# 8
## Long Waves of Political Contestation

Jonas Van Vossole

### Abstract

This paper develops a wave theory of political contestation, and places the current economic and political turmoil in a historical perspective. Based on legitimacy, it serves as an alternative to the waves of democratization of Samuel Huntington (1991). The theoretical framework is based on two main theories: the theory of long waves in political economics and the theory about state-legitimacy and fiscal crisis. In the first section, this paper gives a short overview of the different economic dynamics which over time have been incorporated in long wave theories, predominantly based on the works of Kondratieff (1979) and Schumpeter (1939), and puts the current economic situation in this perspective. The second part analyzes the general interdependency between long waves and politics, and the original criticisms of the endogenous model by Trotsky (1923). The third section considers long waves theories in politics, in particular Samuel Huntington's theory, and discusses the main criticisms of his theory. The fourth section analyzes the influence of the long wave upswing and downturn on state-legitimacy, and is based on the work of O'Connor (2001) and Habermas (1975). The fifth section combines the long wave's concept with legitimacy and protest against a long wave theory of political contestation and gives the first elements of some empirical evidence, comparing the political contestation in the thirties and today. The sixth section draws conclusions and takes a look on the need for further research.

**Keywords:** crisis, long-wave theory, waves of contestation, Kondratieff, Habermas, Huntington.

### Introduction

The combination between democracy and capitalism is by definition an inherently unstable form of organization of a society (Marx 1852; Przeworski and Limongi 1993). The recent economic crisis and the recent political upheaval in

Kondratieff Waves: Juglar - Kuznets - Kondratieff 2014 276-296
both the Arab world and the core of the capitalist world system have resurrected that idea. The systemic character of the Great Recession also brought back some attention to the concept of long waves in economics. This paper is an attempt to bring these elements together and build a theoretical framework around the unstable combination of capitalist economy and its political superstructure.

The theoretical framework is based on two main theories: the theory of long waves in the evolution of capitalist development and the theory of the crisis of legitimacy linked to the economic crisis, which was originally conceived for understanding the interplay with normal business cycles. The long waves serve as a framework to explain long-term instability of the capitalist economy, the legitimacy-theory as a framework to understand the transfer mechanism between that instability and the political contestation movements.

The mainstream theory that comes closest to the approach of this kind is the theory of waves of democratization by Samuel Huntington (1991). However, there are conceptual and methodological problems with this approach. The theoretical framework developed in this paper also tries to answer these shortcomings basing this alternative theory on legitimation and contestation.

The first section of this paper gives a general overview of the different economic dynamics which over time have been incorporated in long wave theory in an attempt to explain the instability of the historical development of capitalism, and puts the current economic situation in this perspective. The second section starts from the criticism on the endogenous character of many long cycle theories and opens its interactive relation with politics. The third section takes a look into long cycle's theories, in particular the 'third wave' of Huntington and addresses its shortcomings. The fourth section brings in the interplay of upswing and downturn of the long wave with the theory of legitimation crisis by Habermas and the fiscal crisis by O'Connor. The fifth section draws a long wave theory of political contestation and tries to find first empirical evidence. The sixth section draws conclusions and takes a look on the need for further research.

# Introduction to Long Waves in World Economics

This article is written from the perspective that a long wave approach is crucial to understand current political developments, not in a deterministic sense, but as a perspective of society which allows to interconnect different long-term developments within the capitalist system with other dimensions of society. This paper does not attempt to give a full overview of all theories treating K-waves, but merely draws some examples, in order to show the relevancy
these long waves can have for the creation and reproduction of institutions in
a capitalist society, in particular democracy.

Historically, before the development of the capitalist world system, periods of economic crisis and scarcity were primarily linked with temporal vacancies of vital elements for the reproduction of those socioeconomic systems. In classic economic terms, we could call them vacancies of production factors others than capital. Shortages of labor, human beings, following human disasters such as wars and diseases, and of raw materials/land, natural resources, following natural disasters such as draughts, earthquakes and floods were the basis of economic crisis situations. Shortages of capital usually did not cause crisis situations, because it played no vital role in the reproduction of societies.

This only changes slowly with the ascendance of capitalism, as the capital
becomes a vital element in the organization of society, and the capital accumu-
lation process becomes central to the reproduction of the existing society.
The idea of K-waves already has existed since early patterns of different paces
of capitalist development came to appear. The price level, on which Kondratieff
based his waves, in the earliest stages of capitalism, however, was determined
much more by agricultural and raw material prices than by industrial prices,
thus having a determinant effect on long wave patterns. Only after 1940 did the
increasing weight of industry in total world production in the primary and sec-
ondary sectors put an end to the downward trend in the price level during peri-
ods of basic sector surplus (Van Duijn 1982, cited by Vayrynen 1983).

As the most renown pioneer of long wave patterns in the capitalist world
system, Kondratieff was hardly the first observing these long wave patterns
(Van Duijn 1982). Inspired by the work of Jacob van Gelderen (1913), he based
his 1926 work *The Long Waves in Economic Life* (Kondratieff 1979) on empir-
ical observations of long waves in world economics, based on price fluctuations
(Delbeke 1981). Since Kondratieff, other authors have found similar wave pat-
terns in growth and investments and different theories have emerged to explain
them and to analyze their interaction with different elements of human behavior
and evolutions of society.

Generally, long-wave theories can be divided into exogenous and endoge-
nous models. Exogenous models explain the economic waves on the basis of
causal factors that are essentially exogenous to the economic cycle, in particu-
lar phenomena such as major wars, discoveries of new markets and new
sources of raw materials.

Endogenous models explain them through the factors that are totally en-
dogenous to the capital accumulation process itself; that is to say their availa-
bility of capital, and the manner, the technology how it is applied. These per-
spectives imply that an economic upswing contains seeds of its own destruc-
tion, while every downturn gives rise, automatically, to remedial action that
leads to a new upswing (Vayrynen 1983).

Kondratieff himself emphasized the discontinuity in the production and dur-
ation of long-term fixed capital as the most powerful driving force of the long
wave (Delbeke 1981). Three elements would produce those wave-like patterns:
short term supply and demand, the expansion and contraction of volumes of
production on the base of existing capital equipment, and changes in capital
stock (Day 1976). Kondratieff's starting point originated probably in Karl
Marx's conjuncture theory (Delbeke 1981), applying them on a longer time-
frame. Marx's theory, explained in *Capital* (Volume 3), observed business cy-
cles, repeating themselves each decade, based on the material wearing out, re-
placement and expansion of the mass of means of production in the form of
machines lasting an average of ten years (Day 1976). As the waves Kondratieff
observed in price statistics were much longer than that of Marx's decade-long
business cycles based on the wearing out of machinery, Kondratieff related
them in a very comparable mechanism to the reproduction of the most durable
and costly forms of fixed capital, such as canals, railways, buildings and
the periodical technological renovations of industry which attend the rising
wave of a long cycle, which would have a wearing-out time of around fifty
years (Day 1976).

The implication is that the long cycle is, as much as the normal business
cycle, a consequence of the internal dynamics of capitalism itself. Within these
cycles Kondratieff distinguished four phases: prosperity, recession, depression,
recovery<fnref n="1" /> (Kondratieff cited by Delbeke 1981), linked to four phases of capital
accumulation: accelerated capital accumulation, overaccumulation, decelerated
accumulation, underinvestment (Mandel 1976; Delbeke 1981), which have
a profound impact on the organization of society. A rising wave presupposes
a lengthy period of savings concentrated in the hands of investors and profit
opportunities sufficiently attractive to start a new wave of durable investment.
This fact thus also implies reduced consumption and lower growth in the period
before the upswing and requires institutions able to reproduce social inequali-
ties and to legitimize them. Over time, the rising wave will cause the interest
rate to rise, as available capital becomes scarce, and investment and consump-
tion would then be curtailed, causing the upswing motor of investment and con-
sumption to sputter and transforming into a declining wave (Day 1976). In the
depression phase, the capital is unable to find enough productive opportunities
for investment, causing a devaluation of capital (Mandel 1976; cited by
Delbeke 1981: 251). This is followed again by higher rates of savings and the

<footnote n="1">¹ Interestingly, Kondratieff linked the long wave with gold production.</footnote>
discovery of cost-cutting innovations (Day 1976), which enables the process to restart.

Others, such as Schumpeter (1939), emphasized the importance of clusters of innovation and technological changes as the base for the long waves. The disappearance of profit and together with the change from monopolistic to competitive markets would be the turning point of long waves, which would lead to the periods of creative destruction (Schumpeter 1976: 81–86), eliminating the inefficient sectors of the economy during the depression phase. At this stage, the economy will be dominated by cost-cutting rationalizing management. This contrasts with the start of a new wave which is characterized by entrepreneurship, instead of management, and stimulates innovative action and technological renewal (Delbeke 1981). Organizational, managerial and social changes play a major role as preconditions for the emergence and spread of technological innovations (Schumpeter 1939; Vayrynen 1983). Mensch (1979) gave Schumpeter's technology-driven theory an empirical base. Incorporation of new industrial sectors and new markets in the capitalist system were crucial during the upswings of 1825, 1886, 1935. The effect on longtime growth of the economy as a consequence of these technological revolutions would however be limited in time. Growing saturation of the new markets, leads to the need of export of surpluses and provokes competition between countries, which eventually leads to the complete saturation of demand of the world economy's leading sectors. The only fundamental solution would be a renewal of the economy, through a new aggressive innovation policy (Delbeke 1981). This means that within the endogenous model ‘innovations do not happen, they are made to happen’ (Ibid.), but also that radically different innovative ideas generally must wait for next upswing (Forrester in Delbeke 1981). On the basis of the observations, it may be concluded that innovation life cycles, infrastructural investments, the dynamics of new industrial branches and the long waves of economic development are associated with one another (Van Duijn 1982: 129–144 in Vayrynen 1983). Each Kondratieff upturn can be linked to a set of technological innovations such as railroads or the automobile suburban complex [Block 1981; Harvey 2010].

Although the role of capital has gained predominance for explaining wave-patterns, I want to emphasize that, in my opinion, this can never be seen apart from the rest of the organization of society, which explains why long waves in economics can never be interpreted in a deterministic sense. Other production factors, for example, have a dialectical relation with the capital accumulation process; and thus with K-waves. Labor and land, for example, stay heavily attached to the patterns of development within the capitalist world economy. According to Rostow (1978 in Delbeke 1981), for example, long waves provoke
changes in the profitability of producing food and raw materials; growing popu-
lation and rising real income during the upswing create an increasing pressure
on the supply of food. In the same way, developing industrialization creates
a pressure on the available supply of raw materials (Delbeke 1981: 9–10). (Fur-
ther reading Jason Moore.)

Within the labor market, competitive pressures within industry become stronger during the downturn. Labour-saving and material-saving technical changes become increasingly important for competitiveness of production. This leads to the growth of capital intensity of production (Freeman 1979; cited by Delbeke 1981). The interdependence between labor market, technology and capital intensity make it very difficult to distinguish unemployment as a result of production innovation from unemployment because of saturation of demand (Delbeke 1981), but from a non-deterministic perspective on long waves in capitalism, they can be both part of the same mechanism.

The same is true for the superstructure of capitalist society and its institu-
tions. Long term developments of capitalism have formed, reformed and de-
formed the institutions of reproduction of the capitalist society. This is also the
case for democracy, as an institution for governing political relations between
citizens and the capitalist state. Today's political turmoil and the declining legit-
imacy of existing democratic institutions as a consequence of the economic
depression and its interaction with long waves is the object of study of this
paper.

RELATIONS WITH POLITICS

Kondratieff's initial endogenous theory has been criticized by Trotsky (1923) from the beginning, using a dialectic materialist perspective on the relation between economics and society in contrast to Kondratieff. His main critique was that Kondratieff's model was too schematic and deterministic. He emphasized the importance of the dialectical relationship between economics and politics. Although he recognized the existence of patterns of long periods of capitalist development, he emphasized the influence of elements which were the part of the political superstructure of the capitalist society. These made the turning points of Kondratieff's wave rather unpredictable, which made Trotsky conclude that their periodicity had never been fixed (Trotsky 1923). 'Significant external factors of this superstructural order or external conditions, are wars and revolutions, which determine the character and alteration of expansive, stagnating or declining epochs of capitalist development' (Ibid.: 9; also cited by Day 1976; Vayrynen 1983).

Polemicizing with Kondratieff, Trotsky stated that long cycles did not
'grow out of the internal dynamics of the capitalist process as such, but out of
the conditions in which [the accumulation process] finds itself ... out of the opening up of new continents, colonies and markets for capitalist activity, or out of the military and revolutionary shocks which cross its path' (Trotsky 1923; Day 1976: 78). Superstructural events hinder the free or semi-free interplay of economic forces. Trotsky sought to demonstrate that 'external conditions' and the relative autonomy of 'superstructural' phenomena precluded any automatic periodicity of long cycles (Day 1976). Moreover, he saw the economic process as such too complex and statistics too limited to have a deterministic positivist economic model (Trotsky 1923). The logical consequence was that Trotsky denied the existence of long cycles and referred instead to distinct 'epochs', or historical 'periods', (Day 1976) which also showed patterns of economic growth and decline, for which the economy in the last analysis nevertheless stayed crucial, but were less deterministic and more open to influence from the superstructure. Governments are thus not totally at the mercy of the long-term developments of K-wave (Vayrynen 1983).

In his original critique, Trotsky (1923) identifies two political events that would have influence on long waves and their turning points: wars and revolutions. Basically these are two systems interrupting events on two apparently different domains: national politics and international politics. These are also the two different arenas where contradictions of the system of production express themselves in the form of a legitimation crisis, as Habermas (1975) analyzed, on the national level and will be developed further on in this paper. As is the case with the legitimation crisis of the system on the national level, imperialism and (neo)colonialism are a transfer mechanism for externalizing the internal contradictions between Labor and Capital, resulting in a social redistribution of power and wealth and a reconfiguration of power relations. What is expressed on the national level as a fiscal crisis or a crisis of overproduction, can culminate in major wars between major countries (Van Duijn 1982). These crises themselves can have a major effect on capital accumulation processes, by removing or erecting barriers to the accumulation process, and thus have effects on the long term development of capitalism and its long waves. Wars and revolutions often condition industrial change, but they are not its prime movers (Schumpeter 1976: 82). Both are determined, but only in last instance, by economic conditions, as they both are the consequence of changing power relations and changes in legitimacy of those relations.

Most studies about the interaction between long waves and politics have been conducted on the level of international relations. States are, for example, within certain limits, 'able to steer and restructure the reality, including engaging in military confrontations among themselves' (Vayrynen 1983: 402). The U.S. case, for example, shows the possibility that 'participation in a major
war outside one's territory may prolong the upswing preceding war by stimulating the economy' (Van Duijn 1982: 6; Vayrynen 1983: 408). But an economic crisis also does always lead to political and military confrontations. If the crisis is deep enough, however, as it was between the two world wars, such confrontations cannot be avoided. The best way to analyze the effect of long wave is thus to start from 'a mutually inter-dependent historical process' (Vayrynen 1983: 407) as major wars bring about economic consequences that alter the course of the economic cycle from what it would otherwise have been (Ibid.).

A similar point of view should be taken into account for the national social and economic policy, with the existence of a margin for governments to temporarily escape the effects of economic crisis through policy-measures, and by this temporarily overcome the contradictions of the capitalist system that provoked the downturn. This could explain how the crisis of the nineteen seventies could have been postponed by neoliberal reforms, the liberalization of financial markets and the reincorporation of the markets of Eastern Europe into the world market.

The above discussion illustrates why this paper does not speak out on the endogenous or exogenous character of long wave patterns. For the same reason, this paper uses the term 'long wave', as does Van Duijn (1982: 1), and not a 'long cycle'. 'The distinction between "wave" and "cycle" is important, as the term "cycle" suggests a model, in which fluctuations are generated as an endogenous process; with fixed periodicity and amplitude' (Ibid.).

## LONG POLITICAL CYCLES THEORIES

Most of the research done on the mutual influence of economic cycle patterns and politics are focused on the influence of elections on macro-economic policy, concentrating on the macro-economic effects of electoral cycles, the so-called political business cycles (Tufte 1980; Willett 1988; Nordhaus 1975). The rest of this paper, however, will discuss theories that focus on the reverse relation: the influence of economic wave-patters, in particular long waves, on the political sphere.

While Vayrynen (1983) and others also have studied the influence of long waves on international relations, this article concentrates on the political legitimacy of national institutions, assuming that political decision-making is affected by the economic evolution. The margins of decision-making are smaller during the periods of stagnation and negative growth. Hence constraints on government action are greater during long economic downturns. Those periods are usually associated with nationalism and conservatism while the upswing phase gives rise to liberalism and reformism (Ibid.). Wave-like patterns of political developments, based on economic cycles can be found in the work of
Eric Hobsbawm (1994). The most influential general theory, however, is that of Huntington (1991) (see Green 1999; Doorenspleet 2000; Fraser 2001).

In *The Third Wave: Democratization in the Late Twentieth Century*, Samuel Huntington (1991) elaborated a theory of ‘waves of democracy’ – believing that democratic institutions ‘emerged in waves of democratization’, observing three of those waves: the first one of 1828–1926 with the democratization of Europe, the second one between 1943 and 1962 in the period of the defeat of Nazi-Germany and the decolonization, and the third one, the democratization in Southern Europe, Latin America and Eastern Europe of 1974–1990. Between the three waves were reverse waves, these periods being 1922–1942 and 1958–1975 (Fraser 2001; Doorenspleet 2000).

Huntington (1991) defines waves of democratization as ‘groups of transitions from nondemocratic to democratic regimes that occur within a specified period of time and that significantly outnumber transitions in the opposite direction during that period of time’ (Huntington 1991: 15; cited by Fraser 2001: 53), also involving liberalization or partial democratization in political systems that do not become fully democratic. Reverse waves are periods in which ‘some but not all of the countries that had previously made the transition to democracy, reverted to nondemocratic rule’ (Huntington 1991: 13–16; cited by Fraser 2001: 41).

