Long Waves, Short Memories - Postcapitalism: A Guide to Our Future - Paul Mason

Postcapitalism: A Guide to Our Future - Paul Mason (2015)

Part I

Chapter 2. Long Waves, Short Memories

The wave-form is beautiful. The sound of the ocean beating against the sand is evidence that order exists in nature.

When you consider the physics of a wave-form, it becomes even more beautiful. It is matter displaying the tendency to invert: the energy that makes the wave rise is the same energy that makes it fall.

When you consider the mathematical properties of the wave-form, it becomes more fascinating still. Fifteen hundred years ago, an Indian mathematician discovered that if you plot every possible ratio between two sides of a triangle it produces a wave-like pattern. Medieval scholars called it a ‘sine’. Today we call the smooth, repetitive waves found in nature sine waves. An electrical current moves in the form of a sine wave; so does sound; so does light.

And there are waves within waves. To a surfer, waves seem to come in sets, growing in size, so that the sixth or seventh is the big one that you want to catch. In fact, this is just the result of a longer, flatter wave moving ‘through’ the short ones.

This relationship - of long waves to short ones - is a source of order in acoustics. For musicians the harmonics created by short waves within longer waves are what gives each instrument its particular sound; music is in tune when long and short waves are in strict mathematical proportion.

Waves are ubiquitous in nature. In fact, at the subatomic level, the wave-like movement of a particle is the only way we can know it exists. But waves also exist within big, complex and unnatural systems - such as markets. For those who analyse stock markets, the wave-form has become like a religious icon: they use tools to filter out the ‘noise’ of daily fluctuations to produce a predictive curve. ‘Peaks’ and ‘troughs’ have become everyday economic terms.

But in economics the wave-form can be dangerous. It can imply order and regularity where there is none. A sound wave simply decays to silence; but waves generated from random data become distorted and disrupted after a time. And the economy is a world of complex, random events, not simple waves.

It was the wave-chart experts of the last boom who failed to predict the slump. In surfing terms, they were looking at waves instead of sets; sets instead of tides; tides instead of the tsunami that was about to hit them. We think of a tsunami as a big wave: a wall of water. In fact a tsunami is a long wave: it swells and it keeps on coming.

For the man who discovered their existence in economics, long waves proved fatal.


The prisoner shuffles; he can’t walk. He is partially blind, has chronic heart disease and clinical depression. ‘There is no way that I can force myself to think systematically,’ he writes. ‘To think scientifically at all without actively working on materials and books, and with headaches, is very difficult.’1

Nikolai Kondratieff had spent eight years as a political prisoner in Suzdal, east of Moscow, reading only the books and newspapers permitted by Stalin’s secret police. He had shivered in winter and sweltered in summer but his ordeal would soon be over. On 17 September 1938, the day his original sentence expired, Kondratieff was tried a second time, convicted of anti-Soviet activity and executed in his cell, by firing squad.

Thus perished one of the giants of twentieth-century economics. In his time, Kondratieff ranked alongside globally influential thinkers such as Keynes, Schumpeter, Hayek and Gini. His ‘crimes’ were fabricated. An underground ‘Peasant Labour Party’, of which he was supposed to be leader, did not exist.

Kondratieff’s real crime, in the eyes of his persecutors, was to think the unthinkable about capitalism: that instead of collapsing under crisis, capitalism generally adapts and mutates. In two pioneering works of data-mining he showed that, beyond short-term business cycles, there is evidence of a longer, fifty-year pattern whose turning points coincide with major structural changes within capitalism and major conflicts. Thus, these moments of extreme crisis and survival were not evidence of chaos but of order. Kondratieff was the first person to show the existence of long waves in economic history.

Though it was later popularized as a ‘wave-theory’, Kondratieff’s most valuable insight was to understand why the global economy goes through sudden change, why capitalism hits structural crisis, and how it morphs and mutates in response. He showed us why business ecosystems that have lasted for decades can suddenly implode. He used the term ‘long cycle’ rather than ‘wave’ because cycles in scientific thought create a sub-language that is highly useful: we speak of phases, states and their sudden alternation.

