Cycle Kondratieff

A cycle of Kondratieff is a Business cycle (one limited duration period which corresponds more or less exactly to the return of the same phenomenon) about 40 to 60 years also called cycle of long life. Highlighted as of 1926 by the economist Nikolai Kondratieff in its work the long waves of the economic situation , it presents two distinct phases: an ascending phase (phase A) and a downward phase (phase B).

• According to Kondratieff, the ascending phase (phase A) is accompanied gradually by an excess of Investissement (realized by the companies to face the Concurrence), which causes a rise of the prices (the industrialists reflect their Production costs on the products) and of the Interest rate (which increase vis-a-vis the strong demand of currency). It thus follows a decline of the economic activity (phase B) during which the prices drop (because there is excess of offer parallel to a decrease in the demand) as well as interest rates (the fall of the Consommation and investments involves a decrease in the demand of currency), which allows a purging of the system and prepares the ground for a new phase of growth.

• Little satisfied by this explanation, Joseph Schumpeter proposes another theory to explain the alternation of the phases has and B. It thus connects the fluctuations of the economy to the appearance of major Innovation S (which occur by “bunches”) with the Technological advance. Thus, according to him, the phase has corresponds to the period of diffusion and damping of the new innovations. During this period, the request for goods is strong, which allows an general increase of the production and thus ensures the economic growth. Little by little, when the economic agents are equipped in new products, the demand falls, whereas competition between the companies is increasingly hard. One arrives then at the point of reversal of the cycle. The phase B corresponds to the elimination of stocks, closing down of the business and of the least profitable dies (what Schumpeter calls the phenomenon of “ creative Destruction”) and to the preparation of a new wave of innovations.