Kondratiev: Pioneer of the Business Cycle

Copyright © 2012 by Frederic Weekes.

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TABLE OF CONTENTS

Notes On Nicolai Dmitri Kondratiev

Waves In Our Lives

Waves In Our Lives Part 1

Waves In Our Lives Part 2

Waves In Our Lives Part 3

Waves In Our Lives Part 4

Waves In Our Lives Part 5

Waves In Our Lives Part 6

Waves In Our Lives Part 7

Waves In Our Lives Part 8

Waves In Our Lives Part 9

Waves In Our Lives Part 10

Waves In Our Lives Part 11

Waves In Our Lives Part 12

Waves In Our Lives Part 13

Waves In Our Lives Part 14

Waves In Our Lives Part 15

Waves In Our Lives Part 16

Waves In Our Lives Part 17

Fictional Kondratiev Curve

A Tax Code You Might Like

A Tax Code You Might Like Part 1

A Tax Code You Might Like Part 2

A Tax Code You Might Like Part 3

National Debt

National Debt Part 1

National Debt Part 2

National Debt Part 3

The Aftermath

The Aftermath

About The Author

Endnotes

NOTES ON

NICOLAI DMITRI KONDRATIEV

The Russian economist’s name can be spelled in different ways but the rendition above is sufficiently accurate to allow an investigator to locate the gentleman in an encyclopedia. His dates are 1882 to 1938.

Kondratiev was educated in the university at St. Petersburg. He learned statistics as well as economics. When the Bolsheviks came to power in 1917, Kondratiev joined the regime in the economic section where he focused on agriculture, contributing to the five-year plans.

His interest in the business cycle over the long term established his reputation and contributed to his demise. He fell victim to one of Stalin’s purges in 1938. Kondratiev found that the business cycle lasted approximately fifty years, from one major depression to the next, as an example. He did not find data going further back than the time of Napoleon (Emperor of the French from 1804 to 1815). Each of these repetitive periods has been given the name ‘wave.’ About four ‘waves’ have transpired since the start of Kondratiev’s data gathering.

The graph on the last page of part 17 is representative but fictional as are the six important moments and periods that are identified. Most anyone who reflects on events since the Great Depression will find the graph and the important moments satisfactory if not absolutely accurate.

The main purpose of writing this book is to suggest that the situations we live through are inevitable if you believe Kondratiev’s data and conclusions. He felt that it did not matter a great deal who was in office, the ‘waves’ kept coming.

While at the University of Pennsylvania, I attended classes at the Moore School of Electrical Engineering. I knew that across the campus was a different place called the Wharton School. On reflection I might have been better prepared to write this book had I studied at Wharton.

A second purpose in writing this book is to express opinions gathered over the years. As the reader will determine, I have become a man of the Right and it gives me pleasure to chide the Left when appropriate.

Kondratiev’s downfall, more than likely, came about because he advocated that savings programs should precede manufacturing. An enterprise, be it the state or a private organization, should build up reserves to pay for the manufacturing cycle: As an example, if tractors were to be manufactured, factories should be constructed; machinery purchased; workers hired and trained; etc. Surely these activities were viewed as capitalistic notions. One guesses further that his name appeared on a long list of individuals to be executed and that Stalin, without reading the list and giving it his best consideration, simply placed his initials at the bottom of the last page.

There is a new four-volume set of some of Kondratiev’s works. Look to Amazon for price and availability for this set and other works by Kondratiev.

Kondratiev, when analyzing long waves, used the seasons to indicate the various activities taking place. He identified them as spring, summer, autumn and winter. In this text we have moved from four to six periods and we call them: Decline, Recovery, Steady State, Enthusiasm, Euphoria, Burst Bubble, and back to Decline. We feel that there is more meaning in the six names selected than in the four seasons.

All characters in this piece with the exception of Kondratiev are fictional.

WAVES IN

OUR LIVES

WAVES IN OUR LIVES

PART 1

Rob Doran had followed what he felt was a straight line in life: the expected pre-college schooling, then four years at university, followed by leaving town to earn a PhD in economics before returning. The dean at his first school emphasized the value of obtaining advanced degrees at another university than one’s own, the value being to learn the different points of view expressed by other professors, some of whom would become career-long associates. The advice proved invaluable.

Doran’s father, a GI, had met a woman wearing the American uniform while stationed in England. The exact schedule was not discussed, whether marriage or pregnancy came first, but this member of the Women’s Army Corps and Doran’s father paired off in 1944 and were only separated at death, which arrived for both husband and wife in their early eighties.

Doran’s mother had read Robinson Crusoe and was impressed by the scrapes the young seafarer got himself into, only to survive them and prosper. She was determined to produce a son and name him Robinson. She had told her husband that there were too many Arthurs and Alices in his family already, they having discussed the names of a few relatives. Her husband was not allowed to participate in selecting a name for the arrival, be it male or female. Robinson Doran was born in an Army hospital in England and dispatched to the United States late in 1945 in a ship crammed with war brides and a few brand new citizens. Doran’s advancement through the teaching ranks was not spectacular except for his authorship of a textbook on finance that became one of the standards adopted by business schools throughout the nation. From that effort there came to him prestige and cash. There were four editions over twenty years. He never tired of hearing his text referred to by his last name. Among a certain group of intellectuals he had become a household name.

