The Juglar Cycle Theory

Transcription

1 The Juglar Cycle Theory For simplicity Juglar Economic Cycles parallel the 11 year Sun Spot Cycle. There is some discussion about the length of Juglar Cycles varying from 7 to 11 years, but our research shows them to be consistent over very long periods of time. There are at times aberrations due to local conditions or the influence of other cycles, but one can pretty much set their economic clock to a consistent timing of 11 years. Why the consistency? Who really knows? Maybe the Industrial Economy picked up the agricultural cycle or maybe public psychology is controlled by changes in the magnet fields caused by sun spot flare ups. What we need to know is such economic cycles exist and by being aware of them we can profit.

2 1. Juglar Cycles of Innovation The primary nature of a Juglar Cycle is the development and diffusion of innovation. While inventions and discoveries do not follow any pattern or cycle, the exploitation of such innovations do. Initial discovery is followed by a longer period of development. The development of technology or a period of innovation is dependant on other precursor technologies. For example, the automobile - a big driver of the economy - is dependant on many innovations from the creation of steel, vulcanization for tires, electricity for lights and starters, metallurgy for engine blocks and transmissions, hydraulics for brakes, glass for windows and refining for fuel. Many more support technologies had to come together in one place for the automobile to exist. After its development, use depends on roads, fuel distribution and repair shops. Today 15% of a middle class budget is allocated to automotive transportation. Besides the physical part of innovation there are social structures that must be ready to accept innovation, education to use new technology and financing for development. From history development of innovation takes approximately five years from a prepared base to a peak. Following the peak the new innovation then enters a period of diffusion over the next six years. The recent Dot Com boom follows a perfect Juglar Innovation Cycle. Growth of the Internet took place from and peaked out in After the peak the Internet did not suddenly die out and disappear. Instead the "New Internet Economy" was integrated into the "Old Economy". This integration took place internationally witnessed by India using the Internet to become the back office to the industrialized world. The Internet boom did not take place in a vacuum but accompanied an entire communications revolution.

3 2. Juglar Cycle Drivers It would be naive to assume all innovation has to wait for a prime Juglar Cycle. There are many smaller innovation or Juglar cycles all interleaved into the "Long Wave". Some may actually run counter to the prime Juglar cycles and each industry may have its own reflection. Periods of development for some industries may be shorter and periods of diffusion longer. Some industries are more volatile than others and as such may not experience much variation at all. Schumpeter in "Business Cycles" writes a great deal about the entrepreneurial spirit. While capitalism may not be the natural state of man and requires government regulation, the entrepreneurial spirit is very much an innate part of human nature. The entrepreneurial spirit is important to understanding prime Juglar Cycles in the "Long Wave". The "Long Wave" is about isolating the major trends in society. While society is bound to a long upward path of enlightenment gains are bounded by limits to growth. Each "Long Wave" encounters different limits and as such provides different challenges for society. The greatest profits arise from those products and services that address current problems. Therefore it is logical to assume that the prime Juglar Cycles will center on providing solutions to current problems. If society had no need for books because the majority are illiterate then a printing press, even if possible, will not lead to an economic boom. Demand for goods and services must address some underlying need. Here is where the entrepreneurial spirit kicks in. The brain is a marvelous thing and will, give time and resources, find solutions to the most complex problems. This is one reason brains have ruled over brawn from the beginning of time. It is also the reason resource based economies are never as rich as entrepreneurial economies.

4 3. Long Wave and Juglar Cycles It would be very convenient if a "Long Wave" was composed of a fixed number of Juglar Cycles. While a single "Long Wave" contains five Juglar cycles, these cycles are not in sync with the "Long Wave". The different timing changes the shape of the "Long Wave", but does not alter the nature of the individual Juglar Cycles. Juglar cycles occurring in the down grade of the "Long Wave" generally peak out sooner, have less intensity and concentrate on a single or few innovations. Alternatively, Juglar Cycles in an upgrade are broad, more intense and have limited down times. The prime Juglar Cycles in the Growth Phase of a "Long Wave" contribute to the super sizing of the economy. Additionally innovation in the "Long Wave" down grade are incremental in nature while those in the up grade introduce new and dramatic innovations. We should not discount social change as part of innovation. The rise of mandatory primary and secondary schooling was forced on society by the need of an educated public to fuel the Industrial Revolution. Thus there should be and are Juglar Innovation Cycles in education and other social trends.

5 Information tech's. environment petrochemicals automobiles aircraft electrics chemistry steel railway steam engine cotton

6 4. Classes of Juglar Cycles Each Juglar Cycle in a single "Long Wave" is different. Each can be classified and serves a different purpose in furthering the progression of the "Long Wave". Below is a list of the different Juglar Cycles and how they fit into the over all economy. This difference is one of the reasons that without the over view of the Kondratyev Theory one can easily miss the differences and thus the nature and progression of economic growth. The Kondratyev Theory provides the road map while the Juglar and Kitchin Cycles execute the mechanics. Precursor The Precursor Juglar occurs at the end of the "Long Wave" down grade during the transition trough. It is usually accompanied by a spectacular boom that is quickly forgotten as new technology displaces its importance. Examples of precursor Juglar Booms are the Internet and the Bicycle boom of the 1890s. Each of these provide the technical foundation for the primary Juglar. Primary The Primary Juglar occurs early on in the Growth Phase of the 'Long Wave" and provides the first new practical technology to solve the Limits of Growth from the past "Long Wave" peak. The nature of the Primary Juglar broadly encompasses many new innovations, but the primary driver is the overcoming of past limitations and building a foundation for the next Juglar Cycle. Secondary The Secondary Juglar Cycle occurs late in the Growth Phase and compounds the technology of the past. The growth of this cycle sets up challengers to the current paradigm and leads to the peak of the "Long Wave". Examples here are the Aerospace and Computer booms of the late 1960s. Consumption The Consumption Juglar comes after the "Long Wave" peak, a time often labeled the "Plateau". This cycle is characterized by the rapid creation and development of immature technology to solve peak limit problems and the vast consumption of wealth leading to an unsustainable speculative boom.

7 Equalization The Equalization Juglar comes mid point in the "Long Wave" down grade and is also a form of consumption. The down grade is a period of incremental innovation so the Equalization Juglar generates profits by introducing increased efficiencies into existing markets and along with Schumpeter's "creative destruction" enables the clearing away of obsolete industries, assets and infrastructure. It is common to see significant financial and geopolitical changes taking place during the diffusion of this cycle. 5. Other Characteristics There are a number of other notable characteristics of Juglar Cycles worth considering. The most consistent is the intensity of violence and wars during the diffusion phase of the Juglar Cycle. Iraq, the Gulf War, Vietnam, Korea, the US Civil War were all fought in the diffusion phase of various Juglar Cycles and all ended very near the bottom of the cycle. Social gains seem to be realized at the peak of Juglar Cycles while the expansion phase is one of struggle. During diffusion change is more readily integrated. Political leaders experience the lowest approval ratings during the diffusion phase.