Understanding technology cycles relevance today
Currently . . .
In the eye popping charts shown above, the Dow’s1 response to tariff regime announced in April 2025 on the right and on the left way back in 1929. The example on the right from 2025 was only two days in length. On the left the bottom of the market took three years to form. If the declines on the right continued for 10 trading days – the Dow would effectively reach zero. That is not going to happen of course. The chart on the left was the worst recorded rout ever in US market history.
The Smoot-Hawley tariffs
It should also be noted that the Smoot-Hawley tariffs are not considered to be the only cause of The Great Depression. Rather those tariffs are considered to have deepened and prolonged The Great Depression. The purpose in showing the charts is that they are indicative of a major symptom for the presence of a technology cycle. That being in the center of the cycle a transition ensues which brings with it depressions. Therefore the introduction of major tariff regimes indicate that an economy is in depression.2 Because technology cycles are so poorly understood these cycles repeat. To be clear, the history never repeats as is the case in the current cycle. This is why understanding technology cycles relevance has become more important today.
The state of the American middle classes
The American middle class is categorically what “made America great.” Not the wealth of the 1% or the size of anything else. Rather it is just the sheer size as the percentage of the total population, which was larger than any other, ever. That middle class used to make a living wage. Today more than half of the middle class lives paycheck to paycheck accruing little wealth as a buffer against difficult economic conditions which occur in everyone’s life below the 1%. Today the majority of the American middle class no longer make “living” wages. See the following chart below on right for data showing this. The PEW study explains in more detail why the US middle class is shrinking. And has been for decades. The Link opens in a new tab.
The data paints the picture clearly
The chart in upper left illustrates when the US middle class was making a living wage from 1945 until the latter 1970s. Governmental policy supporting the middle class created that power house economy through everything from union support to social security and other social programs in response to The Great Depression. The US and other nations have been dismantling social supports for the middle classes since the latter 1990s.
Why?
The answer is really two-fold. First it is where we are in the current technology cycle (the microprocessor cored ecosystem of innovation). Every technology cycle has features a depression at its center and we entered into one roughly 15 years ago. Secondarily, we are stuck in this extremely painful transition phase because the middle class is not only financially struggling while at the same time they are voting against their own self interests.3 And make no mistake, the economy is driven by the middle class – consumer spending accounts for a whopping 66% of the US economy! Therefore the health of the middle class is of paramount importance. Knowing why technology cycles are relevant is tantamount.
Traditionally depressions are classically defined as having GDP contractions. But this has not been the case in this cycle. Well at least not yet. In the current cycle the enormous tax cuts for corporations and super wealthy is likely the major factor artificially keeping US GDP from stagnating or contracting. In other industrialized nations such as Germany and Japan, their GDP’s have contracted or have been stagnant for many years now. Because those nations are not subsidizing corporations or the wealthy with massive tax cuts.
This is why understanding technology cycles is so crucial. Once understood, different economic approaches are required at different times the cycles. This stub has not attempted to fully explain the cycles. Rather just show why it is critical that they are understood. To understand technology cycles the following articles are provided:
How to further understand technology cycles relevance
The recommend next section is the pages outline the history in how technology cycles models evolved.
- Dow = Dow Jones Industrial Average (DJIA). The Dow has been a benchmark of the US technology markets which has existed through the last three technology cycles. In fact the Dow came into existence towards the very end of what is called the Long Depression in 1896. ↩︎
- The US April 2025 tariffs are three times times larger than the Smoot-Hawley tariffs. ↩︎
- This began in the 1980s under the Reagan administrations. ↩︎