Kondratieff studied industrial capitalism. Though others claim to have found long waves in prices going back to the Middle Ages, his data series begins with the industrial revolution in the 1770s.

In Kondratieff’s theory, each long cycle has an upswing lasting about twenty-five years, fuelled by the deployment of new technologies and high capital investment; then a downswing of about the same length, usually ending with a depression. In the ‘up’ phase, recessions are rare; in the ‘down’ phase they are frequent. In the up phase, capital flows to productive industries; in the down phase it gets trapped in the finance system.

There’s more, but that’s the basic theory. In this chapter I will argue that it is essentially right, but that the present crisis represents a disruption of the pattern - and that signals this is something bigger than the end of a fifty-year cycle.

The man himself was supremely cautious about the implications of his theory. He never claimed he could predict events - though he did predict the Depression of the 1930s, ten years before it happened. He arranged for his findings to be published alongside a brutal critique and peer-review.2

But Stalin’s police had, in a way, understood more about Kondratieff’s theory than he did himself. They understood that - if pursued to its conclusion - it would bring Marxism face to face with a dangerous proposition: that there is no ‘final’ crisis of capitalism. There can be chaos, panic and revolution but, on the basis of Kondratieff’s evidence, capitalism’s tendency is not to collapse, but rather, to mutate. Huge swathes of capital can be destroyed, business models can be scrapped, empires can be liquidated in global wars, but the system survives - albeit in a different form.

To the orthodox Marxism of the 1920s, Kondratieff’s explanation of what caused these transformations was equally dangerous. The events that seem to cause the big turning points - wars, revolutions, discovery of new gold deposits and new colonies - were, he said, mere effects generated by the demands of the economy itself. Humanity, even as it tries to shape economic history, is relatively powerless over the long term.

For a time in the 1930s, long-wave theory became influential in the West. The Austrian economist Joseph Schumpeter produced his own theory of business cycles, popularizing the term ‘Kondratieff Wave’. But once capitalism stabilized after 1945, long-wave theory seemed redundant. Economists believed state intervention could flatten out even the minor ups and downs of capitalism. As for a fifty-year cycle, the guru of Keynesian economics, Paul Samuelson, dismissed it as ‘science fiction’.3

And when the New Left tried to revive Marxism as a critical social science in the 1960s, they had little time for Kondratieff and his waves; they were looking for a theory of capitalist breakdown, not survival.

Only a few diehards, mainly investors, remained obsessed with Kondratieff. In the 1980s, Wall Street analysts turned his careful provisional findings into a bunch of crude, predictive mumbo-jumbo. In place of his complex data, they drew simple lines, showing a wave with a stylized shape: a surge, a plateau, a crisis and a collapse. They called it the ‘K-Wave’.

If Kondratieff was right, these investors said, the economic recovery that began in the late 1940s was the start of a fifty-year cycle, which meant that sometime around the end of the 1990s there should be a depression. They built complex investment strategies to hedge against the catastrophe. And then they waited …


In 2008, what the investors were waiting for finally happened - though, for reasons we’ll come to, ten years later than expected.

Now, people in the mainstream are once again interested in long cycles. As it dawned on them that the Lehman crisis was systemic, analysts began to look for patterns produced by the interplay of tech innovation and growth. In 2010, economists at Standard Chartered announced that we were in the middle of a global ‘supercycle’.4 Carlota Perez, an Anglo-Venezuelan economist and follower of Schumpeter, harnessed wave-theory to promise a new ‘golden age’ for capitalism if it could only shrug off financial panic and return to the state-funded innovation process that produced the post-war boom.5

But to use Kondratieff’s insight properly we have to understand what he really said. His original research, in the 1920s, was based on data for five advanced economies between 1790 and 1920. He did not track GDP directly but interest rates, wages, commodity prices, coal and iron production and foreign trade. Using the most advanced statistical techniques of his time - and two assistants whose job-title was ‘computer’ - he established a trend line out of the raw data. He divided the data against population size and smoothed it out using a nine-year ‘moving average’ to filter out random fluctuations and shorter cycles.