According to Huntington (1991) two factors might cause prolonged economic growth to give rise to a wave of democratization. The first one would raise the growth of Gross Domestic Product (GDP) per capita and create the economic possibility to ‘afford’ democratic governance. The second one, rapid economic growth, would give rise to political tensions and movements that disrupt and challenge the prevailing political order from which democratic governance may emerge (Fraser 2001).

Huntington's approach is an exogenous approach to democratization, as it assumes that ‘democracies are equally likely to emerge at any level, that is, even if development under authoritarianism does not increase the probability that a country will become democratic’ (Przeworski and Limongi 1997: 181), and the reason why more developed countries have a higher chance to be democratic is because once they are democratic they are more likely to stay democratic. The exogenous approach concentrates on external influences, such as wars, leading to exogenous transitions (Fraser 2001; Green 1999). World War I and the Russian Revolution, for example, played an important role in the establishment of universal suffrage in Europe (Fraser 2001; Green 1999). World War II and the destruction of Nazi-Germany played an important role in the second wave of democratization and the collapse of the Soviet Union could be seen as an external factor in Huntington's Third Wave of democratization
(1991). Nonetheless, the important role of external pressures for democratization does not contradict with the existence of wave-like developments, as we have seen that events as wars and revolutions are closely linked with them.

The endogenous approach, on the other hand, assumes democracy as the result of development itself, implying that ‘if other countries become as rich as the economically advanced nations, it is highly probable that they will become political democracies’ (Lipset 1959; cited by Przeworski and Limongi 1997: 175). This is essentially a modernization theory of democratization, assumes that some level of economic development is a prerequisite for democracy (Przeworski and Limongi 1993) and originated in the comparative study of Seymour Lipset (1959). It supposes that ‘modernization consists of a gradual differentiation and specialization of social structures that… consist of sequences of industrialization, urbanization, education, communication, mobilization, and political incorporation, among innumerable others: a progressive accumulation of social changes that prepare a society to proceed its culmination, democratization’ (Przeworski and Limongi 1997). Habermas (1975) adopts it in the next section ‘Legitimation crisis’ when he states that the increasing complexity of the economy and organization of society destroys barriers of participation and contradicts the top-down structure of authoritarian decision-making.

Although the debate between endogenous and exogenous models of democratization has been fierce, the holistic approach which this paper adopts, making no distinction between endogenous and exogenous models for long waves makes the difference between both models of democratization – or better periods of political contestation, as we will address further in this paper – pointless, as exogenous factors such as wars and revolutions can be brought into the model through the effect of long waves. In this sense, the only thing that matters is that a correlation between long waves and the democratization processes, be it endogenous or exogenous, appears to be proven in empirical studies (Frazer 2001).

Other criticisms on Huntington's theory (1991) are more relevant for this paper. The first is the problem that democratization and reversal, revolutions and counterrevolution, usually occur at the same moment. The Russian Revolution provoked on the wave of democratizations in Western Europe after WWI, but at the same time harsh counteractions happened (Green 1999). Although Huntington (1991) saw capitalist growth as a democratizing factor, Polanyi (1944) defends that popular democracy and social protectionism also were seen as threads to free markets and entrepreneurship by the economic elite, whose governments during the 1918 wave sought fascist help to restore law and order.
The second criticism is conceptual. Huntington's definition (1991) of de-
mocracy is based on Dahl (1971 cited by Doorenspleet 2000: 385) and incorpo-
rates three requirements: competition, inclusiveness and civil liberties. In prac-
tice he focuses only on competition, ignoring even the requirement of universal
suffrage: voting rights for women, for example, do not play a role in Hunting-
ton's analysis (Doorenspleet 2000). Doorenspleet (2000) tries to answer these
problems with a more inclusive definition and an adaptation of Huntington's
countries-model. However, even this formal definition of Democracy remains
very fragile. Although during the 1990s the number of democratic countries,
according to her definition, would have been known as a peak, for example, the
success of neoliberalism and the consequent reduction of the public sphere re-
duced the competences of voters. Or as Graeber (2011: 383) states that since
Thatcher and Reagan, ‘everyone could now have political rights, but political
rights were to become economically meaningless’. The number of democracies
in the procedural definition may thus have been augmented, the number of de-
mocracies in the substantive definition<fnref n="2" /> probably not; decreasing party-
memberships, decreasing participation in elections and the rise of anti-
democratic parties in Europe since the beginning of the nineties reflect this
trend.

LONG CYCLES AND LEGITIMACY

Keeping the previous criticisms on Huntington (1991) in mind, this paper con-
centrates on the relationship between long waves and legitimacy / political con-
testation of existing institutions instead of their immediate relation with democ-
racy. The concept of legitimacy, and particularly the sociological approach to
legitimacy, enables us to avoid arbitrary definitions of democracy; which are
themselves a product of dominating norms and ideology. Moreover, a stronger
relationship between long waves and political contestation should be expected,
as political (output-) legitimacy<fnref n="3" /> of relationship forms the logical link between
economics and the political superstructure.

Economic growth can provoke democratization, as Huntington (1991) and
Doorenspleet (2000) propose, and recession could provoke a reverse cycle, but
this is not necessary the case, it can even have the adverse effect. Growth can
serve, and has historically served, as Przeworski (2000) showed, for providing

<footnote n="2">² Measuring them as regimes viewed by them as being a representative of the general will or common good, although the measurement is problematic (Schumpeter 1976).</footnote>

<footnote n="3">³ As I am primarily interested in the relation between the economic developments and political legitimacy, this paper will primarily focus on output-legitimacy. For a further discussion about input and output legitimacy relating to financial crisis situations, see my paper ‘A Sequential Theory of Legitimacy Loss’, written for the seminar of Democratic Theory, PhD Course Democracy for the XXI century (Van Vossole 2012).</footnote>
authoritarian regimes with the means to legitimize themselves, with contempo-
rary China as an excellent example. Recession, on the other hand, can lead to
claims for more equal redistribution of wealth and power, and thus for a more
democratic society, as shown in the Arab Spring and the occupy movement in
the recent period. Both up- and downturns of the long wave entail periods of
withdrawal of legitimacy of the political system, and will provoke political con-
testation.

The upswing and legitimacy

The theory of the relation between strong economic growth and the evolution of political legitimacy, this paper uses, can be brought back to the factors influencing democratization Huntington (1991) addressed. Rapid and differential growth, as a consequence of the development of new sectors and technologies, would give rise to political tensions and movements that disrupt the prevailing political order. Growth would generate the political forces that could challenge the prevailing order and refuse to accept the legitimacy of existing power structures, when they are not adapted to new power relations (Fraser 2001). This is what Ronaldo Munck calls ‘Marx-type of unrest’. It is based on Marx’ historical materialist idea that economic development leads to new (class) forces with new interests and the creation of a new power struggle. The development of merchant capitalism, for example, created the first bourgeois classes, which contested the feudal institutions, and the process of early industrialization created a rising working class which contested the minimal democracy and the existing inequalities. These conflicts, and thus the contestation of the existing institutional order, originate in the basic contradictions between productive forces and social and political forms.

This explains why a new investment wave ultimately contributes to politi-
cal and social instability (Day 1976). Examples of this kind of contestation are
the feminist movement, consequence of the incorporation of women in the la-
bor-market, which nearly doubled the labor supply needed for the reconstruc-
tion and boom of capitalism during and after the Second World War. The same
holds for the American civil rights movement and decolonialization move-
ments.

This destabilization through growth, with its higher probability of delegit-
imation of public policies, however, does not mean that democratic institutions
are endangered themselves. Empirical data show that faster growing democra-
cies survive longer than others (Przeworski and Limongi 1997: 167). As growth
means there is a ‘bigger pie’ to be divided, wealth during the upswing creates
a broader margin for policy-making and engages in compromises, making sys-
tems be able to afford democracy (Huntington 1991).
Rising political contestation during periods of upturn can thus be expected, but they are more likely to lead to reform of the existing policy structures than their overthrow. It should be noted, that according to Huntington, possible democratization during the upturn would threaten further growth. In his view ‘democracy generates an explosion of demands for current consumption. These demands, in turn, threaten profits; hence they reduce investment and retard growth’ (Huntington 2006; Przeworski and Limongi 1993), and thus lay the seeds for a new downturn.

## The downturn and legitimacy

Despite the near trivial relation between legitimacy and economic crisis, only relatively few social scientists have analyzed the subject (Block 1981). Instead, most of the literature is based on the relation between democratic legitimacy and the degree of economic development, going back to the study of Lipset (1959) on the social requisites of democracy (Przeworski and Limongi 1997). Block attributes this to two factors: an excessive belief in economic growth, which was only strengthened in the last decades of neoliberalism, and the academic division of labor which separated economics and the other social sciences.

Economic crisis nevertheless represents one of the most common threats to stability (Diamond and Linz 1989; Przeworski and Limongi 1997: 169). Political systems have a high probability of transition and institutional change, when confronted with negative growth. This is the case for democracies as well as for autocracies. Empirical research by Przeworski shows that when democracies face a decline in incomes, they die at the rate of 0.0523 and can be expected to last for nineteen years. Authoritarian regimes die at a rate of 0.0261 and are expected to last for thirty-eight years. They are thus much less stable than in years of growth, with two rates of 0.0160 and 62 years in democracies, and 0.017 and 58 years in autocracies (Przeworski and Limongi 1997: 168). These effects of a crisis manifest themselves immediately. One year of an economic crisis is enough to produce political effects; growth in the recent past does not make any difference (Przeworski and Limongi 1997).

The theoretical relation between the downturn of economic cycles and political legitimacy in this paper is inspired by the transfer mechanisms theorized by Habermas (1975). Although Habermas bases his theory of legitimation crisis on the mechanism of short, decade-long (Juglar) business cycles, his observations are worth considering for long cycles.<fnref n="4" /> According to Habermas (1975), crisis tendencies shift from the economic into the administrative system through the transfer mechanism of government intervention. Government inter-

<footnote n="4">⁴ Habermas based his theory on the same cycle that served as inspiration for Kondratieff.</footnote>
vention is required to protect<fnref n="5" /> citizens from an immediate transformation of the contradictions within the capitalist economy into a social crisis, causing mass unemployment, poverty, hunger and violence (Block 1981).

With this immunization, economic crisis, however, has been transferred to another level, meaning that crisis can be reflected in disparate wage developments, permanent inflation and corresponding uneven redistribution of income, disproportional sectorial and geographical developments, and a permanent fiscal crisis as ‘the economic crisis is intercepted and transformed into a systematic overloading of the public budget’ (Habermas 1975: 69). Ultimately crisis management is the re-coupling of the economic system to the political system. Economic processes, power-relations, class-relations and social distributions of wealth, which had been de-politicized and obscured by the market mechanism, by Habermas (1975: 36) designated as an ‘ideology of fair exchange’, are re-politicized and visualized suddenly. They are not anymore divine ‘natural laws’, but the part of a political choice (Ibid.).

Due to the re-politicization of the allocation of wealth, policy-makers are confronted with a dilemma. Policy-makers have the political choice between passing the social cost of the downturn to the majority of the population, by cutting back on public goods and services, and raising taxes beyond the levels that are seen to be fair, and thus risk to reduce its output-legitimacy, or they can undermine the accumulation process of the economic elite by reducing services needed to capital for its reproduction or ‘by raising additional revenues in an inflationary manner’ (O'Connor 2001 cited by Block 1981).<fnref n="6" />

The consequence of the first option is public poverty, impoverishment of public transportation, education, housing and health care (Habermas 1975). The concern with personal happiness that characterizes the consumer society, which has come ‘increasingly to rest its claim for legitimacy on its capacity to assure continuous economic growth to provide a range of services to the population without raising taxation to a level perceived as oppressive’, comes into conflict with the need for discipline in a period of slow growth (Block 1981: 2). The end of continually rising living in developed capitalist societies, dramatically undermines the legitimacy of modern states in capitalist societies, (Habermas 1975; O'Connor 2001 cited by Block 1981) and as governments lag behind what people expect from them, the ‘penalty for this failure is withdrawal

<footnote n="5">⁵ According to Polanyi, this ability for protection against the ‘self-regulating market’ is the legitimation of the state.</footnote>

<footnote n="6">⁶ The recent austerity measures can be put in the first category, QE2 can be put in the second. It should be noted, however, that QE and monetary expansion of the ECB primarily affect financial capital, and much less industrial capital. This financial capital, particularly in the USA, is in the hands of foreign investors.</footnote>
of legitimation' (Habermas 1975: 46) meaning that 'the system does not suc-
ceed in maintaining the requisite level of mass loyalty' (Ibid.: 69).

Political legitimation should compensate for the loss of economic (output-) legitimacy of the market, as it cannot rely on its legitimizing claims of rationality during a crisis. However, while crisis management creates an increased need for legitimation by the political system, as a consequence of the crisis, the scope for action contracts precisely at those moments in which it needs to be drastically expanded to be successful (Ibid.), leading to a legitimation crisis of the political system. As the margins of decision-making are smaller during the periods of stagnation, political legitimacy is affected by a long economic downturn (Vayrynen 1983), and a higher level contestation of the political establishment can be expected.

WAVES OF POLITICAL CONTESTATION

The loss of legitimation is expressed, and can thus be empirically measured, in
the political behavior of the subjects of the state.<fnref n="7" /> During a legitimation crisis
subjects become both more critical and/or apathetic, while the state has the ten-
dency to change its degree of repression (Habermas 1975). Keniston (1968 cit-
ed by Habermas 1975) observed the critical, activist side in student movements,
revolts by school children, pacifists and women's emancipation. The retreatist,
apathetic side would be represented by hippies, 'Jesus-people', drug subculture,
phenomena of undermotivation in school, etc. Furthermore, Habermas (1975)
believed that the legitimation crisis would re-visualize class contradictions,
which had been concealed by the apolitical market-mechanism.

Data on the normal (Juglar) business-cycle time intervals show this rela-
tionship between conjuncture and political contestation. For example, a relation
can be observed between rising unemployment and recession and the occur-
rence of general strikes (Kelly and Hamann 2009; see also Table 5 in the Ap-
pendix). A similar relation can be found between economic downturn and the
electoral success of right wing extremist formations (De Bromhead et al. 2012).
Within our theoretical framework of long waves, we could expect the same
patterns: a downturn of the long wave could appear as a wave of political con-
testation and class struggle.

From this discussion, this paper assumes the existence of waves in political contestation, recurring waves of political action and higher degrees of politicized participation or politicized nonparticipation (retreatism) during the periods of highest growth in the course of the upswing of a long wave and during

<footnote n="7">⁷ For a further discussion see my paper ‘A Sequential Theory of Legitimacy Loss’, written for the seminar of Democratic Theory, PhD Course Democracy for the XXIst century (Van Vossole 2012).</footnote>
the years of negative growth in the course of the downturn. A look at first glance on history in Europe confirms their existence. The great depression coincided with a general legitimacy loss of establishment parties, the success of political movements of the radical left and radical right and a wave of popular mobilization. A similar wave of contestation happened at the end of the sixties and the nineteen seventies, with a wave of protests, feminist mobilization, civil rights movements, terrorist actions of left and rightwing movements.

Hitherto, in the decades since World War II the most advanced capitalist countries have succeeded (the May 1968 events in Paris notwithstanding) in keeping class conflict latent in its decisive areas; in extending the business cycle and transforming periodic phases of capital devaluation into a permanent inflationary crisis with milder business fluctuations (Habermas 1975) by budgetary and monetary expansion. Today, both stimuli and policies reach their limits, both at the monetary (the loose policy was at the origin of the financial crisis) and budgetary levels, as the high sovereign debts become unbearable, a fiscal crisis situation developing in almost every country and defaults are bringing the financial system in the danger zone. This is expressed in a deeper legitimation crisis.

Today's legitimation crisis could be observed on the activist side in the occupation-movement, the general strikes sweeping through Europe, the Arab Spring, the success of the populist right and populist left in elections and the instability of governments. The retreatism could be found in decaying party-membership, particularly in government parties, the lower electoral participation, experiments of 'non-capitalist economies', etc...

## Conclusion

This paper defends the case of the existence of long waves in politics. Existing main stream political wave theories, in particular that of Samuel Huntington (1991), show serious shortcomings. Huntington's observation, that rapid growth provokes possible legitimacy problems for regimes, could be retained in certain circumstances, but should be complemented with the fact that negative growth has even a bigger impact on legitimation and possible change of the political institutions (Przeworski and Limongi 1997).

As an alternative this paper proposed the existence of waves based on legitimation, which would be expressed as waves of political contestation. These waves find their driving force in the internal dynamics of the economical long wave theories.

Nevertheless, the long wave-approach should never be regarded in a deterministic sense, but as a framework which enables social scientists to engage with different dimensions of social sciences in interdisciplinary manner com-
bining elements of history, economy, sociology and political science to under-
stand and frame current events. It enables us to place the recent economic crisis
and the political turmoil into a historic perspective. It also gives us a framework
to look critically at the solutions proposed by policy makers to this reality.

This paper only established a theoretical hypothesis that should be empir-
ically substantiated. This could be done by a comparative approach of elec-
tion results over the time, a comparison between social movements, as well as
by the occurrence of general strikes for example. Other parameters are the
occurrence of terrorism and the behavior of political parties. This paper
should thus be an invitation for further research and the deepening of the pre-
sented hypothesis.

