Ebook: Kondratieff Waves, Warfare and World Security

In a paper published in 2001 [1] I put forth some empirical evidence, already claimed in the 1980s by Kleinknecht [2] and Vasko [3], that publishing on economic long waves (or Kondratieff waves) seems itself to move along a long wave path. Reckoning the number of publications (books and papers) on long waves since the start of the 20^th century my graph suggested the existence of two clusters of publications separated by ∼59 years, each following a logistic trajectory. The first cluster, presenting a ΔT (time to go from 10% to 90% of the complete growth) = 28 years, peaked in the late 1920s, coinciding with apogee and downswing of the 3^rd Kondratieff wave (K-wave for short) and in my opinion it corresponded to the period of discovery and diffusion of the long wave concept, the period when the main body of Kondratieff's work was published and also the period that witnessed the uprising of publications on business cycles (not considered in my reckoning). The second cluster, presenting a ΔT = 25 years, peaked in the middle 1980s, coinciding with the downswing of the 4^th K-wave and, again in my opinion, it corresponded to a typical phase of proofing the existence, modeling, and theorizing on economic long waves. I concluded then that the unfolding of the second logistic signaled the ceiling of publications on long waves in the coming years, probably heading to a reasonable understanding of the phenomenon.

Now, only four years later, this conclusion seems to be incomplete. Indeed, we have observed a diminishing number of publications during the last couple of years (if compared to the huge amount of publications during the 1980s), but not the expected ‘reasonable understanding’. What some chapters of this book reveal is that doubts on the very existence of K-waves increased (coming even from authors that actively published on long waves during the second cluster), or if they in fact exist (or existed), some recent developments may have perturbed their unfolding, in such a way that long waves might be but a temporary historical fact associated perhaps with the onset of the massive capitalistic means of production.

We must recognize, however, that considerable progress has been made in understanding the underlying mechanisms driving the long wave behavior of the world socioeconomic development. Despite this progress, one also recognizes that many aspects related to these underlying driving forces remain unsolved. Perhaps the most controversial of these aspects to have endured is the close relationship between K-waves and the outbreak of major wars, first suggested by Kondratieff himself.

Social scientists and politicians are well acquainted with the fact that chance events (instantaneous and unforeseeable events of human or physical nature) have been responsible not only for the outbreak of wars, but also have even changed or decided their course and outcome. Notwithstanding, since the last quarter of the 20th century the new recognition of some patterns in the study of warfare may contribute to change this perception. Two main trends in analyzing warfare are now acknowledged: the increasing recognition of the existence of some cyclical patterns of warfare involving the core of the world system, and a shift toward newly evolving patterns involving non-state actors and asymmetric warfare.

Moreover, we should add the fact that warfare analysts agree that for the coming decade the threat of a largely bi-polar, superpower-driven global war situation is practically non-existent. Instead, the near term threat for international security comes from conflicts of asymmetric nature, bringing a confusing mix of stateless actors, separatist and fringe independence movements, insurgence operations, terrorist attacks, the use of WMD (Weapons of Mass Destruction), information warfare, and other unconventional threats. There is consensus too that there are few, if any, countries that can militarily challenge the NATO countries in open combat at the present time, a scenario that, however, may change in the long term.

The prevailing view has been that warfare is a random occurrence having more or less severe or transitory effects on the economic and social system. Contemporary historians, economists, and other system scientists, who have demonstrated the existence of cyclical patterns, however, are increasingly questioning this view [4–6]. Long wave theorists have shown a clear secular pattern of recurrence of major wars with a period of 50 to 60 years [7–10], as well as a concentration of wars in the upswing phase of the K-wave. Another pattern of 25-year periodicity, probably generation-driven, also emerges from these studies [1,11]. Moreover, simple extrapolation of the secular trend points to a highly probable severe conflict by the middle of the second decade of this century (upswing of next K-wave), involving countries struggling for leadership in the Pacific Rim.

Hence, we may tentatively agree with this maturing point of view that wars are not merely the result of blind social and political forces, but patterned according to long socioeconomic cycles and/or, as recently proposed [12], the result of deep and general laws underlying the coevolutionary unfolding of the world system. It is necessary to investigate the underlying causes of the observed patterns, using the modern tools of systems science and looking at social and biological human behavior at the aggregate level, in order to develop a consistent theory of warfare. Even the recently observed trend of “brush-fire” and asymmetric wars might be an adjacent new ingredient of the long wave dynamics.

