You have probably never heard of Nikolai Dmitriyevich Kondratyev. Kondratyev was a Soviet economist who apparently died - no one is certain - in exile in Siberia sometime in the 1930s. As a celebrity, he never attained the status of some other 20th century economists, such as John Maynard Keynes or Joseph Schumpeter.
But Kondratyev is in vogue these days.
So great is the interest in this obscure economist that Citibank - the newsletter of the nation's second largest bank - recently devoted two lengthy articles to summarizing his theories. Walt W. Rostow, the economic historian who served as a high-level official in the Johnson Administration, cites him favorably in a new book, Getting from here to there, America's Future in the World Economy (McGraw-Hill Book Co.). And Jay W. Forrester, a professor of management at the Massachusets Institute of Technology (MIT), also invokes Kondratyev.
Kondratyev's newfound popularity is no puzzle. It reflects the inability of conventional economic theory to explain why the 1970s are so inflation-prone and sluggish when the 1960s were so buoyant. Within giving specific reasons, Kondratyev believed that capitalistic economies naturally follow long-term cycles: first a few decades of prosperity, then a few decades of slump. To many, this is Kondratyev's slump.
Is it? The question now seems increasingly relevant to the United States. For, until recently, America defied the new tide of slower growth. Coning out of the 1974-75 recession, the U.S. economy expanded 6 percent in 1976 and 4.9 percent last year, rates well above the 1962-72 average of 3.9 percent. Meanwhile, however, growth in most major economies reached only half their average in 1977. Germany grew only 2.4 per cent (average: 4.5 percent) and Britain, 0.8 percent (average: 2.0 percent).
But even the United States seems to be slipping into lower growth. Rising interest rates will hobble the housing boom, and higher inflation shrinks consumer purchasing power. In turn, slower growth is likely to result in an increase in the unemployment rate. Some forecasters expect the jobless rate, 5.9 percent in August, to reach 6.5 percent by the end of 1979.
What is bizarre about the lack-luster performance is its relative painlessness. Most of the labor force has work and, for those who do, wage and salary increases have roughly kept them even with inflation. Last year, median family income was $16,000, not much better (after inflation adjustment) than the year before, but no worse either and only 2.6 percent lower than the high in 1973.
The suffering, such as it is, has fallen mainly on the young and unskilled and on our hopes. Black youth umemployment remains stubbornly high (32 percent in August) and the stagnation of incomes represents a setback from the 1960s, when the average increased by a third. The situation is roughly the same in Europe; the young and visitor workers (migrant) have borne a disproportionate share of the burden.
To say that inflation has crippled the economy's capacity to grow (and it has) is to sidestep the critical question of whether inflation springs from deep - and ill-appreciated - causes that put us in a Kondratyev downswing.
Rostow believes this to be so, aruging that rapid growth in the past 25 years has created scarcities in basic commodities - energy, food and basic materials - that exert upward price pressures. He includes pollution in this category (the scarce commodities being clean air and water and a toxic-free earth). Rostow retains a faith-healer's confidence that a new investment boom would inspire technological advances that would increase supplies and muffle inflation.
Lester R. Brown, an environmentalist who never refers to Kondratyev, takes a glummer view of resource depletion. "The global engine of economic growth is clearly losing steam," he recently wrote. "This slowdown did not originate in some sudden human failure to manage the economic system. Rather it is rooted in humanity's relationship to the carrying capacity of biological systems [fisheries, crop lands and forests], the dwindling reserves of oil, the declining quality of mineral ores and the ecosystem's limited capacity to absord waste." Brown believes slower growth is inevitable and desirable.
Finally, MIT's Forrester conceives of a different ailment. He thinks too much investment occurred in the past 25 years, meaning that this force - the drive behind the high growth - no longer serves to propel major economies.
None of these theories seems satisfactory, especially Forrster's. Excess capacity exists today only because inflation has made us incapable of running our economies near their maximum. The theme of resources depletion seems more of the lowdown. But the case seems overdrawn. Grain is in surplus in the United States, coal supplies remain vast and few minerals are rapidly approaching exhaustion.
What distinguishes the 1970s from the 1960s is the lack of confidence in a stable, secure future. Fearing more rapid inflation - and possibly a recessionary reaction - businessmen require a quick payoff from investments, or otherwise don't make them. Lower investment means lower growth and lower capacity to grow.
Inflation is not the only cause of lower confidence - dependence on uncertain oil supplies and a more contentious international climate also figure prominently - but it is the major cause. And the fundamental cause of inflation remains the social and political ethic of industrial democracies.
The widely accepted standard of keeping wages abreast with inflation does more than sustain inflation. It also compels governments to run their economies cautiously for fear of accelerating inflation through shortages of labor or goods. The ethic springs from the best of intentions and is profoundly conservative: it attempts to maintain the status quo for the vast majority. But it may have the worst of consequences. It exiles a significant minority from the benefits of prosperity (though they are placated by welfare). And, more ominously, it may gradually corrode the basis of prosperity itself.