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# Appendix

<table><caption>**Table 1.** Kondratieff wave chronology</caption><thead><tr><th>Long wave number</th><th>Long wave phase</th><th>Lates of the beginning</th><th>Dates of the end</th></tr></thead><tbody><tr><td rowspan="2">One</td><td>A: upswing</td><td>'The end of the 1780s or beginning of the 1790s'</td><td>1810–1817</td></tr><tr><td>B: downswing</td><td>1810–1817</td><td>1844–1851</td></tr><tr><td rowspan="2">Two</td><td>A: upswing</td><td>1844–1851</td><td>1870–1875</td></tr><tr><td>B: downswing</td><td>1870–1875</td><td>1890–1896</td></tr><tr><td rowspan="2">Three</td><td>A: upswing</td><td>1890–1896</td><td>1914–1920</td></tr><tr><td>B: downswing</td><td>From 1914 to 1928/29</td><td>1939–1950</td></tr><tr><td rowspan="2">Four</td><td>A: upswing</td><td>1939–1950</td><td>1968–1974</td></tr><tr><td>B: downswing</td><td>1968–1974</td><td>1984–1991</td></tr><tr><td rowspan="2">Five</td><td>A: upswing</td><td>1984–1991</td><td>2008–2010?</td></tr><tr><td>B: downswing</td><td>2008–2010?</td><td>?</td></tr></tbody></table>

*Source:* Korotayev and Tsirel 2010, Table 1 and 2.

<table><caption>**Table 2.** Democratization waves</caption><thead><tr><th>Democratization Wave</th><th>Reverse Wave</th></tr></thead><tbody><tr><td>1828–1926</td><td>1922–1942</td></tr><tr><td>1943–1962</td><td>1958–1975</td></tr><tr><td>1974–1990</td><td></td></tr></tbody></table>

<table><caption>**Table 3.** Long waves in industrial production since 1782</caption><thead><tr><th></th><th>Prosperity</th><th>Recession</th><th>Depression</th><th>Recovery</th></tr></thead><tbody><tr><td>The first wave</td><td>1782–1792<br>1792–1802*</td><td>1815–1825</td><td>1825–1836</td><td>1836–1845</td></tr><tr><td>The second wave</td><td>1845–1856<br>1856–1866</td><td>1866–1872</td><td>1872–1883</td><td>1883–1892</td></tr><tr><td>The third wave</td><td>1892–1903<br>1903–1913**</td><td>1920–1929</td><td>1929–1937</td><td>1937–1948</td></tr><tr><td>The fourth wave</td><td>1948–1957<br>1957–1966</td><td>1966–1973</td><td>1973–</td><td></td></tr></tbody></table>

*Note:* * War in 1802–1815; ** War in 1913–1920.

*Source:* Vayrynen (1983), based on Schumpeter (1939) and Huntington (1991).
<table><caption>**Table 4.** Hobsbawm's historical periods and long wave periodicities</caption><thead><tr><th></th><th>Upswing</th><th>Downswing</th></tr></thead><tbody><tr><td><em>Long Nineteenth Century</em></td><td></td><td></td></tr><tr><td>Age of Revolution 1789–1848</td><td>First 1793–1814/25</td><td>1814/25–48</td></tr><tr><td>Age of Capital 1848–75</td><td>Second 1848–73</td><td></td></tr><tr><td>Age of Empire 1875–1914</td><td></td><td>1873–96</td></tr><tr><td></td><td>Third 1896–1914/20</td><td></td></tr><tr><td><em>Short Twentieth Century</em></td><td></td><td></td></tr><tr><td>Age of Catastrophe 1914–45</td><td></td><td>1914/20–48</td></tr><tr><td>The Golden Age 1945–73</td><td>Fourth 1948–73</td><td></td></tr><tr><td>The Landslide 1973–97/8</td><td></td><td>1973–98</td></tr></tbody></table>

Source: Hobsbawm 1994.

<table><caption>**Table 5.** Growth and strikes</caption><thead><tr><th></th><th></th><th>Greece</th><th>Italy</th><th>France</th><th>Spain</th><th>Belgium</th><th>Total</th></tr></thead><tbody><tr><td rowspan="2">Unemployment</td><td>Falling</td><td>25</td><td>13</td><td>4</td><td>1</td><td>1</td><td>44</td></tr><tr><td>Rising</td><td>13</td><td>3</td><td>6</td><td>6</td><td>6</td><td>34</td></tr><tr><td rowspan="2">Price inflation</td><td>Falling</td><td>18</td><td>7</td><td>5</td><td>5</td><td>1</td><td>36</td></tr><tr><td>Rising</td><td>20</td><td>9</td><td>5</td><td>2</td><td>6</td><td>42</td></tr><tr><td rowspan="2">GDP growth rate</td><td>Falling</td><td>23</td><td>10</td><td>8</td><td>4</td><td>5</td><td>50</td></tr><tr><td>Rising</td><td>15</td><td>6</td><td>2</td><td>3</td><td>2</td><td>28</td></tr><tr><td rowspan="2">Gross nominal earnings</td><td>Falling</td><td>20</td><td>5</td><td>5</td><td>5</td><td>5</td><td>40</td></tr><tr><td>Rising</td><td>18</td><td>11</td><td>5</td><td>2</td><td>2</td><td>38</td></tr></tbody></table>

Source: Kelly and Hamann 2009.
# 9
## Indicators – More than Evidence and Maths<fnref n="1" />

Peter Herrmann

### Abstract

Work on conceptualizing and measuring poverty is widespread. Looking at the literature we can make out some form of cycles of different perspectives on the topic, oscillating between issuing poverty as a very general matter, on the one hand, and concentrating on very specific problems as, for example, poverty of certain groups or the consequences of living in poverty. While, of course, attention is frequently paid to the connection between poverty and economic development, little consideration is given to the link between poverty and large cycles of capitalism. The present contribution is devoted to theoretical investigation of this matter. This means as well that certain aspects of empirical approaches will be critically investigated. The aim is to problematize some philosophical and methodological aspects of quantification/mathematization, equivalence principle and claim of exchangeability, individualization and, finally, evidence.

**Keywords:** poverty, measurement of poverty, Europe, Kondratieff, social quality.

### Introduction

Moving between the worlds – it means not least that one has to deal with different and multiple facets of a complex picture – and considerations of different aspects of analytical thinking are surely merging with some biographical moments. In this perspective my personal-professional development – working in different countries and covering different subject areas – can surely be seen as some privilege. Getting different takes on specific issues – but also: being challenged to see more or less distinct issues as part of a wider picture. And many things may indeed look very clear if looked at in detail – but taking another perspective, a more distant view, they emerge easily as something entirely different, something that is miraculously beautiful, magic.

Kondratieff Waves: Juglar – Kuznets – Kondratieff 2014 297–320

<footnote n="1">¹ The contribution goes back to notes made in preparation of a presentation during the Summer School in Cork: Conceptualising and Measuring Poverty, 18th–22nd June 2012.</footnote>
Unfortunately such change is only optional – the changed perspective may also show something that is frightening, odious, though it may also be that more distant views open occasionally a door of some kind of social-romanticism while the reality, its close investigation, shows immediately another picture: niceties turn into a rather harsh reality for those who have to face it as matter of their everyday's life, as condition under which they live ... – I will return later to the point of conditions, just keep in mind that I mentioned the term already.

Johann Wolfgang von Goethe, in his piece on *Wilhelm Meister's Apprenticeship* may give us some guidance, saying:

> The fabric of our life is formed of necessity and chance; the reason of man takes its station between them, and may rule them both: it treats the necessary as the groundwork of its being; the accidental it can direct and guide and employ for its own purposes; and only while this principle of reason stands firm and inexpugnable, does man deserve to be named the god of this lower world (Goethe 1917).

## The European and Social Policy Framework

One aspect of my development has to do with my emigration from the European centre, namely from Germany – which was at that time a rich country – to the poor European periphery, namely Ireland. During that period we can see reasonably clear borders between these two countries.

Nevertheless, actually the lack of clarity brought me to Ireland – a project that started from looking the initial topic emerging to research economic activity on the street level. Over time, this moving between the worlds was also a move between different disciplines, subject areas of social science, covering sociology, law and economics – mind, I do not speak of social policy although this is usually considered to be my field of expertise.

It had been a long way – and although I maintained the commitment to combating poverty, my orientation shifted in several respects. For instance, my commitment shifted from working within Ireland towards activities outside of Ireland, first ‘in Europe’. And two monuments may be mentioned as somewhat influential, the one standing in front of the European Parliament in Brussels – a woman, holding in a victorious position up the Euro-symbol. Is it the Europe, the young Europe, abducted by Zeus – abducted and apparently over all the years having forgotten her oppression, being tamed, domesticated by the divine bull, and now carrying herself the ring, not aiming at taming the beast but using it as device for self-discipline. This Europe, again in a victorious position, is presented by a statue in Strasbourg. And this reference to the ancient Greek saga is usually meant to represent not least the ancient Greek values which are seen as common tradition behind today's Europe.
## The Positive about Europe

Leaving at some stage the work in the vicinity of the European institutions and not least developing activities in other countries and regions probably meant to develop more Europeanness than I had been the cases before. It meant in particular valuing the European social model (throughout the following I will name some ambiguity going hand in hand with this appreciation; see as well Herrmann 2007, 2011a). This appreciation is not any celebration of an illusionist renaissance of the Eudemian Ethics as it is usually considered as Greek tradition; my general appreciation is more about another root of European values, namely the Roman tradition, in particular the *Leges Duodecim Tabularum* – the twelve tables as foundation of Roman law and as such the origin of the modern legal system of the Western democracies.

But as much as such system of accountability and equality will be appreciated in the light of other traditions, this, of course, poses immediately a radical question: Positive law stands against negative developments, is suggested as answer to something that is considered to be fundamentally negative, as instrument in fighting poverty?

As much as there is immediately a question mark showing up when it comes to looking at this admittedly playful formulation as it is referring to a very serious and complex issue, there must be another question mark showing up when it comes to ‘indicators’.

As much as Plato is known – and misunderstood – for his rather special reflections on love, he should also be known for his view on numbers and figures respectively. In his opinion figures were *real*: for instance, in a row of four figures, starting with 1, the figure 3 was as real as the third wheel of a four-wheel drive even if you do not fully see it.

And such platonic love of figures is also frequently applied to indicators: though being at first technically nothing else than a row of figures, they are suggested as reflection of a row of life situations, a consideration of complex pictures of life.

## Social Policy as Part of the Critique of Political Economy

Understanding is only possible if we look at the real complexity of life – and we should not be afraid to understand life as a fundamentally economic issue. As Frederick Engels put it:

> According to the materialistic conception, the determining factor in history is, in the last resort, the production and reproduction of the immediate life. But this itself is again of a twofold character. On the one hand, the production of the means of subsistence, of food, clothing and shelter and of the implements required for this; on the other, the production of human beings themselves, the propagation of the species. The social institutions under which men of a definite historical epoch and a particular
country live are determined by both kinds of production: by the stage of
development of labour, on the one hand, and of the family, on the other.
(Engels 1990 [1884]: 131 ff.)

This means for Engels the topic is the production of everyday's life. Life
and its production occur under certain conditions, that is as moment of the
mode of production. And here the current relationship between economics and
social (policy) science is comparable with the marriage of god and the devil.
First a loving couple, inseparable, now they are still welded together but, like
fire and water, hating each other: *odi et amo*.

Maintaining the Pyramid – Stabilizing the Foundation

Usually we consider this hate-love-relation in terms of available resources –
and especially in times like ours there is a sadly-good reason for this.

* While watching the queues in Cork, people looking for jobs abroad and ready to emigrate, you may say (if you like positive thinking) something like ‘Well, about four years ago there were similar dole queues. Now there seem queues for hope’. It is about internationalization by way of migration.

* In Budapest people sleeping rough – actually many not sleeping rough anymore, because the Hungarian government criminalized homelessness, begging, being cygan, etc. It is about criminalizing the victims.

* Teachers in Greece, feeding pupils because they are collapsing at schools – and we are speaking of privileged kids as many do not even make the way to the lessons – actually I have also heard last weekend the same being true now for Germany. This is about the failure of statutory systems, depending on self-help and charity (I do not speak simply of solidarity though this surely plays a role).

* And of course, finally, we have to point at those rough pictures showing us blunt murder in the middle of the global village: starvation of the poorest; in other words, global trade as global mistreatment – German language allows for the play with words: the German word for trade is Handel, the word for mistreatment is Mißhandlung.

Acknowledging that this happens under the auspices of welfare states, we
should feel encouraged to defend the achievements, but nevertheless enter
a fundamentally critical debate of this system at the very same time.

There is surely a simple answer to this: redistribution – and I would be the last contesting the need for immediate steps. These have to be immediate and also massive.

This is importantly a different approach than frequent calls for the caring
welfare state. The welfare state is undeniably one of the most important
achievements of the last 150 years, incidentally the German Reich celebrates
this year the 150th anniversary. And 2012 is also the 70th anniversary of the
Beveridge Report. And not least, 2012 is also the International Year of Cooper-
atives.

Social insurance was favored by the then German minister of trade, Graf von Itzenplitz. Later, Bismarck took the merit to himself through the history books though in the book of his life we find a chapter in which he is initially a strong opponent of what he characterized later by saying ‘This is state socialism, it is practiced Christendom in legalised action’.<fnref n="2" />

Acknowledging the importance of this system, we should not forget ap-
proaching it in a more systematic way. The following core moments should be
highlighted:

1) The welfare state is not simply a matter of *Three Worlds of Capitalism*; rather, we are concerned with one answer to the changing capitalist mode of production.

2) This system is fundamentally misunderstood if we see it as being cen-
trally characterized by values like solidarity. On the contrary, the central point
of this system has to be seen in its unsolidaristic character – it is from the Cal-
vinist negativity that the need and space for positive law emerges; this is with-
out doubt the most important and constructive factor which characterises the
German social state, the Nordic welfare societies of the early 20th century and
the welfare state that developed as Keynes-Beveridigian pattern after WWII.

3) This is also a matter of redistribution: to some extent from the rich to the poor, to a larger extent between the phases of personal life cycles; and for a relatively small remainder – a matter of redistribution between generations. We should not forget that this opens a contradiction within the legal system. This legal system is first and foremost a matter of securing the individual right for exploitation – and any ‘social intervention’ actually contradicts the principle gist of positive law, thus positioning positive law against its own spirit.

4) ‘Social intervention’ maintained a fundamental pattern which actually closely links positive law, the feudal system and modern capitalism, namely the principle of individualization: in feudal societies it is the distinction between the deserving and non-deserving poor, in capitalist societies it is the monetarization of benefits – if you delve a little bit into economics and the analysis of money as general form of exchange you will easily see the connection.<fnref n="3" />

5) It is also characterizing the welfare systems, namely bureaucratization.

In this light the capitalist welfare system can be seen as – admittedly laud-
able – instrument that allows people to perform their jobs, however, without
allowing discussing what people's job actually is.

<footnote n="2">² URL: http://www.rboelling.de/quellen.htm</footnote>

<footnote n="3">³ A special section could be written on ambiguity of the question of women and the individualiza-
tion of rights.</footnote>
## Outrage – Out of Range

We should not only and not primarily look at people – at least not at individuals. We are actually coming to a fundamental problem of so-called social policy. It allowed and even enforced very much – as an academic discipline and as an area of policy-making – an individualizing and normalizing approach. And it did so by claiming independence of economics and the economy.

Colin Crouch emphasized, for instance, in a recent interview:

> Essentially economic knowledge is today in such a way recognised which I cannot comprehend. Especially as economics is dealing with matters on an intellectual level which is distant from real, social life. Economists are abstract in their thinking; they are more akin to mathematicians (Heppe and Mühlhausen 2012).

Investigating this in a wider perspective, the following remains. By separation from economics, social policy paradoxically enforced what it continues to criticize: an economistic model. Taking its point of departure in moral philosophy, economics arrived at a solely growth oriented model culminating in two perversions. The first is the take-over by micro-economics which nowadays dominates in large parts of the entire discipline. Even much of macro-economics is strongly influenced by a fundamentally individualist approach, actually applying micro-economic considerations on the level of a national economy (and equally on the level of global economic development). The second perversion is both, foundation and consequence of this: an empiricist pragmatism emerged already very early in social science, finding its roots in Cartesian thinking. Franz Borkenau brings this on the point, saying that '[a]bsolute empiricism conforms to pure practicism, which completely denies the problematique of norms' (Borkenau 1971 [1933]: 91).

This seems to be a never-ending story – as quick-motion picture captured by pointing at

* Descartes' proposition

> I think, therefore I am, is the first and the most certain which presents itself to whoever conducts his thoughts in order;<fnref n="4" />

* being translated by Locke into the legal form as an ‘individualised social right’, namely the emphasis of private property as fundamental and all decisive

> so that it cannot justly be denied him, when his pressing wants call for it: and therefore no man could ever have a just power over the life of another by right of property in land or possessions (Locke 1821 [1689]: 46);

<footnote n="4">⁴ Descartes, *Principles of Philosophy* (1644), *passim*.</footnote>
* followed by Smith' invisible hand

directing that industry in such a manner as its produce may be of the
greatest value, he intends only his own gain, and he is in this, as in many
other cases, led by an invisible hand to promote an end which was no
part of his intention (Smith 1999 [1776]: 32);

* being translated into a general rule of social science where

particular acts of individual persons, since these alone can be treated as
agents in a course of subjectively understandable action (Weber 1968
[1921]: 13);

* and finding its latest expression in the privatisation of an up to hitherto public sector closely interrelated with a tightened individualised mindset (see Herrmann 2011c, 2012b).

Seeing Thatcher's phrase that 'there is no such thing as society' as analyti-
cally valid, means to open a debate on the fact that societies are hugely, funda-
mentally and on different levels characterized by contradictions.

(i) One of these contradictions gets obvious in elitism, on the one hand, — estimation easily expressed in words, acknowledging positions but not reflected in deeds, measured in awards, publications, income but not in 'being' — and performance orientation, on the other hand, not least the requirements that have to be fulfilled by the deserving poor — sure, workfare is killing softly, not applying the swift stroke of warfare.

