The “Kondratieff Cycles” in Shipping Economy since 1741 and till 2016

The theory of “long waves”, due to Russian economist Kondratieff, which appeared in the 1920s, is presented, and a search whether a similar pattern exists in shipping economy since 1741 is made. Kondratieff believed in the existence —inherent in capitalistic system—of at least 21/2 long cycles of a non-random duration of 54 years on average since 1780—with 27 years up and 27 years down. As we showed—using mainly a diagrammatic analysis—economic history verified—till end-2008—Kondratieff’s theories, though it rejected his claimed harmony in their duration. Given that history may be repeated, and only for this is useful, we tried a nonlinear dynamic forecasting model for dry cargo shipping market for 20 years ahead using “Rescaled Range Analysis” and “Kernel Density estimation method” and found that cycles are here to stay. Presented also is the merger-waves in capitalistic economies since 1893— a factor ignored by Joan Robinson in her macroeconomic analysis for the trade cycle in the 1960s. Further we confirm/reject previous analysts, including Schumpeter, who claimed: 1) that technology has created the long shipping cycles (since 1741); 2) that the impact of major wars since 1740 on freight markets was another cyclical cause; 3) that economies of scale play the significant role and 4) that the impact of risk emerged at a certain time though this outcome was too ignored by macroeconomists. The paper “discovered” the secular shipping cycles of a total duration of 139 years using the proper extra-long time data. This means that the discovery of unknown cycles is a matter of data’s longevity. We have also verified Kondratieff’s cycles—when data were divided in 3 separate technological periods: 1741-1871; 1872-1947 and 1947-today, but lasting longer i.e. 58 years on average. We saw that the great gift of capitalism, which is the “free will”, is to be accompanied by “rationality”, and by a deep knowledge of how capitalistic system functions—a warning placed by Kondratieff a century ago—so that to avoid crises like that at end-2008; also globalization has to be used for the benefit of all nations. This paper indicated new tools: the “Joseph effect”—for cycles and the “Hurst exponent” for long-term dependence; the “Noah effect”—for sudden catastrophes and the “alpha coefficient” for risk. We reckon that economists are there par excellence to protect people and business men from risks and cycles and from the “Noah effects”.