International Conference on Education, Economics and Humanities (ICEEH'2014) Jan. 15-16, 2014 Kuala Lumpur (Malaysia)

The Big Cycles of Accumulation of Knowledge

Dr. Gagik Vardanyan

 relative to the wealth of that country. Examples of knowledge Abstract— The knowledge economy is also seen as the latest economy activities include research, technical support and stage of development in global economic restructuring. Thus far, the consulting.[1]. developed world has transitioned from an agricultural economy (pre- The knowledge economy is a term that refers either to Industrial Age, largely the agrarian sector) to industrial an economy of knowledge focused on the production and economy (with the Industrial Age, largely the manufacturing sector) to post-industrial/production economy (mid-1900s, largely management of knowledge in the frame of economic the service sector) to knowledge economy (late 1900s – 2000s, constraints, or to a knowledge-based economy. In the second largely the technology/human capital sector). This latest stage has meaning, more frequently used, it refers to the use been marked by the upheavals in technological innovations and the of knowledge technologies (such as knowledge engineering globally competitive need for innovation with new products and and knowledge management) to produce economic benefits as processes that develop from the research community (i.e., R&D well as job creation. The phrase was popularized by Peter factors, universities, labs, educational institutes). With earth’s depleting natural resources, the need for green infrastructure, a Drucker as the title of Chapter 12 in his book The Age of logistics industry forced into just-in-time deliveries, growing global Discontinuity, And, with a footnote in the text, Drucker demand, regulatory policy governed by performance results, and a attributes the phrase to economist Fritz Machlup and its host of other items high priority is put on knowledge; and research origins to the idea of "scientific management" developed by becomes paramount. Knowledge provides the technical expertise, Frederick Winslow Taylor. problem-solving, performance measurement and evaluation, and data One of outstanding economists-theorists of the XX-th management needed for the transboundary, interdisciplinary global scale of today’s competition.[4]. century British Economist John Hicks in his work “Capital and Growth”/Oxford, Clarendon, 1965/ has noted the following: Keywords— long waves of accumulation of knowledge, the big “… Probably it is possible to imagine the economy of cycles of an economic conjuncture, information revolution, a capitalism, in which innovation arise in regular intervals, and mental potential, innovations, technological break. all system appears free from visible fluctuations, there are no reasons to assume, that rates of innovations are constant, and I. INTRODUCTION if they are not constant, this in itself the sufficient reason of HERE are different meanings and explanations of occurrence of a cycle - even enough regular cycles. [2]. T knowledge economy, and actually each one explains the The Post-Soviet countries in the beginning of fifth "K- meaning of that in different way. For example, some authors wave" which by right it is possible to name “a long wave”, explained knowledge economy as A system of consumption based on knowledge, have been occupied" by system and production that is based on intellectual capital. The transformations and the state building. In essence knowledge economy commonly makes up a large share of all «downward» wave of tsunami has struck last crushing blow - economic activity in developed countries. In a knowledge across the USSR. All power of information revolution and economy, a significant part of a company's value may consist revolution of knowledge has fallen upon the newborn of intangible assets, such as the value of its workers' countries. knowledge (intellectual capital). However, generally accepted Perhaps, created situation was meant by Vladislav accounting principles do not allow companies to include these Inozemtsev, favorite Russian Doctor in Economics, when has assets on balance sheets. come to conclusion: §chance to take a normal place in the list Investopedia explains 'Knowledge Economy' in following of the countries of leaders of the postindustrial world we way. Lesser-developed countries tend to have agriculture or (Russia - the author) irrevocably missed, and hardly in the XXI agriculture and manufacturing-based economies, while century we can really apply for a similar place ¦. It is possible developing countries tend to have manufacturing or to agree with opinion of the authoritative scientist, but not manufacturing and service-based economies, and developed concerning the whole century. World practice shows, that for countries tend to have service-based economies. Most some decades it is possible to carry out technological break. countries' economies will consist of each of these three major But for this purpose must be save up own knowledge categories of economic activity, but in differing proportions corresponding to world tendencies in area of accumulation. The main thing in this respect - §to catch the wave¦. And for this purpose it is necessary to return to sources. According to Gagik Vardanyan is with the Armenian State University of Economics, Yerevan, 0025. Armenia (phone: +37491-211917, fax: +37410-528864. §first empirical correctness ¦ theories of the big cycles of Email: [email protected].