The meeting that spawned this book had as scope the discussion of the above points, mainly concerned with the relationship between K-waves and warfare under the light of the new trends observed in the international political sphere. To my surprise, however, as well as to most of the participants of the NATO Advanced Workshop on Kondratieff Waves, Warfare, and World Security (held in Covilhã, Portugal, 14–18 February 2005) many of the contributions presented and the discussions developed during the meeting again stirred up the old controversy about the existence of long waves and about the possibility that K-waves might come to an end.

For this reason it was a very difficult task to sort all the 38 received contributions among the three different parts of the book. In Part I (Kondratieff Waves Revisited: New Concepts on the Interpretation of Long-Term Fluctuations in Economic Growth) the reader will find a mix of contributions dealing with new visions or revisions of the concept of long waves considered from very different perspectives related to their unfolding. A few of them also broach the subject of their relation with warfare and some also contribute with some views about future developments, but these aspects were not the main objective of the contribution. Those contributions objectively discussing the issue of K-waves and their relation with military conflicts, following old and/or new conceptualizations of the phenomenon, were selected to form Part II (Kondratieff Waves and Warfare). Finally, those contributions with strong emphasis on the analysis of future scenarios, related or not to warfare and/or world security compose the body of Part III (Looking into the Future).

However, as stressed above, the reader will observe that the authors of many of the chapters composing this book merge the three themes (revisiting K-waves, warfare, and future scenarios) in such a way that the position of their article in the respective Part may seem out of place, but I hope that this fact does not affect the main purpose of the book – that is – to give readers a modern overview of the still debatable long waves concept. I think that readers will agree that this overview, the first published at the dawn of the 21^st century, is very broad and rich in scope, and will contribute deep insights for further research and actions.

The 38 chapters composing this book comprise the contributions of scientists from 12 different countries (NATO countries and NATO-Partner countries). Unfortunately (mainly due to the restrictions imposed by NATO for participants from non-NATO countries in Advanced Research Workshops), we have not the participation of scientists from other cultures and continents holding many different views of the future to enrich our understanding on this ever-exciting debate. This was one of the strong points that arose during the final discussion of the workshop – we must keep in mind that the trend nowadays toward globalization and the increasing role and weight of Asian countries in the geo-political world system urges a broader expertise participation. As I pointed out in a recent paper [13], we are presently witnessing a westward trajectory toward the ‘Morgenland’, and such a culturally broad discussion on long waves would undoubtedly contribute to future actions towards creating a better tomorrow.

I cannot finish this prologue without addressing some words expressing my profound gratefulness to the NATO Public Diplomacy Division – Threats and Challenges Section, represented by the Programme Director Prof. Dr. Fernando Carvalho Rodrigues, and to the University of Beira Interior, represented by the Rector, Prof. Dr. Manuel dos Santos Silva, whose strong support made it possible to bring together at least a significant elite of today's world expertise on long waves related science.

Tessaleno C. Devezas, University of Beira Interior, Covilhã, Portugal

October 2005

The main theses of the theory of the big cycles of conjunction (long waves of economic dynamics) are expressed at the report, their many-sided character, mutual connection with technological and social and political cycles, fluctuations of the innovations' intensity are discovered there. There is a forecast for the Kondratieff's waves at the 21^st century, transition from the fifth to the sixth Kondratieff's cycle, which will promote easing of the internal and international conflicts and military collisions, international terrorism as a point form of the civilizations' clash.

Accepted features of the Kondratiev Cycle/Structure (KCS) or Kondratiev Phenomenon are summarized. Saturation and exhaustion characterizing the end of the stage of depression of the fourth Kondratiev are briefly discussed. Features that may delimit the emergence of a fifth Kondratiev are discussed. Assumptions and requirements for new conceptual models are presented. Multidimensionality in time and space in building these models is emphasized. Several relevant models in the physical, biological, and social sciences are reviewed. A new model is developed, and sources of possibly substantiating data are identified. Because historically the likelihood of insurrections and wars has increased as nations recover from depression into recovery and prosperity, features imminent to war are discussed. A number of policy recommendations relevant to improving societal and environmental conditions and avoiding war are made.