The result was a collection of charts that look like shallow sine waves. They show the first long cycle, beginning with the emergence of the factory system in Britain in the 1780s and ending around 1849. Then, a much clearer second wave starts in 1849, coinciding with the global deployment of railways, steam ships and the telegraph, before entering its downswing phase, with the so-called ‘Long Depression’ after 1873, and ending sometime in the 1890s.

By the early 1920s, Kondratieff believed there was a third cycle under way. It had reached its peak and begun its downswing, probably sometime between 1914 and 1920. But this downswing was nowhere near finished. As a result, he predicted, the political crisis that consumed Europe between 1917 and 1921 would not lead to immediate economic collapse. A shaky recovery was possible, Kondratieff argued, before a depression yet to come. This was completely borne out by events.

Unlike today’s Wall Street analysts, Kondratieff was not ultimately interested in the shapes of the waves themselves. He saw the sine waves he’d plotted on to graph paper as evidence of something deeper happening in reality: a succession of alternating ‘phases’ which, for our purposes, are the most useful tools to understand the fifty-year cycles.6

Let’s consider in more depth these phases as Kondratieff describes them. The first, up, phase typically begins with a frenetic decade of expansion, accompanied by wars and revolutions, in which new technologies that were invented in the previous downturn are suddenly standardized and rolled out. Next, a slowdown begins, caused by the reduction of capital investment, the rise of savings and the hoarding of capital by banks and industry; it is made worse by the destructive impact of wars and the growth of non-productive military expenditure. However, this slowdown is still part of the up phase: recessions remain short and shallow, while growth periods are frequent and strong.

Finally, a down phase starts, in which commodity prices and interest rates on capital both fall. There is more capital accumulated than can be invested in productive industries, so it tends to get stored inside the finance sector, depressing interest rates because the ample supply of credit depresses the price of borrowing. Recessions get worse and become more frequent. Wages and prices collapse, and finally a depression sets in.

In all this, there is no claim as to the exact timing of events, and no claim that the waves are regular. Kondratieff emphasized that each long wave takes place ‘under new concrete-historical conditions, at a new level in the development of the productive forces, and hence is by no means a simple repetition of the preceding cycle’.7 It is, in short, more new than déjà vu.

Now comes Kondratieff’s most controversial point. He noticed that the start of each fifty-year cycle was accompanied by trigger events. I will quote him in full, despite the old-fashioned language, because the parallels with the present are striking:

During roughly the first two decades before the beginning of the rising wave of a long cycle, we observe an invigoration of technical inventions. Before and during the beginning of the rising wave, we observe the broad application of these inventions to industrial practice, due to the reorganisation of production relations. The beginning of the long cycles usually coincides with an expansion of the orbit of world economic relationships. Finally the beginnings of the last two successive cycles were preceded by major changes in the extraction of precious metals and in monetary circulation.8

If we put that into modern English we get the following. The start of a long cycle sees:

· the rollout of new technologies

· the rise of new business models

· new countries dragged into the global market

· a rise in the quantity and availability of money.

The relevance of this list to us is clear: it describes very well what happened to the global economy between the mid-1990s and the Lehman crash. But Kondratieff was convinced such phenomena were not causes, but only triggers. ‘We are no way inclined to think that this provides any form of explanation for the causes of long cycles,’ he insisted.9

Kondratieff was determined to find the cause of long cycles in the economy, not in technology or global politics. And he was right. But in the search for it he relied on theories that had been advanced by Karl Marx to explain the shorter, ten-year business cycles of the nineteenth century: namely, the exhaustion of capital investment and the need for reinvestment.

