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The Sixth Kondratieff

 

The New Long Wave in the Global Economy

 

© Nefiodow, Leo and Nefiodow, Simone, 2016

At first glance, groundbreaking innovations seem to be part of a dying breed. Most experts assume that there have not been any over the past few decades and that their absence is the reason for the low economic growth in the industrial nations. 

And indeed for more than three decades, economic growth in Europe‘s industrial countries tends to decline. Japan has been stagnating for twenty years and doesn’t get ahead, while the U.S. has also not been able to find a concept for real sustainable growth since the turn of the century. 

What’s so remarkable about this trend, is that neither enormous national debts nor cheap money from the central banks are able to change this fact. The growth prospects projected by the leading economic institutes over the next few years are subsequently modest. 

But then again – there is full employment in the U.S. and several other countries like Germany. How is this possible? Is economic growth no longer a prerequisite for full employment? In the past, growth rates of three to five percent were needed to achieve this kind of high level of employment; today, between 1.2 and 1.6 percent are sufficient. Economists are baffled.  

The following is an attempt to provide a scientific answer to these apparent contradictions with the help of the Theory of Long Waves. At the same time, we try to illustrate that groundbreaking innovations indeed also exist today and already distinctly influence real economic events – they simply need to be sought after in entirely different places today than they were in the past.  

To resolve these apparent contradictions, three questions need to be answered: what is currently the biggest obstacle to growth? Where are the biggest productivity reserves? 

The answer to these two questions subsequently reveals why the low growth could so far not be overcome and leads to the third question: what exactly is the reason for this full employment and how can the high unemployment rate that still exists in many industrial nations be eliminated (you can find a more in-depth explanation in our book “The Sixth Kondratieff“).  
 

I. What is the biggest obstacle to growth?

To identify the biggest obstacle to growth, it is necessary to take a look at all relevant disorders that prevent society from producing real growth. We sum up all of these disorders under the term entropic sector.  

If we add up all the damages, losses and costs that accumulate every year as consequences of social disorder (corruption, deception, drugs, violence, terrorism, hacking, extreme inequality, irresponsible speculations, wars, cyberwars, environmental destruction etc.), we get an amount of 18 trillion U.S. dollars for the year 2014. That was more than the United States gross national product. 

Global social disorder currently represents the biggest obstacle to economic development. Why is that? Because corruption and nepotism impede the diffusion of innovations through the market.

 

Because theft, hacking and espionage force companies to invest valuable resources in security and safety instead of growth. Because lies, intrigues, and hatred decrease both company and social productivity. Because irresponsible speculation on the stock exchanges causes billions in wealth loss year after year. Because there are no investments in those countries and regions where crime and terrorism are widespread. In short, social disorder represents the biggest obstacle because it deprives society of those creative and productive resources needed to stimulate growth.  

The largest innovation, productivity, and growth reserves currently lie dormant in this entropic sector. This means that the main barrier today is not a technological problem, not a problem of energy, not a problem of taxes and interests, not an economic and financial problem.  

  

II. Where are the biggest productivity reserves?

By identifying the entropic sector, we simultaneously specify the area where the largest productivity reserves in the sixth Kondratieff lie dormant. With 10-12 percent less disorder/entropy, we would not only reduce the countless visible and invisible obstacles to growth but also generate 2,500 billion U.S. dollars that could be used for real growth and employment year after year. 

It is noteworthy that the entropic sector is not caused by healthy people. This becomes obvious if you take a closer look at the behavior of healthy people. A psychologically healthy person is willing to help and rejects any form of human trafficking and terrorism. A mentally healthy person does not take drugs and treats the environment and natural resources responsibly. A psychomentally healthy person is not corrupt, is honest and does not forge balance sheets. A socially healthy person has a sense of community, does not rob other people's houses and advocates the well-being of all people. A spiritually healthy person has a trusting relationship with God, strives for reconciliation, truth and peace and does not spread hatred and violence. Inner disturbances and diseases and the social misconduct caused by them are the deeper reasons for all the disorder of the world. 

Since both the obstacles to growth and productivity reserves are in the hands of human beings, we are facing a brand-new challenge. Typically, economists are responsible for questions pertaining to economic growth or the removal of obstacles to growth. This does not apply to the present situation. The entropic sector is a barrier that lies outside of the range of influence of economists. 
 
We are faced with a historical paradox: we need more than economic expertise to solve the current economic issues. 