(ii) It seems to be easy to develop the counter argument: if societal figura-
tions that are based on and thinking in figures lost normative guidance, we just
have to return to norms, that is from the vicious cycle of greed to the virtuous
cycle of good deeds. Even one of the key-figures of number-juggling-
economists supposedly stated comfortingly that

[t]he day is not far off when the economic problem will take the back
seat where it belongs, and the arena of the heart and the head will be oc-
cupied or reoccupied, by our real problems – the problems of life and of
human relations, of creation and behavior and religion (attributed to
Keynes).<fnref n="5" />

We face again one of the many paradoxes: the critiques of the figures pro-
vide numerous studies with myriads of figures, permanently updated and per-
manently more shocking and ... — I may quote a student from last year, who
said ‘But we all know this, all this had been said so often but nothing seems to
change’.

<footnote n="5">⁵ URL: http://www.brainyquote.com/quotes/authors/j/john_maynard_keynes</footnote>
So we find a play with numbers against injustice and, I am convinced, an honest indignation and good will to do better. And this is something we find on the right, on the left, and in the middle of the political spectrum and going hand in hand with the spectre of good-doers. On *The Spirit Level* (Pickett and Wilkinson 2009) we are reminded *Why Social Justice Matters* (Barry 2005). And indeed such figures are revealing, shocking and, of course, Stéphane Hessel is right: it is ‘Time for Outrage’.

But social injustice is much more than revealing and shocking – earlier I pointed at global trade, saying that the ‘German language allows for the play with words: the German word for trade is *Handel*, the word for mistreatment is *Mißhandlung*.”

## The Anti-Globalist Moment of Global Capitalism

Rather than maintaining the division between economic and social dimension, we have to emphasize that there is no such thing as the economic or the social as separate sphere. The entire work of Marx is a *Critique of Political Economy* that means a critique of the entire system of how people produce the social conditions under which they live. Thus, we have to look at the determination of the value of labor power as the core question of poverty today. Here are some core points, selected with a focus on those highlighting facts that are of crucial importance in the present context.

• We are living in the era of global capitalism. The only reason for mentioning it is the need for qualification:

– The system is still to a large extent dominated by national interests – as easily seen by the current Euro-debates: even a regional identity falls easily victim of nationalist interest;

– The system is largely dominated by a relatively small number of enterprises:

147 companies formed a ‘super entity’ within this, controlling 40 per cent of its wealth. All own part or all of one another. Most are banks – the top 20 includes Barclays and Goldman Sachs. But the close connections mean that the network could be vulnerable to collapse (Waugh 2011).
<figure><img src="image_143.png" /><figcaption>**Fig. 1.** Core of the Globalised Economy</figcaption></figure>

This means that this capitalism is at least in three respects not simply global capitalism.

1) It is finance capitalism – a fundamentally different system than the capitalist standing at the beginning of this epoch (see for some aspects Herrmann 2011b; and the presentation by J. Huffschmid<fnref n="6" />);

2) It is controlled by a minority of capitalist entities and then again, a minority of this minority consists of ‘productive capitalists’, forcing many into inactivity also as it does not allow developing entrepreneurial activities (e.g., Chang 2010; Schumpeter 1942; Sombart 1913);

3) And, crucially, it is a capitalist system that, in the course of the development of the previously named factors, undermines the fundamental law of its own existence: generating value through production and with this the standard for determining the value of the labour force. We may refer to Marx's famous statement that

> [a]t a certain stage of their development, the material productive forces of society come in conflict with the existing relations of production, or – this merely expresses the same thing in legal terms – with the property relations within which they have been at work hitherto. From forms of development of the productive forces these relations turn into their fetters (Marx 1987 [1859]: 263).

> – At least two important analytical problems remain for political economy, namely to determine if and to which extent the current changes are changes

<footnote n="6">⁶ Huffschmid J. Presentation on Occasion of the Seminar Theories of Capitalism. April, 2009. Vienna. URL: http://www.univie.ac.at/intpol/?p=597 (In German).</footnote>
of the productive forces or changes of reproductive and distributive forces. It may be possible to solve this by taking Marx's understanding of production very serious; however, it may also be necessary to overcome the understanding of the solely productivist underpinning of the mode of production and to open a path to 'social production' – we may find something going into the direction envisaged in the German Ideology: conditions that allow overcoming a strict division of labour.

– Arrighi allows us to understand more of the current processes that systematically drive us into poverty – and the *us* means: the supposed rich nations. The excess of money took various forms – being originally closely attached to productive processes, taking then the form of ‘pure financial speculation’. The latter process moves at some stage beyond its own limits, combining itself with the speculation against states. However, in the meantime financial assets reached such dimensions that speculation is now taking the form of speculation that brings states themselves to the frontline – now as objects of speculation. Arrighi, taking a long-term perspective, shows the rise and fall of major states and empires. The basic pattern follows the sequence accumulation, over-accumulation, investment of excess capital in other countries, unfolding of new capitalist-civilisation there, with a subsequent new over-accumulation, searching for new investment opportunities abroad. It is the long way from Florentine to American capitalism, and possibly peaking in the near future in Chinese capitalism.

* We find a feature that seems to be rather remarkable if looked at against the backdrop of the mainstream publicized arguments, namely the increasing relative share of wages going hand in hand with the decreasing statutory debt while social spending increased.

* This links to another important moment: We are not talking about the lack of money but about the search for new profitable investment opportunities. We can follow a rise of capital since a long time and equally remarkable is the growth of financial assets. In particular the latter means that over years we see actually an increase of excess money.

The volume of finance transactions is currently about 70 times the amount of the entire world's social product, about 20 years ago this amounted to about 15%. The following table may give you an insight.

<table><caption>**Table 1.** GNP Worldwide and Financial Assets – Development (in billion US-dollar)</caption><thead><tr><th></th><th>1980</th><th>1990</th><th>1995</th><th>2000</th><th>2005</th><th>2006</th><th>2007</th><th>2008</th><th>2009</th><th>2010</th></tr></thead><tbody><tr><th>GNP</th><td>10.0</td><td>22.2</td><td>29.7</td><td>32.2</td><td>45.4</td><td>49.3</td><td>55.7</td><td>61.2</td><td>57.7</td><td>62.9</td></tr><tr><th>Financial assets</th><td>12.0</td><td>54.0</td><td>72.0</td><td>114.0</td><td>155.0</td><td>179.0</td><td>202.0</td><td>175.0</td><td>201.0</td><td>212.0</td></tr></tbody></table>

*Source:* Bontrup 2012: 16; with reference to McKinsey Global Institute (Roxburgh, Lund, and Piotrowski 2011), and IMF.
Part of this is the speculation against states.

Another part is the lowering of the costs of working power and the shift of
the responsibility for covering them.

• Consequently, we come to a major point in the economic analysis – and it will soon be clear that ‘economic’ development really means socio- and also political-economic development. A quick look at the following graph may give way to some insight – a simplification within the limits of the allowed:

<figure><img src="image_144.png" /><figcaption>Fig. 2. Kondratiev waves</figcaption></figure>

Source: URL: http://en.wikipedia.org/wiki/File:Kondratieff_Wave.svg. Date accessed: 27.06.2012.

Usually, what Kondratiev called bol'shie tsikly, to be translated as ‘major cycles’, is known as Kondratiev waves, long waves or long economic cycle. It is a rather simple and in many respects actually questionable economic model. Leaving the problems with the model aside, it can help us to get an understanding of the battlefield when we are looking at poverty. We can highlight the following major issues of the development:

– We are speaking about economic growth but now it has to be qualified as matter of growth of the ‘productivist sectors’, going qualitatively beyond simple numeric growth of an abstract national product.

– This is, on the one hand, carried by entrepreneurial individuals and groups.

– On the other hand, it offers investment opportunities for excess money (namely over-accumulated capital) – we may say accumulation by appropriation.

– Economic growth does not translate smoothly into any kind of wealth. On the contrary, in short and simplified: take-off phases are very much characterized by a specific pattern of pauperization, taking in particular two forms: precarization and pressure on wages, both reinforcing each other.
– This is accompanied and made possible – by a reduction of the labour power cost – a complex issue, ranging from direct pressure on wages to direct and indirect subsidies to investors and finally charitabilization.

This is in its own respect a factor which at least temporarily opens new fields of investment.

– Change of life styles is another major point in question. The row of path-breaking technological developments characterizing the major cycles can easily show this. All those inventions: steam engine, railway steel, electrical engineering/chemistry, petrochemicals/automobiles, information technology did have a major impact on the way of life – and this is true for all levels and walks of life.

– Having stated this, we are facing a paradox: as much as socialization is increasing, we see at the same time that this socialization itself allows increasing independence. We are dealing with a complex relationality, exceptionally well captured by Norbert Elias. He allows us to understand why Friedrich von Schiller states (after he looked with disappointment at the French Revolution): ‘Man only plays when in the full meaning of the word he is a man, and he is only completely a man when he plays (Schiller 1910 [1794]: Letter XV).

One fact is of special interest – actually justifying some of the traditional social policy orientation: the suggestion that social policy is distinct from the economy. Today the determination of the value of labor is to some extent again taken outside of the economic framework. Managers and enterprises respectively play outside of the pitch, and corporate charity (for instance, part of the soup-kitchens) is more and more frequent in the countries that are usually considered to be the richest.

## Social Quality – A Proposal for a New Orientation

The *first* fundamental point with regards to poverty is..., well: that we should not primarily look at poverty. It had been done for many times and there is obviously no light at the end of the tunnel. Some flickering here and there in a surrounding that remains caught within the limitations of a tube. Actually we may get the impression that things are getting worse, that problem zones shifted to previously unknown areas – but major changes are not in sight.

*Second*, at the center stage stands the definition of the social, understood as

outcome of the interaction between people (constituted as actors) and their constructed and natural environment. Its subject matter refers to people's interrelated productive and reproductive relationships. In other words, the constitutive interdependency between processes of self-realisation and processes governing the formation of collective identities is a condition for the social and its progress or decline (van der Maesen and Walker 2012: 260).
Normative concepts, based on claimed general values, abstract evidence and assumed commonalities are of no use. The social is something that has to be clearly analyzed, which the different facets have to be determined not as part of a primarily normative system but as part of a complex system. We are dealing with the social as a noun, thus allowing us to understand the substance rather than assuming it. Neglecting this important difference is also a key issue behind the permanent confusion in social policy. We hear of anti-social behavior, we learn about claims for a new social contract, we are confronted with enterprises claiming corporate social responsibility and ... and we hear our students saying 'But we all know this, all this had been said so often but nothing seems to change'.

*Third*, a major problem is the obsession with quantification. This goes much beyond the celebration of everything that can be expressed in figures. The major problem goes far deeper. Quantification emerges as a major issue in science – and this means in today's terms: natural and social science – at a specific point in time. With Borkenau we can point on three principles:

1) The rules of production in the period of manufacturing are very much based on the quantification and the quantitative comparison which is used in the form of equivalents. This is not only a matter of market exchange but also a matter of the technical side of manufacturing.

2) The principle of equivalence is applied in general, going far beyond the array of production and exchange.

3) With this a final aim is an 'all-rational system', aiming at justifying the capitalist rationality by suggesting the categories of formal law and exchange of equivalents as general rules of the world order (see Borkenau 1971 [1933]: 373 ff.).

Höffe elaborates on this in the work on Kant's *Critique of Pure Reason*, highlighting that '[t]he basic content of the first principle, taken with that of the second, presents mathematisation as a transcendental law of nature, or, more briefly put, as transcendental mathematisation' (Höffe 2010: 200).

Höffe continues by highlighting that mathematization, in Kant's view, is also a matter that has to be applied on intuitions, namely: '[a]ll intuitions, as matter of specific spatio-temporal extension, necessarily possess a quantitative character as extensive magnitudes' (*Ibid.*). And

[h]e grounds the process of mathematisation in the essence of the object: insofar as nature consists in intuitively given, and thus in spatio-temporally extended, data, then objectivity is necessarily bound to quantity, and quantity in turn is bound to extensive magnitudes. Every objective intuition is therefore a case of 'applied' mathematics (*Ibid.*: 201).
From here we can draw a line to later developments in social science: the positivism as proclaimed by Comte but also to some extent the Marxist claim that society could finally be broken down to mathematical formulas.

*Fourth*, evidence is the main issue in debates in social science – for instance, the European Commission highlighted this in a Communication (European Commission 2010). There is surely a good reason to request informed reasoning behind any decisions and, of course, the planning of decisions. It seems to be taken without question that the strongest evidence is given by numbers, especially numbers understood in a Platonic way as something real. But the flipside of looking for evidence should not be underestimated. Evidence, in simple translation, according to the Merriam-Webster dictionary,<fnref n="7" /> suggests a fact that cannot be challenged.

One of the major problems is the underlying reference to a set of norms that are and cannot be questioned – going back to the Latin root of *ex-videntem* this is getting especially obvious: taking visibility as proof is logically limited to affirmation.

*Fifth*, taking the definition of evidence from the Merriam-Webster dictionary (evidence as an outward sign, that is indicator), we face a problem with it. The Latin root of the term indicator is in this case actually not directing us to evidence but to something entirely different, we may even say that we arrive at the opposite. *In-dicare* is about valuing something, speaking about something and a proclamation. (a) The fact that a proclamation has to be made means first and foremost that the proclaimed matter is not self-evident – otherwise, it would not be necessary to speak about it. (b) It is reasonable to see such an indication as something that is not fixed, finally determined and self-contained – rather it is an indication by way of opening a field for a detailed exploration, and also lines which to be explored for finding the way across the field. As stated in a forthcoming article, indicators

are not measurement instruments *sui generis*. Rather they are instruments for developing an understanding of complex issues and their trends. As such they need to be guided by a sound conceptual reflection of what they are looking for. For instance, we need work on securing the basic means for existence for human society by indicator studies, and to make actions on both aspects of reserving natural resources and self-restriction on our consumption behaviours (Herrmann 2012a).

*Sixth*, what had been said with respect to indicators is of course also part of a political debate which takes place in various realms. An important point of this is processuality – and with this relationality – as the core moment of

<footnote n="7">⁷ See http://www.merriam-webster.com/dictionary/evidence. Date accessed: 12.06.2012.</footnote>
social research. Though on a seemingly rather abstract level, we are now dealing with some more technical issues of the Social Quality Approach (SQA). Of course, processuality and relationality are generally recognised (for instance, in time series analysis in poverty research). And of course, it is one of the truisms at least for Sunday-sermons that the *Homo sapiens* is a *zoon politicon* – actually it is an interesting exercise to look at the fundamentally individualist notion of pure Aristotelian thinking.

Simplifying tentatively processuality and relationality we can refer to the fact that ‘constitutive interdependency is created by the outcomes of the interplay between two basic tensions’ (Beck, van der Maesen, and Walker 2012: 50).

<figure><img src="image_145.png" /><figcaption>**Fig. 3.** Fundamental tensions for determining the social</figcaption></figure>

*Source:* Beck, van der Maesen, and Walker 2012: 51.

This is then explained in the following:

> The horizontal axis mirrors the tension between systems, institutions and organisations on the one side, and the life world of communities, families, networks and groups on the other. The vertical axis mirrors the tension between biographical life courses and societal developments of collective identities (the open ones and the closed ones) (Ibid.).

First, it is important to state that this is only a framework within which the assessment moves – and talking about the assessment means to look into two directions: the one is the analytical perspective and the other is about the development of political strategies. And as much as technical issues have to be considered, we are at the end dealing with political issues, in particular, issues that are based on interests and lead to conflicts. Second, this requires searching for the qualitative moments that is the qualitative aspects that are actually filling this space. However, saying ‘filling this space’ does not mean that we are dealing with a closed space. Being defined by two tensions, the framework is itself characterized by shifting borders.
*Seventh*, right at the beginning I said that 'the reality, its close investigation shows immediately another picture: niceties turn into a rather harsh reality for those who have to face it as matter of their everyday's life, as condition under which they live'. As promised I am returning to this point, namely the question of conditions. We arrive subsequently at the core set of factors that are of immediate relevance for policymaking, in particular at what we call conditional factors (Beck, van der Maesen, and Walker 2012: 60, and extended: 61 ff.):

- socio-economic security,

- social cohesion,

- social inclusion, and

- social empowerment.

*Eighth*, conditions as such are only marking potentials – not less but not more. This is has been frequently addressed. Of course, we will immediately remember Marx's analysis of the class relationships and the famous point he made with respect to the development of the class-struggle. There he points to the development of a class in itself to a class for itself (see Marx 1976 [1847]: 211).

And another interesting reference can be made to Bloch who discusses the perspective on potentiality in his work on *The Principle of Hope*. He points to four dimensions, namely: (1) the formally possible – what is possible according to its logical structure; (2) the objectively possible – possible being based on assumptions on the ground of epistemologically based knowledge; (3) the objectively possible – possible as it follows from the options inherently given by the object; (4) and the objectively real possible – possible by following the latency and tendency which is inherent in its elementary form (see Bloch 1959: 258–288).

So we have to look at the driving forces, which are in the SQA mainly presented as constitutional factors, outlined in the following (Beck, van der Maesen, and Walker 2012: 56; see extended definitions *Ibid.*: 58):

- personal (human) security,

- social recognition,

- social responsiveness, and

- personal (human) capacity.

*Ninth*, a third dimension can be seen as guidance, the orientations given by normative factors. Mind, in the social quality perspective these are not point of departure. Rather, it is a set that emerges from the interaction itself. One may say, in any historically given point in time they are evident – and as such they are also contested. This contest is not least a matter of the oscillation between the different horizons of possibilities/opportunities as they were mentioned before with reference to Bloch. These normative factors are (Beck, van der Maesen, and Walker 2012: 60, and extended: 61 ff.):

- social justice,
- solidarity,

- equal value,

- human dignity.

Tenth, the most important point – fully acknowledging what was said earli-
er – the SQA is not primarily about the data we are looking for. They are very
much those that are commonly used. But taking the social serious we need to
look at the complex relationship not only of people but the relationship of peo-
ple as actors and also the complex interactions. So far we have four elements
for the SQA:

- the basic tensions,

- the conditional factors,

- the constitutional factors,

- the normative factors.

The major challenge is to bring these together. Looking at the actual mean-
ing of the tree sets:

- conditional factors being a matter of opportunities and contingencies and their limitations,

- constitutional factors as processes, and

- normative factors as orientation.