If, he argued, the ‘regular’ crises that come along every decade are the result of the need to replace tools and machines, then fifty-year crises are probably caused by ‘the wear and tear, replacement and increase in those basic capital goods requiring a long period of time and tremendous investment for their production’.10 He had in mind, for example, the canal boom of the late eighteenth century and the railway boom of the 1840s.

In Kondratieff’s theory, a long wave takes off because large amounts of cheap capital have been accumulated, centralized and mobilized in the financial system, usually accompanied by a rise in the supply of money, which is needed to fund the investment boom. Grandiose investments are begun - canals and factories in the late eighteenth century, railways and urban infrastructures in the mid-nineteenth century. New technology is deployed and new business models created - leading to a struggle for new markets - which stimulates the intensification of wars as rivalries over colonial settlements increase. New social groups associated with the rising industries and technologies clash with the old elites, producing social unrest.

Some of the details are obviously specific to each particular cycle, but what’s important in Kondratieff’s thesis is the argument about cause and effect. Takeoff is caused by capital accumulating faster than it is invested during the previous depression phase. One effect of this is the search for an expanded supply of money; another is the increased availability of new, cheaper technologies. Once a new growth spurt begins, the effect is a spate of wars and revolutions.

Kondratieff’s insistence on economic causes and political/technological effects would come under attack from three directions. First, from Marxists, who insisted that the major turning points in capitalism could only be caused by external shocks. Secondly, from Schumpeter, his contemporary, who argued that long waves are driven by technology, not the rhythms of capital investment. A third set of critics said that in any case Kondratieff’s data was at fault and that evidence of waves was overstated.

But Kondratieff was right - and his arguments about causation brilliantly describe what has happened to the economy since 1945. If we can fill in the gaps in Kondratieff’s theory we come close to understanding not only how capitalism adapts and morphs in response to crisis, but why this capacity to adapt might reach its limits. I will argue in Part II that we are living through a significant and likely permanent disruption of the patterns industrial capitalism has exhibited for 200 years.

First, though, the critics have to be answered.


In 1922, the publication of Kondratieff’s first outline of long cycles sparked an immediate controversy. Leon Trotsky, at the time one of the top three leaders of Russian communism, wrote that, if fifty-year cycles existed, ‘their character and duration are determined not by the internal interplay of capitalist forces but by those external conditions through whose channel capitalist development flows’.11

In the early twentieth century, revolutionary Marxists had become obsessed with the idea that human action - the ‘subjective will’ - was more important than economics. They felt trapped by economics, which had become the property of moderate socialists who believed revolution was impossible. Kondratieff, Trotsky insisted, had got things the wrong way around:

The acquisition by capitalism of new countries and continents, the discovery of new natural resources, and, in the wake of these, such major facts of ‘superstructural’ order as wars and revolutions, determine the character and the replacement of ascending, stagnating or declining epochs of capitalist development.12

It may seem strange to those who know Marxism only as a form of economic determinism, but Trotsky was here insisting that political conflict between nations and classes was more important than economic forces. Instead of the long waves, Trotsky argued that Soviet economics should concentrate on explaining the ‘entire curve of capitalist development’, from birth to takeoff to decline: that is, its whole history. Long waves were interesting, but to those who desired the end of capitalism, the most vital pattern of all was capitalism’s complete lifecycle, which must surely be finite.

Marxists had by now evolved their own explanation of the big mutation in business structures after 1890 - which they dubbed ‘imperialism’ and which, they presumed, was the final or ‘highest’ stage capitalism could reach. So, confronted with Kondratieff’s data, Trotsky too drew a curve - a curve entirely the product of his imagination. It showed the takeoff and decline of an imagined capitalist country over ninety years. The purpose of the chart, Trotsky explained, was to show what a full and painstaking computation of the data might produce. According to him, once you understood the trend-line of a capitalist economy you could understand whether a fifty-year cycle - if it existed at all - was part of the overall upswing, downswing or the end. Trotsky made no apology for the imaginary nature of his curve. The data was not yet good enough to draw a real one, he said, though with work it might be done.

