Publications

“Technology evolves through revolutions because the prevalence of a specific paradigm, induces a profound social adaptation to its characteristics”

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Theoretical Framework

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"Technological Revolutions: Which Ones, How Many and Why It Matters: A Neo-Schumpeterian View"

2021 Perez, C. and Murray Leach, T. Working Paper – Horizon Project Beyond 4.0 Publications

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Introduction

The BEYOND4.0 project takes its name from Industry 4.0, a term coined at the turn of the last decade to promote the technological upgrading of German industry and popularised by Klaus Schwab (2016) via his leadership of the World Economic Forum. Over the past decade, it has gained significant traction in discussions of technological or industrial revolutions, despite not being well defined (Kowalikova et al., 2020); according to Schwab, it relates to cyber-physical systems, whereas to others, it relates to advanced ICT and/or AI and robotics. Either way, this fourth revolution has been heralded by some as the saviour of our futures while perceived by others – sometimes in tandem, sometimes opposingly – as the cause of job and skill losses, regional declines and further threats ahead.

However, the definition of what makes a technological revolution is not clear and established. Since the mid-eighteenth century, academics and policymakers have been intrigued by repetitive historical patterns of economic growth and decline and the links between these patterns and major shifts in the socio-economic context. For some of those scholars, the influence that technological change has played in these shifts has been a key area of interest. Yet different schools and authors have identified different numbers of revolutions and provided diverging interpretations of their nature and consequences. Whilst there have been some attempts to outline definitive historical periodisations with categorical ‘empirical evidence’ (see Section 3.1), these have not resulted in any watertight conclusions. We hold that it is not actually possible to judge what are, in fact, theoretical frameworks as correct or not, because they are, precisely, theories – and each one focuses on a particular question, or set of questions and goal, and uses a different lens to interpret and slice history.

Thus, what we hope to do with this background paper, a critical survey of the study of the relationship between technological revolutions and economic growth in the industrial era, is not to discuss the validity of the different interpretations, but rather to identify the point of view that leads to each periodisation. The goal is to broaden our understanding of the notion of technological or industrial revolutions, and to consider the impact that different approaches have on the application of history to our understanding of the present and the future. We argue that ultimately there are clear advantages to complementing Schwab’s concept of Industry 4.0 with a neo-Schumpeterian interpretation; one which emphasises the role the State and wider society can play in shaping technological progress, specifically when it comes to policy design in relation to skills, employment and their relationship to social wellbeing.

The paper is laid out as follows. Section One is a discussion of our approach to the literature review and a brief description and summary of the broader literature and popular discourse survey work that was done for Task 7.1, the detailed findings of which can be found in the extensive Appendix to this paper.

Section Two is a detailed summary of the key contributions. The interpretations of economists studying growth – Kondratiev, Schumpeter, Kuznets, Maddison and others – are contrasted with the periodisations made by economic historians – Landes, Mokyr – and by those focused on the consequences of technical change – R. Gordon, Frey and Osborne. We also cover the input of Marxist scholars – Hobsbawm, D. Gordon, Bowles; of those concerned primarily with socio-technical transition processes – Geels et al.; and the analyses and predictions of the future of technology focused on the worlds of management and engineering, such as Brynjolfsson and McAfee, Schwab and others.

Section Three is a summary of the neo-Schumpeterian approach and includes a detailed primer on the dating and content of each technological revolution: the associated raw materials, general-purpose technologies, infrastructures, and organisational forms; the periods of installation, bust and boom; and the defining ‘lifestyle’ that has aided in the positive-sum deployment of the new technologies for business and society.

In Section Four, the paper argues that the differences in interpretation stem from the focus and premises adopted by each author and from the types of interactions studied and highlighted, with a particular warning regarding the tendency towards technological determinism and the importance of understanding the role of society in shaping the direction and diffusion of technology.

Finally, Section Five compares the Schwab and Neo-Schumpeterian approach, concluding that they are complementary. The paper holds that the way revolutions are defined leads to different policy implications, and that is why the interrogation of theoretical notions is crucial; our primary objective will be to compare the way that each of the models understands the nature of the revolution and the power of society to mould it, believing that understanding defines the capacity to guide policy action effectively.

