The population mechanism for the Kondratiev cycle continued to function during the 16^th century price revolution. The period around Kondratiev price peaks were still times of relative food shortage leading to reduced fertility. The period around Kondratiev price troughs were still times of relative food abundance and higher fertility. Timing of the Kondratiev cycle still was regulated by the population model, even though the social impact of the cycle had changed. The natural alignment of economic output with the price cycle gave rise to the War Cycle. The ends of eras of high war intensity in 1713, 1763, 1815 and 1871 (Figure 5) correspond well with Kondratiev peaks in 1711, 1772, 1814 and 1864 (Figure 14). These war peak dates directly correspond to the ends of "peak wars": War of Spanish Succession in 1714, Seven Years War in 1763, Napoleonic Wars in 1815, and Franco-Prussian War in 1871. There are also war peaks corresponding to the end of the Thirty Years War (1648) and World War I (1918) that closely correspond to Kondratiev price peaks in 1650 and 1920. Before the Thirty Years War and after WW I, the correspondence between the Kondratiev and War Cycles was not evident. This section describes how the War Cycle developed.

War has been part of the human condition from the dawn of time and the medieval era was no different. By the late medieval period, wars were no longer largely fought by feudal troop levies. Vassals had increasingly fulfilled their feudal obligations to their overlords by providing funds rather than actual troops. This development reflected the development of a money economy over the 12^th through 14^th centuries and the growth of towns, which had always preferred to meet their obligations with cash as opposed to personal military service.

As a result of these changes, a "war-fighting" economy arose in which mercenaries were available for hire by anyone with ready money who wished to fight a war. There was no shortage of monarchs willing to go to war with each other; the limiting factor was the wherewithal to pay for one's wars. The monetization of war meant that it was possible for a ruler to augment his forces by borrowing the funds needed to carry out his plans. War ceased to be a purely political activity in which a charismatic leader could inspire others to support his cause through their personal service, and came to be somewhat of a financial transaction. Any ambitious prince who could convince the bankers to lend to him could make war.

But bankers are a sober lot. They care little about glory or the righteousness of one's cause. Mostly they care about getting a return on their investment and the return of their principal. A good way for a ruler to secure a loan was to pledge certain regular revenues for the repayment of the loan with interest. For example, King Edward III pledged the revenues from the English wool tax to raise loans to fight the French early in the Hundred Years War.⁵³

As previously described, the rising prices of Kondratiev upwaves made war finance easier; the converse was true during downwaves. Downwave war often resulted in loan default and bankruptcy of the lenders. The start of the Hundred Years War in 1336 was ill-timed, being in the midst of a downwave. Figure 16 shows a sharp drop in wool exports around 1340 that forced Edward III to default on his war debt and led to the collapse of a string of Florentine banking houses.⁵³

One way to deal with downwaves was to encourage new trades that could then be taxed to provide new revenue streams. These new trades served as leading sectors to spur the growth of successive "new economies". New revenue streams could support fresh loans to support additional military campaigns. Thus we see Edward III encouraging the development of an English wool textile industry in the mid-fourteenth century. Figure 16 shows the abrupt appearance of an English woolen cloth industry shortly after Edward's default. In the next century it was the Portuguese under Prince Henry the Navigator and his successors who were opening new trading routes to African gold and Indian pepper. The discovery of America by Columbus led to probably the greatest leading sector tax revenue, the "royal fifth" of the treasure exported from Spain's Latin American colonies.

Figure 16. The growth of new trades by Western European nations

During the 14^th through 16^th centuries the basis for capitalism developed out of the scramble for taxable leading sectors to fuel militarism. Capitalism is an economic system that features private ownership of capital, market-based transactions and a growth ethic. A central tenet of capitalism is that capital is mobilized with the objective of maximizing its rate of growth. This is a new development over previous economic systems that resemble capitalism in that wealth is privately owned and market economics practiced, but which lack this growth ethic. For example, 15^th century Chinese merchants engaged in more extensive free-market trade than their European contemporaries. Rather than using their surplus profits to grow their business, successful Chinese merchants typically bought land and a title of nobility or education for their children instead, hoping to advance themselves or their offspring beyond the lowly merchant class and into the landed aristocracy or the learned Mandarin class. Fifteenth century Italian merchants also refrained from reinvesting their surplus profits to expand their own business at the expense of their fellow merchants. Doing so would provoke the same from others to the ruination of the trade. Instead they spent their surplus profits on sumptuous living and patronage of the arts. The Italian Renaissance was largely funded by these surplus trading profits.

Merchants, like everyone else, craved status and theirs was lowly. The route to status in China was land and education, in Italy it was lavish spending and patronage of the arts, but in other European countries it increasingly came from financial support of the monarch's war making policies (what might be called patriotism). As Monarchs came to realize the war potential of the income streams generated by a flourishing trade, the status of those who generated such wealth and who pioneered new leading sectors or otherwise brought wealth to the nation (e.g. privateers) was enhanced. In portions of Europe, it became possible for wealthy merchants to gain power and status without giving up their economic function. Rather, they could augment their status it by obtaining more wealth through business. They came to seek ever more wealth, beyond anything they could ever use. In this way Western merchants gradually developed the growth ethic and became capitalists.