Trotsky’s 1922 attack was used then, and has been used since, to refute the idea of long cycles. But it does not. It simply says they are (a) not likely to be regular, caused as they are by external shocks; and (b) need to be fitted into a bigger, single wave-form that is the rise and decline of capitalism itself. Put another way, Trotsky was calling for a better and more historic definition of the ‘trend’ against which the fifty-year cycles were computed.

This in itself was logical. With all trends, statisticians look for what they call a ‘trend break’: a clear point where the curve stops rising, flattens out and prepares for a fall. The search for a trend break within capitalism was to obsess left-wing economists throughout the twentieth century - and ultimately elude them.

Meanwhile Kondratieff had been busy.


In January 1926, Kondratieff published his definitive work, Long Cycles of the Conjuncture. On 6 February, the cream of Soviet economics gathered at Kondratieff’s think tank, the Institute for Conjuncture, above Tverskaya Street in Moscow, to rip it to shreds.

The verbatim record of the meeting contains none of the fear and irrationality that Stalin’s purges would soon inject into Soviet academic life. The participants speak freely and harshly. They pursue the same three lines of attack that have dominated criticism of Kondratieff ever since: that his statistical methods were wrong; that he’d misunderstood the causes of the waves; and that the political conclusions were unacceptable.

First, Kondratieff’s main opponent, economist Dmitry Oparin, argued that the method he had used to smooth out shorter cycles was false, and had distorted the results. In addition, long-term data on the rise and fall of savings did not support Kondratieff’s theory.

Then the seminar turned to the issue of cause-and-effect. The economist V. E. Bogdanov argued that, instead of the rhythm of the long cycles being dictated by capital investment, it must be dictated by innovation. (This makes him the first person to reduce the long-cycle theory to a history of technological innovation, but not the last.) Bogdanov, however, raised a valid point. It was not logical, he argued, that the cost of building big things such as canals, railways or steel mills should dictate the rhythm of the world economy over fifty years. The objection to a capital-driven cycle led him to propose a tech-driven one, and on this basis he then advanced a more rigorous version of Trotsky’s ‘external shock’ argument.

If long waves did exist, they must, according to Bogdanov, be caused by the ‘random intersection of two essentially causal series’: the internal dynamics of capitalism and those of the external, non-capitalist environment.13 For example, the crisis of non-capitalist societies such as China and the Ottoman Empire in the late nineteenth century created new openings for Western capital; the agrarian backwardness of a country like Russia shaped the growth of its capitalist sector, forcing it to seek funds from France and Britain.

Bogdanov had a point. Kondratieff’s theory assumed that the rhythms of capitalism exert a one-way gravitational pull on the non-capitalist world. In fact, the two constantly interact, and any synthetic version of Kondratieff’s theory would have to take account of that.

Towards the end of the seminar, a long-time Communist Party hack, the agrarian economist Miron Nachimson, weighed in on the political implications of long-wave theory. The obsession with long waves, he said, was ideological. Its purpose was to justify crisis as a normal state of affairs; to say that ‘we are dealing with an essentially perpetual movement of capitalism, first upwards and then downwards, and that it is not appropriate to dream of social revolution yet’. Long cycles, Nachimson realized, would pose a big theoretical challenge to Bolshevism, whose premise was capitalism’s imminent doom.14

The debate gets close to the heart of the problem with Kondratieff’s work:

1. He saw the dynamics of capital investment as the primary cause of fifty-year crises. Yet his account of these dynamics was not sophisticated.

2. He assumed the non-capitalist world was the passive bystander to capitalist wave patterns when it was not.

3. At this point, though he saw each wave as a more complicated version of the next, he failed to situate the role of long waves within the ultimate destiny of capitalism.

And there was another, related, problem with Kondratieff’s work: the data problem. It has pursued long-cycle theory all the way through from the era of the slide rule to that of the Linux box. We must consider it here because the data problem has acted like a ‘no entry’ sign to Kondratieff’s work for a generation.