Concluding Words

The current popularity of the notion that we are in the midst of a ‘Fourth Industrial Revolution’ comes at a time when the growing inequality characterising the past few decades has become evermore unacceptable and its reversal evermore urgent. The COVID-19 pandemic has not only increased that sense of urgency, but also brought into focus the role of innovation in solving major problems such as global health – and the power of governments to both foster that innovation and support the economy in multiple ways.

In these circumstances, the role of technology, as a set of tools that can both solve existing problems – such as unemployment, environmental damage and global inequality – and create similar problems of its own is being increasingly recognised. In particular, the answers to the questions of its degree of inevitability, of its possible or negative effects and of society’s capacity or incapacity to shape it for the common good, are becoming essential. All too often, the pronouncements that we are in a technological revolution come both without critical interrogation, and with an underlying bias toward technological determinism.

In this paper, we have tried to map the various avenues pursued by scholars of technological evolution, from the ones who see it dimly as the possible cause of major economic fluctuations, through those who focus on one or another of the particular changes it produces – be it in politics, society, work, production practices or employment – to those who emphasise the mutual influence between technology and society. We have tried to illustrate how the different framings can lead to different understandings of how best to act now. It is our contention that the neo-Schumpeterian identification of the recurring historical pattern in the propagation of technological revolutions and the role played in each period by finance, production, politics and government policy is particularly useful for identifying the opportunities for social shaping. At the same time, the understanding of the processes provided by the Dutch transitions school can illuminate the types of action and the roles played by the different actors in each of the sectors. In addition, a useful method for guiding the actual process of change is the work of Mariana Mazzucato on the use of ‘missions’, a practice that can be adopted by governments to bring together the action of multiple agents in society all focused on achieving one after another of the desired goals (Mazzucato, 2021).

Armed with this deeper understanding, the route to a better future can be helped by the many scholars who are taking up the Industry 4.0 framing to analyse the specific risks and promises of the frontier technologies in each of the areas where they influence change. A technological revolution is a massive process of change across society, affecting and affected by everything from geopolitics to lifestyles. Understanding the way such changes have been faced historically is likely to increase the chances of success in overcoming the major threats confronting humanity today, and in building a socially and environmentally sustainable world.

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“Capitalism, Technology and a Green Global Golden Age: The Role of History in Helping to Shape the Future”

Perez C. (2016 ) In Mazzucato and Jacobs eds. Rethinking Capitalism London: Wiley Blackwell Ch. 11 pp. 191-217.

Working Paper

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Introduction

The increased awareness of the role of technology and innovation in the economy has not yet found a clear expression in orthodox economic theory – or in the growth strategies being applied across most of the advanced world. There are currently widely divergent opinions on the likely impact of information technologies on growth and employment. While the optimists claim that these technologies, guided by the market, will eventually bring growth, the naysayers counter with predictions of high unemployment and low growth. At the same time, a significant proportion of the environmental movement has been calling for zero growth, ‘de-growth’ or similar, essentially blaming technology for climate change and other environmental and social ills.

In this chapter, I shall argue that what all of these divergent views on technology and growth share is the absence of a proper historical understanding of innovation: of its nature, of the interactions it generates in the economy, and of the regularity in the technological upheavals from which innovation has sprung since the first Industrial Revolution. Although it is difficult to find an economist today who will not accept that innovation is a key driver of economic growth, it remains almost impossible for them to express its impact adequately in orthodox models. Increases in labour productivity through the change in proportions of labour and capital do reflect process innovations, but the impact of radical product innovations can neither be expressed nor predicted. Such truly new capital goods and infrastructures as (historically) steamships, railways and computers, which cost less and less at the same time as their influence on growth and society becomes more and more powerful, are probably the most dynamic inducers of growth. The specific nature of these technologies is not easily measurable, and there are hardly any comparable statistics of such “game-changers” across the past two centuries, so they are routinely ignored. Yet this oversight is a waste of one of the richest sources of knowledge about how growth comes about and how jobs are created and destroyed.

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“From long waves to great surges: continuing in the direction of Chris Freeman’s 1997 lecture on Schumpeter’s business cycles”

(2015) European Journal of Economic and Social Systems, Volume 27 – N° 1-2, pp. 69-79

European Journal of Economic and Social Systems

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Abstract

This is the third of a series of three articles: The centrepiece is the posthumous publication of Chris Freeman’s critique of Schumpeter’s Business Cycles in a 1997 lecture. It is preceded by “An Introduction” by Alan Freeman and followed by an article of mine, “From Long Waves to Great Surges. Continuing in the direction of Chris Freeman’s 1997 lecture”.

