The Winter Phase
Is characterised by intensive rather than extensive accumulation. Existing technologies are increasingly replaced by new labour-saving technologies, so a relative surplus population is created. Unemployment rises, and wages fall. The rate of surplus value rises. Economic growth is subdued, as existing industries replace labour, rather than adding labour, whilst the growing sectors of capital, in new industries, are too small to exert a large enough influence on overall economic activity. Initially, this means that the annual rate of profit falls, however, as the phase develops, the rate of profit rises, as the rate of surplus value rises, and the introduction of new technologies brings about a moral depreciation of fixed capital, and reduction in the value of circulating capital.
The rising rate of profit, brings about a rise in the mass of realised profit, whilst subdued economic growth means that the demand for loanable money-capital remains low. The excess of the supply of loanable money-capital over its demand causes interest rates to fall. The fall in interest rates, in a period of sluggish economic growth, leads to this potential money-capital being used for speculation. The prices of shares and bonds are pushed higher, along with the price of land.
The longer the period of stagnation continues, the more workers become atomised, and competition amongst them increases. The workers not protected within co-operative production, those that are unorganised and outside the trades unions, and most affected by insecurity, become most inclined towards individualist solutions, and most likely to be drawn in by reactionary forces.
During this period, material conditions favour more conservative and even reactionary social forces. The weakness of economic development, lessens the economic and social power of big industrial capital, and of the social democracy which represents its interests. As Marx points out, money-lending capital, and merchant capital always promote such conservatism, wherever they are dominant, and as low interest rates promote speculation, as the price of fictitious capital rises, these forms of capital gain in strength. Conservative political forces, are also based upon the small capitalists, and associated social layers, and it is their interests that are promoted during such periods. That includes a growth of conservative ideas such as nationalism and protectionism. Along with this goes a resurrection of conservative and reactionary social and cultural values, and an attack on the more progressive values developed during the previous periods.
During these periods, capital begins to develop in new geographical areas, as well as in new types of industry.
The Winter phase has been experienced in the last century from the mid 1920's through to 1949, in Europe, with the US only entering this phase in the mid 1930's, and again in the period from 1987 to 1999.
Spring Phase
Is characterised by a much more rapid economic growth, as the new industries, based upon new technologies, take on increased social weight, so that, although accumulation continues to be based upon intensive rather than extensive accumulation, capital accumulation, in total, increases rapidly, on the back of a high rate and mass of profit. The intensive nature of accumulation, along with the drawing in of new supplies of labour-power, means that wages do not rise (though real wages do, as the value of labour-power falls), and the rate of surplus value increases. The mass of realised profits continues to outstrip the demand for loanable money-capital, so interest rates remain low.
Low interest rates continue to encourage speculation that results in financial as opposed to economic crises, though the former often flows over into the latter. The rapid pace of economic growth can result in shortages of particular inputs, which then results in economic crises, as the circuit of capital is frustrated, either because inputs are simply unavailable, or else the price for them is pushed up so high that it could not be recovered in the sale of the end product.
The economic prosperity begins to create a sense of stability in the minds of the workers, and they begin to rebuild their organisations. Its during these periods that workers should take advantage of the improving economic climate and low interest rates to develop their own co-operative production most rapidly.
Along with the new scientific and technological ideas that blossom during this period, as a consequence of the preceding Innovation Cycle, comes a flowering of new ideas, more generally, in relation to art and culture, and the development of new more progressive social values. It goes along with a gradual transformation of material conditions that favours big industrial capital, and the social democracy that rests upon it.
The Spring phase has been witnessed, from 1949 – 1961, and from 1999 to 2012.
Summer Phase
Is characterised by a shift towards extensive rather than intensive accumulation. Productivity gains begin to slow down, the demand for labour-power rises, using up available supplies, so wages begin to rise, and the rate of surplus value begins to fall. As the range of new products developed in the Spring phase, begins to mature, profit margins decline. More productive-capital is laid out, in an attempt to retain and capture market share, and to develop new products, and the rate of profit begins to fall.
As the rate of profit falls, a greater proportion of surplus value is devoted to the reproduction of capital, and less to the payment of dividends and rents. Additional shares and bonds are issued to raise additional money-capital. The prices of stocks and bonds falls, causing stock market crashes, and longer bear markets. The rate of interest thereby rises, causing land prices to fall.
Workers having gained confidence in the preceding period, particularly in those new more vibrant industries, and geographical locations, begin to advance their cause more actively. With economic growth still robust, and particularly the larger industrial capitals reliant on selling large volumes of commodities, to realise their profits, capital concedes higher wages, as any reduction in the rate of surplus value is offset by the rise in the mass of surplus value and realised profit.
