Long wave theory
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The theory that capitalist economies alternate between periods of faster and slower growth over spans of forty to sixty years, far longer than the business cycle of about ten years. The Dutch economists van Gelderen and de Wolff proposed it first, and the Soviet economist Nikolai Kondratiev systematised it in the 1920s, giving it the name "Kondratiev waves". In 1923 Trotsky objected to calling these long phases "cycles", holding that they were determined by external conditions rather than by capitalism's internal laws, and in the 1960s and 1970s Ernest Mandel revived the idea as a Marxist long-wave theory explained by the rate of profit, class struggle and political events.
In depth
Economies boom for a few years, fall into recession and recover. The industrial cycle Marx analysed ran roughly ten years. Long-wave theory holds that a longer swell lies on top of it: for some decades booms are long and strong and recessions short and shallow, and for the next few decades recessions are deep and recoveries weak. Depending on the theory, a wave lasts forty to sixty years, with phases of high and low growth alternating.
The Dutch economists Jacob van Gelderen and Salomon de Wolff argued for 50- to 60-year cycles in 1913 and 1924, but it was the Soviet economist Nikolai Kondratiev who brought the observation to international attention. In The Long Waves in Economic Life (1926) and other works of the 1920s he used price and interest-rate statistics to divide the nineteenth century into two waves, 1790–1849 (turning point 1815) and 1850–1896 (turning point 1873), and held that a new wave had begun in 1896. The rising phase showed rising prices and low interest rates, the falling phase the reverse. In 1939 Joseph Schumpeter proposed naming the waves "Kondratieff waves" and traced them to clusters of basic innovations such as the steam engine, the railway and electricity. In the Soviet Union Kondratiev was arrested in 1930 and shot in 1938, and his views were attacked under the name "Kondratievshchina".
The first Marxist response was Leon Trotsky's 1923 letter "The Curve of Capitalist Development". Trotsky reported that after the Third Congress of the Comintern Kondratiev had tried to set up a "major cycle" of about fifty years alongside the ten-year "minor cycle", and said his statistics should be carefully verified country by country and for the world market as a whole. He refuted in advance the attempt to give the major cycle the same "rigidly lawful rhythm" as the minor one as a false generalisation from a formal analogy. The long segments of about fifty years, he argued, have their character and duration determined not by the internal interplay of capitalist forces but by the external conditions through which capitalist development flows: the incorporation of new countries and continents, the discovery of new resources, wars and revolutions. Instead of cycles Trotsky proposed charting a "curve" of capitalist development.
The Belgian Trotskyist economist Ernest Mandel revived the discussion. In "The Economics of Neo-Capitalism" in the Socialist Register (1964) he predicted that the post-war long boom would end within five years; he devoted chapter 4 of Late Capitalism (1972) to "long waves"; and he published his Alfred Marshall Lectures at Cambridge of 1978 as Long Waves of Capitalist Development: The Marxist Interpretation (1980).
Mandel's long waves run as follows. In time-series data on capitalism since the 1820s one can see long waves lasting about 20 to 25 years from peak to trough or trough to peak. In the ascending phase cyclical upturns are stronger and downturns weaker; in the receding phase the reverse. But Mandel did not accept, with Kondratiev, that there were endogenously predetermined "long cycles". Every boom ends with a fall in the average rate of profit, but no enduring economic mechanism "automatically" brings recovery after a severe depression. The turn from a falling to a rising wave depends on state policy decisions, on the outcome of political battles between classes and class fractions, and on extra-economic factors such as war. Mandel therefore saw long waves not as mechanical cycles but as "specific historical epochs" to be explained in their totality. He held that six variables, the organic composition of capital, the proportions of fixed and circulating capital, the rate of surplus value, the rate of accumulation, the turnover of capital and the relation between the producer-goods and consumer-goods departments, move semi-independently and shape the long-term pattern of growth and profitability.
For Mandel long waves had political meaning. They shape the life experience of each generation, the lessons it draws and the pattern of workers' struggles. When the demand for labour is high workers are in a strong position; in times of mass unemployment they are weak. Mandel sometimes spoke of a "class struggle cycle" alongside the ups and downs of business, and used the framework to analyse the post-war boom, the long world recession of 1974–82, the debt crisis of the developing countries and the stock crash of 1987.
Long-wave theory is not accepted by most academic economists. Even among its supporters there is no agreement on the cause of the waves or the start and end years of each, and critics see in it the recognition of patterns that may not exist. On the other hand the historian Eric Hobsbawm wrote that good predictions based on Kondratiev waves, rare in economics, had convinced many historians and some economists "that there is something in them, even if we don't know what". The American economist Anwar Shaikh, analysing the general price level in gold in the United States and Britain, identified three long cycles with troughs around 1895, 1939 and 1982. Mandel's long-wave theory is the companion of his theory of late capitalism and is often compared with Robert Brenner's long downturn thesis.