Now we also have some debate in the EFSQ, not least in the collaboration
with Asian colleagues, if these factors are actually fundamentally different, if
compared with traditional approaches. In the following some of the differences
are presented. Niklas Luhmann talked about background noise, that is not di-
rectly interfering and determining development but nevertheless decisive as
factor, supporting or even evoking certain developments or hindering, possibly
blocking others. May be the SQA is something like this: a background noise,
a challenge we have to keep permanently in mind, not least as a standard
against which research, politics and policies can be measured.

Thus, four perspectives for which the approach is important can be high-
lighted:

(1) it is an academic tool;

(2) it is about politics;

(3) it is about policy;

(4) it is about a polity.

*Eleventh*, finally a few concrete issues shall conclude the contribution –
examples rather than an attempt to offer a comprehensive picture.

**I. Dissolution of development – development as dissolution**

Social Policy – Economic Policy – Rights – Care. These four terms are opening a field going much beyond the four topics in the strict sense. Stretching this to
an ultimate border we can say that the historical perspective on the rise and fall of empires is closely related to their integration and dissolution.

Development seems to be intrinsically linked to and even depending on a process of dissolution – we find it discussed under major catchwords as division of labor, social divisions, specialization, individualization, etc. We could leave it there, trusting in the self-referential survival of the new units – it is important to see that such dissolution actually means establishment of new, distinct units. But as we are still dealing with human beings as social beings and as we are still living in societies, we have to think about the framing. Indeed, we find frequent new inventions, aiming at integration and integrity: Social security, social insurance, *Folkhemmet*, welfare state, social protection. And of course, we should not forget the brute fascist *Volksgemeinschaft*, gated communities, Etzioni's *Responsive Communitarian* movement ... and as recent idea of these 'good societies' we find the term 'social investment systems' – recently I have heard, still on an anecdotal level, that this is now increasingly replacing the term 'social protection systems'. It would be easy to reject this new yarn: It is the fundamental problem of a society that is caught in a linear concept of hierarchical thinking where people are celebrated on occasions if it suits, and where they are victims of mobbing if that suits better.

However, leaving criticism aside: are not we in fact all standing helplessly in front of a wall of evidence – thus, overlooking the evidence of the wall? In any case, without having a solution at hand, it is for social policy obvious: If we reduce the economic dimension of social policy on the dimension of 'resources' and the 'productivity of workforce', we will fall short and we will be left helpless. The challenge is to respect charity but to engage for an approach that is fundamentally rooted in the idea of fundamental rights without any reference to productive role in limited economic perspective, an approach that understands also the importance of production of the social. As much as I respect the honesty behind a lot of good-doers, we have to be sincere in what we mean. This means to be determined to speak about production. Otherwise, we are facing a structural problem, again linked to the equivalence principle and the claim of exchangeability.

*We may speak of a monopolization paradox – the limitation of rationality on evidences which make it factually impossible to ‘be wrong’.*

## II. EU: Stagnation through hyperactivity

If we take a reasonably wide perspective, we can say: for a long time the EU has been monitoring the development, setting up new programs and frameworks, thus disguising its standstill with a kind of hyperactivity. I do not think that there are simple solutions. This means that I do not believe in replicating
patterns that may have worked on national levels now on the EU-level. Nor do I believe in governance as it was initially proposed by the Forward Study Unit. Looking at governance, a major flaw has to be seen in the following: the way forward was too closely caught in early if not pre-capitalist notions. Voluntarism, social responsibility, general interest and the acceptance of equality as generally accepted value cannot be taken as given.

On the contrary, latest since the late 19th century we see that capitalist growth leads to inequality and conflicts. Already Adam Smith was indeed critical about the conflictual constellations of imperialism (see, e.g., Smith 1999 [1776], the discussion in book IV, VIII, III).

Leaving the more theoretical debate aside, we can also look at the recent developments – here in particular the Irish case which delivers the pattern which has been repeated in many other countries like, for instance, Hungary, all striving for a tiger model: economic growth meant at the very same time increasing economic inequality. The especially important issues on the political level cannot be expressed in any figures – at least the figures are only expressing a small part. The real political dangers are

– the loss of the public;

– the loss of the general interest;

– by its translation into quantifiable individualist relations, based on the principles of exchange and equivalence;

– and finally the fostering of administratization or managerialization of the now calculable space.

To be clear: red tape is not cause but consequences of a social mind-set that lost its substance to an invisible hand.

Of course, this is not a recent issue and differentiated analysis is required. However, the strict orientation to growth policies is highly problematic.

We can look against this background at the Commission's Annual Growth Survey, issued in November 2011:

For 2012, the Commission considers that efforts at national and EU level should concentrate on the following five priorities:

• pursuing differentiated, growth-friendly fiscal consolidation;

• restoring normal lending to the economy;

• promoting growth and competitiveness;

• tackling unemployment and the social consequences of the crisis;

• modernising public administration (European Commission 2011: 3).

As we see in the ‘Flash Eurobarometer 338’, issued in April 2012 (European Commission 2012) the meaning of these policies, that is the social impact of the crisis and their public perceptions in the European Union, the results are sobering.
It is important to see the connection – to be exact: the disconnection. The growth strategy takes the centre stage of the European Union with a population of about 502,000,000 people (for 2011) – it is a strategy that is seen as an evident condition for overcoming poverty, it is a strategy that aims at increasing both private production and private consumption, and that is factually serving a minority, contributes to further personal and regional concentration of wealth, that drives entire countries into disastrous situations, that allows presidents with faked PhDs and psychotic prime-ministers to govern and finally creates regional despotism and nurtures neo-fascism – the perspective of a harsh reality you may easily overlook when travelling the tourist way.

Both, arguments brought forward on grounds of supposedly evident values and also proposals for simple institutionalist changes are likely to fail. The problem is the tension of equality as political and economic category – and the challenge is to seriously discuss again political economy rather than limiting the debate on economics and social-political technology.

*We may speak of an equality paradox – the formal approach not being able to answer the substantial dimension.*

### III. Formalisation. The danger of a straightjacket

A fundamental problem has to be seen in the very limitation of our thinking as it has been outlined under the major headings: quantification/mathematization, equivalence principle and claim of exchangeability, individualization and, finally, evidence.

I am not entirely sure if it is possible to determine any ‘original sin’. Fact is that a mind-set, caught by these dimensions, has extremely limited capacities to deal with multiple contradictions. That society is marked by an antagonistic class contradiction is only side. The other is the recognition that the development of the productive forces is a driver behind the overall development. And this means to recognize also the contradictions, tensions and fractures. Four of them are highlighted below.

1) There are lost securities on one side. To mechanically maintain social security systems means to maintain capitalism.

2) Retirement – and over the years a reduced pension eligibility age – are surely a huge relief. But where is the simple answer to the subsequent loss of social identity in a society that is strictly and in nearly all respects – even when it comes to defining old age pension – based on the idea of own ‘gainful employment’ in the form of quantifiable and equivalent exchange?

3) Big society is again a big thing – and commenting on a recent publication by Armine Ishkanian and Simon Szreter, titled *The Big Society Debate*
(2012), Bill Jordan contends ‘There is nothing new about the notion of a Big Society’.<fnref n="8" />

I disagree to some extent. I follow Jordan to the point to which ‘civil society’ in its various forms was interpreted in highly problematic ways. However, I problematize the statement in two regards. First, it overestimates the ‘strategic diabolic intelligence’ – I see in the rulers more naïvety combined with obsession for power. Second, the understanding of civil society that is underlying David Cameron's thinking is in multiple respects inconsiderate. Civil society today is not the same as it used to be when it discussed, for instance, by Hegel or de Tocqueville. And this has to be considered when we use – and also when we criticize – terms and concepts before we throw the baby out with the bathwater.

Looking at this example, and comparing it with others as, for instance, the recently published *World Happiness Report* (Helliwell *et al*. 2012) or the *Inclusive Wealth Report 2012* (United Nations University International Human Dimensions Programme 2012), we have to acknowledge good will and, importantly, the departmentalization in our heads: the traps of quantification/mathematization, equivalence principle and claim of exchangeability, individualization and, finally, evidence.

4) A fundamental contradiction which is frequently overlooked is that human beings are social,<fnref n="9" /> economic and historical beings and they are such as individuals in their own, very specific space-time (see Herrmann n.d., 2014). With this perspective we gain at least an understanding of the limitations – not least the limitations of thinking alternatives while taking the risk of transcending quantification/mathematization, equivalence principle and claim of exchangeability, individualization and, finally, evidence.

*We may speak of a perpetuation paradox.*

And the question will always be: But do we really have to start from here? And with this we arrive at a very fundamental challenge: fighting against poverty and exclusion can only succeed if it is a fight for another society.

## References

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<footnote n="8">⁸ Bill Jordan, Blurb on Ishkanian and Szreter (2012). URL: http://www.e-elgar.com/booken try_main.lasso?id=14782; 12/10/14.</footnote>

<footnote n="9">⁹ If we refer to Aristotle we have to be careful as there is a likely confusion between (understanding the) social and political.</footnote>
**Bloch E. 1959.** *Prinzip Hoffnung*. Frankfurt am Main: Suhrkamp.

**Bontrup H.-J. 2012.** Anhörung im Deutschen Bundestag am 6.6.2012 zum Gesetzentwurf der Bundesregierung über die Feststellung eines Nachtrags zum Bundeshaushaltsplan für das Haushaltsjahr 2012 (Nachtragshaushaltsgesetz 2012) (BT-Drucksachen 17/9040 und 17/9649). Stellungnahme.

**Borkenau F. 1971 [1933].** *Der Übergang vom feudalen zum buergerlichen Weltbild*. Studien zur Geschichte der Philosophie der Manufakturperiode. Darmstadt: Wissenschaftliche Buchgesellschaft.

**Chang Ha-Joon. 2010.** *23 Things They Don't Tell You about Capitalism*. New York: Bloomsbury.

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**European Commission 2010.** *The European Platform against Poverty and Social Exclusion: A European Framework for Social and Territorial Cohesion*. Communication from the Commission to the European Parliament, the Council, the European Economic and Social Committee and the Committee of the Regions. Brussels. COM (2010) 758 final.

**European Commission 2011.** *Annual Growth Survey 2012*. Communication from the Commission. Brussel. COM (2011) 815 final.

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**Goethe J. W. von. 1917.** *Wilhelm Meister's Apprenticeship*. Vol. XIV. Harvard Classics Shelf of Fiction. New York: P. F. Collier & Son. URL: http://www.bartleby.com/br/314.html. Date accessed: 30.06.2012.

**Helliwell J. F., Layard R., Sachs J. D. (Eds.) 2012.** *World Happiness Report*. New York: The Earth Institute Columbia University.

**Heppe F., and Mühlhausen M. 2012.** Wir unabhängig sind wir? *Der Freitag* 7.06. URL: http://www.freitag.de/politik/1223-vielkeicht-hat-occupy-schon-heute-mehr-erreicht-als-die-68er

**Herrmann P. 2007.** *European Social Model – Existence, Non-Existence or Biased Direction*. William-Thompson-Working Paper 1. Aghbaullogue: ESOSC. URL: http://www.wvfs.at/wt-wp_old/WT WP-1 European-Social-Model What-Kind-of-Existence_Ancara.pdf. Date accessed: 30.06.2012.

**Herrmann P. 2011a.** Precarity and Precarisation in the Light of EU-Integration. *Precarity. More than a Challenge of Social Security or: Cynicism of EU's Concept of Economic Freedom* / Ed. by P. Herrmann, and S. Kalaycioglu, pp. 16–48. Bremen: EHV.

**Herrmann P. 2011b.** *The End of Social Services. Economisation and Managerialism*. Bremen – Oxford: EHV.
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**Herrmann P. 2012a.** Economic Performance, Social Progress and Social Quality Indicators – In Reference to the Notion of Social Sustainability. *International Journal of Social Quality* 2(1): 41–55.

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**Herrmann P. n.d.** Do We Really Need Human Rights? *From Big Bang to Global Civilisation: A Big History Anthology* / Ed. by B. Rodrigue, L. Grinin, and A. Korotayev. Berkeley, CA: University of California Press. In Press.

**Herrmann P. 2014.** *Social Policy – Production rather than Distribution*. Bremen – Oxford: EHV.

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# 10
World System Energetics

Stephen I. Ternyik

## Abstract

Human societies are evolving as energy transduction systems and the biophysical flow of energy in a socio-economic system quantizes the flow of time and drives temporal acceleration. The decisive role of money in a monetary production economy is highlighted as temporal access to energy. The greater the natural energy input for productive output, the higher the economic wave frequency and the shorter the wave length. A singularization of human history, that is a replacement of long wave patterns, in the nearer future depends on the technical achievement of a relatively constant energy input. According to the basic formulae of the Snooks-Panov curve, a significant quantum change of the temporal flow will take place in the next decade; it is an open mathematical guess and an ongoing human intelligence test, if this temporal turning point is of discrete or continuous nature.

**Keywords:** transduction, energy, time, money, Snooks-Panov curve, acceleration, singularity, global intelligence.

Waves can be understood as travelling energy and matter as geometry of curved space-time. Force equals geometry and the structure of matter equals different wave's types. An increase in whatever size is proportional to size itself and the speed of evolutionary waves in human civilization is directly proportional to the number of its inhabitants, that is a systemic process of self-similar evolution. This is a stochastic process with time dependency where the statistical coupling of equal parameters/values is either rapid (short-range) or slow (long-range) in performance curves (e.g., of human production and learning); however, economic life or being is an existential conflict that consumes energy and increases entropy and it takes energy to convert energy from one form to another, always with a loss of some energy by friction.

The more energy (e) in a wave, the higher its frequency (f); the wavelength (l) is inversely always proportional to f (we can actually interconvert e, f and l). It follows that shorter wavelengths are more energetic than long wave lengths, increasing energy input leads to higher wave frequencies and shorter wave lengths, that is principle of cyclical causality, most probably in spiral form as applied evolutionary to human history. Measuring the empirical acceleration of observable human history (equal to about 50,000 solar years,

Kondratieff Waves: Juglar - Kuznets - Kondratieff 2014 321-325
eventually starting with 1 million people) tells us that every new great techno-economic wave took only about one third of former evolution temporary intervals, expressed as logarithmic scale formula (Snooks-Panov curve); from this evolutionary algorithm follows that the duration of future technological shifts will become exponentially smaller and that techno-economic evolution could become a continuous process, rather than the discrete time-lapsed cyclical waves of past experiences, leading to a singular techno-global civilization until 2050, with 9 billion people and the quantum of potentially more inventors or entrepreneurs.

World energy consumption per capita has almost doubled from 40 to 80 gigajoules (1960–2010), according to the numerical canon of all statistical data charts (e.g., BP); this not only reflects the corresponding symmetric population dynamics, but points to our argument that every human civilization can be observed primarily as an energy transduction system and that predictive models can be based on this technical fundament. It is, for example, important to note that even U.S. non-governmental debt (divided by GDP, e.g., FED data) tripled in this temporal period which methodically recalls the financial misuse of bank credit money to stimulate ‘the economy’ via fiat debt and interest ‘creation’; in any case, this monetarist technique is no more sustainable and monetary policy will have to become more congruent with energy economics. In addition, new technologies have to be consequently applied to as ‘time saving technics’, according to the life maintaining principle of syntropy. Unfortunately, we found not one data extrapolation of the world energy consumption that modeled any stoppage of the increasing energetic demand, concerning the temporary interval of the time-space from 2000 to 2050.

The 6th Kondratieff (of eco-energetics, biotech, health science, propelled by advanced AI, new energy technology and quantum monetary economics) that started in 2000/2001 could convert in the time-space from 2018 to 2050 into technological singularity (like envisioned by J. Neumann and visualized by Snooks and Panov), *if* world energy consumption can be kept relatively constant by sustainable global economics science (if e will be constant / f and l will behave accordingly / in reciprocal conversion). It goes without saying that any future monetary system has to implement this factual formula via narrow reserve banking, that is applying a more ‘boring’ financial system; it is unwise to finance artificial living standards via credit money as placebo and ultimately palliative effect, because money is *physically* access to energy. In any case, not the speed of any reform is decisive, but its direction; this is basically a radical rational challenge for the human mind to expand intelligence beyond traditional methods of cognitive thought (different levels of time and causality). For example, mathematical logic is consciously not directed at temporal levels, but any causal formulation of the bio-physical universe in classical or quantum theoretical terms is actually operated in temporal sequences. A future extension
of the human cognitive horizon has to be methodically rationalized via causal,
retro-causal and super-causal process learning that implies multiple time arrows
or loops.

Our scientific inquiry deals actually with the last 5 minutes of a 24 hour
day, that is about 50,000 years of human archeological evidence, with acceler-
ating economic long wave spiral cycles of 5000, 500 and 50 years. It is not big
history research, but human history in-depth. We methodically suspect that the
quantity of energy input for productive output (conversion of natural energy for
human needs) is a reliable measure for the scientific observation and prediction
of human societal change along this temporal algorithm. However, we do not
perceive this biophysical scaling of socio-economic systems as determinism or
‘randomism’, but as a human behavioral phenomenon of probabilistic adapta-
tion and cognition. The dogmatic objection that there is no natural science of
human society cannot be accepted from our side; it might be biographically true
that the fate of an individual is not calculable, but *collective action* (e.g., *energy
consumption, monetary payments*) is *countable mass motion* with biophysical
consequences. As we are now in the last seconds of the 24 hour cosmic day, it
is exiting to elaborate the methodical guess for future human direction of the
beginning new day cycle, that is to research into the current quantum leap to
a new level of science, in search of creative unity for humankind. However, we
are aware that the demand for ideas and ideals is not equal to knowledge, but
that which can be improved by knowledge, should be.

