It seems eerie that eighty years after the entire world’s economy crashed and dictatorship flourished around the world, the same scenario will be seen again by a completely new audience.
The causes of the Great Depressions of the 1930′s and the 2008′s are, strangely, very much alike.
Russian thinkers are intrinsically different from European thinkers. Russia lies to the East of Europe and to the North of Asia. Genetically, Russians have Asian and European DNA. Their written interpretation of life expresses the Asian influence, where the individual is just part of a much grander scene.
Life, in Asian philosophy, is wave like in appearance and holds eternal patterns that reflect the family, from grandfather to newborn. In Russian thinking, we can easily witness the passage of time through three generations. The reason for this inter-generational thinking lies in the history of Russia.
The Mongolians invaded and conquered Russia in 1223 and remained in Russia for three centuries. Like the Moors in Spain, they left a strong genetic imprint on the Russian population. The Mongols also left an Asian method of interpreting life. This is evident, not only in Russian thinking, but also in all Eastern European thinking. Eastern European and Western European interpretations of life differ in their focus of time.
Western Europeans think in short waves. The Business Cycle is typical. It is described as typically lasting from 7 to 11 years. Eastern Europeans, with their Asian influence, think in terms of long cycles. As mentioned, the Kondratiev Cycle is approximately 54 years in length. Historically, we can see both cycles.
The long cycle reflects the rise and fall of countries, and the short cycle reflects the rise and fall of small groups within a country. We see that clearly in Russian literature, such as War and Peace, by Leo Tolstoy, where the novelist analyzes the effect of war on the aristocracy of Russia. The novel covers the life of generations. It is vast in terms of time and people.
In 1925, Nicolai Kondratiev, a Russian economist, presented his interpretation of economic cycles. Because he had an Asian perspective his interpretations reflected two generations of life.
The Kondratiev Cycles are approximately 54 years in length, but their beginnings do not follow each cycle exactly, since great events such as World Wars interfere with the length of life of the generation. The cycles, like Nature, reflect the Spring, Summer, Fall and Winter of societies.
During the Spring phase of the great cycle, there is economic growth and the accumulation of wealth. The attitude of the population is positive and they are eager to work and succeed. During the Summer phase, the population begins to enjoy its new found wealth and the attitude of the population changes from “Let’s work!” to “Let’s play!”
In the Fall phase, the wealth begins to disappear yet, the population wants and demands more. The Government and its banks and financial institutions lose their mental grip on reality and start to offer loans to the demanding public.
THIS IS THE BEGINNING OF THE “BUBBLE”
At the beginning of the Winter phase, the Bubble bursts, the economy quickly contracts and the population realizes that they were living in a dream-world. The Winter phase lasts for approximately one decade, and poverty, unemployment and bankruptcy are found everywhere. The Government offers solutions in the form of Dictatorship.
SCHEMATIC OF KONDRATIEV WAVES
If we examine the Kondratiev wave of the 1930s and the 2008s, we can see the remarkable similarities: the beginning of the wave– confidence and hard work.
This was the end of the FIRST WORLD WAR. Before we review the events of this cycle, we must understand who were the players in the U.S.A at the beginning of the Depression of the 1930′s and who were the players at the beginning of the Depression of 2008. The remarkable similarity will surprise you.
Almost all writers who describe the Great Depression of the 1930′s ignore the role of the Immigrant. Their focus is always on the role of money, banks and government. But, it is people who make an economy. And, in the 1930′s Immigrants made up a sizable percentage of the entire population – as they do in the 2008 Great Depression.
WHO WERE THE IMMIGRANTS IN THE U.S. DURING THE 1930′S?
During the last half of the 19th. Century, the South of Europe was in a state of economic poverty. The wealthy owners of business, made their fortunes in factories, using Cheap Labor. The use of War as a means of gaining immense profits was commonplace. In Europe, the average person either worked in poverty on a farm or worked in poverty in a factory.
Karl Heinrich Marx, a German Jew, was born in Northern Germany and, he described the plight of the European working class. What Marx described was a struggle between the holders of wealth, The Capitalists and the working class, The Proletariat.
The Capitalists were clearly the winners of this struggle since they controlled the governments and had the force of the Police and the Army behind them. The workers of Europe in the 19th. Century could either starve or emigrate. The poor workers left Europe by the millions. It was the greatest mass migration of humans in history.
These workers migrated to the Western Hemisphere and settled in Canada, the U.S.A., Venezuela, Uruguay, Chile and Argentina. If we look at any of these countries today, we can see the obvious genetic influence of the Europeans who arrived over a century ago. The immigrants were extremely hard workers and they were welcomed by wealthy business owners who used them as cheap labor in their factories.
The immigrants arrived in the U.S.A. during the period 1880 to 1920. During that period, approximately 20 million immigrants arrived and they made up 15 percent of the American population. In 1920, the U.S. Government passed a law, restricting any further immigration, except by select countries. This ended the major migration to the U.S. In South America it continued until Europe became wealthy after the Second World War.
We can see the remarkable similarity of mass migration from Latin America to the U.S. in the latter half of the 20th. Century. Once again, migrants make up about 15 percent of the U.S. population, in spite of the fact that the U.S. population has more than doubled. The type of work of the immigrants is also remarkably similar.
In the 1920′s the immigrants worked in construction and in the factories, and in the latter half of the 20th. Century they did exactly the same work! During both periods, the economy went straight up. After about 20 years the Bubble began.
THE “BUBBLE” IN THE 1920′S
In the 1920′s the people with money were gambling that the Stock Markets would continue to go straight up. The stock market gamblers were buying their stocks On Margin. This means that they were Borrowing Money to buy their stocks. The banks during that period were indifferent to the borrowing, and, in fact, encouraged it.
The Western Governments did nothing to control the mania. The working classes worked hard, earned much more than they ever had before, and enjoyed La Dolce Vita. These years were called: The Boom Years. As we will see in the next episode, exactly the same event occurred about 54 years later.
Could it be that the Russian economist, Nicolai KONDRATIEV had it right 85 years ago?
TO BE CONTINUED.