The following are the links to the corresponding abstracts:

• Introduction to Chris Freeman’s “Schumpeter’s ‘Business Cycles’ Revisited“

Alan FREEMAN · pp.37-46
• Schumpeter’s “Business Cycles” Revisited
Christopher FREEMAN · pp.47-67
• From Long Waves to Great Surges
Carlota PEREZ · pp.70-80

Link to full articles

– Freeman Alan (2015) Introduction EJESS

– Freeman (1997:2015) Schumpeter’s “Business Cycles” Revisited

– Perez (2015) From long waves to great surges: continuing in the direction of Chris Freeman’s 1997 lecture

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"Unleashing a golden age after the financial collapse: Drawing lessons from history"

2013. “Unleashing a golden age after the financial collapse: Drawing lessons from history” in Environmental Innovations and Societal Transitions, Vol. 6, March, pp. 9-23

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Abstract

The current crisis is not a “black swan” but a recurrent historical event midway along the successive technological revolutions. In contrast with other crises, the ones that follow the major technology bubbles install a vast innovation potential that can be unleashed with adequate government policies. The so-called Golden Ages in the past two centuries (the Victorian boom, the Belle Époque, the post war golden age) have followed post-bubble recessions. After governments save the banks and jump-start the economy, they need to regulate and reorient finance towards the real economy while fostering synergistic growth in agreed directions. The article holds that the possibility is there for unleashing a golden age – national and global – by tilting the playing field in favor of “green growth”. The question is whether the conditions for government to become proactive again are as favorable as after WWII.

Keywords

Financial bubbles, golden ages, great surges, green growth, industrial policy, techno-economic paradigms, technological revolutions

Highlights

The current post-bubble recession is more akin to that of the 1930s than to that of the 1980s.
Economic revival requires the equivalent of the Welfare State, Bretton Woods and the New Deal to unleash innovation and investment.
To be effective, the regulation of globalized finance must be supranational and overcome opacity.
“Green growth” is not only for saving the planet but is probably the most effective route to saving the economy.
The conditions in favor of active State intervention to shape markets are not yet ripe but there are several growing trends pointing in that direction.

Introduction
Not a “black swan”: the historical recurrence of bubbles and crises
Three steps out of the post-bubble collapse
Emergency action to save the patient
An adequate institutional framework for global finance
Creating conditions to guide synergistic growth
Overcoming the crisis by tilting the playing field to redirect innovation
Are the socio-political conditions favorable to unleashing the next golden age?

List of Figures

The historical record: different prosperities on either side of the financial collapse
Pendular polarization of income along each Great Surge of Development in capitalism

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"Financial bubbles, crises and the role of government in unleashing golden ages"

2013. In Pyka, A. and Burghof, H.P. (eds.) (2013) Innovation and Finance. London: Routledge, Ch.2, pp. 11-25

Working Paper 2012 FINNOV WP-2-12

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Abstract

This article holds that the recent financial collapse belongs to a family of major boom and bust episodes associated with the way in which successive technological revolutions are assimilated by the economy and society. This understanding would move policy thinking away from trying to regulate against further bubbles and, instead, towards actively shaping market conditions to enable the full flourishing of the newly installed technological potential into what can be a sustainable global golden age. Such an objective would also guide the necessary changes in taxation and the financial system in order to make real economy investment more profitable than casino finance. The article briefly describes the recurring historical pattern, discusses the nature of what can be seen as the recent double bubble collapse and examines the elements of a possible global golden age combining universal ICT, “green” growth and full global development.

"The financial crisis and the future of innovation: A view of technical change with the aid of history"

2011. In van Tilburg et al. (Eds), Let finance follow and flow: Essays on finance and innovation, The Hague: AWT

WP: February 2010. Working Papers in Technology Governance and Economic Dynamics, No. 28, Tallinn University of Technology, Estonia, and The Other Canon Foundation, Norway

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Summary

This essay locates the current financial crisis and its consequences in a historical context. It briefly outlines the difference in patterns of innovation between the first two or three decades of each technological revolution -regularly ending in a major financial collapse- and the next two or three decades of diffusion, until maturity is reached. With this historical experience in mind, the essay discusses the opportunity space for innovation across the production spectrum taking into account the specificity of the Information and Communications Technology (ICT) paradigm and the increasing social and environmental pressures in the context of a global economy. Finally, there is a brief look at the sorts of institutional innovations that would be required to provide adequate finance to take full advantage of those opportunities.