**The more natural energy a human economy transduces into social needs, the more accelerates the economic life of that social entity in temporal terms (the increasing conversion of energy quantities equals physically the temporal acceleration of economic wave frequency and length).**

This seems to be the *basic hypothesis* of applied natural law for social science; the formal statement applies biophysically to global geometric time and local arithmetic time (*chronos* in Koine Greek), but is physically not valid for universal cosmic time: the temporal clock on this globe (closed world clock / *kairos* in Koine Greek) is not equal to the universal time flow (open cosmic clock); according to ancient Hebrew wisdom, human biological age follows the cosmic clock (*aeon* in Koine Greek). The energetics of (monetary) economics is decisive and especially in a monetary production economy, *money is access to energy* (inter-conversion of energy, time, money; the economic circuit reads: **energy/quantizes/time = time/quantizes/production = money/quantizes/energy**).

Human performance will never outperform these natural forces, but intelli-
gence can cleverly adapt and expand the degrees of economic freedom, reach-
ing higher rational levels of human action; this qualitative temporal interval
between thought and deed can be called consciousness, with the human brain as
time-processing organ, operating basically on changing levels of photonic en-
ergy. The techno-economic evolution of human civilization in fractal waves
from natural chaos to social harmony is a cosmological enigma that implies the
existential question why human life emerged as growing organism on the sur-
face of this limited globe (?); the purpose of the civilizing process is to defend
human life from the brutish laws of Mother Nature via the survival strategy of
dynamic efficient syntropy. The natural enemy of human life as individual and
as collective is entropy and it is world time for economic science to learn this
lecture from biophysical science. Consequently, all data quantifications of how
and what of human evolution imply the qualitative rational challenge of data
interpretation. The biophysical paradox that is rationally hidden in all these
energy transductions is that death makes life possible; L. Fantappie and
E. Schrödinger were synchronically the first scientists to point to this psycho-
medical and philo-theological mystery of extreme future value for human prob-
lem-solving.

The economic production cycle is primarily not a perpetual motion of hu-
man firms, households, banks and the like (which is the canonical explanation
of standard textbook liturgy and litany), but fundamentally an energy circuit of
natural input and processed output, with the cyclical motion of energy, time,
production and money (= access to energy). This biophysical viewpoint is not
an ethical denial of human ingenuity or liberty; on the contrary, social psychol-
ogy is an eminent analytical part of this methodical approach that fits mathe-
matization and statistical data science. The methodical research into universal
history via natural-law social science can measure the degrees of human free-
dom more exactly than any other systems forecasting strategy; monetary cri-
tique has to be an essential part of world system energetics, because a fiat mon-
etary system intrinsically first tends to spend and then to earn (the only realistic
brake for this financial mischief is technically narrow reserve banking). We
have to remember that Economics is still not a science, but a profession that
evolved from private and public accounting techniques for property, credit and
interest; it is more than probable that book-keepers developed human script out
of counting finite entities for stock formation and trading in the Sumerian city
states where temples served as commercial centers. In any case, further mathe-
matization of global system energetics (mathematical globalistics) will surely
clarify the original and natural laws of energy waves in our human social econ-
omy and its role in the quantum time-space of future production circuits as dis-
crete repetitive or continuous singular socio-natural events.

References

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Stakhov A. 2009. *The Mathematics of Harmony*. Singapore: World Scientific.

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Ternyik S. 2013. *Monetary Wave Theory*. New York: Barnes Noble.

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### III. THE SIXTH WAVE AND FUTURE OF TECHNOLOGIES

#### 11
**The Sixth Kondratieff. The Growth Engine of the 21st Century**

Leo Nefiodow and Simone Nefiodow

**Abstract**

Is it possible to forecast a Kondratieff cycle? The following article introduces a method that is able to predict Kondratieff cycles in their early phase and describe them in ever-greater detail during their further development. This method was first published in 1996 (Nefiodow 1996). The fifth Kondratieff still shaped economic events during this time, and the new, sixth Kondratieff was in its early stage (Fig. 1). This prediction was possible, because prior to that long wave researchers created a broad-based foundation for the Theory of Long Waves and thus demonstrated the regularity of the Kondratieff. In the second part of this article, we use this method to identify the sixth Kondratieff.

**Keywords:** sixth Kondratieff, Kondratieff waves, Kondratieff cycles, basic innovation, leading industry, value chain, long cycle, fifth Kondratieff.

**Criteria to Identify and Predict a Kondratieff Cycle**

To identify a Kondratieff cycle, it should be searched on four levels:

1. The technological level (Criterion 1).

2. The economic level (Criterion 2).

3. The social level (Criterion 3).

4. The time level (Criterion 4).

These levels are described below with the example of the fifth Kondratieff.

**Criterion 1.** The first criterion is the search for those innovations that are able to trigger and support a Kondratieff cycle. Here we follow and acknowledge Schumpeter (1961). To distinguish them from other innovations, we call them *basic innovations*. A basic innovation most notably differs from other innovations by the following characteristics: it triggers the Kondratieff cycle, definitively shapes the innovation process for several decades, creates a large new market, extensively alters society and has a life cycle of 40–60 years.

Kondratieff Waves: Juglar – Kuznets – Kondratieff 2014 326–353
Information technology was the basic innovation of the fifth Kondratieff (Fig. 1). Over five decades, it shaped technological, economic and social changes in the developed countries and turned the world into a global village in terms of information. The scientific foundation was primarily supplied by informatics and computer science. No other technology was able to even remotely exhibit comparable economic dynamics and widespread effect during the second half of the 20th century (Nefiodow 1991).

<figure><img src="image_146.png" /><figcaption>**Fig. 1.** The long waves of economic development</figcaption></figure>

Source: Nefiodow and Nefiodow 2014.

The core of information technology was the digital computer (Fig. 2). To achieve high performance, microelectronics, software technology and data processing technology were invented. At the same time, the introduction of the computer into communication technology, office technology, industrial electronics, consumer electronics and military engineering was the prerequisite for the introduction of digital technology into these technologies, whereby their performance could be considerably increased.

The dynamics of information technology could also be seen in the extent of research and development expenditures (R&D). Towards the end of the fifth Kondratieff, more than one third of global research and development expenditures were allocated to information technology (ca. 250 billion U.S. dollars in 2003). It formed the core focus of research expenditures for all larger companies (Table 1).

**Criterion 2.** The second criterion pertains to the economy and consists of identifying the *leading industry* and the *value chain*. The leading industry is the industry, which newly develops thanks to the basic innovation. And it is also the one that benefits the most from the basic innovation. This leading industry acts as an engine of growth for the overall economy for the duration of the
Kondratieff cycle. During the first Kondratieff, this was the textile industry, during the fifth Kondratieff it was the information technology industry.

<figure><img src="image_147.png" /><figcaption>**Fig. 2.** The technological network of the information technology</figcaption></figure>

Source: Nefiodow 1991.

For an industry to be classified as a leading industry it needs to be an economic heavyweight. As emanates from Table 2, due to its above average growth, the information technology industry skyrocketed from zero to the first place among globally manufacturing companies during the fifth Kondratieff.

To be able to properly assess the importance of a leading industry, its con-
tribution to economic growth needs to be determined. The annual contribution
of the aerospace industry for example to Germany's gross domestic product
between 1980 and 2000 was below 0.7 percent. The volume of the aerospace
industry was therefore too small to be able to affect the economic development
overall. This industry can be classified as an important high technology indus-
try, but not as a leading industry. By comparison, the economic growth of
the USA in the 1990s was supported by the information technology industry by
more than 30 percent (Fig. 3).
<table><caption>**Table 1.** 1997 research and development expenditures in the private sector (billion D-marks)</caption><thead><tr><td>Company</td><td>Headquarters</td><td>R+D</td><td>Industry Sector</td></tr></thead><tbody><tr><td>General Motors</td><td>USA</td><td>14.9</td><td>Auto/IT</td></tr><tr><td>Ford Motor</td><td>USA</td><td>11.5</td><td>Auto/IT</td></tr><tr><td>Siemens</td><td>Germany</td><td>8.2</td><td>IT/Electro</td></tr><tr><td>IBM</td><td>USA</td><td>7.8</td><td>IT</td></tr><tr><td>Hitachi</td><td>Japan</td><td>7.0</td><td>IT/Electro</td></tr><tr><td>Toyota Motor</td><td>Japan</td><td>6.3</td><td>Auto/IT</td></tr><tr><td>Matsushita</td><td>Japan</td><td>6.1</td><td>IT/Electro</td></tr><tr><td>Daimler-Benz</td><td>Germany</td><td>5.7</td><td>Auto/IT</td></tr><tr><td>Hewlett-Packd</td><td>USA</td><td>5.6</td><td>IT</td></tr><tr><td>Ericsson</td><td>Sweden</td><td>5.5</td><td>IT/Electro</td></tr></tbody></table>

*Source:* Nefiodow and Nefiodow 2014 based on *Wirtschaftswoche* from November 19, 1998.

<table><caption>**Table 2.** The major industries in the manufacturing sector</caption><thead><tr><td>Industry Sector</td><td>Total Revenue in 1997 Globally in Billion US-$</td></tr></thead><tbody><tr><td>Information Technology</td><td>1730</td></tr><tr><td>Automotive</td><td>1190</td></tr><tr><td>Oil</td><td>1010</td></tr><tr><td>Chemical Industry (incl. Pharmaceutical Industry)</td><td>460</td></tr><tr><td>Food and Beverage Industry</td><td>340</td></tr><tr><td>Mechanical Engineering/Plant Engineering & Construction</td><td>300</td></tr><tr><td>Steel/Metal Production</td><td>200</td></tr><tr><td>Aerospace</td><td>150</td></tr></tbody></table>

*Source:* Nefiodow and Nefiodow 2014 based on ‘The Fortune Global 5-Hundred’ in *Fortune Magazine* from August, 3, 1998: F-15–F-26.
<figure><img src="image_148.png" /><figcaption>**Fig. 3.** Contribution of information technology industry to GNP growth including revenues for telecommunication services</figcaption></figure>

*Note:* Average values are taken during 3–5 year periods. Value added creation was calculated at 50 % of IT revenue.

*Source:* Nefiodow and Nefiodow 2014.

The leading industries affect the economic system like a locomotive affects a train: they put all wagons of the train in motion. Joseph Schumpeter (1961) called this phenomenon ‘the Bandwagon Effect’. If we stay with the image of a train, the individual wagons represent the sectors of the economy, which benefited from the basic innovation and its leading industries.

The *value chain* is made up of the leading industry and all other sectors that benefit from the basic innovation. Whereas the basic innovation triggers the Kondratieff cycle, the value chain is its actual carrier. This can be illustrated by the example of the fourth Kondratieff (Fig. 4). The car was the basic innovation, the automobile and petrochemical industry sectors were the leading industries and the value chain was made up of the leading industries and all other industrial sectors that benefited directly or indirectly from the automobile: This included highway, bridge and road construction companies, steel and tire manufacturers, manufacturers of fuel power stations and gas-fired power plants as well as countless suppliers of metal, electric, electronic and plastic parts. Numerous companies and service sectors were also a part of the value chain: gas
stations, automobile associations, mass tourism, car dealers, transport companies, banks, insurance companies and the leisure industry. All of these participants built a global network of suppliers, customers, retailers and users, which created millions of new jobs. Every fifth job in the USA and every seventh job in Germany became dependent on the car during the fourth Kondratieff.

<figure><img src="image_149.png" /><figcaption>**Fig. 4.** Value chain of the 4th Kondratieff (this list is not exhaustive)</figcaption></figure>

Source: Nefiodow and Nefiodow 2014.

The value chain of the fifth Kondratieff is illustrated in Fig. 5. When we add the contributions to growth of the value chain including information services such as education, business consulting services, media, advertising, etc., whose development during the fifth Kondratieff was significantly determined by information technology, then the fifth Kondratieff determined more than 70 per cent of U.S. growth during the 1990s.
<figure><img src="image_150.png" /><figcaption>**Fig. 5.** The value chain of the fifth Kondratieff</figcaption></figure>

Source: Nefiodow and Nefiodow 2014.

**Criterion 3.** The third criterion pertains to society. The value chain that is caused by the basic innovation leads to a far-reaching reorganization of society.

Observance of this criterion is being checked by determining the diffusion of the basic innovation in society (see Nefiodow and Nefiodow 2014: Appendix 5):

– A brand-new infrastructure develops thanks to the basic innovation. Examples: water routes in the first Kondratieff for coal transportation; the railroad network during the second Kondratieff; connecting society to electrical networks in the third Kondratieff; road and highway networks during the fourth Kondratieff; the telecommunications network of the fifth Kondratieff.

– Thanks to the basic innovation, more efficient work as well as management that is more efficient and organizational concepts are possible in companies.

– In the field of education, it creates new occupations, new areas of expertise, learning contents and studying techniques.

– To ensure controlled handling of the basic innovation, new legal controls have to be created (e.g., data protection acts during the fifth Kondratieff).

– At the stock exchange, the basic innovation guides capital investments to those companies that have specialized in its production and application.
– New forms of leisure, communication and entertainment emerge from the basic innovation.

**Criterion 4.** The fourth criterion pertains to the *life cycle*. The basic innovation and its leading industry must average a 40 to 60 year life cycle.

The innovation life cycle can be described by the S-curve. The S-curve is determined for instance by accumulating the quantity of the basic innovation (e.g., the number of registered cars in a country) or the value added of the information technology industry and illustrating it over time (Fig. 6). During the life cycle, the basic innovations and leading industries display an above average growth.

<figure><img src="image_151.png" /><figcaption>**Fig. 6.** The life cycle of the information technology industry in the fifth Kondratieff</figcaption></figure>

Source: Nefiodow and Nefiodow 2014.

The 40–60 year duration of a Kondratieff cycle only applies to the pioneers. Latecomers like China or Brazil were able to catch up with the previous Kondratieff cycles in a shorter amount of time, because they utilized the experiences of leading countries through cooperative efforts.

We can remove each innovation that progressively develops for less or longer than 40–60 years for identifying a Kondratieff cycle. Criterion 4 explains why environmental protection for instance is not a basic innovation of the sixth Kondratieff. You can date the birth of modern environmental industry back to the year 1972 when the Club of Rome's famous report *On the Limits of*
*Growth* was published. Since then, this industry sector has grown above average and there are no discernible growth limits. The life cycle of environmental industry is likely to be far beyond 60 years and is therefore eliminated as a basic innovation of the sixth Kondratieff. That said, environmentalism delivers important contributions to the sixth Kondratieff, in particular as it pertains to ecological health. Although it is not a basic innovation, it is an important part of the holistic health value chain.

These four criteria are sufficient to identify a Kondratieff cycle. To be able to predict a new Kondratieff cycle however, you need to add a fifth criterion.

**Criterion 5.** The barriers of the new Kondratieff cycle.

At the end of a Kondratieff cycle, the previous growth pattern has been mostly exhausted. Before you begin to search for the new basic innovation, you need to first identify the primary growth barriers that conflict with a Kondratieff cycle's development. After all, of all the potential innovations, only those that reduce the barriers the most can be classified as basic innovations. Those barriers can be adherence to outworn concepts, a lack of willingness to innovate, fear of the future, lack of infrastructure, etc.

The recession at the end of the first Kondratieff for instance occurred, because companies back then were confronted with a growth barrier. Regional market opportunities had exhausted during the course of the first Kondratieff and transportation costs back then did not allow expansion on a grander scale. High transportation costs were the barrier to the second Kondratieff. This problem was solved with the introduction of the railroad. It cut costs by a factor of 200 and now companies were able to get into mass production, reduce piece costs and export to larger areas.

The growth barrier of the fifth Kondratieff was the lack of a highly productive information processing technology. The number of information and service professions had steadily increased during the fourth Kondratieff, but the technology that was available at the time – the phone, the telegraph, teleprinter and typewriter – was not efficient enough. This barrier was overcome with the invention of the computer.

What growth barriers are we facing today? What impedes sustainable economic growth today in Europe, Japan and the USA?

Every Kondratieff cycle faces its own barrier. Based on our analyses, there are two main barriers when it comes to the sixth Kondratieff; we call the first one the entropic sector.

**Barrier No. 1: Worldwide social entropy**

Entropy is a term taken from physics that describes the disorder of a physical system. Here the term is used to demonstrate the global social disorder.

Let us take Germany as an example: every fourth German cheats his/her insurance, eight million times per year things get stolen in retail, every fourth fire that costs millions traces back to sabotage; by now every fourth company has fallen victim to cyber crimes, illicit work in 2010 is estimated at 360 billion
euros – that is 15 percent of the gross domestic product. Harassment at work is spreading and costs the German economy 15 billion euros each year. Forty per- cent of marriages are failing. One quarter of scientific publications is based on manipulated data. This list could go on and on.

Let us take the USA as an example. Statistically speaking, every fifth male American of working age is a criminal. Fourteen percent of adults are consid- ered severely mentally ill and about 50 percent of all marriages end up in di- vorce. Every fourth American student is being bullied; at least 160,000 children skip school every day for fear of being bullied and 280,000 students are being physically attacked in high schools each month. Almost every tenth adolescent person smokes marijuana; many of them regularly have a joint. Every third U.S. scientist cheats in his/her publications. The national debt has steadily in- creased for years and is higher than the gross domestic product. Social inequali- ty broke a record in 2009. The net income of the top one percent of income earners increased from 1979 until 2009 by 277 percent; the net income of the poorest fifth, however, only increased by 18 percent to where 0.1 percent of high-income earners made more money than the 120 million people on the bot- tom. This list could go on and on.

Athletics is also not spared from this increasing disorder. Discoveries of doping cases, referee bribery, manipulations of sporting events and corrupt sports officials are on the agenda every day. During their lifetime, up to 70 per- cent of women all over the world become victims of physical, psychological or sexual violence. By their own account, every fourth man in Asia raped their partner or another woman at least once. Piracy on the world's oceans is increas- ing; patent protection and copyrights are systematically being ignored or evad- ed. Cyber crime is growing by double-digits, computer virus attacks and coun- terattacks are increasing and have led to a new type of warfare, so-called cyber warfare between countries and institutions. Today, every business and every government can be heavily disrupted or even paralyzed (as the example of the cyber attacks in Estonia in 2007 has shown). This list could also go on and on.

