Peter Herrmann
Corvinus University. Faculty of Economics. Department of World Economy
Honorary Associate Professor
Financial Crisis or New Cycle? Some forgotten moments of the current discussion of crisis
Abstract
Reference is increasingly made to a general crisis – going beyond seeing the current situation as especially severe and also highlighting that both, causes and effects reach deep into different areas of life: from the personal and life styles over production and private and public finances to the ecological foundation of the current socio-economic way of life. – The challenge is, indeed, the search for a new modèle anthroponomique (Boccara). Having said this, there is however little consideration of the fundamental changes of the overall mode of production.
Starting from a developed capitalist economy means not least that the priority is maintaining the given mode of production – orientation on permanent growth is more important than the guidance by individual and societal use values. However, this self-maintenance is currently under the following core pressures.
First, the means of production are in such a way and to such an extent developed that we find a historically new stage of socialisation and individualisation – we can go so far to say that we find very much like in the late middle-ages/Renaissance the invention of a new individual/individuality, hugely meaningful for the (re-)productive system.
Second, the means of production are in such a way and to such an extent developed that we find in consequence a permanent over-accumulation of capital on the global level.
Third, an additional factor causing this over-accumulation and driving it further is the tremendous centralisation and concentration of capital. This is of a twofold character, namely it is (α) a matter within the corporate sector – as vertical distribution – and (β) between the different sectors of private incomes. Each of these is again divided: (α i) between department I (means of production), department II (means of consumption) and (α ii) between the two productive departments and an increasingly important department III (finances and design). And (β i) the general distribution of income to the high income groups and (β ii) within the lower-income groups.
We arrive at two developments, each emerging on a horizontal and a vertical axis.
Parallel to this – and actually subsequently – we find a development that can be briefly described as the search for investment opportunities: though temporarily profitable in a reflexive way – producing virtual value as finance capital – the over-accumulation is a means of “parking” capital, preparing investment that arises from the newly created needs and opportunities.
It will be shown that the emergence of a new Kondratieff major cycle cannot only be understood as technical matter but is very much a consequence of a medium term development that results from changes in
the (re-)production of the means of production
the mode of (re-)producing the means of production
the (re-)production of means of daily life
the mode of (re-)producing daily life.
Taking this as background, the contribution will also outline the applicability of elements of the Régulationist approach as possible complements of the Kondratieff-approach.
Lucy Badalian, Victor Krivorotov
(USA)
Kondratieff Waves and the Lifecycle of Historical Economies
K-Waves – a new methodological approach.
After a surge of interest in the 1970s-80s, the K-waves weren’t accepted within the Western academic mainstream for 2 reasons. 1. Price waves, GDP and many other time series are inconclusive after the 1980s, perhaps due to the excessive monetary generation. 2. The K-waves were tied to the lifecycle of specific historical economies, whose timing remains debatable even for accepted periods, such as the Industrial Revolution.
Badalian Krivorotov (2008, 2012) proposed to shift the focus from the lifecycle of an economy at large (too generic to be measurable) to the lifecycle of its Accumulation Engine (AE), which is more specific. An AE reflects the availability of resources/funding sources for domesticating the geoclimatic zone of the up-and-coming dominant. It allows raising significant levels of funding through novel pricing/fundraising/accumulation schemes, such as the charter-company, the joint stock-market, private wealth/sovereign funds, for the 19th, 20th, 21st centuries respectively. Badalian Krivorotov (2008, 2012) suggested that the price time series show periods of extreme shortages-of-demand (further SD, goods chase money) and extreme shortages-of-supply (further SS, money chases goods). AE thus traces the lifecycle of a specific historic economy through its major turning points.
The plus of this approach is in the quality price datasets from the early 13th century (Farmer) (Clark), most notably, for England. The minus is in the capriciousness of historical price trends. Fischer (1998) noted that, up to the 1830s, price spreads between neighboring French villages could reach up to 30%. However, while smaller fluctuations may be random, extreme points of SS/SD involve large areas. They show up on major price series. The hardships and misery related to the major turning points are remembered through generations. Below, we use such disparate and distant markets as London, Cairo and Alexandria to illustrate the amazing synchronicity of price movements in the late 14th century – well before the modern communications of Internet/Telegraph.