The need for wealth to fund wars was insatiable because rulers would match increased forces by their competitors with their own increases. The cost of war spiraled ever upward,⁵⁴ requiring a ceaseless accumulation of capital to fund it all. It is this interaction between capitalism and militarism that propelled Europe from a backwater on the western edge of Eurasia to a world-dominant colossus in just three centuries. As this system developed, certain features appeared in the cycles. As described earlier, funding wars was easier during upwaves because rising prices encouraged business expansion, which increased revenues allowing larger military operations to be funded. Thus, upwaves came to be booms in existing trades and in the warfare they supported, which in tern reinforced the upwave. When the belligerents were no longer willing to finance their wars, they ended, and the inflationary prosperity of the upwave transformed into the deflationary depression of the downwave.

The War Cycle provides a second mechanism through which Kondratiev cycles (and the social distress they produce) can be created. After the end of the 16^th century price revolution when population stopped rising the population model for the Kondratiev cycle again went inactive as it had in the fifteenth century. When population again began to rise in the eighteenth century price became uncoupled from population (see Figure 16), demonstrating that the population model no longer operated. In contrast, the War Cycle continued to operate throughout the 18^th and 19^th centuries, producing regular periods of high and low war intensity with their associated economic cycles. That is, after the mid-17^th century, the Kondratiev cycle was caused by the War Cycle and not the population cycle. The question arises as to what mechanism was responsible for producing the timing of the War Cycle. In the beginning, the War Cycle "piggy backed" on the population cycle, taking its timing from that cycle. When the population model became permanently inactive after 1650, a new timing mechanism for the War Cycle was necessary. This mechanism is described in the next section.

American historian Quincy Wright, discoverer of the war cycle, proposed a generational explanation for it.⁵⁵ There is a warrior generation who experienced the ravages of war firsthand and raised the next generation to have an aversion to war. The generation after that grows up during a time of relative peace and learns to romanticize war, becoming another warrior generation upon coming of age. That is, "warrior" and "peace" generations alternate.

Figure 17 shows a diagram of an idealized version of this model. The Kondratiev cycle is divided into "seasons" with the upwave spring and summer seasons falling on the "war" side of the graphic and the downwave seasons falling on the "peace" side. A peace generation grows up in the summer and fall, the children of warrior generation parents. Their leading members reach military age around the time of the Kondratiev peak. As a peace generation they are less interested in military service and so fewer of them are available for military service. After decades of warfare, demand for additional manpower is high. The collision between rising demand for soldiers and falling supply makes continuation of war increasingly difficult and eventually the belligerents throw in the towel.

Figure 17. Schematic for the Wright generational model for the war cycle

Peace ends war-induced inflation and begins the downwave depression. There is little interest in warfare during the Fall season, and the proportion of peace generation members amongst all men of military age rises. As Fall turns to winter a new warrior generation is growing up, but until they reach military age, all potential recruits as well as their junior officers will be members of the peace generation and society will be risk-adverse towards war. Around the time of the Kondratiev trough, the first members of the younger warrior generation reach military age and most of those who knew the horrors of the last wars will have retired or died. War again becomes a viable policy

I can express this mechanism in terms of a simplistic model. Let A_MIL be the military age and L be generational length, defined as the time it takes for a birth cohort to replace themselves. Assume at time zero a warrior generation starts being born. At time = A_MIL warriors become available for military service, providing a readily available and cheap source of manpower. This is the Kondratiev trough and war breaks out soon afterward. The war generation continues to be born until time = L when a peace generation starts being born, the offspring of the first wave of the previous warrior generation, who are now disenchanted with war. At time = A_MIL + L the first members of the peace generation reach military age and peace comes soon after. This is the Kondratiev peak. Thus the peak occurs at time A_MIL + L and the trough occurs at time A_MIL. The time between peak and trough is then L and the length of the Kondratiev cycle is 2 L.

The cycle length for the population driven Kondratiev cycle is 4 D t, where D t is the time from birth to physical adulthood, or about 12-15 years (see Appendix D). A population-based Kondratiev cycle is then about 50-60 years long. The cycle length for the Wright generational model is 2L, where L is the length of a biological generation, or about 25-30 years. A war-based Kondratiev cycle is about 50-60 years long--the same cycle length as the cycle produced by the population mechanism. This correspondence means the Kondratiev cycle length remained at its Medieval and Early Modern length right up to the 19^th and early 20^th century cycles studied by Kondratiev.

In summary, the cycle of war and peace induces alternating warrior and peace generations. Associated with these generations in their rising adult phase of life are hawkish or dovish politics, forming a political policy cycle that causes the war cycle. That is, war and peace generations help create the political environment that produces the policy of war or peace. The policy creates the next generation, which (after they grow up) will produce the next cycle. Each generation begets its opposite, which after a lag, reverses the policy of their elders. That is, the Wright model is a lagged negative feedback mechanism just like the population model.

A sequence of events can be identified. First the population mechanism produced alternating periods of commodity price inflation and deflation. This led to alternating periods of rising and falling commodity production (the innovation waves) which led to rising and falling tax revenues. Oscillating tax revenues led to rising and falling war intensity (the War Cycle) which induced alternating warrior and peace generations, which fed back to produce the War Cycle. Because of their similar natural lengths and direction of operation, the population mechanism and the Wright mechanism reinforced each other, making the War Cycle more regular than it might otherwise be and helping to establish a regular sequence of warrior and peace generations. As the strength of the population model diminished as the 17^th century advanced, the war generational mechanism became the primary and eventually the sole driver of the cycle.