Introduction: The mixed consequences of major bubble collapses

Major bubbles in the market economy are complex processes with mixed consequences. The NASDAQ boom, the collapse of which brought a two year recession and permanently wiped out half the illusory value of the inflated technology stocks, facilitated enough over-investment in telecommunications and fibre optic cables to interconnect the global space digitally and bring hundreds of millions of people into Internet use.1 The 2008 meltdown is having and will have a much deeper and more widespread negative impact on the global economy. The upside of that is made up of two very different consequences: One is the fact that from 2004 to 2007 there was a definite impulse to global growth. At the centre of it were the Asian economies, especially China and India, which through their lower costs for products and services increased the buying power of salaries in the already industrialised world and also gave a respite to the energy and materials exporting countries through a major increase in prices. This had as a counterpart, though, that the boost in consumption in the more advanced economies that facilitated this global growth was fed by the export surplus funds coming back from Asia. This inflated the housing bubbles that nabled growing consumer credit on the back of the asset price gains. The bursting of those bubbles has brought the whole network down and turned the positive feedback loop into a vicious downward spiral. Nevertheless, globalisation is a fact and the new emerging economies will change the shape of the world to come.

The other consequence of the bust, which could in some sense be defined as ‘positive’, is that by revealing all the crooked ways of the financial world during the boom, it has broken the myth of an ideal ‘free market’ and brought back the State into an active role in the economy. Such a come back is not limited to restraining the abuses of finance but extends to avouring the expansion of production and job creating activities over speculation and to spreading the benefits of growth more widely across society. This happened in the past after each of the major technology bubbles, with different intensity and in varying manners depending on the historical moment and on the specific technological revolution that underlay the boom. The most recent and strongest case of State intervention in these directions is, of course, the Welfare State and the Bretton Woods agreements and institutions, after the war and the long depressive years of the 1930s. The set of institutional innovations adopted then was very well adapted to the requirements of the mass production technologies of the time, which were able to bring consumer prices down to the level of workers’ wages, as long as the market was large enough to reap the full economies of scale.

The current meltdown will require, after the initial rescue of finance, an equivalent set of institutional innovations at several levels: global, supranational, national, regional, local and community. The governance structure of societies is likely to experience changes as profound as those that turned the rigid pyramidal and strictly hierarchical and compartmented organizations of giant corporations into relatively flat, highly flexible and dynamic networks spanning the globe. Rather than strictly separate single-function departments with interaction only at the top, these nimble giants now count on innumerable single-purpose (though often multi-function) units that are small, agile, creative and empowered to pursue the defined objectives in their own chosen manner and to respond immediately and autonomously to changes in context or in clients’ demands. A transformation of equivalent magnitude and direction is now in order for the State at all levels, though taking into account the difference in criteria, guiding principles and goals.

This essay begins by briefly summarizing the path followed by the operation of the market system in the process of installing and deploying successive technological revolutions and locating the current historical moment in that recurring sequence. A second section examines the sources of criteria to ‘foresee’ the directions of innovation in the next two or three decades and the final section discusses the policy challenges posed specifically by the need to foster the pursuing of those directions.

1- The Internet really only began in 1994 but by 2000 there were already more than 300 million people using it. The estimate now is one and a half billion. From http://www.internetworldstats.com/stats.htm downloaded April 13, 2009

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"Technological Revolutions and Techno-economic paradigms"

(2010) In Cambridge Journal of Economics, Vol. 34, No.1, pp. 185-202

CJE, Working Paper

Spanish translation: Revoluciones tecnológicas y paradigmas tecno-económicos

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List of Tables and Figures

Figure 1. The trajectory of an individual technology

Table 1. Five successive technological revolutions, 1770s to 2000s

Table 2 Five Technological Revolutions: Main industries and infrastructures

Table 3 The five great surges of development and their techno-economic paradigms

Abstract

This paper locates the notion of technological revolutions in the Neo-Schumpeterian effort to understand innovation and to identify the regularities, continuities and discontinuities in the process of innovation. It looks at the micro- and meso-foundations of the patterns observed in the evolution of technical change and the interrelations with the context that shape the rhythm and direction of innovation. On this basis, it defines technological revolutions, examines their structure and the role that they play in rejuvenating the whole economy through the application of the accompanying techno-economic paradigm. This over-arching meta-paradigm or shared best practice ‘common sense’ is in turn defined and analysed in its components and its impact, including the influence it exercises on institutional and social change.