It’s a mark of Kondratieff’s ambition that the research group he ran employed one of the great mathematicians of the twentieth century, Eugen Slutsky. And while Kondratieff wrestled with real data, Slutsky was engaged in a project of his own, using random numbers.

Slutsky showed that, by applying a moving average to random data, you can easily generate wave-patterns that look like real economic facts. To prove the point, he produced a wave-pattern from random lottery numbers and superimposed it on to a chart of British growth statistics: when the one was squashed down on to the other, the shapes looked remarkably similar. In statistics, this is known as the ‘Yule-Slutsky Effect’, and is now understood to mean that the very act of smoothing out data generates spurious results. However, Slutsky believed the opposite. He believed that the emergence of regular wave-patterns from random events was real15 - not just in economics but in nature:

It seems probable, that an especially prominent role is played in nature by the process of moving summation with weights of one kind or another, where the magnitude of each consequence is determined by the influence, not of one, but of a number of the preceding causes, as for instance, the size of a crop is determined, not by one day’s rainfall, but by many.16

In other words, raindrops fall randomly into a square kilometre, but at the end of the season you have a crop yield that you can measure against last year’s. The cumulative impact of random events can produce regular, cyclical patterns.

By the time Slutsky wrote this, Kondratieff was becoming dangerous to know. In 1927 conflicts within the Soviet bureaucracy erupted into expulsions and street fighting. Historian Judy Klein points out that it would have been easy for Slutsky to disown Kondratieff, who was under suspicion as an avowed market socialist. Instead, he supported Kondratieff’s basic theory.17

In fact, Slutsky’s experiment added a crucial insight to long-wave theory. He noted that waves generated by filtering random data do not repeat for ever. As he computed them over time, the patterns would suddenly break down, an event he dubbed ‘regime change’: ‘After a more or less considerable number of periods every regime becomes disarranged, the transition to another regime occurring sometimes rather gradually, sometimes more or less abruptly, around certain critical points.’18

To anybody interested in the long-range patterns in economics, the challenge posed by Slutsky’s observation is clear. First, long waves may not be traceable to a tangible cause - whether it be innovation, external shocks or the rhythms of capital investment. They may just be a regular feature of any complex economic system over time. Secondly, whatever the cause, we should expect regular wave patterns to break down and reset themselves.

Slutsky himself believed this pattern of sudden breakdown could operate at two levels: inside the ten-year business cycle and across the fifty-year long cycles. But his work raises a third possibility. If industrial capitalism has produced a sequence of fifty-year waves over a period of more than 200 years, then maybe at some point this too breaks down, inaugurating a regime change that leads to a whole different pattern.

In the past twenty years there has been a stats-driven backlash against Kondratieff. Various modern studies claim to show that, if better smoothing-out techniques are used, Kondratieff’s waves simply disappear, or become patchy. Others correctly point out that the long-term price fluctuations observed within the first three waves disappear once a sophisticated global marketplace emerges after 1945.19

However, given the massive amount of extra data and better methods that we possess, it should be possible to detect Kondratieff waves in the global growth statistics.

In 2010, the Russian researchers Korotayev and Tsirel did just that.20 They used a technique called ‘frequency-analysis’ to show convincingly that there are powerful fifty-year pulses in the GDP data. For the post-1945 period, they show that even the raw data contains clear evidence of an up phase after 1945 and a prolonged down phase beginning in 1973.

In fact, using the IMF’s definition of recession (six months during which global growth dips below 3 per cent), they calculate that, while there were no recessions for the period 1945-73, there have been six recessions since 1973. They are confident that the Kondratieff wave is present in world GDP figures after 1870, and observable in Western economies before that.

There is more evidence for the existence of long cycles in the work of Cesare Marchetti, an Italian physicist who analysed historical data on energy consumption and infrastructure projects. The result, he concluded in 1986, ‘very clearly reveals cyclic or pulsed behaviour’ in many areas of economic life, with cycles lasting roughly fifty-five years.21

Marchetti rejects the idea that these are waves, or primarily economic - preferring to call them long-term ‘pulses’ in social behaviour. But, he says, signals that are unclear in economics ‘become crystal clear when the “physicals” are analysed’.

