6.4 Resilience analysis .1 Model diagnosis
6.4.2 Long-wave economic Kondratiev Cycles
Evolutionary cycles are ubiquitous in nature and have been identified in systems created by human society including the economy (De Greene, 1993;
Carry, 1996). Cyclicity in the economy has been identified at four temporal scales at least (Table 6.3), ranging from the short-wave Kitchin Cycle of between three and seven years, through the Juglar and Kuznets Cycles, to the long-wave Kondratiev Cycles of between 45 and 60 years (De Greene, 1993).
There is controversy regarding the existence of Kondratiev Cycles (De Greene, 1993) and their methodology of construction (Carry, 1996). However, Carry (1996) critically analysed the nature of the debate surrounding the deterministic or probabilistic determination of the Kondratiev Cycles and concluded that Kondratiev’s treatment of uncertainty in the conception of the long-wave economic cycle is consistent with modern authors and provides the evidence for the existence of such cycles. In addition, Berry (1991) made an extensive analysis of economic data and found new evidence for the reliability of long-wave economic theory. The Kondratiev Cycles show the behaviour over time of the evolution of modern industrial societies, a phenomenon that shows patterns of boom and bust, characterised by four phases, prosperity, recession, depression and recovery shown in Figure 6.4. The Kondratiev upwave consists of the phases of recovery and prosperity and the Kondratiev downwave consists of the recession and the depression phases. Table 6.4 summarizes the four Kondratiev cycles that have been described between 1785 and 2000, each of between 41 and 63+ years. Kondratiev’s work was extended in the 1930s by the prominent economist Joseph Schumpeter (Schumpeter, 1950). Schumpeter emphasised the role of technical innovation in producing the dynamics of the cycles particularly with reference to the bunching of innovation in the phase of depression equivalent to the release to reorganisationin the adaptive cycle. This bunching of innovation produced ‘gales of creative destruction’ (Schumpeter, 1950), whereby an ensemble of technologies both creates new opportunities for economic growth and paves the way for the slowdown of growth and replacement by newer technologies. In relation to cycles of dominance in cultures, this sequence of events has been described with these words, ‘Things will be undone by the myth that created them’ (Sewell, 2003).
Table 6.3.Four temporal cycles identified in the economy Cycle name Approximate cycle duration (years) Kitchin or business Cycle 3 to 7
Juglar Cycle 8 to 10
Kuznets Cycle 15 to 25
Kondratiev Cycle 45 to 60
Source:De Greene (1993)
Recovery Prosperity
Recession Depression
Level, amount, or numbers and complexity
Time
Fig. 6.4. The Kondratiev Cycle shows the behaviour over time of the evolution of modern industrial societies, a phenomenon that shows patterns of boom and bust, characterised by four phases: prosperity, recession, depression and recovery.
Source:De Greene (1993)
Holling and Gunderson (2002) made use of Schumpeter’s theories in the development of the adaptive cycle for describing the changes from the conservation phase (K) to the release phase and adopted the use of the term ‘gales of creative destruction’. Of the three commonly identified classes of social theories of change (life-cycle representation, gradualist life-cycle and revolutionary change models) Schumpeter adhered most closely to the revolutionary change model, recognising the four-phase properties of complex evolving systems and the tensions they generated to produce stages of growth and transformation. For example, Schumpeter (1950) saw socio-economic transformations proceeding such that market forces stimulated innovation in the exploitation or r phase; institutional hierarchies, monopolism and social rigidity controlled the K phase of consolidation; forces of ‘creative destruc- tion’ triggered the release or phase; and technological invention deter- mined the source for a phase transformation to the reorganisation phase.
Table 6.4.The four Kondratiev Cycles described for the period 1785 to 2000
Kondratiev Cycles
Phase 1 2 3 4
Recovery 1840–1860 1896–1905 1937–1948
Prosperity 1785–1815 1860–1873 1905–1920 1948–1970
Recession 1815–1825 1873–1886 1920–1929 1970–1990?
Depression 1825–1840 1886–1896 1929–1937 1990?–2000?
Dominant new technologies or industries in each cycle
steampower, textiles
coal, steel, railroads
oil, electricity, chemicals, automobiles
aircraft, electronics, computers, control systems, rockets and missiles Cycle length 55+years 56 years 41 years 63+years Adapted from De Greene (1993)
Such complementary theories of revolutionary change in social and biological systems provided insight for the adaptive cycle (Gunderson et al., 2002a).
Conceptually the phases of the Kondratiev Cycle and the adaptive cycle may be compared (see Table 6.5).
The durations of each of the two adaptive cycles are synchronous with the third and the fourth long-wave economic Kondratiev Cycles. The upwaves of the Kondratiev Cycles shown in Table 6.4 are in the order of 50% to 60% of the total duration of the Kondratiev Cycle. The durations of the frontloops in the two adaptive cycles that describe the behaviour of the WA agricultural region constitute approximately 66% and 57% of the duration of the cycle. This is considerably less than the 75% of time suggested for the frontloop of the adaptive cycle described by Holling and Gunderson (2002).
The adaptive cycle heuristic model was developed from empirical data on biological systems in which the characteristics of biological processes were described by means of a slow build up of resources or capital in the frontloop, occupying 75% of the total duration of an adaptive cycle, which was released in one rapid catastrophic event in the backloop occupying only 25% of the duration of the adaptive cycle (Holling and Gunderson, 2002). However, the WA agricultural region does not conform to the model of long slow accumulation of capital. The duration of the frontloop occupied between 57%
and 66% of the total duration of the cycle, less than the 75% described by the adaptive cycle model. An alternative proposition based on the Kondratiev
Table 6.5.Relationship between the phases of the Kondratiev Cycle and the adaptive cycle
Kondratiev Cycle Adaptive cycle
Recovery –r
Prosperity r–K
Recession K–
Depression −
The Kondratiev upwave consists of the Recovery and Prosperity phases
The Kondratiev downwave consists of the Recession and Depression phases
Cycles may be used to explain the behaviour of the WA agricultural system.
The economic/technical factors at the global scale, which are responsible for the dynamics of the Kondratiev Cycle have entrained a similar cycle in the WA agricultural region. That is to say, the dynamics of the WA agricultural system were strongly influenced by exogenous factors at the global scale with little controlling influence from natural resource policy or by other endogenous balancing feedback to change the behaviour of the system.