Introduction

The growing impact of the Information Revolution and the visibly increasing importance of innovation and entrepreneurship has resulted in a resurging interest in Schumpeterian ideas. Brad De Long suggested in his review of McCraw’s biography of Schumpeter that the late 20th and early 21st Century should be as much a Schumpeterian reign as the mid 20th Century was Keynesian.2

Indeed, Schumpeter is among the few modern economists to put technical change and entrepreneurship at the root of economic growth.3 Yet, strangely enough, he saw technology as exogenous and –together with institutions and social organisations– “outside the domain of economic theory”4. His focus was the entrepreneur and his goal was to explain the role of innovation in economic growth and on the cyclicality of the system.

It is the Neo-Schumpeterians who have endeavoured to analyse technical change and innovation as such, with their regularities and evolution; who have delved into the characteristics and dynamics of innovation, from individual technical changes through clusters and systems to technological revolutions. This task has been performed by looking at technology, engineering and business organisation from the perspective of the economist and the social scientist, identifying the common features in the processes of evolution, in the interrelations and in the breakthroughs that occur in the most diverse technical areas. These regularities then inform an understanding of the relationship between technical and organisational change, between these and economic performance as well as the mutual relationships between technology, the economy and the institutional context.

This paper will concentrate on technological revolutions and techno-economic paradigms, their definition, the causal mechanisms that bring them about, their impact on the economy and institutions and their relevance for economic analysis. Yet, since these macro phenomena are deeply rooted in the micro-foundations of technical change, the following section will refer to some of the basic theoretical advances made at the micro and meso levels.

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"The double bubble at the turn of the century: technological roots and structural implications"

2009. Cambridge Journal of Economics, Vol. 33, No. 4, pp. 779-805 ISBN 0-86187-949-X

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2009. “Technological roots and structural implications of the double bubble at the turn of the century”, CERF Working Paper No. 31 Cambridge Endowment for Research in Finance, Judge Business School, University of Cambridge, U.K. April.

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Abstract

This paper argues that the two boom and bust episodes of the turn of the Century -the Internet mania and crash of 1990s and the easy liquidity boom and bust of 2000s- are two distinct components of a single structural phenomenon. They are essentially the equivalent of 1929 developed in two stages, one centred on technological innovation, the other on financial innovation. Hence, the frequent references to that crash, to the 1930s and to Bretton Woods, are not simple journalistic metaphors for interpreting the “credit crunch” and its solution, but rather the intuitive recognition of a fundamental similarity between those events and the current ones. The paper holds that such major boom and bust episodes are endogenous to the way in which the market economy evolves and assimilates successive technological revolutions. It will discuss why it occurred in two bubbles on this occasion; it examines the differences and continuities between the two episodes and presents an interpretation of their nature and consequences.

List of Tables and Figures

● Table 1 Five great surges of growth and five major technology bubbles

●Figure 1 Three major technology bubbles as paroxystic culmination of a long process of experimentation with new technologies and infrastructures

● Figure 2 Major technology bubbles involve differential asset inflation biased to the “high tech” stocks – the information technology bubble in the 1990s

● Figure 3 The mass production bubble in the 1920s was also concentrated on the high tech stocks

● Figure 4 At the boom, the NASDAQ overtook the NYSE in volume of trading

● Figure 5 The abandonment of fundamentals: Not earnings but capital gains

● Figure 6 The abandonment of fundamentals is even more intense regarding the new technologies

● Figure 7 The decoupling of the stock market from the real economy: market capitalisation disregards the behaviour of profits

● Figure 8 The intensification of financial activity overtakes asset inflation during the bubble

● Figure 9 Much of the increased bubble activity revolves around the new tech stocks

● Figure 10 The more enduring impact of the bubble collapse on the new technology sectors than on the rest

● Figure 11 The MTB also fosters the flourishing of new companies and types of funds in the financial sector

● Figure 12 The late 1920s as a single major technology bubble

● Figure 13 The 1990s and the 2000s: Different focus on technology or financial shares

● Figure 14 The 1990s and the 2000s: Differential asset inflation

● Figure 15 The 1990s and the 2000s: Change in the weight of new technology shares

