War, Inflation, and the Kondratieff Long Wave

Addressing Kondratieff's argument (1979) that long waves of economic activity are responsible for major wars, this study develops and tests three hypotheses relating war to long price waves. Focusing on the experiences of Great Britain and the United States between 1750 and 1977, we find that wars, especially global wars, do not initiate the upswings of Kondratieff's long price waves, but their termination does coincide fairly consistently with the initiation of price downswings. Equally important, global wars tend to reinforce and exaggerate the height of the price upswing to such an extent that the Kondratieff price waves would be difficult to discern in the absence of war and war-induced inflation. Using Box-Tiao impact assessment models, it is also possible to estimate the general effect of the intervention of war on price levels. Global wars, as opposed to interstate wars, are found to have an abrupt and temporary impact on prices. Nevertheless, the impact persists for a number of years beyond the actual duration of warfare. While some questions are raised that must go unanswered in this article, the empirical outcome helps clarify the meaning of the Kondratieff long-wave phenomenon, the less than fully appreciated impact of war on economic conditions and sociopolitical processes in general, and the nature of destabilizing linkages among the world system's political and economic subsystems.