1. Reference bibliography:
CYCLES IN ECONOMICS. The vision of the cycle in the economy: the relationship with macroeconomic variables
Reference bibliography:
Renato Giannetti, Crisis económicas: el siglo XIX, Oikos-Tau (Barcelona 1988).
Luis Sandoval, “Los ciclos económicos largos Kondratiev y el momento actual”, UNAM, Mexico (2013).
Ernest Mandel, Las ondas largas del desarrollo capitalista, Siglo XXI (Madrid 1986) (English title: “Long waves of capitalist development”).
Carlota Pérez, Revoluciones tecnológicas y capital financiero, Siglo XXI (Mexico 2004).
Joseph A. Schumpeter, Ciclos económicos. Análisis teórico, histórico y estadístico del proceso capitalista, Prensas Universitarias de Zaragoza (Zaragoza 2002).
Angus Maddison, Contours of the World Economy, 1–2030 AD. Essays in Macro-Economic History, Oxford University Press (Oxford 2007).
Josep González I Calvet, “Los ciclos: aspectos reales y financieros”, Department of Economic Theory, Universitat de Barcelona, unpublished.
Prof. Carles Manera

2. The perception of the crisis
Before Clement Juglar’s work (1860): crises were considered natural, isolated “calamities”, caused by the incorrect functioning of credit.
Crises were not understood as parts of the global dynamics of capitalism: the observation was almost “final”, according to authors François Sismondi and Thomas Malthus. They were not understood as an intrinsic part of the capitalist mode of production.
Karl Marx: he perceived the contradictory nature of capitalist development, and related crisis to the industrial cycle.
Prof. Carles Manera

3. Absence of a theory of crisis and the economic cycle
This is explained by the acceptance of Say’s law. Crisis is perceived as a temporary disturbance. This continued until the publication, in 1936, of John Maynard Keynes’ General Theory.
But prior to this, the Great Depression which began in 1873, led to the development of research in the field of Economics: Tugan-Baranovsky (Russia), Spiethof (Germany), Wicksell (Sweden), Hawtrey (Great Britain), Aftalion and Lescure (France). These works are related to the changes in capitalist economics, both in the productive apparatus and in the transformations in the sphere of competence.
Later on, authors like Hayek, Kalecki, Kaldor, Hawtrey, Schumpeter or Samuelson provided modern models of economic cycles and theories.
Prof. Carles Manera

4. The big cycles, according to Schumpeter
There are three kinds of cycles which overlap: Kitchin, Juglar and Kondratiev.
1. Juglar: duration of around 8-10 years.
2. Kitchin cycle: 3 years, based on analysis of interest rates and wholesale prices.
3. Kondratieff (around 1920): years, a long cycle. Analysis based on the dynamics of investments in direct relation to social realities. During the expansion phase of the economic forces, wars and revolutions occur. In the recession phase, discoveries and inventions take place which are applied in the next upswing. The long cycles behave in accordance with the innovations.
Schumpeter: a pattern that includes a model of fluctuations with three cycles: the brief or Kitchin cycle, the medium or Juglar cycle, and the Kondratieff long-wave period.
Prof. Carles Manera

5. Crisis and technological change…
Kondratieff establishes a relationship between the market equilibriums and the periodic reinvestment of fixed capital, where the replacement of capital goods is identified.
Economic upswing is explained by the availability of loans and low interest rates…
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6. …which ends up as over-accumulation
…and the boom represents an increase in production on a higher lever than that permitted by the current flow of savings. The increased supply of capital goods eventually leads to an increase in interest rates, and this is a sign of a scarcity of loans, in a context of increasing costs (wages and inputs). Profits fall.
The crisis comes into being due to the over-investment made and the scarcity of capital.
Prof. Carles Manera