Badalian Krivorotov (2008) demonstrated the amazing functional synchronicity of the 19th and the 20th centuries, as part of a specific fossil energy-based Western model. In the Market Pendulum Model, further MPM, an AE reflects the rise of a new technological style, and its investment/infrastructure lifecycle through its costs/effects on productivity. Historically, a specific era/dominant territory/technological style/dominant energy source had a finite lifespan, from globalization to globalization. First, the mature dominant seeded a new periphery territory. Domestication of new territories, with abundant calorie-rich new energy sources, was paid for by exports, while the then dominant’s technologies were adjusted to the specifics of the new zone of domestication*. Novel infrastructure within the new territory developed for the purposes of domestication leads to a productivity leap under a new production/business model**. After 2 full oscillations (domestic/global), corresponding to 2 K-waves, first of production, then of consumption, the dominant economy of its era matured.
Each new technological/investment cycle leads thus to a total restructuring of the world hierarchy, around the era’s rising dominant. The first K-wave is thus formative, shaping the specific technological style for an entire era. As the dominant technological style is standardized, it radiates globally, through globalization. At this point, the dominant loses its competitiveness due to high fixed costs and diminishing returns. It exits physical production which is outsourced abroad. The dominant meanwhile develops an economy of extreme scale, known as globalization. This helps in compensating for high fixed costs, diminishing returns and fading competitiveness against cheap periphery suppliers with s surge of volumes. This pattern is showcased below for the 19th and the 20th centuries on examples of Britain and the US respectively.
… 1840s-1860s =progreSSing shortages of supply/inflation (SS).
1880s-1895 = progreSSing shortage of demand/deflation (SD).
1895-1913 = SS
1925-1945 = SD
1945-1983 = SS.
1985-2010s = SD. 2008 and up … = crisis, sd.
Market Pendulum Model (MPM) in history – the major turning points.
Extreme points of SS/SD affect large regions and seem fairly universal. They mark starts and ends of known historical eras beyond any doubt through major events: pestilence, major wars, revolutions, announcing technological/institutional shifts.
14th century. SS. Mortality-food supply equilibrium (Findlay Lundahl 2003). Famine of 1295-1315, the 1348 Black Death, repeated in1360-1385
1440-1460. SD. Acute monetary famine at the threshold of the Early Modern growth
1620-1660. SS. The 30 Years War + English Revolution/Civil War, the Fronde in France. In 1661 the nation-state fully formed, as Louis XIV aSSumes personal rule. Canal du Midi
1688-1715. SD. Financial crisis. Major Wars, the Great Alliance against France (1688-1696) The 9 Years war + War for Spanish SucceSSion (1701 -1715) Economic downturn of the first phase of the Age of Discovery.
1740-1763. SS. English-French Rivalry. Austrian succeSSion+ 7years war (Global) .
1763-1793 SD. Financial crisis. American and French Revolutions. Resuming the Atlantic Trade after the revolution. English industrial growth under Deflationary preSSure/Debt
1795-1803-1816. SS. Pre-War Economic Growth and Napoleonic Wars. Industrial technological style is commercialized in Britain. Export-oriented economy servicing Europe
1830-40 SD. The Great DepreSSion (Britain, Europe, US). Current account deficits in European countries. Britain responds by expanding its consumer markets (Labor Laws, Corn Act) and domestic infrastructure. The first Rail road boom. The 1844 Bank Act.
1850-70. SS. Industrialization in Europe. Rail road booms (Europe,US. French-PruSSian, Crimean wars. US Civil War. RuSSian emancipation. Italian Independence. 1860-1870 From wooden to steel navies
1880-1890. SD. Rolling financial/monetary crises, 1890 Baring, 1894-6 US, Global Gold Standard
1914-1922 SS. Growth at the start of the century. WWI
1929-1945 sd. The Great DepreSSion. New Deal. WWII. 1944 Bretton-Woods
1968-1981 SS. Vietnam, Afghan wars, The Double Oil Shocks
2008 SD financial Crisis. Sovereign debt crisis.
 
MPM holds in the 21st century.
From the late 20th century price series break and become inconclusive, due to accelerating monetary generation. Nevertheless, trends remain traceable through the prices on capital. SS caused shortages of capital, raising credit rates, while SD led to dropping credit rates, such as the ongoing crisis of extreme SD. Thus, even while price charts broke, the trends didn’t. Rhythmic MPM sequence of SS/SD shows in other indices, such as short term interest rates, see graphs for the UK and the US below.