Disorder has become a worldwide mega problem and a mega market. Global money laundering has increased twentyfold from 1990 until 2009 and had almost reached US $2,000 billion. Corruption and bribery are at a record high all over the world and in 2009 caused at least five percent of all economic costs. The large banks manipulate interest rates (e.g., Libor and Euribor rates) for pure profits interests at the expense of the general public. Millions of people all over the world work for illegal and criminal organizations.

In the following section, the global disorder is conceptualized as an *entrop- ic sector*. If we add up the damages, losses and costs that accumulate every year in this sector, we get an amount of at least US $14,000 billion for the year 2006 (Nefiodow and Nefiodow 2014). That was more than the United States gross national product. Based on our own calculations, global entropy has increased by at least 25 percent between 2006 and 2013.
The entropic sector plays a key role in the sixth Kondratieff, because the enormous losses, damages and costs that incur year after year in this instance have turned this into the most significant barrier for the economic and social development. This means that the first barrier is not a technological problem, not a problem of energy, but rather an ethical one. We are faced with a similar situation to the one at the beginning of the second Kondratieff, where enormous unfair social structures – lack of rights, extreme impoverishment and worker exploitation – had seriously put the existence of the free market economy at risk. Those countries that introduced social and political innovations just in time (e.g., global health insurance coverage, disability and pension insurance as well as universal male or manhood suffrage) were able to reduce social disturbances and barriers and thus prevent revolutionary upheavals and enable the second Kondratieff to fully develop.

This ethical barrier presented by the entropic sector can also be viewed from a different perspective. Ethical deficits can be seen as health deficits. This becomes apparent if you draw a comparison with the behavior of healthy people. A psychologically healthy person does not cheat and does not rob other people's houses. A mentally healthy person has a good perception of reality, does not use drugs and cannot be bought. A socially healthy person has a sense of community, advocates well-being of all people and does not harass others. A spiritually healthy person does not lie, has a structured and trusting relationship with God, strives for reconciliation, truth and peace and does not spread hatred and violence. Inner disturbances and diseases and the social misconduct caused by them are the deeper reasons for global entropy (see Fig. 7).

<figure><img src="image_152.png" /><figcaption>**Fig. 7.** Causes of global entropy</figcaption></figure>

Source: Nefiodow and Nefiodow 2014.

**Barrier No. 2: The traditional health care system**

Besides entropy, the traditional health care system is the second main barrier to the sixth Kondratieff (Fig. 8). It includes the pharmaceutical industry, medical technology and academic medicine with physicians, hospitals, pharmacies, health insurance companies, etc.
Over the past two centuries, the traditional health care sector made tremendous progress. Many diseases that were considered incurable or fatal in the past can now be effectively treated. Today acute medical care and surgery offer life-saving help even in extreme cases, which is something that was barely considered possible in the past. The history of medicine over the past two centuries was a real success story.

But this success story is about to end. Since the late 20th century, the new medical advances are no longer sufficient to adequately deal with the dynamics and complexity of modern life and its high demands on the physical, emotional and mental strength of human beings. Between 1980 and 2010, the global number of breast cancer incidence rates has doubled and, according to estimates by the United Nations, cancer rates in general are going to more than double during the 2000–2030 period. According to projections by the World Health Organization (WHO), depression is globally going to be the second most common cause of not being able to work and premature mortality by 2020. The increasing number of diseases is also reflected in spending. In 1965, health care spending as a percentage of the U.S. gross domestic product was 5.9 percent; in 2012, it had increased to 17.2 percent (US $2.8 trillion).

Demographic development is not the only cause for this trend. Young and middle-aged people are also getting sick more often than before. Between 2000 and 2010, the number of mentally ill students in Germany has increased by 20 percent and adolescents and young adults under the age of 25 are among the group with the largest increase in depression. In 2000, every fourth adolescent in Europe suffered from allergies; in 2010, it increased to every third person. Every tenth European between the ages of 45 and 54 regularly takes antidepressants. In the USA, type 2 diabetes has risen tenfold in middle-aged adults during the past 20 years.

## The traditional health care system

* Medical technology.

* Pharmaceutical industry.

* Health services.
  (Doctors, non-medical practitioners, hospitals, health insurance companies, health insurance funds, pharmacists, public health services, medical care facilities.)

* Health spas/sanatoriums.

* Company health services.
  Health as a competitive factor, training and continuing education (e.g., in people skills), human resource development, health management.

* Other (health-related).
  Skilled trades (e.g., for orthopedic products), sporting goods and sports facilities, health publications, medical EDP, etc.

<caption>**Fig. 8.** Value chain of the traditional health care sector</caption>

*Source:* Nefiodow and Nefiodow 2014.
Pharmaceutical drugs are among the biggest shortfalls of the traditional health care sector. Most of them do not cure the disease; they only suppress its symptoms. What is more, drugs often remain ineffective, because their effectiveness has not been tested before the patient takes them. Migraine medications, for instance, only work for 50 percent of all patients, antidepressants for 40 percent, drugs to treat Alzheimer's disease for 30 percent and cancer therapeutic agents work for 20 percent of all patients at best.

Unwanted side effects are another downside. According to a study by the University of Toronto, using drugs as prescribed is the fourth leading cause of death in the United States.

What we call the traditional health care system today is in fact not a health care system at all. The system structures are not geared towards healing, but mainly towards the treatment of physical diseases. The correct label would be disease care system, since more than 95 percent of expenditures go towards the research, diagnosis, treatment, administration and management of diseases. And this disease care system costs more and more money. Today every sixth dollar in the United States flows into the traditional health care system. More than US$ 10,000 billion were spent in this area throughout the world in 2012. Medical technological progress is the key driver of these expenditures. It generates approximately 70 percent of the cost increase (Schneider et al. 2014: 107). However, the costs of medical technological advances are not offset by obtained savings, which explains the permanent increase in costs.

In contrast, only limited means are available for prevention, preventive medical checkups and healing. Dementia is an example that shows us the consequences. In 2010, the U.S. federal health insurance programs *Medicare* and *Medicaid* spent approximately 140 billion U.S. dollars to treat dementia; but only 0.5 billion to research its causes (Coy 2012). That is a ratio of 280:1.

The traditional health care sector is important; it will remain important and indispensable. It plays a key role today in the economy and society, but it uses up too many resources at this point while productivity is too low (Schneider et al. 2014).

How can those two barriers – big losses, expenses and damages of the entropic sector and the high costs and low productivity of the traditional health care system – be overcome? In the past, growth barriers were overcome by developing those basic innovations that were able to make the biggest contribution to reducing the primary growth barriers. And these new basic innovations do exist. The new basic innovations are biotechnology and psychosocial health and they come with an emerging new value chain. This new value chain will be the main carrier of the sixth Kondratieff (Fig. 9).

**Biotechnology as a Basic Innovation of the Sixth Kondratieff**

In the new value chain, biotechnology satisfies the most important criteria for identifying one of the basic innovations of the sixth Kondratieff cycle. It is not
just a brand-new technology, it answers the question on how the second barrier,
the traditional health care sector, can be overcome.

**Criterion 1.** One first-rate indicator is investments in research and development. How much biotechnology has globally shaped the research scene over the past few decades is evidenced by the fact that from 1999 to 2012 two-thirds of all Nobel Prizes in Medicine were awarded for findings in this area.

Within the research scene, private companies play a decisive role both in their research expenditures and in implementation of findings. Biotechnology companies lead the field. The companies in this industry that are listed on the stock exchange globally invested 20-40 percent of revenues in research and development. Biotechnology also obtained top priority worldwide quite early on when it comes to R&D government aid, not just in the USA, but also in Europe, Japan, the People's Republic of China, Australia and Singapore.

The newly emerging health care sector

* Biotechnology.

* Naturopathic treatments, natural products, all natural foods.

* Complementary/alternative medicine.

Homeopathy, classic acupuncture, electroacupuncture according to Dr. Voll, kinesiology, bioresonance therapy, anthroposophic medicine, magnetotherapy, Dr. Rath's cellular medicine, biofeedback, quantum healing, traditional Chinese medicine, Ayurvedic medicine, Reiki, etc.

* Environmental protection (predominantly).

* Agriculture, diet, food.

* Wellness/fitness, tourism (health tourism).

* Architecture (healthy living), building and construction industry (healthy building materials), textile industry (allergy free and breathable fabrics and clothing), the senses (color therapies, aromatherapies, music therapies).

* Self-medication and self-care.
  Participation of illness costs, rising self-care.

* Workplace health management.

Company health insurance funds, company sponsored fitness programs, cafeterias, welfare centers, health seminars, preventive medical checkups, good health bonus.

* Psychology, psychiatry, psychotherapy, psychosomatic medicine.

* Religion/spirituality.

**Fig. 9.** Health value chain of the new emerging health care sector

Source: Nefiodow and Nefiodow 2014.

Even in the early phase of the sixth Kondratieff – from 1997–2003 – the life sciences whose core is biotechnology, registered by far the largest increase in the USA with 95.7 percent of R&D government aid. Likewise, at
25.7 billion U.S. dollars, the life sciences were the largest promoted single item in 2003 (Figs 10 and 11).

<figure><img src="image_153.png" /><figcaption>**Fig. 10.** Research and development expenditures by the U.S. Federal Government.</figcaption></figure>

Source: Carey 2004.

The large R&D expenditures become very noticeable in the health care sector. In 1995, less than ten cancer treatment products were in clinical trials in the USA, most being acutely toxic chemotherapy. In 2005, over four hundred cancer treatment products were in the human testing phase; more than 60 percent of these drugs came from biotechnology companies and most were designed to have minimum side effects.

One impressive example on how biotechnology is able to reduce the second barrier of the sixth Kondratieff and significantly improve productivity of the traditional health care sector is personalized medicine, which emerged in the early 21st century. A little known fact, but nonetheless true, is that pharmaceutical products are completely overrated in their effects today. This is not because the active ingredients are bad. In fact, this is because these active ingredients are used for every patient with the same diagnosis. The genetic makeup of the individual patients is completely disregarded. This results in the fact that 90 percent of drugs, for instance, work only for 30 percent of patients.
<figure><img src="image_154.png" /><figcaption>**Fig. 11.** Research and development expenditures by the U.S. Federal Government.</figcaption></figure>

Source: Carey 2004.

Personalized medicine will make it possible to prescribe drugs in terms of individual effectiveness and tolerance, to avoid medical malpractice, improve the detection and healing of diseases and to reduce the costs for new drug development and costs in the healthcare sector overall. According to American research, personalized medicine could save up to 50 percent in drug spending. Globally this would amount to just under 400 billion U.S. dollars annually. Personalized medicine should put an end to the era of one-size-fits-all drug policies. This is important, because their unwanted side effects are the second most common reason for emergency hospitalizations. Whatever paths personalized medicine will take, the possible improvements are tremendous.

**Criterion 2.** The basic innovation, its leading industry and its value chain are the most important drivers of economic growth.

The growth of biotechnology from 1980 to 2009 ranged between 14 and 20 percent. Even during the 2000–2002 and 2008–2009 crisis years, the sector grew at double-digit rates. In 2010, genuine, DNA-based biotechnology reached a global turnover of US$ 120 billion (Nefiodow and Nefiodow 2014). This figure could almost double by 2015.
Among the research-intensive industries, biotechnology has the largest number of startups. In 2008, 4,700 companies worldwide operated in the field of biotechnology, 44 percent of which in North America, 40 percent in Europe and 16 percent in the Asia-Pacific region. Consequently, their contribution in creating brand-new jobs was very important. In 2010, about 500,000 people all over the world were employed in the field of biotechnology.

The economic significance of biotechnology cannot just be deduced from the turnover generated by genuine biotechnology companies. An assessment also needs to consider the revenues, the productivity improvements and the many impulses for new applications, which biotechnology induces in other business sectors, particularly in the industrial sector, in agriculture and nutrition as well as the healthcare sector.

In 2010, one-fifth of the global revenue for the chemical industry is allocated to biotechnological processes and procedures ('white biotechnology'), which equals revenues of ca. 250 billion euro. Within the industrial sector, in 2010 the direct and indirect markets in biotechnology reached a volume of 1,500 billion euro. The relative value for pharmaceutical products was 800 billion euro.

The European Union has highlighted the special importance of biotechnology by combining the individual sectors of biotechnology into one mega industry called 'bioeconomy' (this includes the food industry, agriculture and forestry, the fishing industry, the textile, cosmetic and pharmaceutical industries as well as the energy carriers from biomass). In Europe in 2010, this industry employed more than 22 million employees who generated annual sales of 1,700 billion euro (European Union). There are no growth limits detectable over the next few decades.

**Criterion 3.** The basic innovation and its value chain is the driver of far-reaching changes in society as a whole.

The applications for biotechnology reveal that biotechnological applications are going to significantly change the entire society (Fig. 12): medical science, health, environmental protection, energy production, the chemical industry, agriculture, nutrition, raw material production and biological information processing. Every year new applications are added to this (e.g., the production of artificial plants, microorganisms and brand-new creatures).
<figure><img src="image_155.png" /><figcaption>**Fig. 12.** The biotechnology value chain</figcaption></figure>

Source: Nefiodow and Nefiodow 2014.

Biotechnology can improve the quality of life in many areas of society given a responsible approach. Science can broaden its horizon when it comes to understanding life, which improves the knowledge about human beings and nature. The environment can be protected more effectively and crime fought more successfully with genetic identification methods. Congenital physical disabilities and diseases will be successfully treated over the next 10–20 years. Productivity in the healthcare sector, industrial production, in nutrition and agriculture can be significantly improved, which reduces shortages in the world (hunger, unemployment, raw materials scarcity).

However, a frivolous handling of this highly productive technology can result in considerable damages. Biotechnology could be abused for control purposes and discrimination (e.g., when career and life opportunities would be made contingent on genetic testing). By interfering in hereditary disposition, nature's balancing act can become unbalanced. The respect for Creation can be affected and thus opens the floodgates to manipulations of human beings. And it is also possible that the production of artificial microorganisms, plants and animals could create new diseases and epidemics.
**Criterion No. 4.** The lifecycle of the basic innovation equates the length of a Kondratieff cycle.

The overall growth cycle cannot be exactly determined during the early phase of a basic innovation. Instead, one has to determine its respective state each year and estimate its further development. From the view of the early 21st century, one can assume that the potential of biotechnology will not be fully developed over the next two decades. At the same time, it is unlikely that the industry will maintain its above-average growth rates over the entire 21st century. Hence, its life cycle almost certainly should be between 40 and 60 years – and thus within the length of a Kondratieff cycle.

**Psychosocial Health as a Basic Innovation of the Sixth Kondratieff**

Psychosocial health is the second basic innovation of the sixth Kondratieff and the answer to the question on how its biggest barrier – global entropy – can be reduced most efficiently. It also meets the four criteria that are required for identifying a Kondratieff cycle.

**Criterion 1.** The basic innovation and the innovations based on it in neighboring fields are characterized by above-average innovation dynamics.

Scientific interest, for instance, shows that this criterion is being met. Between 1980 and 1982 approximately one hundred studies on mental and psychosocial health were published in the USA; between 2000 and 2002 it was more than 1,100 (Koenig 2007: 105). This signifies an eleven-fold increase. From 1990 to 2012 it was more than 5,200 (Bonelli and Koenig 2013). This enormous increase in scientific interest speaks for itself.

U.S. government-funded psychology projects also increased above average. With an increase of 49.6 percent between 1997 and 2003, psychology ranks second behind the life sciences among the funded individual disciplines (Fig. 11).

The increasing importance of psychosocial health is also revealed in the increasing research efforts in brain research, neuropsychology and psychiatry. It is indisputable at this point that neural processes and mental and psychological conditions are closely connected in the human brain. Mental disorders and illnesses point to faulty brain activity at the mid range of cell structures. Area 25 of the brain, for example, is seen as the center of the depression circuit; the amygdala causes anxiety and five nerve centers in the midbrain have been identified as the control center of aggression. One can assume that through further findings the relationship between the mind, brain, consciousness, body and social behavior will be better understood and contribute to improved psychosocial health.

The computer provides the opportunity to model mental phenomena, to study them and to develop new therapies. This makes it an important tool for
future psychosocial research. At present, however, many mental and psycho-
somatic disorders and diseases cannot be treated with modern technologies,
because the theoretical understanding is still incomplete. Before computer-
aided technologies are able to properly take effect, theoretical and practical
research will have to better examine the relationships. Early experiments to
treat mental disorders (e.g., phobias) with computer-aided virtual reality tech-
nologies have proven successful. People who had fear of small spaces were
able to learn how to cope with their fear in virtual rooms. Even though psycho-
informatics is still in its infancy, it should experience a rapid development over
the course of the sixth Kondratieff.

**Criterion 2.** The basic innovation, its leading industry and the value chain they trigger will be the main driver of the economy.

To meet this criterion, the basic innovation and its value chain need to pen-
etrate the overall economic structure, to lead it on a solid growth path over sev-
eral decades and generate large new sales volumes.

And the volumes that can be unleashed by psychosocial health are indeed
enormous. As pointed out above (Barrier No. 1), the global losses, damages and
costs that are caused by psychological, mental, spiritual, and social disorders
and illnesses – social entropy – exceeded US$ 14,000 billion in 2006. The larg-
est percentage of this is made up of mental and social disorders and illnesses.
Ten percent less psychosocially caused entropy would deliver the economy
over US$ 1,400 billion for productive purposes year after year.

An improvement of mental and social health cannot just avoid the enor-
mous losses, damages and costs of entropy; the physical, creative and produc-
tive potential of a person is also better mobilized this way. Psychosocial health
is a quality of cross-sectional character: it increases productivity in all areas of
the society: on the individual, institutional, economic and social level. And
since the overall productivity can be increased through psychosocial health, it
has an enormous potential for quantitative and qualitative growth.