Marchetti says that the clearest evidence for long cycles lies in the pattern of investment in physical communication ‘grids’. Taking canals, rail, paved roads and airline networks as his examples, he showed how the build-out of each peaked roughly fifty years after the previous technology had done so. On this basis, he predicted that a new type of grid should appear around the year 2000. Though writing a mere fourteen years before the millennium he could not guess what it would be. Today we have the answer: the information network.

There is, then, physical and economic evidence that a fifty-year pattern exists. The wave shapes generated by such a pattern, or pulse, are of secondary importance to the fact of the pattern’s existence. To an economist they indicate deeper processes at work - just as for the astrophysicist a black hole can be detected only by the movement of matter around it.

And here’s why it’s important. Kondratieff gave us a way of understanding mutations within capitalism. Left-wing economics had been looking for a process that led only to breakdown. Kondratieff showed how the threat of breakdown usually leads to adaptation and survival.

The problem with Kondratieff remains his account of the economic force that drives the cycle; and how this relates to the ultimate destiny and longevity of the system. It is this we have to fix.


I once gave a lecture on Kondratieff to 200 economics students at a British university. They had not a clue who, or what, I was talking about. ‘Your mistake,’ said an academic to me after the talk, ‘was to mix micro- and macro-economics. They are just not used to that.’ Another lecturer, whose job it was to teach economic history, had never heard of Kondratieff.

But they’d heard of Josef Schumpeter. In Business Cycles (1939), Schumpeter argued that capitalism is shaped by interlocking wave-cycles, ranging from a short-wave three- to five-year cycle produced by the build-up of stocks inside businesses, through to the fifty-year waves Kondratieff had observed.

In a tortuous logical exercise, Schumpeter ruled out the credit cycle, external shocks, changes in taste and what he termed ‘growth’ as causes of the fifty-year cycle. Instead he argued: ‘Innovation is the outstanding fact in the economic history of capitalist society and … is largely responsible for most of what we would at first sight attribute to other factors.’22 He then supplied a detailed history of each of Kondratieff’s waves as an innovation cycle: the first is triggered by the invention of the factory system in the 1780s, the second driven by railways from 1842, the third by a cluster of innovations we now call the Second Industrial Revolution, in the 1880s and 90s.23

Schumpeter took Kondratieff’s wave-theory and made it highly attractive to capitalists: in his version the entrepreneur and the innovator drive each new cycle. Conversely, periods of breakdown are the result of innovation becoming exhausted, and capital being hoarded in the finance system. For Schumpeter, crisis is a necessary feature of the capitalist system, in that it promotes the ‘creative destruction’ of old and inefficient models.

And though Kondratieff was largely forgotten, Schumpeter’s work has lived on as a kind of religious insight: a techno-determinist account of boom and bust that mainstream economists can turn to at times of crisis, when their normative beliefs fail.

The most prominent modern follower of Schumpeter, Carlota Perez, has used the tech-driven theory to urge policymakers to give state support to info-tech, biotech and green energy - with the promise of a new ‘golden age’ to follow sometime in the 2020s, once the next wave takes off.

Perez added some refinements to wave-theory that are useful for understanding the present phase. The most important is her idea of the ‘techno-economic paradigm’. It is, she argues, not enough for there to be a cluster of innovations at the start of each wave-cycle, nor for these innovations merely to interact with each other. A ‘new common sense, guiding the diffusion of each revolution’ has to emerge, a recognizable ‘logic of the new’ that enables the replacement of one set of technologies and business practices with another.

But by dating the waves from the invention of key technologies, not their rollout, Perez departs both from Kondratieff and Schumpeter. And she proposes a different causal sequence: innovators invent, financiers get excited and speculate, it all ends in tears and the state moves in, regularizing the situation so that a golden age of high growth and productivity can occur.