Gold, monetization and super K-waves.
The rise of gold is synchronous with the nation-state, confirming the existence of Super K-waves. Below, the S-shaped curve of rising gold prices in the 15th , 16th centuries (Monetary Revolutions (Munro (1999)) reflects the surge in monetization and significantly higher funding needs of the nation-state (hi tech blue water navies, standing armies etc funded through a novelty – state budgets).
Rise in gold prices today: Does this reflect a new Super K-wave?
After a long stability, 1932 marked the first surge of gold prices. After the 1960s, appreciation of gold is unprecedented and price charts break down. Does the introduction of fiat moneys after the 1973 dissolution of the 1944 Bretton-Woods agreement reflect our much larger funding needs for the up-and-coming hi tech style, as electronics replaces mechanics? If yes, does this foretell an immense institutional shift in our future? The Monetary Revolution of the 15th-17th centuries accompanied the rise of the nation-state with its much higher level of monetization. It was the leading power structure up to the 20th century. The 20th century brought in a transitional structure of federalist superpowers. Today, the evolving debt crisis shows the inadequacy of state budgets as the primary funding tool of the nation-state starting from the 17th century. Does this foretell a coming fading of the nation-state and a rise of some new, more powerful core basic institution of supranational nature, in the manner of the EU in the process of rapid consolidation or perhaps even larger?
Bibliography.
Badalian, Lucy and Victor Krivorotov. 2012 “A Financialized Monetary Economy of Production,” by Andrea Fumagalli and Stefano Lucarelli: A Comment. International Journal of Political Economy. 41, no.1 Spring 2012: 95-108.
Badalian, Lucy and Victor Krivorotov. 2008. “Technological Shift and the Rise of a New Finance System: The Market Pendulum Model.” European Journal of Economic and Social Systems, 21, no. 2: 233-266.
Munro, John. 1999. ”The Monetary Origins of the ‘Price Revolution’ : South German Silver Mining, Merchant-Banking, and Venetian Commerce, 1470-1540.” Department of Economics and Institute for Policy Analysis, University of Toronto. WORKING PAPER No. 8 http://www.economics.utoronto.ca/public/workingPapers/UT-ECIPA-MUNRO-99-02.pdf
Бадалян Лусине Гайковна,
Криворотов Виктор Федорович
(США)
Кондратьевские Волны и жизненный цикл исторических экономик
Есть К-волны или нет? Новая методология ценового анализа.
После значительного интереса в разгар Нефтяного Шока в 1970х-80х, западный академический мейнстрим не принял концепцию K-волн как регулярного феномена. Выставляются следующие аргументы. 1. Ценовые циклы, ВВП и прочие временные ряды размыты и не показывают стабильных волновых трендов после 1980s, не исключено, что из-за чрезмерной монетарной генерации. 2. Известные К-волны привязаны к жизненному циклу специфических исторических экономик, которые до сих пор дебатируются и даже оспариваются в рамках мейнстрима даже для таких, казалось бы, общепринятых периодов, как Индустриальная революция.
Бадалян, Криворотов (Badalian Krivorotov 2008, 2012) предложили сместить общий фокус анализа от жизненного цикла экономики (как понятия слишком общего для измеримости) к жизненному циклу Механизма Аккумуляции (МА), который намного более специфичен и поддается измерению. МА отражает наличие ресурсов и инвестиционных средств для освоения геоклиматической зоны будущего доминанта своего периода. Исторически, успешный МА был основан на введении инновационных инвестиционных/аккумуляционных бизнес-схем, от чартерной компании, до акционерного рынка и страновых фондов/частного инвестиционного капитала для XIX, XX и XXI вв соответственно. Бадалян Криворотов (Badalian Krivorotov 2008, 2012) привязали пики и спады временных ценовых рядов к периодам эстремальных недостач предложения (далее НП) и недостач спроса (НС) соответственно. В случае НП деньги ищут товары, что поднимает цены. В случае НС, товары ищут деньги, что снижает цены. МА тем самым прослеживает жизненный цикл спуцифической исторической экономики через ее поворотные пункты. Мы покажем, что волновые колебания прослеживаются через учетные ставки, отражающие цену на капитал даже в случае, когда остальные ценовые серии размываются экстремальным размером эмиссии.
|
