The Kondratieff (Kondratiev) Wave

Immensely popular, the Kondratieff wave — also called the long wave or K-wave — is an amazingly consistent long-term economic cycle of the modern world economy.

Russian economist Nikolai Kondratieff (also spelled Kondratiev) was the first to discover this cycle, publishing his research in his 1925 book The Major Economic Cycles.

Unfortunately, Kondratieff was banished to the Russian Gulag by Stalin in 1930 and later received the death penalty. Kondratieff's crime: His view that capitalism and communism often vacillated and morphed from one to another, and importantly, that political leadership often had no powers to alter the cycle.

The Kondratieff wave averages 50 years in duration, but can range anywhere from 40 to 60 years in length. It consists of alternating periods of high economic growth and slower economic growth.

Unlike the shorter term Kitchin, Juglar, and Kuznets business cycles, the Kondratieff wave has repeatedly proven its regularity with major political changes in society.

The Kondratieff wave is generally divided into four "seasons" — the Kondratieff Spring (economic improvement) and Summer (acceleration into prosperity) ... and the Kondratieff Fall (plateau, slide into recession) and Winter (acceleration downwards, depression).



The first stage of expansion and growth — the "Spring" stage — encompasses a social shift in which the present wealth, accumulation, and innovation create positive developments and advancements in society, accompanied by peaceful and steady economic growth.

In the next phase — the "Summer" stage — economic growth accelerates and begins to widen the gap between the haves and the have nots, creating production inefficiencies and tensions in society at large.

After this stage comes the plateau period of the Kondratieff wave — the "Fall" season of deflation. This period is generally characterized by recession and contraction.

Finally, the "Winter" stage arrives, indicated by the drop-off into a severe recession and eventually depression. Correspondingly, this sets off high volatility in markets and society at large.

The important turning points in the K-wave — and how they tie into changes in markets and industry sectors — can be seen in this chart I have for you.

1790-1849: Characterized largely by the Industrial Revolution
1850-1896: The age of transportation (steam and railways)
1897-1949: The age of steel, electricity, heavy engineering, and mass production (autos)
1950-current: Coincides with the beginning of the Cold War, but ironically characterized by the Information Age and telecommunications, peaking in 2000-2001 with a recession and a depression phase (or the "Winter" stage) beginning in late 2008.

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