● Figure 16 The 1990s and the 2000s: Very different real interest rates

● Figure 17 Two rhythms of monetary expansion according to Milton Friedman

● Figure 18 The 1990s and the 2000s: Continuity and acceleration in the instruments of casino-type speculation

● Figure 19 The intensification of globalisation after the MTB collapse and into the ELB

● Figure 20 The intensification of the MTB bias towards financial profits during the ELB

● Figure 21. A The decoupling from the real economy intensified from the 1990s to the 2000s

● Figure 21. B The contrast with the deployment period of the previous surge: 1947-1974

Introduction

The economic literature seems to pay less attention to financial bubbles than would be warranted by their profound effect on economic growth both during the boom and after the bust. There tends to be an implicit agreement that they are a derailment of the market mechanism due to external causes. In fact, the Austrian and Chicago schools, but also most neoclassical economists, tend to lay the blame on government, be it monetary policy or distorting regulation (Hayek 1933; von Mises 1949). The rational expectations school is more inclined to see such events as the intelligent work of the invisible hand, as seen in the literature on rational bubbles (Blanchard and Watson 1982; Diba and Grossman 1988).By contrast, J.K. Galbraith (1990) saw them as a recurring loop of delusion built-up by the market mechanism, but as fundamentally irrational and due to mass euphoria, herd behaviour and greed. It was Minsky (1982) -following Keynes (1936), and in turn followed by Kindleberger (1978)- who saw financial crises as a natural consequence of the way debt markets work and advanced the financial instability hypothesis.

This paper proposes to distinguish major technology bubbles (MTBs) as a special class of bubbles that constitute a recurring endogenous phenomenon, caused by the way the market economy absorbs successive technological revolutions (Perez 2002). They are different both in nature and consequences from the bubbles induced by excess liquidity from whatever source and from the Ponzi finance moments identified by Minsky. They are the result of opportunity pull rather than of easy credit push. But they are indeed bubbles. They are moments of Galbraithian irrationality, but, at least in terms of prefiguring the future value of some of the stocks involved, they also contain an element of rationality (Pastor and Veronesi 2004 and 2005).

History has given us the ideal laboratory: a major technology bubble -the 1997-2000 Internet Mania- followed by the easy liquidity bubble of 2004-07. The fact that they took place in rapid succession provides us with clearly comparable and compatible data. Yet it also suggests that they are strongly connected and interrelated.

This paper will argue that the two bubbles of the turn of the century are two stages of the same phenomenon. The first section below discusses the endogenous nature and consequences of major technology bubbles. The second analyses the reasons for the easy liquidity bubble to have followed in the wake of the NASDAQ collapse. In the third and fourth parts the two bubbles will be contrasted and compared, distinguishing their differences and similarities. Finally, there will be a brief summary of the argument and its implications in terms of policy challenges.

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WP: "Great surges of development and alternative forms of globalization"

2007. TOC/TUT WP No. 15 Working Papers in Technology Governance and Economic Dynamics, The Other Canon Foundation, Norway and Tallinn University of Technology, Estonia.

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2009 Published in Spanish: “La Otra Globalización Los Retos del Colapso Financiero”, Problemas del Desarrollo: Revista Latinoamericana de Economía Vol. 40, No. 157, pp. 11-37 (México) April

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1. In Great Surges in economic development: Recurrence and uniqueness
2. The ruthless role of the major technology bubbles
3. The legacy of the bubble: three tensions at the Turning Point
4. The need for institutional recomposition to favor production over finance
5. Why globalization?
6. Some thoughts on the possibility of a positive-sum globalization
7. The Institutional Challenge

List of Tables and Figures

● Table 1 The five great surges of development: Technological Revolutions and Techno-economic paradigms
● Figure 1 The double nature of technological revolutions
● Table 2 A different techno-economic paradigm for each great surge of development
● Figure 2 The life cycle of a technological revolution
● Figure 3 The social assimilation of technological revolutions breaks each great surge of development in half
● Figure 4 Parallel surges with major bubbles, Golden Ages and approximate dates of Turning Points
● Figure 5 Income polarization as one of the negative legacies of the Installation Period

Introduction

The present understanding of globalization is inextricably tied to the free market ideology for both proponents and opponents. This paper will argue that globalization has many potential forms of which the neo-liberal recipe, applied up to now, is only one.