The disorder in the world and the huge losses, costs and damages caused by this are a human problem. If we want to get this disorder under control, we have no choice but to primarily invest in human beings. 

Having said that, the stronger focus on human beings can only succeed if economists are prepared to rethink their strategy. To put it another way, without investments in the healing of human beings, we currently won’t succeed in decreasing entropy and freeing up productivity reserves and economic growth. There is no other area that can lead to a strong, real upturn and full employment again. 

And this takes us to the third section: the identification of groundbreaking innovations. 

III. The causes of full employment and their scientific basis

According to the Theory of Long Waves, groundbreaking innovations – the so-called basic innovations – are the triggers and carriers of long phases of prosperity. These phases last between 40 and 60 years and are called Kondratieff cycles in technical literature. One of the special strengths of this Theory is that it enables us to identify groundbreaking innovations and distinguish them from other innovations.  The function of these basic innovations is to overcome obstacles to growth and releasing productivity reserves that lie dormant. 

During the turn of the century, the global economy entered into a new long wave – the sixth Kondratieff cycle (Illustration 1). The driving force of the sixth Kondratieff – or to put it another way, the long-awaited breakthrough – is health care; its basic innovations are psychosocial health and biotechnology. 
 

Illustration 1: The Long Waves of the Economic Development

Source: Nefiodow, Leo and Nefiodow, Simone: The Sixth Kondratieff, 2014.

 

The leading function of the health care sector

 

Over the past two centuries, the health care sector made tremendous progress. Many diseases that were considered incurable or fatal in the past can now be effectively treated. Countless drugs are available to ease or cure pain and disease. Today acute medical care and surgery offer life-saving help even in extreme cases, which is something that was barely considered possible in the past. Thanks to medical advances, life expectancy has steadily increased and infant mortality has been reduced. The history of medicine over the past two centuries has been a real success story.

But this success story is about to end. Since the late 20th century, the new medical advances are no longer sufficient to adequately deal with the dynamics and complexity of modern life and its high demands on the psychological, emotional and mental strength of human beings.

The health care sector is typically seen as a kind of “repair shop“ for our physical problems and perhaps also as an economic heavyweight. We propose a shift in perspective: to view the health care sector as the new leading industry in the future. The same way, the information technology industry held the leading function for the overall economy during the last, the fifth Kondratieff, now the health industry assumes the leading function in the 21st century. 

The fact that the health care sector assumes a leading function, is already heralded today by its economic weight. 

The health care marketplace is among the largest industry sectors in the world. In 2014, globally 12 trillion US-Dollars were turned over in this market with a direct impact on the job market. At more than 22 million employees in 2014, the health care sector was one of the largest employers in the U.S as well as in other countries. Between 2004 and 2014, 53.8 percent of all new jobs in the U.S. were created in the health care sector. 

Health expenditures will also make the largest contribution to economic growth and employment in the future. In its projection from December 8, 2015, for the period 2014-2024, the US-Bureau of Labor Statistics concluded that by the year 2024, health care will be the biggest employer in the US. ”Healthcare occupations and industries are expected to have the fastest employment growth and to add the most jobs between 2014 and 2024“. 

Source:  http://www.bls.gov/news.release/archives/ecopro_12082015.pdf 

Since the disorder in the world – as aforementioned – is not produced by healthy but rather by sick people gives the health care sector a significance today that it previously didn’t have: since it is responsible for treating and healing sick people, it is presently the best platform to get the causes of the disorder in the world under control.  

Yet to accomplish this, the health care sector needs to give up its extensive and needless self-restriction on physical disorders and diseases and focus on treating the whole person. 

When we talk about health care, we usually refer to the traditional health care sector shaped by academic medicine (Illustration 2). Alongside this traditional sector, a second health care sector has established itself over the past few decades, which is characterized by high innovation activities and which so far has spawned brand-new – and in part also highly controversial – options for the health care sector. The traditional and newly emerging health care sectors jointly form the driving force of the 6th Kondratieff. 

 

________________________________________________________

 

The traditional health care system

•    Medical technology
•    Pharmaceutical industry 
•    Health services 
(Doctors, non-medical practitioners, hospitals, health insurance companies, health insurance funds, pharmacists, public health services, medical care facilities)
•    Health spas/sanatoriums
•    Company health services
Health as a competitive factor, training and continuing education (e.g., in people skills), human resource development, health management
•    Other (health-related)
Skilled trades (e.g., for orthopedic products), sporting goods and sports facilities, health publications, medical EDP etc.

