Questions about the 6th Kondratieff
Here an overview of the often asked questions about the sixth Kondratieff,
answered by Leo Nefiodow
3. Digitalisation cannot be the carrier of the sixth Kondratieff
Leo Nefiodow November 2017
The digitalisation is seen today as an indispensable and seminal technology. This should be undeniable. But digitalisation is being counted as one of the main carriers of the sixth Kondratieff. This is not correct. Why? Because it does not meet basic criteria that identify a Kondratieff cycle: the criteria of a new market, of full employment and that of the life cycle.
The criteria of the new market
Economically speaking a Kondratieff cycle is a long business cycle with a duration of 40 to 60 years. Its trigger and carrier are new innovations which did not exist before and through them a brand new market is being created. The following explanations will show that digitalisation does not meet this criterion.
A look back in history shows that the digitalisation started with the invention of the digital Computer in 1941. In 1951 the first digital Computer (Univac I) of the firm Univac in the U.S.A. was brought into commercial use for data processing. This was the start of the fifth Kondratieff cycle.
Illustration 1: The long waves and their main applications
The first four stages of the fifth Kondratieff (about 1950 to 1980) were marked by the use of the digital Universal computer (Mainframe) (Illustration 2). It was the prime time of the electronically data processing systems (EDV). This period ended in the 1980s when its potential became mainly exhausted (Illustration 2). At the end of this phase there were about 10 Million users worldwide.
Illustration 2: Development of digital technology during the fifth Kondratieff cycle
The fifth stage of the fifth Kondratieff was marked by the digital Personal Computer (PC). Herewith the computer became a commodity. Its easy use increased the amount of users worldwide to over 100 million.
In the last stage of the fifth Kondratieff (Illustration 2) the Internet, the World Wide Web as well as broadband and company-internal nets took the centre. In this phase the world market was penetrated with the digitalisation and the net itself became an intelligent universal computer. At the end of this phase there existed half a Billion users of the digitalisation.
The fifth Kondratieff came to an end at the turn of the century (Illustration 1). The digital information technology had achieved at this time a turnover of more than 2000 Billion US-Dollars per year and became the biggest industry of the world. The worldwide digital interconnection achieved its peak and reached into all levels of society (Illustration 3).
The digitalisation war the trigger and carrier of the fifth Kondratieff. The end of this long cycle did not meant an end to the digitalisation. This trendsetting technology is going to maintain its key role in the 21st century. And it will deliver indispensable contributions to the sixth Kondratieff, e.g. like e-health. But digitalisation is now not a digital revolution – which had already taken place in the second half of the 20s century – but an evolution.
A comparison to the second Kondratieff can show the evolutionary character of the digitalisation. The railroad was one of the basic innovations of the second Kondratieff (Illustration 1). Before that there were no railroads. When most cities were finally connected to the railroad network at the end of the 19th century, the second Kondratieff cycle came to an end.
But this does not mean the end of the railroad. After the second Kondratieff the railroads were further developed, improved and used. The technology changed from coal driven engines to electric driven engines during the third Kondratieff to Diesel driven engines in the fourth Kondratieff, and in our times to a magnetic levitation train. This all belongs to the evolution of the railroad technology.
* Digital automating and interconnectedness of factories
* Digital automating and interconnectedness in and from offices
* Digital automating and interconnectedness of a whole firm
* Digital industry-wide automating and interconnectedness
* Digital worldwide interconnectedness (Internet, Satellite, cable nets)
* Digital interconnectedness of the working and private area
Illustration 3: The Levels of digital interconnectedness in the 20th century
The criteria of full employment
With every new Kondratieff cycle a new market emerges and with it a great number of new jobs. Those countries who possess a leading role in the unlocking of a Kondratieff cycle achieved every time full employment, because the number of new created jobs were much higher than the replaced.
A strong increase of employment cannot be expected from the digitalisation. All prognoses expect that there will be new jobs created, but there will be more lost than created. This is typical for a ripe technology. There are already many good specialists and a lot of know-how on this expertise, so that the development will primarily go into rationalisation.
This follows that the digitalisation will not be a job engine. It contradicts the specification of being a carrier of a Kondratieff cycle.
Today the criteria of full employment are met as shown in the U.S.A. and Germany. Both countries have achieved full employment because they have unlocked the job potential of the sixth Kondratieff which is dormant in the health economy (see the contribution to full employment on this homepage “Questions to the sixth Kondratieff”).
The job engine of the sixth Kondratieff is the health economy. The new long cycle provides the chance to absorb those lost jobs by digitalisation with new jobs in the health industry.
The criterion of a life cycle
Groundbreaking improvements – so called basic innovations – are the trigger of a Kondratieff cycle. With each new basic innovation a brand new industry appears which will be the leading industry during a Kondratieff cycle. The life cycle of a basic innovation and its connected leading industry can be determined with an S-curve. The life cycle starts with the market entry of a basic innovation and ends with the turn of the S-curve that follows after a dynamic growth into the horizontal. Illustration 4 shows this with the example of the fifth Kondratieff.
The digitalisation exists meanwhile (2017) since nearly 70 years and will continue to exist much longer. The carrier of a Kondratieff cycle must have a life cycle of 40 to 60 years. This was fulfilled with the digital information technology industry in the fifth Kondratieff (Illustration 4).
llustration 4: The development of the information technological industry as the leading
industry in the fifth Kondratieff
The end of the fifth Kondratieff does not mean the end of the area of the information technology industry. With the end of the fifth Kondratieff this industry will only lose its leading function for the whole economy (Illustration 5). The information economy will change in its structure: from a development and manufacturing of information technology towards information services and information media. The evolving of the information economy will lead to a rise of new and different companies; center stage will no longer have those well known companies like IBM, HP, CDC, Fujitsu, but rather those companies who work in the application of information technology, like Google, Facebook, Amazon.
Only a particular time frame counts as a Kondratieff cycle; the start is the entrance of a new basic innovation into the market, then its above the ordinary growth and diffusion into many other market sectors, the transition to a normal development (Illustration 4). This is the case with all Kondratieff cycles. For example when the railways connected in a country all small and large cities, the second Kondratieff ended (Illustration 1). The railway technology was a leading industry for the whole economy only during the second Kondratieff. At the end of this cycle the railway technology became an ordinary and normal technology amongst the others.
llustration 5: Percentage of Information Technology Industry in GNP Growth
Including revenues for telecommunication services. Average values taken during 3-5 year periods. Value added was calculated at 50% of IT revenue.