Over the last two centuries in the US, macroeconomic rhythms and political processes have been closely cointegrated. Each K-wave has been composed of three Kuznets cycles, each Kuznets cycle has been marked by a particular type of growth, and each transition between Kuznets cycles has been marked by both political and economic instability. One type of instability coincides with K-troughs and a second type with K-peaks, and these in turn with warfare. Exactly on time, we are currently in a K-trough, with all of its economic and political instabilities, and are engaged in a new trough war, the War on Terror.

This paper defines a hypothetical Law of capital accumulation that includes a growth rate of supply of labor force as a non-linear function of capital intensity. The main state variables are the labor productivity, unit value of labor force, employment ratio, and capital-output ratio. An application of an extended Kalman filtering to the U.S. macroeconomic data 1969–2002 and computer simulation runs demonstrate that long wave has been a viable pattern of capital accumulation.

The characteristic of the inertia scenario is a strengthening of the secular tendency of the general profit rate to fall. This is not accepted by the U.S. state and business leadership. The terrorist attack of the September 11, 2001 has served as a new powerful catalyst for a mobilizing policy that aims at a fast overcoming of the structural crisis and safeguarding the global dominance based on technological leadership.

The mobilizing policy enables, probably, overcoming the structural crisis, accelerating productivity growth, raising the general profit rate, reducing unemployment ratio in 2001–2010. The main leverage is freezing real wage under the conditions of the present war. This paper touches briefly the question whether the USA tend to participate in wars late in long boom and beginning of structural crisis.

Spectral analysis is a particularly valuable method for seeking dependences expressed as lags between different magnitudes. Its use in this article was first determined by the search for maximum objectivity in the observation of time series. The possibility of applying it to a large number of series was then examined. This twin requirement resulted from a desire to avoid the criticism generally levelled at statistical studies concerning cyclical movements of the economy. Spectral analysis is based on the theory of stochastic processes. It starts with the core hypothesis that a given time series consists of a large number of sinusoidal components with different frequencies (univariate spectral analysis). It makes it possible to divide a particular category of records into a set of oscillations of different frequencies and then to show the links between the components with the same frequency in the various series examined (cross-spectral or bivariate spectral analysis). It has had limited applications in cliometrics to date. It is used here to determine the frequency of GDP series of several OECD countries. A reminder of the method (I) is followed by successive examination of the various series chosen, the treatment of these series and the results of spectral analysis (II). It is then possible as a conclusion to show the prospects of this type of approach and to synthesise a completely new major result for understanding economic dynamics in the nineteenth and twentieth centuries, that is to say the existence of a single intermediate cycle with 15 to 20-year frequency that calls into question or even partially contradicts previous work on economic cycles.

This paper studies the long-term economic cycles of the international price of the oil barrel written in the supply contracts signed after January 1972. The approach begins by the estimation of the long-term trend using the Hodrick-Prescott filter, and continues with the isolation of the long-term cycles that can be identified from the data series. In a second step it dissects each one of the long-term cycles in the different expansion and contraction periods of the price cycles. In the last step it appreciates the existence of an association among these cycles and their phases, the armed conflicts that occurred during these 30 years, the main political leaders of the countries that played the main role in the international scene (some countries of the EU, the USA and Russia) and other important explicative factors of the long-term evolution of the international crude oil price.

Of the many theories that have been offered to ‘explain’ K-cycles, the most plausible by far is their close correlation with clusters of radical innovations associated with changes in major primary energy sources, starting with the “age” of coal and iron, followed by the “age”of steam power, railways, steel, and town gas, followed by the age of electrification, internal combustion engines and automobiles. Schumpeter (writing in 1939) suggested that the third wave would end around 1950. He expected the A-period of a fourth K-wave to begin then, with a B-period starting in the 1970s and ending around 1990. The postwar boom and the advent of nuclear power and natural gas seemed to fit that prescription. The slowdown beginning in the 1970s also fits the pattern. US oil production peaked in 1969-70. The energy crisis of 1973-74 was followed by the deepest recession since the 1930s. Nuclear power suffered a setback in the 1980s, and the on-going de-industrialization of the US accelerated. In effect, it can be argued that the fourth K-wave occurred on schedule and ended around 1990-1992, also with a deep recession. The A-period of the fifth wave presumably began then, driven by the ‘digital revolution’ ICT and the internet. But recent events, especially since 2000, also suggest that the pattern may have broken. This paper reviews the evidence for such a view. The relevance to US National Security is spelled out clearly in Michael Klare's book “Resource Wars” (2001) which virtually predicted 9/11 and the US attack on Iraq.