Perez’s supporters say this date sequence is just a repackaging of Schumpeter, with the start-point of each wave dragged twenty-five years earlier. But it is more than that. For her, the primary focus of long-wave theory is ‘the irruption and gradual assimilation of each technological revolution’, not the upswings and downswings in GDP that were the focus for Kondratieff.24

As a result, she is left with all kinds of consistency problems. Why is the fourth wave (1909-71) nearly seventy years long? Because the policy response to the 1930s Depression did not bear fruit until 1945, she answers. Why does the clear sequence ‘innovation, bubble, bust’ happen twice between 1990 and 2008? Again, she answers, because of policy mistakes.

Perez’s version of wave-theory stresses the response of governments at crisis points, but puts very little emphasis on the struggles between classes or the distribution of wealth. In an almost pure inversion of Kondratieff, the economics are driven by technology, and technology is driven by governments.

The attraction of the tech-driven wave-theory is that the evidence for it is tangible: clusters of innovation do take place before the start of long waves, and their synergies can be documented. It is materialist, in that it sees revolutions and changes in social attitudes as the product of something deeper. New technologies bring to power what Schumpeter called ‘new men’ - who in turn bring with them their own tastes and norms of consumption.

But Kondratieff was right to reject technology as the driver of big change. It is adequate for describing the start of fifty-year cycles but does not fully explain why the clustering of inventions takes place, nor why a new social paradigm emerges - nor indeed why the wave ends.

If we stick with Kondratieff, and extend his sequence of long cycles to the present, drawing on Marchetti’s ‘physicals’, and much better data than that which was available in the 1920s, we can draw the following outline.

Industrial capitalism has gone through four long cycles, leading to a fifth whose takeoff has stalled:

1. 1790-1848: The first long cycle is discernible in the English, French and US data. The factory system, steam-powered machinery and canals are the basis of the new paradigm. The turning point is the depression of the late 1820s. The 1848-51 revolutionary crisis in Europe, mirrored by the Mexican War and Missouri compromise in the USA, forms a clear punctuation point.

2. 1848-mid-1890s: The second long cycle is tangible across the developed world and, by the end of it, the global economy. Railways, the telegraph, ocean-going steamers, stable currencies and machine-produced machinery set the paradigm. The wave peaks in the mid-1870s, with financial crisis in the USA and Europe leading to the Long Depression (1873-96). During the 1880s and 90s, new technologies are developed in response to economic and social crises, coming together at the start of the third cycle.

3. 1890s-1945: In the third cycle heavy industry, electrical engineering, the telephone, scientific management and mass production are the key technologies. The break occurs at the end of the First World War; the 1930s Depression, followed by the destruction of capital during the Second World War terminate the downswing.

4. Late-1940s-2008: In the fourth long cycle transistors, synthetic materials, mass consumer goods, factory automation, nuclear power and automatic calculation create the paradigm - producing the longest economic boom in history. The peak could not be clearer: the oil shock of October 1973, after which a long period of instability takes place, but no major depression.

5. In the late-1990s, overlapping with the end of the previous wave, the basic elements of the fifth long cycle appear. It is driven by network technology, mobile communications, a truly global marketplace and information goods. But it has stalled. And the reason it has stalled has something to do with neoliberalism and something to do with the technology itself.

This is just an outline: a list of start- and end-points, technology clusters and significant crises. To go any further, we need to understand the dynamics of capital accumulation better than Kondratieff did, and in ways the techno-theorists barely touch. We need not only to understand that capitalism mutates but also to understand what within the economy drives the mutations, and what might limit them.

Kondratieff gave us a way to understand what systems theorists call the ‘meso’ level in economics: something between an abstract model of the system and its concrete history. He left us a better way to understand its mutations than the theories advanced by twentieth century followers of Marx, who focused on external factors and doom scenarios.

We are not done with Kondratieff yet. But to complete what he tried to do we have to dive into a problem that has obsessed economics for more than a century: what causes crisis.