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Economic Crisis Due to "Technological Acceleration"

The cause of this economic crisis is the technological acceleration stage of development of the industries that emerged from the third industrial revolution. This explanation requires some time to understand. Nikolai Kondratiev was a Russian economist whose papers on "long waves" showed that economic depressions happen every half century. So what causes long waves? The cause of the long wave cycle of depressionary periods is an 80 year periodicity of scientific revolutions in physics. 

If you examine when the scientific revolutions happened in physics, you'll see that they happen about every 80 years:

1506 Copernican Revolution;

1580s and 1590s Gilbert, Galileo, Kepler (independently introduced similar theories);

1664 Newton;

1745 Franklin (development of the ideas of fluids of heat, electricity, magnetism);

1820 Faraday (lines of force, point-atoms, basic ideas of Classical Field theory);

1905 Einstein (basic ideas of Quantum Mechanics and Relativity theory).

These scientific revolutions led to many inventions and new technologies and the three industrial revolutions. Franklin's fluid paradigm led to the development of "Caloric" based chemistry by Lavoisier and others, the development of the battery, simple electrochemistry products, and the development of "heat engines" by Watt and others and better steam engines.  During the First Industrial Revolution that started about 1790 in Great Britain, the steam engines began to replace other forms of power.  They were more efficient and more powerful. Faraday invented motors and generators, and important electrochemical and metallurgical products. During the Second Industrial Revolution that started about 1890, new products that utilized electrical power began to be mass produced.  Internal combustion engines and automobiles that were made by the metallurgical and chemical techniques pioneered by Faraday reached the market.

A similar thing happened during the 1970s and 1980s. In 1905, Einstein laid the basis for both the theories of Quantum Mechanics (QM) and Relativity. His basic framework of hypotheses included the concept of quanta of energy; mass-energy equivalence; his concepts on time, space, gravity, mass, and inertia; and other basic concepts of early 20th century physics. Einstein is recognized as being the first to think of quanta of radiation as something real, not just a mathematically useful construct as did Planck. A second generation of theorists that included Schwinger helped to develop Quantum Mechanics. Research on atomic processes  during the 1960s enabled the invention of atomic power stations, and quantum mechanics enabled the development of the transistor, laser, and electron microscopes. These inventions enabled the Third Industrial Revolution of the 1970s and 1980s that we who are old enough remember.

A bunch of new software companies, PC companies, high tech companies making computer and electronics goods, and biotech companies emerged.  Using new computer controlled equipment, US industry experienced a productivity growth boom about 1999, almost  80 years after a similar productivity growth boom that started in 1919, and almost 100 years after a similar boom started in Britain in 1819.  About 10 years after each of these productivity growth spurts, economic depressions started in these countries. 

Joseph Waters called the sudden spurt of productivity and the technological changes that afforded the 1919 spurt a "technological acceleration."  I think this is a good term. Economic depressions happen during the technological acceleration stage in the development of each group of industries that emerge from industrial revolutions.  At this stage, there is little new innovation of industry producing products, and the companies in each industry vie for market share and compete on price. Oligopolies emerge in each industry, as we see has happened during the last 10 years. The same thing happened during the 1920s and 1930s. By automating production, the oligopoly companies reduce their employment. Unemployed workers can't buy the manufactured goods being produced, and may default on bank loans.  The businesses that borrow heavily to fund their corporate growth and automation drive also may default on loans. There is a banking and financial crisis happening now that is very similar to the 1930s and 1830s in America. 

So the cause of the current economic depressionary era is the transition from product innovation to process innovation (oligopoly formation, automation of production) that happened near the middle of the life-cycle of development of the present group of industries that arose out the Quantum Mechanics scientific revolution.  Industrial revolutions have followed about 40 or 60 years after the Franklin, Faraday, and Einstein scientific revolutions.  Economic depressionary times have been experienced during each industrial revolution and about 40 years afterwards.  This is what caused the long-wave cycle.  But Kondratiev was wrong on the timing.  It isn't really a 50 year cycle, but a 40 year cycle. Kondratiev, who lived in the early 20th century had fewer data points.  The long wave cycle since 1900 has been a 40 year one. Depressionary periods started about 1893, 1929, 1973, and 2008. The depressionary periods during the industrial revolutions show low productivity growth rates, and depressions during the technological accelerations show high productivity growth rates.