Over the break I was sent a copy of “The Long Wave” which is a newsletter by Ian Gordon, an analyst looking at Kondratieff cycles and postulating that we are about to go through a cyclical downturn.
On this matter I must firmly disagree. Much of the economics that came out of the Soviet Union was bunkum, but there were a few bright sparks. Kondratieff did some useful work retrofitting theory to the data, as beloved of technical analysts, but it is too easily proved wrong by looking at his supposed causes.
Despite my (well documented) disagreement with Rothbard on the matter of banking, I believe he (and the rest of the Austrian School) puts the position correctly on business cycles – they are caused not by underlying instabilities in capitalism but by government action. There is nothing inevitable about a business cycle: there is a lot that is inevitable about governments.
If you are looking for the causes of any future downturn in the US look to the budget deficit, wasteful spending, attempts to block free trade and to over-regulate other areas of the economy. Blaming a downturn on a cycle over which you have no control is a cop-out.
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