Economists pay little or no attention to Nikolai Kondratieff’s ‘Long Wave’. It’s the period between two economic depressions.

Kondratieff took 36 price, value and quantity time series datasets in the USA, UK, France and Germany (from 1788 into the 1920s) to make the case that the ‘long wave’ (the ‘Kondratieff Wave’ or K-Wave) found in these analyses is characterised, first, by an inflationary half which trends to a peak after thirty or so years, then downwards for a similar period into a deflationary trough.

Although the economist Joseph Schumpeter held Nikolai Kondratieff to be an economist of the first order, Kondratieff’s work is ignored by modern economists, because it reflects poorly on their abilities. And there’s always “the natural business cycle” excuse, even for a financial depression.

Kondratieff had no explanation for the cause of the three long waves he studied. However, having a real estate valuation background, I’ve made a case that each K-Wave is explicable in terms of real estate bubbles and bursts growing exponentially larger as the growth in wages and profits to small to medium enterprises declines into another economic catastrophe.

At a symposium on tax reform at Melbourne University on 2 August 2005 also addressed by Professor John Freebairn, Professor Julian
Disney and Tim Colebatch, I spoke about “Collapsing Economies and National Resource Rents”. I argued the case that economic rent/unearned income is a significant proportion of the economy, and that we’ve been allowing increasing amounts of land rent to become privatised and capitalised into incredibly burgeoning land prices.

My symposium speech concentrated on financial destruction being wrought by taxing productivity and failing to tax speculatively rising land prices sufficiently. It was applauded as making sense to the audience, but of course ignored and worsened as governments of both persuasions and the RBA continued to prop up the real estate market at every turn, instead of having the tax regime provide signals that might generate real wealth.

Private debt has increased to impossible levels as we continue levying taxes on wages, profits and good and services while we continue to pump land prices. Unaccounted underlying inflation from rising land prices and the excess burden from taxing wages and profits presents a looming disaster for Australians. In the absence of politucal action, it will be left to correct itself. The second-half descent of the K-Wave towards the 2027-2030 depressionary trough has been remorseless and ruinous times are palpable.

Neoclassical and neoliberal economists remain at the levers.

If we wish to arrest the decline into financial collapse,it may be time for analysts and policymakers to consider to what extent Petty’s national rent offers potential to slash the taxation of productive activity. Replacing taxes with resource rents could also help to keep the lid on skyrocketing land prices, which have played such a destructive role in Australia’s economy during the second half of the fourth Kondratieff wave.