Venture capital (VC) provides financial and managerial support for new innovative ideas at the initial stages of commercialization. It has helped to find the market for many radical innovations of 20^th century, including personal computer, Internet and genetic engineering.

As a part of market economy venture business was not stable from the very beginning. The periods of rapid growth alternated with deep recessions. However each time VC revived anew as the Phoenix due to its very important function in modern knowledge-based economy.

This report presents an analysis of statistical data that prove the existence of several cycles in VC dynamics in the USA and the Great Britain. The main factors of these cycles formation are discussed. The author proposes two possible scenarios of development of VC market for the first 30 years of the new 21^st century. A hypothesis is put forward about the relation between VC cycle's amplitude and a phase of Kondratieff's cycle.

The title captures the gist of the Neo-Kondratieff Agenda: Can long waves break? This question looms large in EU countries. The Lisbon 2010 Mission depends on the breakability of the low, slow long trends considered stiff in many EU countries. The point is that some of these slow trends may change fast, indicating fast renewal.

Schumpeter attributed to Kondratieff the regular, slow moving Long Wave Concept (K-Model). Had Kondratieff not been imprisoned for his contrary economic theory, and shot upon order of Stalin, Kondratieff himself may have objected to his name being attached to such a stiff macro-wave mechanism in socio-economic life. He knew better. Kuznets (“Secular movements in production and prices”) started the Neo-Kondratieff Agenda with the notion of irregular movements (Kuznets: “atypical Kondratieff”). And I followed suit, in 1975, with the Metamorphosis (M-Model) as an alternative to Schumpeter's K-Model, proposing overlapping S-curves, implying the possibility that the economic system may shift fast from the stagnant branch of an old S-Curve towards the fast growing branch of the new S-Curve: A growth spurt. That is what goes on when a “long wave” breaks.

In this paper, I analyze Structural Instability (alias: breakability) by means of a potential function, apply it to the Roaring Twenties (and the crash 1929/31), and to the New Deal thereafter. The approach is robust and transferable to today: To the Roaring Nineties, the crash 1999-01 and a Neo-New Deal 2005 ff. this is “synthetic” Economic Evolution.

These contingencies vary from country to country (place dependencies), and depend on speed of better understanding, and learning (pace dependencies). Key impact area of this type of social learning is the financial service area. There will be much shake-out associated with the new take-off, as banks and governments prefer supporting big firms in old industries. The Neo-New Deal will favour European Small and Mid-Sized Firms' Innovations that open up new avenues.

The empirical evidence of Kondratieff cycles is highly controversial. In this paper, the question is analysed how far World War I and II are responsible for this situation. It is shown that after estimating the effects of the Wars and other exogenous shocks the long-term economic development is characterized not by Kondratieff - but rather by Kuznets cycles. The long-term growth rate for the US economy seems constant, for the European economies there are significant changes in speed of the growth process. These growth phases seem to be in significant inverse correlation with the innovation process.

The phenomenon of states changes of the world economy during the last 200 years shows that there is a certain 70-year regularity in its development, which is expressed in increased structural complexity of the global economic system every 70 years. The development happens after certain periods of bifurcation (up to 50 years) accompanied by the lower rates of economic development, and periods of adaptation (up to 20 years) with the higher rates.

The theoretical reasoning of this process shows that complication in the structure of the global socium is the external demonstration of the self-organization process in a large complex system we call the “world economy”. This process of development is based on two fundamental laws of nature: the principle of minimum dissipation of energy (or resources), and the law of conservation of accumulated energy (economic efficiency); and is realized via two types of development mechanisms – bifurcation and adaptation.

Formation of the world-security system should rest on applying the natural laws of development, and lead towards the creation of a complex, two-level (regional and global) structure with the institution of geopolitical pluralism, based on implementing the “principle of minimum dissipation”. This will contribute to the development of the global system on a conflict-free base.

