An Introduction to Demand Management, Long-Run Growth and Global Economic Governance
Chapter 12: Limits to Growth?
Some see the short-term fluctuations that we studied in the previous Part, in particular in Chapter 3, as the ripples on the larger waves that they perceive to be governing economic conditions. The long waves both have a lower frequency (so that it takes longer to move from peak to trough and back again) and an amplitude that is sufficiently large to influence long term averages (whereas the peaks and troughs of the short-term business cycles are assumed to average out). Another way to say this is that during the rise of the wave we see more periods of prosperity than during the downturn. These larger waves, which thus take much more time both to build and to be recognized, are the topic of the present chapter. Whereas the short-term fluctuations often dominate the newspapers and the policy debate, the long movements play the main role in history books and often can be recognized in characterizations of periods such as the Golden Decade of Keynesianism for the 1950s and 1960s. In such periods policies and the economy reinforce each other and may thus yield either very good or very bad results. It should be noted that long wave theories typically become popular in economic downturns (probably because it holds the promise of an unavoidable upturn) so it is expected that long waves will return to the top of the research agenda again. An important element of the long wave is that it suggests that there are endogenous limits to high growth eras (and that is a lesson that is often forgotten in the optimistic decade(s) preceding a global downturn).
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