Rob had met Rose at a local all-girls college when they were undergraduates. They were attending a mixer, one of those events in which people of the opposite sex spend an evening dancing, talking and evaluating. Young men and women would not attend unless they were expecting action to result, not that evening necessarily, but in the weeks to come. Rob always wondered whether part of his attraction to Rose was her resemblance to his mother. She was pretty, beautifully built (stacked was the expression in use at the time), and quick.

He had formulated a theory over the years concerning Rose’s brains. Rob felt that the average brain contained the same number of neurons as an excellent brain, but that in the excellent brain the neurons were aligned, as crops would be in a well-tended vegetable garden. They would not be scattered randomly. His theory held that the reading of important texts on Rose’s part eliminated the scattering effect that was at work in most brains. Rob loved Rose’s brains and her body. The order might vary from day to day. He never tired of discussing important matters with her, nor did they ever tire of passionate moments.

2008 had been a dramatic year for Rose and Rob and for half of the American population as well. The values of their investments and their house fell. They felt fortunate that their house was paid for. The value of the farm, as they called it (it was situated west of the city), may have gone down but there was no effect on their lives. Rob had used his inheritance from his father (his mother had died first) to purchase acreage west of the city, on the way to Lancaster, perhaps two-thirds of the way. There were over ten acres and a stream ran through the property. Part of it was wooded and Rob thought he could make out the outlines of an apple orchard, perhaps planted during the Depression and abandoned after the war when the owners departed for the city. That’s how Rob imagined the chronology of events leading up to his purchase. He did not meet with a non-resident-owner but negotiated through a real estate broker. The place was situated less than a mile from a town. Rob also thought of the words village and hamlet for the collection of three stores and a gas station. The road from the town to his place was paved halfway, turned to gravel, and went on to other farms, all occupied presently but only a few worked.

Rob and Rose never agreed on the purchase. Rose’s point was that it wouldn’t see much use as they were city folks, enmeshed with friends and activities. Rob had always been the one over the last decade to plan weekends in the country. Rose threw herself into making habitable the house on the place. The setting was perfect, on a slight rise with a view of the creek. There was no lawn. The land from the house to the creek held shrubs and grass and a sprinkling of small trees. In addition to the house where they stayed, there was a small house, something between a small house and a tool shed. They called it The Shack.

The originators of the house, perhaps two hundred years back, had excavated a cellar and lined the walls with stone. That person, or another occupant later on, had put in a cement floor and attempted to make the walls watertight.

Above the stone basement only wood had been used. Downstairs consisted of a kitchen, dining room, and main room. Upstairs had three rooms as well: a bathroom and two bedrooms. Rob and Rose noticed right away that a recent owner had been born pessimistic. The bathroom had a gas water heater while the kitchen had one operated by electricity. There was an electric stove and a gas contraption that could be used to boil water. The large room downstairs had a fireplace, a gas stove, and two portable electric heaters.

Rose’s contribution was to find furniture that complemented the style of the house and its location. There were antique stores to visit where the appropriate pieces could be purchased. After injecting her knowledge (That’s what any woman would do, she told Rob.) she started to care about the place to the extent that she added curtains to hide the venetian blinds and covered the pillows and cushions in the large room with quiet green and brown materials.

When Rose had finished her tasks around the house she became reluctant to leave her home in the city. Philadelphia was home as it always had been. There was a first time when Rob went to the country alone. He claimed his gardening activities could not be delayed. Spring was on the way and he had to clear and till the soil before he planted. When he drove off for the four days, they parted on friendly terms but that could be accounted for by their many years together. Rose felt that his new view on how he should spend his life would go away. Rob wasn’t a farmer and soon enough he would fall into agreement with his wife on how to spend his time in retirement. She advised that he return to a life of the mind: reading, researching and writing. He had reached retirement age and decided on winding up his affairs at the university sometime during 2009.

WAVES IN OUR LIVES

PART 2

The end of 2008 will be remembered as the time when governments everywhere went into action to revive their respective economies. The little country of Iceland had over-borrowed and found itself in trouble. Many other countries were navigating in choppy waters. Unemployment increased, some people stopped paying on their mortgages, others on their credit cards or car loans. Banks were having difficulties identifying persons or companies that were certain to repay money advanced to them.

Rob’s stated and written solution to the crisis had two parts. The first was to eliminate the federal tax on corporate income for three years. The cost to the Treasury would be three hundred billion dollars per year, about the amount of the stimulus package. The second part would be to permit the geniuses that had caused the problems with the economy to stay in place and repair the damages they had created. Who could know more about the corrupt practices that created havoc in the financial sector than those very executives who created the problems? Rob would advance these ideas to fellow professors, many of whom subscribed to the concepts, but only half-heartedly. They needed time to consider all this, they would say. The professors he would engage in conversation who were not in his field were also lukewarm, their hang-up being that they were accustomed to corporations paying taxes, that corporations had