**Criterion 3.** The basic innovation is the driver for far-reaching overall social changes.

At first glance, the social importance can be recognized by the high and
continuously increasing demand for psychosocial health. This applies to psy-
chotherapeutic, psychological and psychiatric services as well as to radio and
television programs, Internet services and publications with psychological, psy-
chiatric and psychotherapeutic content.

A second look shows how much psychology has infiltrated language and
awareness and has mentally changed society. The term ‘self-esteem’ for, in-
stance, was not mentioned even once in British newspapers in 1980; in 1990
it appeared 103 times and in 2000 already 3,328 times. In 1993, the word
‘stress’ appeared less than 1,000 times in the British press, but in 2000 more
than 24,000 times (Furedi 2004).
Many other terms from the psychology scene have also infiltrated everyday language: repression, projection, sublimation, defense mechanism, depression, neurosis, burnout, psychosis, etc. More and more, the mental layers of humans are being specifically addressed, examined, commercialized and burdened. The things that people divulge in public these days in TV talk shows would have still been unthinkable in the mid-20th century. At the beginning of the 21st century, psychological content has developed into a general climate of opinion and in parts into a pseudo-religious doctrine of salvation.

**Criterion 4.** The life cycle of the basic innovation corresponds with the duration of a Kondratieff cycle (40–60 years).

This criterion cannot be exactly determined during the early phase of a Kondratieff cycle and needs to be assessed and checked year by year instead. From the viewpoint of the early 21st century, we can assume that thanks to increasing networking between brain research, neuropsychology, psychoinformatics, psychiatry and psychotherapies over the next three decades, a noticeable improvement of psychosocial health can be achieved. In light of the increased efforts in research, however, it is unlikely that the industry sector will maintain its leading function throughout the entire 21st century. Hence, this subsequently means that its life cycle should almost certainly be within the length of a Kondratieff cycle.

## A New and Holistic Definition of Health

The World Health Organization (WHO) definition of health is a state of complete physical, mental and social well-being and not merely the absence of disease or infirmity. In 1997, the Executive Board of the World Health Organization provided some food for thought with a broader definition of health, *'Health is a dynamic state of complete physical, mental, social and spiritual well-being and not merely the absence of disease or infirmity'* (Khayat n.d.). This is likely the first time a prestigious international institution emphasizes the importance of spirituality for health. This was once again highlighted in the WHO 2005 Bangkok Charter for Health Promotion in a Globalized World, *'Health is one of the fundamental rights of every human being and encompasses mental and spiritual well-being'* (WHO 2009). According to the WHO, terms like disease and health are no longer limited to the body. They are systems concepts. There are also sick souls, social dysfunctions and diseases and sick families, companies and societies.

## The Sixth Kondratieff

The new value chain of the sixth Kondratieff also includes other important drivers of growth – aside from the two basic innovations. Naturopathic treatments belong to the new value chain (Fig. 13). They have expanded for many years and will play an important role as a competitive concept for diagnosis,
treatments and healing. Complementary and alternative medicine has expanded
also very strongly.

The traditional healthcare system

* Medical technology, pharmaceutical industry.

* Health services.
  (Doctors, non-medical practitioners, hospitals, health insurance companies, health insurance funds, pharmacists, public health services.)

* Health spas/sanatoriums.

* Company health services.
  Health as a competitive factor, training and continuing education (e.g., in people skills), human resource development, health management.

* Other (health-related).
  Skilled trades (e.g., for orthopedic products), sporting goods and sports facilities, health publications, medical EDP, etc.

The newly emerging healthcare sector

* Biotechnology.

* Naturopathic treatments, natural products, all natural foods.

* Complementary/alternative medicine.
  Homeopathy, classic acupuncture, electroacupuncture according to Dr. Voll, kinesiology, bioresonance therapy, anthroposophic medicine, magnetotherapy, Dr. Rath's cellular medicine, biofeedback, quantum healing, traditional Chinese medicine, Ayurvedic medicine, Reiki, etc.

* Environmental protection (predominantly).

* Agriculture, diet, food, wellness/fitness, health tourism.

* Architecture (healthy living), building and construction industry (healthy building materials), textile industry (allergy-free and breathable textiles and clothing), the senses (color therapies, aromatherapies, music therapies).

* Self-medication and self-care.
  Participation of illness costs, rising self-care.

* Workplace health management.
  Company health insurance funds, company sponsored fitness programs, cafeterias, welfare centers, health seminars, preventive medical checkups, good health bonus.

* Psychology, psychiatry, psychotherapy, psychosomatic medicine.

* Religion/spirituality.

<caption>Fig. 13. The health value chain of the sixth Kondratieff</caption>

Source: Nefiodow and Nefiodow 2014.

Big portions of environmental protection are a part of this new value chain as well. Why were CFCs, those gases that destroy the ozone layer, banned? Not because we discovered our love for the ozone layer, but because we are facing a skin cancer epidemic with a damaged ozone layer. Why did we put cata-
lytic converters in cars? When you take a closer look, most environmental pro-
tection measures only serve the environment at first glance; protecting the
health of human beings is the stronger motive. This is why large portions of
environmental protection are a part of the health value chain.

The wellness industry, fitness studios and health tourism have expanded strongly. Companies increasingly have come to realize that employee health has become a strategic weapon: SAP for instance, one of the largest software companies offers its 65,000 employees worldwide optional and free genome analysis for them to be able to organize a customized, individual cancer treatment in case of cancer.

In the long run, both value chains are most likely going to merge (Fig. 13). There are already close collaborations between both sectors today. **Health economy** will make up the core of the new value chain, while a network of industry sectors will be around where health plays an important role (e.g., health tourism in the tourism industry or health protection in environmental technology). When you consider the health documents by the WHO, the value chain of the sixth Kondratieff reveals health in a holistic sense: physically, psychologically, mental, social, ecological and spiritual (Fig. 14).

Today the healthcare sector already makes the most important contribution to growth and employment in those countries that respond positively to the sixth Kondratieff. At 3.8 %, the health care sector in Germany, for example, grew almost twice as much between 2006 and 2011 than the overall economy (2.1 %) and the number of wage earners in health care was 5.7 million (2009). When you add those jobs that are indirectly allocated to the health care sector, the number of employees increases to 8.8 million. That amounted to 22 percent of all wage earners (BMWi 2013; Ostwald et al. 2014). By comparison, the German automotive industry, the showpiece of German industry, only employed about 1 million people (2.5 %). Germany's sizable international reputation over the past years is closely tied to the successful devotion to the sixth Kondratieff.

The fact that the health care sector is a job creator can be also seen in the USA – even though the productivity potential of the health care sector is under-developed and the social potential is still being underestimated. In 2001–2012 more than half of all new jobs in the private sector were created in health care (Mandel 2008 and our own calculations). The largest growth barrier for the USA as well as Japan and other countries is the wrong way of handling the health care sector.
<figure><img src="image_156.png" /><figcaption>**Fig. 14.** The six long waves in economic development</figcaption></figure>

Source: Nefiodow and Nefiodow 2014.

## Health and Spirituality

In several documents of the WHO faith is mentioned as an integral part of health (WHO 2009). In addition, there is an analysis of 5,200 scientific studies that have been conducted between 1990 and 2010 on the relationship between health and spirituality. The result: in 74 % of cases, there was a positive correlation. In 19 % of cases, the result was neutral, in 5 % negative and in 2 % there was no correlation at all (Bonelli and Koenig 2013). In an extensive study, the World Economic Forum also determined that religious belief could make a vital contribution to preserving individual and social order (World Economic Forum;<fnref n="1" /> Ventura and Magnoni 2014). That is why faith plays a key role in the health value chain.

## A Look into the Future: Morality as a Competitive Factor

Moral factors frequently do not get high priority in politics and the economy. Yet the financial crisis of 2008–2010, the European debt crisis (2010–2014) and many other crises have shown what devastating consequences poor morals can bring. For a country to be able to renew and to be economically successful, it is not just enough to formally have the structures of democracy, a formally

<footnote n="1">¹ World Economic Forum's Global Agenda Council on the Role of Faith 2012–2014. URL: http://www.weforum.org/content/global-agenda-council-role-faith-2012-2014</footnote>
free market economy and a due process concept. What is crucial are the morals
with which they are being practiced.

The relationship between social responsibility, economy, politics, and morals
can be shaped. For centuries, for instance, it was common practice among mer-
chants of Hamburg to seal an agreement with a handshake and its observance was
a point of honor. Economy and morals do not have to exclude each other. One
large step to strengthen morals on a global basis was the extension and link up of
the different international courts of justice and criminal courts. These days, it is
no longer as easy as it used to be for public officials and military leaders of the
world to totally disregard human rights and get away with it.

Klaus Schwab, the founder of the renowned World Economic Forum, where 1,600 top managers and 40 heads of state participated in 2012 in Davos, Switzerland, stated on the eve of the conference that capitalism in its existing state is no longer the economic model that is able to solve the global issues. Schwab<fnref n="2" /> asks for a new spirit of global social responsibility (Grabitz 2012). His statements are noteworthy, since Schwab is a market economy expert and far from being an opponent of capitalism.

Brazil is one success story of how entropy reduction makes economic pro-
gress possible. In the 1980s, the country still ranked among the poor and under-
developed countries. In the 1990s, thanks to conservative economic policy, it
managed to keep hyperinflation in check; the country subsequently introduced
active social policy. Yet at first, it did not amount to much. Crime gangs took
money away from the poor, which was intended to pay for their children's edu-
cation, health expenses and to create an independent livelihood. The country
then used its armed forces. Three dozens of the worst slums were being occu-
pied and the Mafia driven away. Now the residents were not just able to breathe
a sigh of relief, but also invest in their future. From 2001 to 2011, Brazil's mid-
dle class grew by 93 percent; it made up almost half of all Brazilians in 2012
(Vèlez-Plickert 2013).

Greece serves as a counterexample. After the end of World War II, the
country quickly recovered and worked its way up into the ranks of industrial
nations. But then a nationwide network of corruption, political old-boy net-
works and nepotism developed, which increasingly strangled the economy.
Several billion euros from Brussels and European relief programs also trickled
away in obscure channels and did not take a turn for the better. As long as cor-
ruption was not under control, the country continued to decline. In 2013,
Greece lost its status as an industrial nation and was downgraded to emerging
market status. The biggest barrier to Greece's growth was and is entropy.

We would like to remind at this point that the free market economy is
an economic system that, even though it does not stipulate specific morals for

<footnote n="2">² See K. Schwab in *Die Welt Newspaper* from January 25, 2012.</footnote>
market participants, does not work without morals. To be able to work effi-
ciently, the free market economy needs honest business people, incorruptible
officials and politicians and unbribable journalists and scientists.

Final Remarks

When the first edition of *The Sixth Kondratieff* was released in 1996, it made a daring prediction. Each year it became more specified and is now supported by studies of renowned institutions (Allianz 2010; BMWi 2013; Ostwald *et al.* 2014). It is not unusual that a new Kondratieff cycle is met with skepticism in the beginning. However, those who identify it early on and consequently develop its potential are able to benefit the most from its dynamics.

A Kondratieff cycle represents a unique historical process. At the innova-
tion level, each Kondratieff cycle has its very own pattern of development, pro-
duces new protagonists and satisfies new needs of people. What is so special
about this sixth Kondratieff? What makes it so different from the previous cy-
cles?

The sixth Kondratieff is a health-related cycle. This means that for the first time in history, the focus of economic and social development is not on a machine, a chemical process, energy or hardware technology, but rather the human being with his physical, mental, psychological, social, ecological and spiritual needs, problems and potential. We leave the growth patterns of previous Kondratieff cycles behind. Now the human being takes center stage. This is the message of the sixth Kondratieff: the healing of man is the best program for the future.

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**Abstract**

In the present paper, on the basis of the theory of production principles and production revolutions, we reveal the interrelation between K-waves and major technological breakthroughs in history and make forecasts about features of the sixth Kondratieff wave in the light of the Cybernetic Revolution that, from our point of view, started in the 1950s. We assume that the sixth K-wave in the 2030s and 2040s will merge with the final phase of the Cybernetic Revolution (which we call a phase of self-regulating systems). This period will be characterized by the breakthrough in medical technologies which will be capable to combine many other technologies into a single complex of MBNRIC-technologies (med-bio-nano-robo-info-cognitive technologies). The article offers some forecasts concerning the development of these technologies.

**Keywords:** production revolutions, production principle, Industrial Revolution, Cybernetic Revolution, self-regulating systems, Kondratieff waves, fourth K-wave, fifth K-wave, sixth K-wave, World System, center, periphery, medicine, biotechnologies, nanotechnologies, robotics, cognitive technologies.

**I. Production Principles, Production Revolutions and K-Waves**

According to our theory (Grinin 2007a, 2007b, 2012b, 2013; Grinin and Grinin 2013a, 2013b), the whole historical process can be most adequately divided into four large periods, on the basis of the change of major developmental stages of the world productive forces, which we call production principles. *The production principle is a concept which designates very large qualitative stages of development of the world productive forces in the historical process. It is a system of the unknown before forms of production and technologies surpassing the previ-*

<footnote>* This research has been implemented as part of the Basic Research Program at the National Research University Higher School of Economics (HSE) in 2015 and supported by the Russian Foundation for the Humanities (Project No 14-02-00330).</footnote>
ous ones fundamentally (in opportunities, scales, productivity, efficiency, prod-
uct nomenclature, etc.).

We single out four **production principles**:

1. Hunter-Gatherer.

2. Craft-Agrarian.

3. Trade-Industrial.

4. Scientific-Cybernetic.

Among all various technological and production changes that took place in history the following three production revolutions had the most comprehensive and far-reaching consequences for society:

1. **Agrarian** or Agricultural Revolution. Its result is the transition to systematic production of food and, on this base, to the complex social division of labor. This revolution is also connected with the use of new power sources (animal power) and materials.

2. **Industrial**, or Production Revolution as a result of which the main pro-
duction concentrated in the industry and began to be carried out by means of
machines and mechanisms, and at that not only the replacement of manual la-
bor by machines occurred, but also biological energy was replaced by water
and steam energy.

3. **Cybernetic** Revolution which have led to the emergence of powerful in-
formation technologies, and in future will stimulate transition to wide use of
self-regulating systems.

**Structural model of production revolutions.** Within the proposed theory we suggest a fundamentally new idea that each production revolution has an internal cycle of the same type and, in our opinion, includes three phases: two *innovative* (initial and final) and one *modernization* phase (Grinin and Grinin 2013a, 2013b; see Fig. 1). At the initial *innovative* phase new advanced technologies emerge which spread in other societies and territories after a while. As a result of the final *innovative* phase of a production revolution the new production principle reaches its peak.

Between these phases there is the *modernization* phase – a long and very
important period of distribution, enrichment, diversification of the production
principle's new technologies (which appeared in the initial innovative phase)
when conditions for a final innovative breakthrough are created.<fnref n="1" />

<footnote n="1">¹ For example, in the modernization phase of the Agrarian Revolution local varieties of plants and breeds of animals borrowed from other places were created.</footnote>
<figure><img src="image_157.png" /><figcaption>**Fig. 1.** Phases of production revolutions</figcaption></figure>

Thus, the cycle of each production revolution looks as follows: *the initial innovative phase* (emergence of a new revolutionizing production sector) – *the modernization phase* (diffusion, synthesis and improvement of new technologies) – *the final innovative phase* (when new technologies acquire their mature characteristics).

The scheme of *innovative* phases of production revolutions in our theory looks as follows (modernization phases are omitted).

**Agrarian Revolution:** *the initial* phase – the transition to primitive manual (hoe) agriculture and animal husbandry (started about 12,000–9,000 BP); the *final* – transition to irrigation agriculture (or plow agriculture without irrigation) (this began approximately 5,5 thousand years ago).

**Industrial Revolution:** *the initial* phase starts in the 15th century with the development of navigation, water-powered equipment and mechanization, with qualitative growth of labor division in the manufacturing, and also other processes; *the final* phase – the industrial revolution of the 18th – the first third of the 19th century, connected with the introduction of various machines and steam energy.

**Cybernetic Revolution:** *the initial (scientific and information) phase* dated back to the 1950–1990s. The breakthrough occurred in automation, energy production, synthetic materials, space technologies, exploration of space and sea, agriculture. But especially – in creation of electronic control facilities, communication and information. *The final innovative phase* (*of self-regulating systems*) will begin in the 2030s or 2040s and will last till the 2060s or 2070s.

Each of production revolutions means the transition to a fundamentally new production system; the beginning of each production revolution marks the borders between corresponding production principles.
<figure><img src="image_158.png" /><figcaption>**Fig. 2.** Production revolutions in history</figcaption></figure>

**Structure of the Production Principle**

*Development of the production principle is a period of genesis, growth and maturity of new forms, systems and paradigms of organization of economic management, which surpass many times the former ones in major parameters.*

The principle of production is a six-phase cycle. Its first three stages correspond to three phases of the production revolution. The subsequent three (post-revolutionary) stages are a period of the maximization of the potentials of the new forms of production in structural, systemic, and spatial sense:

1. *The phase of the production revolution's beginning.* A new, not yet developed principle of production emerges.

2. *The phase of primary modernization* – diffusion and strengthening of the production principle.

3. *The phase of completion of the production revolution.* The production principle acquires advanced characteristics.

The first three phases of the production principle still present an incomplete production principle.

4. *The phase of maturity and expansion of the production principle.* Wide geographical and sectoral diffusion of new technologies, bringing the production principle to mature forms, transformations in social and economic spheres.

5. *The phase of absolute domination of the production principle.* The final victory of the production principle in the world, intensification of technologies, bringing opportunities to the limit beyond which crisis features appear.

6. *The stage of non-system phenomena, or preparatory* (for the transition to a new production principle) *phase*. The intensification leads to emergence of non-system elements which prepare the birth of a new production principle. (When, under favorable conditions, these elements form a system, in some societies the transition to a new production principle will begin and the cycle will repeat at a new level.)

The last three phases of the production principle characterize its mature features.