As the prices of fictitious capital and land decline, relative to the value of productive-capital, the material conditions shift in favour of big industrial capital, and the social democracy that rests upon it. The new cultural and social values that sprung up in the Spring period, become established as the norm in the Summer period. Conservative forces are pushed back across the piece.
The Summer phase has been seen in the period between 1961 to 1974, and a new Summer phase commenced in 2012.
Autumn Phase
Is characterised by increasing tendencies towards crisis. Accumulation is overwhelmingly extensive rather than intensive, and the consequence is that remaining labour supplies are used up, pushing up wages, and reducing the rate of surplus value. Low growth in productivity means that any rise in the prices of materials feeds through entirely to unit costs, but these increased costs cannot be recovered in market prices, causing the profit margin to be further squeezed. These low profit margins mean that any sharp increase in input prices causes market prices to drop below production costs, leading to crises.
Low rates of profit with tight labour markets leads to low levels of capital accumulation, and economic growth.
These conditions lead capital to seek solutions by embarking on a drive for new technological solutions, to replace labour. Low rates of profit, even with the reduced demand for money-capital, causes interest rates to be high, because less profit can be realised, and made available, and as crises break out, increasingly capital demands money-capital to simply stay afloat, rather than to expand. At these points, interest rates hit their highest level. Stock and bond markets sell off, and land prices fall sharply.
Individual firms stop competing amongst themselves for labour-power, and increasingly resist demands for higher wages. Industrial struggles become more intense and prolonged. Towards the latter part of this phase, the results of the new drive for technological innovation begin to be felt, as new labour saving technologies are introduced, which further undermine the position of workers.
The Autumn phase is a period of wars and revolutions because it is most sharply defined as the period of conjuncture between continued advance, or the failure of such advance and the onset of reaction. Everything that was developed, and taken as secured, in the previous period, is challenged. Society comes up against the barrier to further development within its existing capitalist shell, which it must break out of to make further advance, or else it falls back.
The Autumn phase was witnessed in the period 1914-mid 1920's in Europe (mid 1920's - mid 1930's US), and 1974-1987.
As Trotsky and Kondratieff point out, the period of conjuncture between each phase is usually the most significant, although, in reality, there is no sudden break, from one set of conditions to another, only a more pronounced change at these conjunctures, as quantity turns into quality. Revolutions that take place at the beginning of the Autumn phase have more favourable conditions, for example, than those that occur towards its end.
Another phenomenon seems to be the coincidence of these conjunctures with stock market crashes. The conjunctures in 1961, 1974, 1987 and 1999, for example, were all associated with significant market crashes. But, again the basis of these seems to vary in accordance with the particular phase of the cycle.
If we take the Winter phase of the cycle, for example, interest rates are falling and speculation is encouraged, as a result. The financial crisis arises because the speculation causes asset price bubbles to be inflated, which subsequently burst (2000). The financial crisis then has a knock on effect to the real economy. In the Spring phase of the cycle, the conditions which existed in the Winter phase, which caused falling interest rates, and speculation continue to apply, once more fuelling speculative bubbles, which burst and flow over into the real economy(1962 and 201?).
However, in the Summer and Autumn phases this is reversed. In these periods, it is changes in the real economy, which causes economic crises, which affects profits, which sparks financial crises. To use Marx's terminology a crisis of the first form (overproduction) sparks a crisis of the second form (money crisis) as a cascading failure of payments and credit occurs.
For example, it was the onset of the new slump and Autumn phase around 1974, which saw the crisis of profits break out into such a failure of payments and credit, which led to a money crisis (part of which was the decision, in 1971, of the US to remove the convertibility of the dollar with gold), which caused a serious fall in stock and bond markets, and prolonged instability during the 1970's in global currency markets. The 1987 global stock market crash, which saw the biggest sell off ever in US markets, was sparked by a similar fear of a payments crisis, as the US economy, partly under the influence of the adoption of the ludicrous economic ideas of Art Laffer, developed an astronomical twin deficits crisis.
Laffer had suggested, much as the Tories suggest today, that the budget deficit could be reduced by cutting taxes, which would then cause rich people to invest. In fact, what they did was to take the huge tax handouts given to them by Reagan, and use that money to speculate, creating a new financial bubble, and to consume more, causing US imports to rise, and its trade deficit to balloon. As the financial speculation did nothing to increase US productive capacity, it became obvious that the financial asset prices were not justified, and there was no way of paying back the US's creditors. Afraid they would not get paid, therefore, those creditors began to sell their US financial assets.
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