‘Transitioning to Smart Green Growth: Lessons from History’ in Fouquet, R. (Ed.) Handbook on Green Growth

Perez, C. (2019) ‘Transitioning to Smart Green Growth: Lessons from History’ in Fouquet, R. (ed.) Handbook on Green Growth, Cheltenham: Elgar, pp 447-463

Places to find the book: https://www.goodreads.com/book/show/43974099-handbook-on-green-growth

Link to the working paper: http://beyondthetechrevolution.com/wp-content/uploads/2014/10/BTTR_WP_2017-1.pdf

Table of Contents: 

How did the Great Depression lead to the Post-War Golden Age?
Why can ‘smart green growth’ be a successful direction now?
The role of relative prices in shaping and accelerating the transition
The fear of technological unemployment may be unwarranted
The lessons of the transition from the 1930s to the post-war boom
Inequality and ‘differential recession’ as obstacles to visibility and action
Why would full global development be in the interest of the advanced world?
Creating the conditions for the best of possible futures

Section 3: The role of relative prices in shaping and accelerating the transition

The provision of cheap energy was a fundamental driver of the consumption pattern during the post-war boom. Both the production and the use of automobiles and electrical appliances were energy- and materials-intensive. During that time, the price of fuel and electricity in the US actually decreased, while all other prices increased significantly (see Figure 2).
By contrast, the cost of labour was going up through the pressure of the officially recognised labour unions and the reduction of the working day, week and year. Those changes increased consumption demand and spurred increases in scale and productivity in manufacturing, which were basically obtained through replacing expensive labour with machinery moved by cheap energy.

Figure 2

figure 2
Source: US Dept. of Commerce

The rapid reduction of industrial energy consumption achieved after the hike in oil prices of the 1970s and 80s was not due to great innovation. Aluminium, paper, steel, cement and petroleum refining represented 60% of industrial energy use in the United States. Each could have saved between 10 and 60% using technologies that were readily available, but were not applied before because –as they frankly declared– energy was ‘too cheap to worry about’ (see Figure 3).

Figure 3
The six Industries with maximum energy consumption in the United States in 1974, potential reduction with available technology in the 1970s and theoretical minimum

figure 2

Source: Fortune, March 1974, pp. 110-111

 As the figure suggests, the potential for energy reduction is still significant (Grubler and Riahi 2010) and industry can move in that direction if the price of energy is made to reach a level where it is profitable to do the necessary research and the innovative investment. Markets do work, but the direction they take depends on the context, and that includes relative prices and relative taxes.

As to the consequences of expensive energy for low-income consumers, it is obviously a challenge for policy makers. Solutions should be found in some form of direct or indirect compensation that will, nevertheless still encourage personal energy-saving.

Conclusion: Creating the conditions for the best of possible futures

The context created by the turning point is one where the combination of threats and opportunities are at their maximum level. The socio-political turmoil and the decoupling of finance from production seem to leave leaders impotent to turn the tide. And yet, there is never a greater opportunity to unleash the best times that the system can provide. It is a question of tilting the playing field so that the interests of business coincide with those of the majority of society. Historical experiences can teach us how to do it; understanding the nature of the ICT revolution can give us the most appropriate directions in which to stimulate the underlying potential for innovation and investment.

In this chapter, we have argued that the most appropriate directions in which to guide the ICT potential are smart green growth, leading to a constant increase in the proportion of intangibles in GDP and in lifestyles, and full global development. Global reach is in the very nature of ICT, but without sustainability shaping it, the result will not be development. Both directions would be aimed at moving finance out of the current casino behaviour and reconnecting it with real production investment. It has happened at previous turning points and it can happen again. A win–win game is there to be unleashed between business and society in every country and between the advanced, emerging and developing worlds.
Unleashing the power of ICT to bring a sustainable global boom could do for the world population what the post-war golden age did for that of the Western democracies. To turn this possibility into probability will require a difficult consensus-building process, moved by persuasion – or by a serious decline in the world economy. It is to be hoped that persuasion will succeed in time. 



Published 2002

'...the book fills an important gap in the literature on business cycles and innovations. I most strongly commend it to all those attempting to understand the past and future evolution of technology and the economy.'

Christopher Freeman, Emeritus Professor, SPRU,
University of Sussex, UK

'...Carlota Perez shows us that historically technological revolutions arrive with remarkable regularity, and that economies react to them in predictable phases. Her argument provides much needed perspective not just on history, but on our own times. And especially on our own information revolution.'

W. Brian Arthur, Santa Fe Institute, New Mexico

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Technological Revolutions Financial bubbles Installation Period Frenzy Deployment Period Golden Ages Dual strategy Techno‑economic paradigms Neo‑Schumpeterian Respecialization Synergy Turning Point Future markets Knowledge society Green growth Maturity Full global development Globalization Sustainability Socio‑economic development Paradigm shifts Irruption Market hyper‑segmentation