The main aim of that paper is to outline an alternative view on a wavelike development of human systems. The hypothesis is based on evolutionary interpretation of human knowledge development. There are some evidences that individual knowledge of each human being consists of paragons (understood as an ideal pattern of human behaviour) – of perception, cognition, behaviour, understanding, and so on. Paragons play a role analogous to genes in biology and determine, in some way, the behaviour of an individual in well-defined life situations. On the basis of biological analogy a hierarchical structure of human knowledge (a so-called archetype) is partitioned into six levels (taxa), namely: (1) epigenetic paragons, (2) the image of the world, (3) the image of the society, (4) the image of the economic system, (5) the epistechne, and (6) the paradigm.

This paper gives a brief historical account of the discussion on innovations clustering, reviewing Kuznet's criticism on Schumpeter's cluster-of-innovation hypothesis. Thereafter engages into econometric analyses of time series of major innovations that were produced by various authors. We conclude that much is to be said in favour of a rehabilitation of Schumpeter's (1939) cluster-of-innovation hypothesis.

In this report a new Kondratieff's book is represented and a general dynamic Kondratieff's model of economic growth, privately published in 1934, is described and analyzed. Some theoretical views of Russian economist-theorist are revised and adjusted both to his real day-by-day life in isolation (1932-1938) and immanent logic of precedent intellectual development. As a result, important Kondratieff's deviation from well-known K-cycles approach and Mitchell research program towards early econometrics combined with macroeconomic dynamics problems (building of social genetics system) is observed.

My work in the mid-1980s on Kondratieff waves tried to explain long waves in terms of causal relationships among six main variables: war, production, prices, innovation, investment, and real wages. I emphasized war as a central element; saw production waves as leading war/price waves by roughly 10-15 years; and saw war,innovation,investment,andpossiblyrealwages as mutually reinforcing mechanisms in the long wave. Based on analysis of historical time series, in 1989 I elaborated a four-phase dating scheme based on the lagged correlations among variables, and discussed the phase of the world system (as of 1989) in terms of that scheme.

In this paper I revisit these conclusions fifteen years later and find they had strong predictive power regarding the transition in the early 1990s from the “stagnation” quarter-phase of the K-wave to the “rebirth” quarter-phase (higher production growth and investment, low prices, high real wages, high innovation, and low great-power war). All these variables in the late 1990s fit the expectations of the K-wave scheme, especially the relative peacefulness and low military spending in contrast to the previous phase. Looking forward, changes since 9/11 may signal the onset of a new Kondratieff phase, “expansion.”

In recent theories on the relation between war and the Kondratieff wave it is assumed that wars are concentrated at the end of Kondratieff upswings. They intensify the tensions of the boom, destabilise economic and social relations and usher in the ensuing downswing.

Its protagonists maintain that this co-movement of war and upswing has been with us for ages. There is, however, one notable exception. World War II, the most momentous war of all, does not fit this pattern. It is a-typical for two reasons. Firstly it occurs at the end of the Kondratieff downswing and is consequently out of step. Secondly it is followed by a sturdy upswing, which obviously does not fit the postulated ‘mechanism’ of the movement.

In this paper it is argued that World War II is not an integral part of the Kondratieff wave. It stands out as a separate entity. The extent of its material destruction was such that the economies of the belligerent nations were thrown off their steady state paths. They had to lift themselves, so to speak, by their own bootstraps to return to the main road. The high growth rates typical of such a ‘reconstruction boom’ received special impetus because new technologies were embedded in reconstructed plant and equipment.

While long waves have been seriously discussed by economists for almost one hundred years, to date there is no scientific consensus that particular frequency components are in any way privileged in the undoubtedly fluctuating history of modern economic and political development. This is disappointing for two reasons. First, the demonstration that robust, well-defined periodic components existed would present us with a plausible tool for forecasting. And second, they could (and their purported existence has variously been thought to) provide insight into underlying causal mechanisms that generate the observed patterns. The data, I argue, only provide support for a continuous spectral pattern of a power law, 1/f^α type. This is borne out in the paper by the analysis of political indicators such as the newly revised Modelski/Thompson sea power index and the Levy great powers conflict data. Claims for underlying low-dimensional chaos are only partly substantiated. Individual peaks at various frequencies in the spectrum are probably only due to “random noise” factors unique to segments of the record and not robust across countries and historical episodes. While one could then play the game of finding ad hoc explanations for why the ‘K-wave’ did not take its expected form in this or that century, from the perspective of the theory of complex dynamics it seems more plausible to conclude that a periodic model is not appropriate. Rather, the underlying model is more likely to be of the self-organized criticality or percolation type, characterized by power-law or fractal behavior rather than well-defined periodicity. I highlight some features common to several models of innovation/economic dynamics and war/hegemonic cycles, such as highly clustered but nonperiodic critical events and resulting long life cycles of rise and decline, that may serve as a plausible explanatory mechanism for this 'revisionist' interpretation of the empirical record on long waves.

