Here an overview of the often asked questions about the sixth Kondratieff,
answered by Leo Nefiodow
2. Does capitalism draw to a close?
Nefiodow, Leo and Nefiodow, Simone. January 2017
How can one determine an upswing of a Kondratieff cycle? Once there is a stable economic growth with over more than half a century, if full employment occurs, optimism is wide spread, the living conditions of the majority of people continuously improve.
But not all countries participate in the upswing of a Kondratieff cycle. The Soviet Union for example missed out to invest in time into the carrier of the fifth Kondratieff which was the information technology (Figure 1). As a result their living standards continuously declined and it fell back in competition with the western countries, until its state dissolved.
Questions about the 6th Kondratieff
Figure 1: The Kondratieff cycles since the 18th century
Once a Kondratieff cycle has ended then the most important driver of the whole economy omitted. Experience of the history teaches that the recession that then is implemented not only leads to high job losses, also – depending onto the intensity of the recession – leads towards pessimism, fear about the future, social unrests. It is very typical for those times that voices appear that call for radical changes.
We currently live in such a phase. The fifth Kondratieff is finished and the sixth Kondratieff, which started with the turn of the century is still too weak to lead the whole economy to a strong and stable upswing. Like in the previous Kondratieff cycles there exist severe and unsolved problems which are being blamed on the capitalistic system and onto politics (high under- and unemployment, corruption, deception, drugs, violence, terrorism, hacking, extreme inequality, irresponsible speculations, wars, cyberwars, environmental destruction etc.). It is very characteristic of those times that radical demands for political and social changes appear.
History shows that all recessions at the end of a Kondratieff cycle could be overcome by the upswing of a new Kondratieff cycle. This regularity can be shown over more than thousand years (Table 1).
Table 1: The Regularity of the Kondratieff Cycles
Source: On the basis of George Modelski and William R. Thompson. Leading sectors and world powers: The coevolution of global politics and economics. 1996.
If a regularity sustains over such a long period of time then it can be assumed that it will also exist in future. This means that the current crisis our time will be solved with the new, the sixth Kondratieff cycle (Figure 1). For more see our article “6th Kondratieff” here on this website.
In support of this forecast are many more reasons: Humanity has an enormous amount of resources for capital, science, knowhow and energy. We have many well-engineered and efficient technologies and infrastructures. Many well educated and trained people are placed worldwide at disposal and there are still more demand than possibilities. Rather we should ask how to coordinate those resources into the right direction.
Or put it differently: If we achieve to redirect those resources that are available into the direction of the sixth Kondratieff, then our current crisis will lose quickly its importance, pessimism will vanish and a new long phase of prosperity will evolve.
It is astonishing that critics of the capitalism recommend a stronger role of the state as a proper solution. Are there no other alternatives than to go for the several failed Marxist, socialist and communistic models and its variations?
In the last 250 years market economy and capitalism have shown to be the most flexible and the most efficient economic systems. Because of their high adaptability and productivity they gave those state that are market economies and parliamentary democracies a leadership role in human rights, freedom, constitutional legality, science, technology and economics as well as a high standard of living to its people like never before. And both systems still have enough flexibility to adjust to the current demands and to gain control over the current crisis.
What is necessary now is not to stubbornly hold on to the old ways and recipes but instead to develop these systems further. The current form of capitalism urgently requires a reform. The main goal of this reform should not focus on new structures, new finance models or new charities, but instead stepping into the sixth Kondratieff (see article “The 6th Kondratieff”). Those countries that achieve this goal will overcome the internal disorientation quickly, defuse its social conflicts and will enter into a new and long phase of prosperity, like it happened in the last 1000 years also (see table 1).