The Great Depression Flashcards
Kondratieff cycle: How many phases characterise it, each is half of a ‘long swing’, and what indicators were used to identify it?
Four phases 1815-1915
Identified in wholesale prices and other indicators correlated with them
“we consider the long cycles in the capitalistic economy only as probable”
Description of price movements…
Generated by reinvestment in capital goods?
Set in motion during industrial revolution, investing in capital goods with long lifetime, lumpy investments so needed to be in upswing and so low interest rates
Ie
Prices
Interest rates —-> increase in upswing, fall in downswing
Profits
Why would one argue there were inconsistencies in Kondratieff cycle? Ie observations.
+ Critiques?
In Great Depression-> wages also rose!
In recovery in Belle Epoque (1896-1913) growth was slow and wages fell further
mid-Victorian boom 1850s-70s would’ve expected p, r and pi to rise, BUT path of better prices nor growth continuous or stable over the whole period (see graph pg 4)
What’s happening to prices?
Prices:
Sig inflation happened only twice,
Due to cost cutting innovations (Landes) -> trend fall in prices, considered 😊
Any large boats on inflation happened due to
- gold discoveries in places like Aus, £ was backed by it, full convertibility and QTM: MV=PT SO M rising, P must also rise assuming V and T constant.
BUT prices fall alongside new discoveries subsequently which contradicts this monetarist explanation!
- Franco-Prussian wars
What’s happening to growth?
Exports did not grow in volume terms but in value terms, capital formation stable (not enough evidence I(r) was choked off as r rose, perhaps inelastic)
“neither in terms of growth nor price trends does the mid-Vic period possess a unity” (Church)
What’s Rostow’s alternative explanation to why we had long-swings, if we had them?
Why is he wrong?
Different types of investment resulted in different time lags
During boom: unproductive investments with a long gestation period (gold mines, war financing and railways)
Depression after 1873: shorter-term projects with quiet returns which bring down costs in Depression, also no major wars with inflationary effects
BUT doesn’t tally with price movements and where investment went at different times, why would they switch between STLR projects over 25 year periods?
What info do we have on real indicators?
Unemployment
Wages
Output
What do we conclude from this?
Unemployment: TU stats only, but seems like quite high unemployment rates
Wages: growing, pressure on profit margins, labour growing in power? NOT a K-cycle but related to LF strength
Growth on industrial output slowed, agricultural output stagnated
CONC: “would be wise to wait several centuries before asserting the existence of long swings”
Saul’s opinion on the Great Depression
What GD? Didn’t exist! Period doesn’t display any trends that are any different from previous cycles.
Any prices in prices was due to wars
Solomou’s opinion
“Evidence for REGULAR Kondratieff cycle discontinuities is weak…”
Climacteric view - is there evidence for the GD starting long-run decline? (Feinstein’s data)
Overall it depends what evidence you look at!
Evidence for GDP growth falling from 2.2% to 1.8%, BUT growth of GDP hits a minimum here.
HWVR gotta tell apart GDP and GDP per worker
former: get rebound from late Edwardian period
latter: declining trend in productivity growth rates
SO latter evidence for decline
Also contemporaries were like wtf is happening with our exports in 1880s and 1890s? Is that secular decline in export growth rates?
TRUE, but recovery thereafter.
Though must admit export growth slower that competitors in volume terms and losing world SHARE in X, our world X VOLUME is still growing.
What about industrial growth rates? Two reasons as to why we should take caution as slowing rate of industrial production may indicate…
…
1) Switching of resources from industry-> less productive services
2) Some goods not entering official statistics e.g. those from ‘higher’ industry, as consumers would like to spend extra money (know W rising)
+ output/person employed may reflect reduction in hours of work, as industrial production per head population fall shows taking more hours of leisure
Industrial growth rates (Feinstein)
SO generally what can we say about the evidence of a climacteric from growth rates?
THERE IS NO CLEAR EVIDENCE!
So what are we identifying?
Just a phase in a 50 year Kondratieff cycle?
Secular decline, a climacteric?
Or something else?
Nope
Nope
Yes, RELATIVE decline, losing out to main industrial competitors
Are competitors catching up or overtaking?
Overtaking:
Delay in new industry development
Keep small-scale, slow growth path
Catching up
Britain DID have resources and ability to develop new industries when needed in WW1