7. Cycles detected (Source: E. Mandel, L. Sandoval)
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8. The waves vision (Source: Alec Oxenford)
Existencia de ciclos decenales: cierto acuerdo entre los economistas.
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9. Waves and sectors
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10. Expansion phases, or A phases…
Significant capital investments are made in new technologies. High profit rates are obtained.
Once the innovations have been disseminated, the markets become saturated and the profits drop. Investments contract.
Capitals change strategy: they accumulate in the financial sector, which offers greater rates of yield and fewer risks.
The expansive long wave leads to increases in wages and the expansion of internal markets.
Prof. Carles Manera

11. …linked to innovations, which are of a different nature
1. Revolutionary innovations. Energy change, the appearance of new engines. They reach the whole economy. They increase productivity. They comprise the core of the technological-economic revolution.
2. Radical innovations. Assembly-line production or the appearance of a factor that has an impact on others (the microchip, for example, in electronics).
3. Complementary innovations. Of process, having to do with secondary changes, with the presentation of products, and design.
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12. Depressive or B phases…
The pace of development becomes slower, and profits and investments fall.
Radical innovations accumulate in the final years of these phases, which will be developed – along with the revolutionary ones – during the new long wave of economic upswing, when investing in the financial-speculative bubble is no longer attractive.
Prof. Carles Manera

13. …with conflicts between productive and speculative capital
“The ensemble of innovations of process and products, of management, organisation and intensification of labour have led to an increase in the exploitation of labour and a zigzagging recovery of the profit rate of productive capital, a process that is constantly interrupted by the diversion of these capitals towards “financial innovations” high profit rates, with a downward trend of the average profit rate of productive capitals therefore prevailing in the medium and long term” (L. Sandoval).
Prof. Carles Manera

14. More consequences of phase B
1. Bankruptcies of companies.
2. Concentration of capital.
3. Productive relocations.
4. Wage decrease.
5. Job insecurity.
For the next cycle: competence and the progress of new countries, and tardiness of the leading ones ( with the Industrial Revolution; , with technology adapted to oil).
Prof. Carles Manera

15. Schumpeter draws inspiration from Kondratieff
1. The cycle is the specific form of economic development. Four factors can be distinguished: the EXOGENOUS FACTOR (demand from governments), the DEVELOPMENT FACTOR (changes in the population), the SAVINGS FACTOR and the INNOVATION FACTOR.
2. The economic cycle represents the periodicity with which innovations become manifested in the economy: therefore the action of the INNOVATIVE ENTREPRENEUR.
Prof. Carles Manera

16. The figure of the entrepreneur
The entrepreneur in a situation of equilibrium: his or her initiative is followed by others. The innovations are accompanied by expansion of credit, by rising interest rates. When innovations concentrate on a few industrial sectors, the innovation burnout is accentuated. Stocks accumulate. Credit, interest rates and prices drop.
That is to say: the destabilising factor is the entrepreneur who is capable of disrupting the production and distribution conditions: “creative destruction”.
Innovations are verified in clusters. Relationship with Kondratieff, and the theory of long-term investments.
Prof. Carles Manera

17. The composition of the long cycle
Each long Kondratieff wave contains a number of Juglar and Kitchin cycles.
Six Juglar cycles can be counted for each long wave, and three Kitchin cycles are counted for each Juglar cycle. However, this is not an absolute, automatic rule for Schumpeter.
CRITIQUE: Simon Kuznets qualifies Schumpeter’s conclusions, by saying that the statistical basis is too fragile to clearly identify highly-defined short cycles (on which only annual information is available). Monthly data are required for short cycles. More interestingly: the use of trends, which mark economic evolution.
Prof. Carles Manera

18. Juglar cycle
Ten-yearly. This cycle was already present in the works of other authors, such as Karl Marx.
Movements in prices determine the evolution of the cycle: more pronounced expansion of the larger cycles during the phase of rising prices and smaller depression. In the case of a downward phase in the long period, the phenomenon is the opposite.
To sum up: when prices fall, phases of prosperity are shorter than those of depression; when prices rise, depression phases are briefer than those of prosperity.
Prof. Carles Manera

19. Juglar and Kitchin cycle: predictive capacity? (Source: Vicente Canuto)
Prof. Carles Manera