Closer to date; 1990s and beyond

Just for clarification, especially as my earlier analysis was written over a quarter of a century ago, and there have been two deep recessions since then.

Technically, on my own definitions, there has been no slump since the early 1980s. It is not a question of whether a particular recession is the deepest recession of all times.

Rather, it is more a question of what is happening in a string of recessions.

It was becoming increasingly clear that since around 1983 or thereabouts, the economy could not deteriorate all that much further, but that there was bound to be an upswing, indeed a very strong upswing. The typical pattern during the slump would be a double downswing, of around four years, in which there was a deep initial extreme depression, and then, instead of a normal recovery of about two years, the next two years was a mixed pattern, with elements of growth, certainly, but also elements of decline, as shown by continued increases in unemployment.

Once the secondary recession had petered out, this was a time of possible sudden growth rates.

In terms of grand economic theory, I did not think that either Marxian economics or Schumpeter had the picture fully sorted things out. One strand of late 20^th century theory was that recessions were inevitable, and would become deeper and deeper until the capitalist system was going to be in collapse, there was going to be a revolution, and there was going to be a world socialist system. Was it though totally clear that there were going to be no prospects for revival after around 1980? It seemed unlikely, whether or not there was going to be a supposed Thatcherite or Reagonite capitalist revolution.

Another approach, that of Schumpeter, suggested that yes, the economy was inevitably going to collapse every so often, but that it was going to recover, but only through a burst of innovation. There was no indication that the economy would recover on its own accord.

I was looking closely at changes in growth rates in the economy, and the ups and downs of employment, and unemployment, and I checked through many of the arguments of the start of the upswing, and things did not add up. The trough of the recession, in the 1930s, in Britain and in other major economies, would be around 1932, economic growth had speeded up quickly in the next couple of years, and yet the spurt in industrial innovation, and the numbers of new patents, came a couple of years later. It was the return of growth, and then the upsurge of innovation, rather than a case of innovation starting the recovery.

A critical distinction.

Then, somewhere in Russia, at some stage in the 1920s and 1930s, Kondratiev suggested what seemed to me to be a much more subtle approach. There was no dogmatic approach to his work, no indication of three Kitchens to a Juglar, six Juglars to a Kondratiev (the types of business cycle that Schumpeter placed nuch of his analysis on), but rather, things go up and down, economic backgrounds may be totally different (nowadays we can say that there was deflation in the 1930s, and inflation in the 1980s), but the pattern varies each time. The one consistent pattern was that there tends to be great recessions around each 50 years.

Kondratiev stuck to his theoretical arguments, a dangerous approach when Stalin was in power, and he argued consistently that the western economy was in process of recovery through the 1930s, once the recession of the early eighties was going to pass through the system.

It is relatively easy now to chase material on the Internet, and look through biological material; much easier new than to to search material for the various university libraries in England. Kondratiev is now a much less shadowy a person than when trying to read things up in the 1980s. He was certainly a much more recognised a figure than I had supposed, setting up a respected research institute. More stuff to look at, on a much later blog.

In the meantime, what I had in the 1970s was plenty of fragmentary material prior to the Great War, more detailed statistical material, even if still fragmentary early on, and of course more material than anyone can catch up with, later on. The fifty year long cycle was a good starting point of analysis, although it was a pure coincidence that the start of the big slumps started in 1929 and 1979.

From a British point of view. It was abundantly clear that there were deep recessions from 1918 to 1929. Quite possibly it would have been far less clear in the USA, with the Wall Street Crash being an extreme jolt. I have to admit I have looked only at the British recessions between 1918 and 1929, and from the other side of the Atlantic, there would easily have been different points of v9iew to analyse.

Therefore I could not claim that I had a perfectly precise interpretation.

Even so, various recessions between 1918 and 1929, extraordinarily sharp recessions between 1929 and 1933, only one brief but sharp recession in 1937 and 1938, then of course the enormous disruption of the Second World War, then long steady growth in the post-war economy, in the west at least. Then, somehow (it's complicated), the post-war consensus started to fall apart, with full employment disappearing, and inflation, even in the advanced economies, becoming an enormous problem. Then there was another slump, and I could see that it was a genuine slump, in that there was going to be a post-slump recovery.

That was about as far as I could get through in my analysis, since I had completed my thesis only in 1989. There were however indications that after 1987, there were signs of overheating (the financial crash of 1987, and, hardly unexpected, a short, sharp crash in the early 1990s). Extrapolating, and I saw no reason not to extrapolate, there would be every reason to believe that the economy was going to grow well and steadily – until problems were about to set in!