[Marxism] Economic Lessons From Lenin’s Seer

[Bonnie Weinstein <giobon@xxxxxxxxxxx>]

Economic Lessons From Lenin’s Seer
By KYLE CRICHTON
February 15, 2009
http://www.nytimes.com/2009/02/15/weekinreview/15crichton.html? 
ref=business

NIKOLAI KONDRATIEFF was not exactly a faceless bureaucrat in post- 
revolutionary Russia. He had held an important economic post in the  
last, short-lived government of Alexander Kerensky before the  
Bolsheviks took charge; then he founded an influential research  
organization, the Institute of Conjecture, and became an important  
theorist of the New Economic Policy under Lenin.

But he would long ago have been consigned to the dustbin of history  
had it not been for his quirky academic passion, which he pursued in  
a series of books and papers through the 1920s. Reviewing economic  
history since the late 18th century, Kondratieff came to a startling,  
doomsday conclusion: that capitalist economies were fated to go  
through regular and predictable cycles of around 50 years, inevitably  
culminating in a depression.

Despite having become a committed Communist and the author of a  
theory of inevitable if periodic capitalist collapses, Kondratieff  
was executed in 1938, a victim of the Stalinist purges. Apparently,  
he had raised too-trenchant questions about the government’s newfound  
enthusiasm for heavy industry and agricultural collectives. After  
spending eight years in the gulag, he left behind a final letter to  
his daughter, poignantly urging her to be “a clever and good girl”  
and “not to forget about me.”

It was a fitting epitaph, for whenever it seems Kondratieff is about  
to be forgotten, the economy nosedives. And once again, perhaps the  
most dismal of the dismal science’s practitioners is back in the  
news, which his disciples try to fit into the cycles, or “Kondratieff  
waves,” that he described.

Kondratieff and his disciples — among whom was Joseph Schumpeter, who  
wrote about capitalism’s “creative destruction” — identified four  
stages in each cycle, corresponding to the seasons. After spurting  
ahead in the spring phase, they said, the economy cruises through the  
summer, experiences a scary drop as autumn sets in, and then —  
despite the TARPs, TALFs and whatever else governments do — descends  
into a winter phase that can last up to 20 years.

In case you hadn’t noticed, it has been getting quite chilly lately.

Over the years, Kondratieff’s appeal has waxed and waned in  
counterpoint to the economy, falling out of favor in good times but  
charging back when things look bleak. But his theory has never been  
accepted by mainstream economists, who consider it an occult hall of  
mirrors in which any sort of pattern can be discerned by shifting  
starting dates and definitions.

Kondratieff’s adepts have cried depression before, for example in  
1982. Reporting on the buzz his theory was getting during that  
downturn, a New York Times correspondent, Paul Lewis, wrote:  
“According to Kondratieffian analysis, the world is caught in the  
fourth great economic downswing since the 1790’s, a period of global  
recession that will probably last until near the end of the century  
when a new age of prosperity will begin — and there is little anyone  
can do about it.”

Today, Kondratieff’s disciples (a dwindling band, by the way) are  
just as certain that the bad times began in 2000, with that year’s  
stock market crash. That was followed by the autumn phase of the Bush  
years, characterized by an enormous (Kondratieff would say desperate)  
expansion of debt and leverage in an attempt to maintain the  
prosperity of the spring and summer years.

Evidently, Kondratieff waves tend to be in the eye of the beholder,  
and whatever value they have is descriptive, rather than predictive.  
After all, the American economy ultimately shrugged off several  
market drops like that of 2000, allowing the 25 years that followed  
1982 to be a period of largely uninterrupted growth. But in the last  
decade of that period, the United States’s growth was driven by debt  
in a desperate attempt to maintain an unsustainable level of  
consumption, a stage that Kondratieff’s theory quite accurately  
describes.

“The people who do the predicting are usually not central within the  
discussion of economics,” said David Colander, an economic historian  
at Middlebury College, and an expert in the discipline’s crank  
theorists. But economies do “have this tendency to exceed” that  
Kondratieff and others have grasped, he added, and that is largely  
lost in modern economic theory.

He offers the Austrian School as a possible rival to Kondratieff’s  
line of thought. Austrian economists tend to emphasize a laissez- 
faire approach and entrepreneurship (not the most popular policies at  
this moment) and strict limits on money supply growth, usually by  
hitching the currency to the gold standard.

While considered outside the mainstream, the Austrian School is far  
more respectable, counting in its ranks two Nobel Prize winners,  
Friedrich Hayek and James Buchanan. Peter Schiff of Euro Pacific  
Capital — an adviser to the libertarian presidential candidate Ron  
Paul and one of the most prominent doomsayers in the current collapse  
— also subscribes to its theories.

Hayek is said to have successfully predicted the Great Depression and  
some Austrian School devotees are taking credit for calling this one.  
“The financial meltdown the economists of the Austrian School  
predicted has arrived,” Mr. Paul wrote in September, 11 days after  
Lehman Brothers filed for bankruptcy.

In the 1930s, John Maynard Keynes displaced Hayek and the Austrian  
School in intellectual popularity, establishing his “general theory”  
as the economic bible of the postwar decades. The Austrian line of  
thought made something of a comeback in the Reagan years, but never  
quite gained acceptance in the economic fraternity, Mr. Colander says.

“It probably should,” he says.

“A good profession should take its outsiders more seriously,” Mr.  
Colander says. “They make you look at things in different ways. The  
worst thing for policy makers is to think they are right.”


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