Europe has to face new problems. Since the WWII catastrophe, it has renounced to internal wars. And, under the American umbrella, it can provide for such an ambition. It stands for the voice of Kant's vision of international relations. However, as it is protected by USA, the European position as regard to risks of war arising may seem ambiguous. If it wants to be credible, it has to give good example at its borders. But, two cases, in Caucasia and in Africa, show that it is not so. This paper aims at recalling how the ‘geographic-induced’ war pressures, during the European history, above all since 1800 (the Napoleonic wars) and even more since 1914 (the first world war) were. This first enables to look at the way the situation has essentially evolved, and secondly how that very situation can modify the verdict of the Modelski-Goldstein's theory about risks of war in the world for the coming fifty years.

During the past 30 years, I have analyzed thousands of time series concerning all sorts of social and economic phenomena—from the destruction of the threshers (1 month) to the evolution of British naval power (500 years), from the rounds of artillery shot in Europe by American forces during WWI to American casualties in the Vietnam War, from the victims of the Red Brigades in Italy to those of the witch hunts in the Middle Ages, and so on. The perplexing result is that a very simple logistic model can always fit the data in a predictive format.

The usual enlightened belief that human events are the result of the fight between competing and collaborating free wills—in imprecise contexts, with unpredictable consequences—seems to be challenged by these results. History appears as the smooth de-convolution of a built-in program where free wills lock in to make it smooth. There appear to be many programs, in fact, like wheels within wheels, strictly clocked by ubiquitous Kondratiev cycles or waves, so that details are describable and predictable. This can be seen in Figure 1, where logistic center points of transportation infrastructures in the USA, subway starting dates for the world, and innovation waves are reported against the deviations from an exponential of energy consumption in the USA. It must be clear that I am not presenting a theory here, but rather some conclusions from numerous—that is, a few thousand—empirical analysis.

Current long wave upswing falls on the phase of deconcentration of Modelski's long cycle. Hence the danger of new world war conflict is arising. These circumstances demand for investigation of possible exact causes of probable war. It's a matter of a sharp necessity to explain the economic motivation fundamentals being the basis for global instability growth. Such kind of investigation seems to be useful for creation and implementation of the instruments intended to resist the danger of global war.

Therefore economic nature of the globalization processes should be analyzed in the first place. This kind of investigation shows that the danger of new war in globalized world is connected to resource and financial trends economic dynamics characteristics, as well as to the changes in stimulus for basic innovations formation.

Patterns of violence in the world system are rarely constant. Two cases in point are global wars and contemporary waves of terrorism. Global wars emerged only in 1494 and may now be a relic of the past. Contemporary waves of terrorism began to emerge in the French Revolutionary Wars and are still very much with us. A co-evolutionary model, focusing on the reciprocal interactions among political-economy, political and military organizations, weaponry, and war, helps to explain the emergence of both phenomena.

There are different behaviors appropriate to the different phases of growth. This has been observed among species in nature as they go through the four seasons, but also among humans in society as different economic-growth phases succeed one another. Typically, difficult times stimulate entrepreneurship whereas prosperity nurtures conservatism. Less obviously, preoccupation with the “what” characterizes formative times whereas preoccupation with the “how” characterizes periods of maturity.

A multitude of different behaviors can be mapped on the four phases of any growth cycle. On a larger scale, and to the extent that society is anthropomorphic, society as a whole goes through different behaviors while experiencing transitions between cyclical phases of growth. Given a growth phase we can expect specific behaviors, and inversely, given a specific behavior we can deduce the growth phase being traversed. It follows that WWII may have been survival-driven whereas WWI greed-driven.