It is not then the Law of The Tendency For the Rate of Profit To Fall, which lies behind the crises of overproduction, typical of the Autumn or crisis phase of the cycle, but those crises, which provide the impetus for a new Innovation Cycle, to overcome the constraints of inadequate exploitable labour supplies. It is this new Innovation Cycle, which then produces the labour saving technologies that overcome that constraint, and so raise social productivity, which then creates the conditions for the Law Of The Tendency for the Rate of Profit To Fall to operate, as this higher productivity causes relatively lower quantities of fixed capital and variable capital, to process larger quantities of materials, thereby causing the organic composition of capital to rise.
But, this is then not the cause of crises of overproduction, it is both a consequence of them, and the means by which they are overcome! Firstly, new labour saving technologies, introduced in older industries cause an absolute reduction in employment in those industries, for the reasons described in Part 10. This releases capital and labour to be employed in new spheres of production, where the rate of profit is higher. But, the introduction of the new labour-saving technologies has other effects. It means that what were formerly more skilled jobs, can now be undertaken by semi-skilled or unskilled workers.
The monopoly of the print unions was broken, in the 1980's, for example, because new computer technology meant that the old methods of typesetting disappeared, and anyone could do typesetting who was able to use a computer keyboard. As a result, not only did a series of “Instant Print” workshops spring up in town centres across the country, often started by people who had been made redundant from other industries, using their redundancy money, which challenged the old print workshops, but it became possible to recruit entire new workforces, in parts of the country with no history of printing, as for example, Eddie Shah did in Runcorn.
This same process can be seen in the shifting of old mature industries to low wage economies in Asia, once the minimal infrastructure requirements are in place. But, similarly, the same Innovation Cycle creates not only new technologies that replace existing skilled labour, it also creates entirely new industries. In the 1930's, for example, the development of the motor car industry, and consumer electronics industries, did not develop in the old industrial areas of the North and North-East, where traditional engineering skills existed, but in the Midlands and South-East. Similarly, the development of the computer industry in the 1980's and 1990's, arose in the United States, on what was more or less completely virgin territory in Silicon Valley, in California, with lots of cheap housing for workers, as well as available industrial land, and a background in technology provided by Stanford University.
It is on this basis that the Innovation Cycle itself is a function of the Long Wave cycle, and not, as Schumpeter seemed to believe the explanation of it. This is why the Innovation Cycle itself repeats on a regular basis, not immediately prior to the development of a new boom period, but as a response to the previous crisis period.
George Ray, in the article referred to previously, quotes the work of Mensch (G. Mensch “Das technologische Patt” Frankfurt 1975 and also in “Stalemate in technology”, Ballinger, Cambridge, Mass. 1979) who, in suggesting the need for a “new push of basic innovations”, to lift the world out of its depressed state, of the time, also identified clusters of such basic innovations during the last 200 years, which correlated with Kondratieff’s cycle. These were in or around 1770, 1825, 1885, and 1935 with not much since – remember this was written in 1975. Ray compares these two sets of data and concludes,
“Kondratiev’s three troughs followed the innovation-poor periods with an even more uniform lag of about 50 years. Given the difficulties of measurement, this apparent regularity provides food for thought since, if the high ‘technological content’ of each of the long wave theories – most explicitly Schumpeter’s – is considered, this surely must be the most important macro-economic aspect of innovation.”
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