The newly emerging health care sector

•    Biotechnology 
•    Naturopathic treatments, natural products 
•    Complementary/alternative medicine
Homeopathy, classic acupuncture, kinesiology, bioresonance therapy, anthroposophic medicine, magnetotherapy, biofeedback, quantum healing, traditional Chinese medicine, ayurvedic medicine, Reiki etc.  
•    Environmental protection (predominantly)
•    Agriculture, diet, food
•    Workplace health management
Company health insurance funds, company-sponsored fitness programs, welfare centers, health seminars, preventive medical checkups, good health bonus
•    Wellness/fitness, 
 •    Tourism (health tourism), Architecture (healthy living), construction industry (healthy building materials), textile industry (hypoallergenic and breathable fabrics and clothing), the senses (color therapies, aromatherapy, music therapies),
 •    Self-diagnosis, self-medication, and self-care
 •    Psychology, psychiatry, psychotherapy, psychosomatic medicine 
 *    Health care supporting technologies (nanotechnology, optical technology, robotics, neurotechnology, psychoinformatics)
 •    E-Health (medical Apps, e-counseling, information- and communication technologies) 
 •    Religion/spirituality 

 

 

_______________________________________________________

 

Illustration 2: Mega Market Holistic Health

Source: Nefiodow, Leo and Nefiodow, Simone: The Sixth Kondratieff, 2014.

 

One focal point of the newly emerging health care sector is the basic innovation biotechnology. It taps into the vast innovation potential in the areas of health therapies, medical technology, diagnostics, medicine, agriculture, diet, environmental protection, new raw materials and biological information processing. Growth limits to this technology are currently not detectable. 

The second basic innovation is psychosocial health. The leading role of psychosocial health results from its problem-solving potential. The escalation of the world’s problems demands a global regulatory policy that is not just geared towards energy, climate, finances, environment, and trade, but that also considers the specific human behavior, the psychological, mental and social aspects. Why? Because most of the problems in the world have a psychosocial source. The psychosocially sick person is the biggest risk facing humanity. It is the psychologically, mentally and socially disturbed or sick people, who plan and execute wars and aggression, invent and implement misanthropic ideologies such as racism, colonialism, National Socialism or communism. All forms of social injustice, violence, crime and terrorism come from psychosocially disturbed or ill people as well as all troubles and stresses in human relationships and the most dangerous threats to the environment and the climate. 

The answer to the problem

How can the aforementioned contradiction between full employment and low economic growth be explained?

At the turn of this century, a new Kondratieff began, the sixth Kondratieff. This cycle is carried by the need for health. Now people are prepared to spend money on their health and companies are willing to invest in health. And society needs the health care system like never before to get social disorder under control. This leads to the creation of many new jobs, especially in the traditional health care sector. 

Until now, however, these jobs were not productive enough to trigger strong economic growth. The main cause of health expenditures is medical progress. The problem is, the savings it garners are lower than its costs. This is why productivity is so low. (1) 

Yet since we want medical progress at all costs, expenditures continuously increase and no strong growth is generated due to the low productivity of these expenditures. To enable stronger growth, the productivity in the health care sector needs to be improved. This is the goal of the sixth Kondratieff. Especially the two basic innovations of biotechnology and psychosocial health have the potential to trigger significant pro-ductivity and growth impulses.   

Conclusion and final remarks

The sixth Kondratieff is in its second decade and therefore doesn’t have the strength yet to lead the global economy into a steady upswing. 
 

For this to succeed, health expenditures would need to be more consistently treated as investments than in the past. Outside of the health care sector, there are currently no other candidates through which the industrial nations are able to achieve full employment, real and sustainable growth as well as a forward-thinking social order. The present obstacles to growth can be overcome if health promotion is aimed at the whole person and his/her natural environment. Those countries, markets, organizations and people who consequently tap into and unlock the sixth Kondratieff will be among the winners in the 21st century.

 (1)  Schneider, Markus; Karmann, Alexander; Braeseke, Grit: Produktivität in der Gesundheits¬wirtschaft. Gutachten für das Bundesministerium für Wirtschaft und Energie. Wiesbaden, 2014.  (English: Productivity in the Health Care Sector. Expert Opinion for the German Federal Ministry for Economic Affairs and Energy)

 

 

Translation by Elena O´Meara