratieff, N. Die langen Wellen der Konjunktur Archiv fr Socialwissenschaft und Socialpolitik 1926. Harry Maier, Wellen des Fortschritts, Die Zeit, 19 March 1993. Nefiodow (2001) p.133.

the fifth Kondratieff wave, related to Information Technologies, during the late 1990s.4 This occurred in Asia by the mid-1990s, and in Europe and the US a few years later. In 2006, the same author published his forecast for the sixth Kondratieff wave, which will take place during the first decades of the twenty-first century.5 He reports four findings that are directly relevant for Wellness Tokens. (Wellness Tokens are discussed at length in Chapter VII of Money and Sustainability: The Missing Link.)

First, the next wave will be based on what he calls psychosocial technologies, or individual, community and environmental healing processes. The difference of this sixth wave compared to the previous five is that for the first time, the core technology would not primarily be rooted in the material and quantitative realms. Social and qualitative change in human and environmental conditions would predominate instead. Second, the best way for a country to reduce the pain of the transition from any one of the waves to the next is to invest early in the next waves core technologies. This will ensure that new workplaces are created in markets created by the new wave, while jobs in the markets of the old wave are scaled down. Similarly, private investment in core technologies of this transition will allow one to be carried by the wave. It is analogous to investing, for instance, in railroads and steel in the 1850s, in Ford Motor Company or GM in 1935 or in IBM and Microsoft in 1980. Third, a new wave always integrates the strengths of the old one as a tool for its transformation: in our case, this means that the sixth wave will build on the information technologies of the fifth one. Finally, the skills that most need development for this specific sixth wave are those of cooperation and interpersonal communication.

If Nefiodow is right, the best areas to invest in today are the technologies supporting the move towards integral wellness thanks to psychosocial health technologies. Wellness Tokens are one way to achieve this. They are taking advantage of the new means developed during the Fifth Wave through IT and mobile phone technologies. And they address an issue that is otherwise doomed to grow predictably to unprecedented levels over the next decades.

4 5

Nefiodow (1991) and (1994). Nefiodow (2001)

Figure G.1: The six Kondratieff cycles, their corresponding core technologies and the societal domain in which they predominantly express themselves. The sixth Kondratieff wave, the one that will be driven by technologies providing Integral Wellness, is expected to become dominant during the first decades of the twenty-first century. 6

This is Appendix G to Money and Sustainability: The Missing Link. To read more about the book or to order a copy, visit: www.triarchypress.net/money-and-sustainability

Each wave is generated through the interaction of the previous wave with the next wave. The dates marked at the bottom of each wave correspond in reality to the end of the previous Kondratieff wave, not the beginning of the next wave. Nefiodow (2001) p.xxx.