At the mention of long cycles, most economists will recall Joseph Schumpeter’s classic study, Business Cycles. In that work Schumpeter referred to cyclical movements of approximately fifty years in length as ‘Kondratievs’, after the Russian economist N. D. Kondratiev, who was one of the first writers to attempt to provide statistical evidence of such phenomena. In recent years Kondratiev’s name has appeared with increasing frequency not only in business journals, but also in the writings of Ernest Mandel. In his new book, Late Capitalism, Mandel has made a systematic effort to reconcile Kondratiev’s conclusions with the Marxist tradition in general, and with the views of Leon Trotsky in particular.footnote¹ The present article will therefore explore some of the more important differences which emerged in various encounters between Trotsky and Kondratiev, and then assess the problems which inhere in Mandel’s endeavour.

Kondratiev’s first reference to long cycles occurred in his book The World Economy and its Conjunctures During and After the War (1922). For the most part the book was concerned with an empirical analysis of events since 1914, rather than with explicitly theoretical questions. The concept of long cycles was introduced only in the last chapter, and then in the form of a somewhat tentative historical generalization. At various places in the book, however, Kondratiev commented upon the nature of capitalism’s ‘equilibrium’. While it might at first seem paradoxical, the problem of how to interpret capitalism’s equilibrium later played a critical role in the debate with Trotsky over how to interpret the system’s dynamics.

The economic crisis of 1920–21, Kondratiev explained, had resulted from a disruption of equilibrium in the distribution of world markets and productive forces. America and other overseas countries had vastly expanded production during the war, leading to their occupation of Europe’s former export markets. By early 1920, Europe’s initial recovery led to an effort to regain these markets and thereby to restore the world economy on the basis of its pre-war, but now obsolescent equilibrium. The result was the international crisis which began in mid-1920. Kondratiev described the relationship between crises and equilibrium in the following manner: ‘In its most general form the essence of an economic crisis lies in the fact that the national economies of separate countries and the world economy as a whole, taken as a moving system of elements, loses its equilibrium and experiences an acute, painful process of transition to the condition of a new moving equilibrium. From the economic point of view a crisis is always only an acute and painful process of liquidating the disparities which have arisen in the structure of a national economy, and which destroy the equilibrium of its elements. [A crisis] is the process of establishing a new equilibrium among these elements in place of the one which has broken down.’footnote²

Contrary to many Bolsheviks, Kondratiev argued that the crisis of 1920–21 was neither unique nor exceptional.footnote³ Its historical function was not to herald the imminent collapse of capitalism, but to facilitate the restoration of equilibrium. The concept of long cycles was invoked in order to put the problem into its proper perspective and thus to substantiate this conclusion. Since 1789, Kondratiev declared, capitalism had experienced two complete long cycles of approximately fifty years. The years 1789 to 1809 had witnessed a long wave of expansion, followed by a long wave of relative stagnation from 1809 to 1849. These two waves, together, constituted the first cycle. In 1849 a new cycle began with an expanding wave which lasted until 1873, and which was then followed by a declining wave until 1896. The expanding wave of the third cycle then lasted from 1896 until 1920.footnote⁴ The particularly acute nature of the post-war crisis was thus explained by the fact that it marked a turning point in the third long cycle and the beginning of its declining wave. In the coming years, Kondratiev predicted, depressions would be protracted and recoveries brief, giving the long wave its stagnant tone. Nevertheless, the pending wave of relative stagnation did not contradict the fact that capitalism was re-establishing its moving equilibrium. The effect of the 1920–21 crisis would be ‘a decisive weakening of the discrepancies in the system of elements which makes up the world economy’.footnote⁵

Leon Trotsky dealt with essentially the same questions a year before the publication of Kondratiev’s manuscript, in a speech to the third congress of the Communist International. Like Kondratiev, Trotsky believed that to analyse capitalism’s crises one must first understand its equilibrium. His treatment of the subject was in many ways similar to Kondratiev’s: ‘Capitalist equilibrium is an extremely complex phenomenon. Capitalism produces this equilibrium, disrupts it, restores it anew in order to disrupt it anew, concurrently extending the limits of its domination. In the economic sphere these constant disruptions and restorations of the equilibrium take the shape of crises and booms . . . . Capitalism thus possesses a dynamic equilibrium, one which is always in the process of either disruption or restoration.’footnote⁶

The similarity did not end there. Trotsky too disagreed with those Comintern members who were eagerly awaiting capitalism’s collapse. He argued that the return of crises itself was evidence that ‘capitalism is not yet dead’.footnote⁷ In order to assess future prospects, Trotsky likewise believed that current events must be put into perspective. For this purpose he referred to a graph of English foreign trade which had recently appeared in The Times. He described the graph as follows: ‘In January of this year the London Times published a table covering a period of 138 years . . . . In this interval there have been 16 cycles, i.e., 16 crises and 16 phases of prosperity. Each cycle covers approximately 8 2/3, almost 9 years . . . . If we analyze the curve of development more closely, we shall find that it falls into five segments, five different and distinct periods. From 1781 to 1851 the development is very slow; there is scarcely any movement observable . . . . After the revolution of 1848, which acted to extend the framework of the European market, there comes a breaking point. From 1851 to 1873 the curve of development rises steeply . . . . Then from 1873 on there follows an epoch of depression. From 1873 until approximately 1894 we notice stagnation in English trade . . . . Then comes another boom, lasting until the year 1913 . . . . Then, finally, with the year 1914, the fifth period begins—the period of the destruction of capitalist economy.’footnote⁸ As the above excerpts indicate, Trotsky and Kondratiev appeared to agree on the concept of equilibrium; and Trotsky’s time periods also corresponded generally with Kondratiev’s outline of long cycles. Obscured by these similarities, however, were fundamental differences, the only sign of which, at this point in time, could be detected in Trotsky’s reference to historical ‘periods’ as compared with Kondratiev’s ‘cycles’. The full significance of these terms would subsequently become clear.

Only with respect to one critical point were Trotsky and Kondratiev already in total disagreement. Whereas Kondratiev reasoned that the crisis of 1920–21 indicated the approaching restoration of capitalism’s equilibrium, Trotsky denied that such was the case. Within the separate national economies of Europe he saw continuing disequilibrium between town and country and between the various branches of industry.footnote⁹ In the world economy an even more profound disequilibrium was apparent in Europe’s relationship with America. America’s export competition was menacing Europe’s recovery. And the American economy was itself in jeopardy ‘because Europe is impoverished and can no longer buy American goods’.footnote¹⁰ The necessary consequence would be ‘a period of prolonged and profound depression’.footnote¹¹ Future crises would curtail American production while simultaneously levelling out the economies of Europe ‘in reverse’. ‘. . . In the epoch which we have entered’, Trotsky asserted, ‘. . . up-swings can only be of a superficial and primarily speculative character, while the crises become more and more prolonged and deeper-going.’footnote¹² Theoretically capitalism’s equilibrium might eventually be restored—after two or three decades—but only at a horrible price: Europe would be ‘thrown violently into reverse gear’ and millions of workers would ‘die from unemployment and malnutrition’.footnote¹³