Economic Long Wave Cycles: An Analysis of the U.S. Financial Future

John Shuttleworth shares information on Nikolai D. Kondratieff's economic long wave cycles and the financial future of our country.


| July/August 1985



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Diagram: Economy - U.S. wholesale prices.


ILLUSTRATION: MOTHER EARTH NEWS STAFF

The economic outlook column has an article from MOTHER EARTH NEWS founder John Shuttleworth on the financial future of our country. 

It's been a few years since the writing of MOTHER's founder, John Shuttleworth, graced these pages. Therefore, we're pleased—as we're sure all longtime subscribers in our audience will be—to welcome Ol' John's analysis of the factors behind today's often confusing economic developments . . . and his perceptive thoughts concerning just where we may be headed! 


Many of you will remember that as far back as issue 44 (March/April 1977), this column has explored and quoted from the 1920s work of Russian economist Nikolai D. Kondratieff. Particularly as interpreted by Julian M. Snyder, editor and publisher of International Moneyline ($282 a year, New York, NY). The fact that Nikolai the K died at communist hands in a Siberian prison because he preferred to quote the results of his research rather than spout the official party line only adds to his reputation. As does the following report . . . largely based upon the May 21 and November 26, 1984, issues of International Moneyline.

Kondratieff discovered very quickly that since the start of the Industrial Revolution, Western economies had expanded and contracted in a roughly 54-year-long wave . . . with approximately 27 years of expansion and 27 of contraction in each cycle. Now, these 27 years of "up" followed by 27 years of "down" economic activity are not always regular enough to set your calendar by. But if you'll plot commodities all the way back to English agricultural prices in 1260, the way Nikolai did, you'll find his theory holds up amazingly well. Recent expansions have climaxed with commodity prices topping out in 1814, 1866, and 1920 . . . followed by sharp "primary recessions" and then eight- or ten-year "plateau periods" of unstable and deteriorating prosperity that, finally, ended in crashes and financial panics.

Most recently of all, we witnessed a commodity price explosion in 1974, accompanied by the 1974-1975 recession . . . trailed by the usual plateau period which, even now, threatens to fall apart into one stem-winder of along wave downswing. It should be carefully noted, however, that the coming collapse (assuming that Kondratieff will once again be proven right) will not necessarily be a replay of the 1930s Great Depression.

Julian Snyder is a good friend of Massachusetts Institute of Technology Professor Jay W. Forrester—another Kondratieff student—and, in recent months, has quoted the good professor extensively. According to both Forrester and Snyder, the last expansion phase of Western society ran from 1945 to a peak in 1974 . . . before plunging into the sharp 1974-1975 recession. During the plateau period that followed, business—as we all know—was fundamentally tired, credit became increasingly overextended, and economic activity in general was sluggish. At the same time, however (especially during 1984), the forces of inflation wound down . . . and we've all enjoyed rising purchasing power without the pain of higher prices.





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