The INs And The OUTs

What is going on in America these days is an epic battle between the INs and the OUTs. To get a good handle on it we should first look at an economic theory first proposed by Russian Nikolai Kondratieff in 1925. The modern interpretation of his theory goes like this:

According to the innovation theory, these waves arise from the bunching of basic innovations that launch technological revolutions that in turn create leading industrial or commercial sectors. Kondratiev’s ideas were taken up by Joseph Schumpeter in the 1930s. The theory hypothesized the existence of very long-run macroeconomic and price cycles, originally estimated to last 50–54 years.

In recent decades there has been considerable progress in historical economics and the history of technology, and numerous investigations of the relationship between technological innovation and economic cycles.

I would add that there is also a political dimension to the waves and I will get to that But first there is a chart I like a lot that explains the waves we have seen so far. The chart is from the blog deconstructingrisk.

Kondratieff WavesThe cycles are divided into four periods. Expansion, turning point, stagnation, and recession

As you can see we are currently in the down (recession) part of a cycle. It is not a happy time. The unhappiness is because most of the profits from exploiting the last wave of technology have been extracted and the rising part of next wave has not yet gained sufficient strength to have a general effect. Economically we have stagnated. And that brings me to politics.

And for the politics I’d like to look at the early technology of electricity. In the early days of electricity Direct Current (DC) was the king. And the emperor of DC was Thomas Edison. A flash of inspiration today is still represented by a light bulb turning on over the inventors head. DC was a combination of two technologies. The steam engine and the DC generator. It was a great advance. The power source (the steam engine) did not have to be mechanically tied to the mechanical load – wires and the DC motor allowed the two to be separated. That gave a lot of flexibility in machine design. You could also have big loads and small loads driven by one power source without needing a lot of shafts and gearing.

Edison was a clever guy and he got politically connected He got his big start in New York City despite his labs being in Menlo Park, New Jersey (I visited the remnants of his Menlo Park lab when I was a kid visiting relatives in Newark).

There were some problems though. DC is essentially a local technology. The loads had to be within about a mile of the generator because otherwise the losses caused by the currents flowing through the wires was too great. You could compensate for that with higher voltages but those higher voltages had the problem of safety.

Now along came a guy called Nikola Tesla. His greatest invention was the Alternating Current (AC) motor. You no longer needed DC to turn shafts. AC was also very easy to transform from higher voltages to lower voltages. And vice versa. You used coils of wire wound around magnetic steel. And that device was called a transformer. That allowed high voltage transmission (lower losses due to lower current) over hundreds of miles. Quite an improvement over local DC generators.

The installation of all those DC generators was also a political matter. Edison had to negotiate with local politicians to locate his plants and string the wires needed for local transmission. And Edison and his political cronies resisted AC for a number of good and not so good reasons. DC light bulbs would work as well on AC if the voltages were correct. But many kinds of DC motors did not work at all on AC. A switch to AC would mean a lot of lost capital. And of course economics entered in. Edison would not be making as much money (maybe none). So there was a period of time during the transition where there were a lot of political fights.

Edison went so far as to invent the electric chair (an AC device) to prove the dangers of AC. We all know Edison lost that battle but a lot of companies today still bear the Edison name. They eventually switched to the better (for the time) AC technology. The battle over what kind of electricity should be in general use was called The War of the Currents. And as is usual, politics slowed the transition to the better technology because the Edison folks worked hard to get AC banned by law. Eventually J.P. Morgan and Tesla prevailed. Because large scale technological advance does not happen without finance.

And so here we are today. My favorite example of politics slowing technological advance today is cannabinoid medicine. It promises to revolutionize medicine. And the INs (Big Pharma) are fighting the OUTs with everything they have. The technology is immoral is quite a common tactic. Big Pharma is one of the largest supporters of “Drug Free America”. That is breaking down because we have a war on and cannabis (smoked) is one of the best medicines for relief from the PTSD that is debilitating so many of our veterans.

The science is unproven is another line of attack. There are actually laws against human trials of the plant. And that despite thousands of years of history where the plant was known to have medicinal value.

At the present time there are still two candidates in the race for President who favor the OUTs over the INs. Bernie Sanders and Donald Trump.

It is my estimation that Trump is on the side of the OUTs generally. His current pointman on energy issues supports fracking and is no fan of the idea that plant food (CO2) causes global warming. And guess what? At this point in time the OUTs are better for humanity than the INs. Which has always been the case so far in technological history. But these things only matter when the last wave has been nearly fully exploited. We are there. Or here. Now. Depending on how you look at it.


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