42 International Conference on Education, Economics and Humanities (ICEEH'2014) Jan. 15-16, 2014 Kuala Lumpur (Malaysia) outstanding Soviet economist Nikolai Kondratiev, §before the 20-25 years prior to the beginning of §k-waves ¦, it is possible beginning of upward waves, and sometimes at the very to assume also, that with the termination of last economic beginning of it are observed considerable changes in the crisis the following long wave of accumulation of knowledge basic conditions of an economic life of a society ¦.[3]. and increase of intensity of innovations will begin. According Besides the others, such are §deep changes of techniques of to Kondratiev`s logic, sixth "K-wave" will begin in 2035-40th manufacture and an exchange (which considerable technical Therefore, «to catch a wave» it is necessary to begin already inventions and opening in turn precede) ¦. Further Kondratiev now – from the beginning of the sixth “long wave” noticed, that §during about two decades before the beginning accumulation of knowledge. It is possible to deduce one more of upward waves... we can observe revival in sphere of reason from a wave metaphor: waves at "ocean" of economic inventions. Before the beginning and at the beginning of and social processes lift that, overturn those or other countries. upward waves wide application of these inventions is In this sense, at “a convenient wave” even those countries, observed... ¦.[4]. Confirming to the resulted reasons, it is which on the indicators (from the point of view of economy of possible to give an example information-communication knowledge) are outsiders, can break forward. Thereupon technologies: in 1971, i.e. for 20 years prior to the beginning pertinently to recollect industrialization and technological of the fifth §k-wave ¦, the microprocessor, and in 1975 - the break of the USSR during this period when the West “groaned personal computer has been invented. Basically these torment” an economic crisis of the end 1920 and the inventions have begun the current information revolution beginnings of 1930th: in crisis (especially the USA) sold which influence has amplified in the early nineties. This many industrially developed countries of the equipment, revolution is one of the main motive forces of economy of technologies and factories. Here reduction of the citation from knowledge. It is remarkable, that right after start of the Soviet the World Development Report of 1996 in which it is companion, the USA have reconsidered the education system noticed, that achievements of planned system were and, as a whole, a chain of creation, distribution and considerable: industrialization, base formation, public health application of knowledge. After ten years preconditions of services, maintenance with dwelling and workplaces of all information revolution have been created. population, and also seeming invulnerability Great depression Being based on the above-stated and on other researches, it of 1930th If those heavy years crisis has bypassed the country is possible to assume about existence of long waves of (or a reserve not too) presently it is especially possible to leave accumulation of knowledge (on T.Rajnovu-the long waves of with rather smaller losses such situations. However discoveries and inventions), or the big cycles of approaches of those times most likely will not work. accumulation of knowledge. Proceeding from the assumption, that upward the wave of these cycles begins for

DIAGRAM 1

43 International Conference on Education, Economics and Humanities (ICEEH'2014) Jan. 15-16, 2014 Kuala Lumpur (Malaysia)

The Kondratieff Cycle is a theory based on a study of Simultaneously, it is important not only creation of nineteenth century price behavior which included wages, knowledge, but also their effective application. It should be interest rates, raw material prices, foreign trade, bank deposits, promoted by formal and informal institutes of a society. And and other data. He, like R.N. Elliott, Kondratieff was the society of knowledge-environments of the economy based convinced that his studies of economic, social, and cultural life on knowledge can be such society. For the decision of proved that a long term order of economic behavior existed problems of accumulation of knowledge and an exit on a and could be used for the purpose of anticipating future trajectory of innovative development, it is necessary to economic developments.[5]. involve some methods and systems of accumulation of He observed certain characteristics about the growth and knowledge in each country, to rely first of all on internal concretionary phase of the long wave. Among them, he possibilities of increase in a mental potential and on own detailed the number of years that the economy expanded and forces on realization of this potential. contracted during each part of the half-century long cycle, For resistance reduction to innovative development by the which industries suffer the most during the down wave, and social environment, it is necessary to raise the general level how technology plays a role in leading the way out of the of culture of the population of the country. On reduction of contraction into the next up wave. systems of accumulation of knowledge in a dynamic condition K-waves are attributes of the world economy and are more not enough time - only 5-6 years, taking into account calls and visible in international production data than in those of possibilities of sixth "K-wave" is taken away. individual national economies. They are processes In article problems of innovative development in a context of characteristic first of all of a lead national economy (such as the theory of the big cycles are considered. The idea of the that of the United States, or Britain in the 18-19th centuries) big waves of accumulation of knowledge on the basis of and of world trade in products and services of leading sectors, Kondratiev's works under the theory of the big cycles (long hence of the global economy. waves, Kondratiev's cycles, K-waves) is developed. It is 2. K-waves concern output, rather than prices, proved, that at “a convenient wave” even the economically and sector output surges and infrastructural investment in the poorly developed countries can carry out break in social and world economy rather than the general macroeconomic economic development. performance (e.g. GNP growth) of national economies. They should not be sought for in the ups and downs of such REFERENCES indicators as gross domestic product and must be distinguished [1] http://www.investopedia.com/terms/k/knowledge-John Hicks. Capital from shorter-term business cycles and fluctuations in the and growth. /Translated to Russian. Moscow, Progress, 1993, p. 439 economic conditions of individual countries. However, high- [2] http://lexbox.am/uploads/PDF/Armenian%20legistlation/English/Banki ng/Regulation_2.pdf growth periods for leading sectors tend to translate into [3] Nikolai Kondratiev. Main Problems of Economic Static’s and general economic expansion and prosperity. Dynamics. Moscow. Economy. 1989. P. 199 3. K-waves unfold as phased processes that imply S-shaped [4] Nikolai Kondratiev. Main Problems of Economic Static’s and Dynamics. Moscow. Economy. 1989. P. 218 growth (or learning) curves, including for each particular [5] Jonathan Lang. Basic Principles of Market Economy: Yesterday, today, sector, and over a period of some 50-60 years, a period of slow tomorrow. St. Petersburg, Aurora, 2007. P 55-56 start-up, followed by fast growth, and ultimate leveling-off. That is why they are waves of economic activity, each wave different in kind from the last one, rather than cycles, seen as mechanical fluctuations in attainment of some uniform quantity. The start-up period of the next leading sector is also the period of flattening growth rates, declining profits, and severe competition for the previous lead industry; this transition between two leading sectors peak may be known as downswing, and takes the form of generalized slow-down and in the 1930s, of the Great Depression.

II. CONCLUSION If during an industrial epoch it was possible to become successful with the help of several inventions, even such what was in due time the invention of Bessemer, so unfortunately it cannot be made now. Time demands, that the majority of the population not only was competent, but also ready to the global changes especially in market relations period. And for this purpose we need health, non-stop formation and, the most important thing, high level of culture is necessary.

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