The need to recognize the whole planet as the economic space is an inherent feature of the present technological revolution and its techno-economic paradigm. However, just as national State intervention in the economy took several different forms in the previous mass production (or “Fordist”) paradigm, so globalization can be socially and politically shaped in order to favor truly global development and support the full deployment of the current flexible production (or Information technology) paradigm.

Simply put: globalization need not be neo-liberal. A pro-development version of globalization has not yet been designed or defended as such (1). It will be argued that, without it, not only would it be very difficult to relaunch development in the South but also to overcome the present instabilities, imbalances and recessionary trends in the economies of the North.

These propositions stem from an historically-based model of the way in which successive technological revolutions are assimilated in the economic and social system, generating great surges of development that follow a recurring sequence and involve major readjustments in both the economic and the socio-institutional spheres (2).

In terms of this model, the present period, after the collapse of the major technology bubble, would be at the mid-point of the current great surge, right when the structural tensions that underlie the ensuing instability and recessionary trends require a fundamental institutional recomposition. Among other tasks, income needs to be re-channeled towards new layers of consumers in order to help overcome the premature market saturation that results from the polarization of income in the top band of the spectrum in each country and in the world. This paper will argue that the present is, for that reason, the most appropriate time to put forth bold proposals for a profound redesign of global regulation and institutions.

The argument is developed beginning with a general summary of the model, in section 1. Then, Section 2 focuses on the recurrence of great financial bubbles, a decade or two after the irruption of each technological revolution, and examines their role in facilitating paradigm shifts and in concentrating investment in the installation of the new infrastructures. Section 3 analyzes the post-bubble recessions and the structural distortions inherited from the “casino” economy, while Section 4 discusses the need to overcome those tensions by means of appropriate regulation and institutional changes. Section 5 analyzes the globalizing nature of the Information Technology paradigm followed in section 6 by a discussion of the features of that paradigm that could lead to a positive-sum game between North and South. Finally, section 7 looks at the institutional challenges involved in such a post-neo-liberal form of globalization taking into account some of the present world trends and their possible outcomes.

1 Though it could be held that the European Union has some important features of such a version Up

2 This paper is largely based on Perez (2002) [Spanish edition 2004]

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WP: "Respecialisation and the deployment of the ICT paradigm: An essay on the present challenges of globalisation"

2007. In Compano et al., The Future of the Information Society in Europe: Contributions to the Debate, Technical Report EUR22353EN, IPTS, Joint Research Centre, Directorate General, European Commission).

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List of Tables

Table 1 The five great surges of development: Technological Revolutions and Techno-economic paradigms
Table 2 The different features of the Installation and Deployment periods
Table 3 The respecialisation of the advanced countries: Local specificity as one of the forces guiding investment for the domestic market

List of Figures

Figure 1 The social assimilation of technological revolutions breaks each great surge of development in half
Figure 2 Variation in the share of the nation’s income earned by the top 0.1 percent of U.S. taxpayers 1920-2002
Figure 3 Market segmentation and its differing conditions from raw materials to all manufacturing and services
Figure 4 Some examples of products in different market segments
Figure 5 Possible trends in the global distribution of the hyper-segmented markets of each industry

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"Finance and technical change: A long-term view"

2004. In H. Hanusch and A. Pyka, eds. The Elgar Companion to Neo-Schumpeterian Economics, Edward Elgar, Cheltenham, pp. 775-99

WP “Finance and technical change: A Neo-Schumpeterian perspective” CFAP-CERF WP No. 14 , Cambridge Endowment for Research in Finance, Judge Business School, University of Cambridge, U.K.

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2011. African Journal of Science, Technology, Innovation and Development Vol. 3, No. 1, pp. 10-35.

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Abstract

The paper presents an alternative model of the emergence and propagation of technological revolutions. It proposes an explanation of the clustering and the spacing of technical change in successive revolutions. It provides arguments for the recurrence of clusters of bold financiers together with clusters of production entrepreneurs and an interpretation of major financial bubbles as massive episodes of credit creation, associated with the process of assimilation of each technological revolution. It concludes by demonstrating that financial capital has a fundamental role in the articulation and propagation of technological revolutions.

Introduction

Ever since Kuznets published his review (1) of Business Cycles questioning the sudden clustering of entrepreneurial talent that was supposed to accompany each technological revolution (2), Schumpeter’s followers have felt uneasy about this unexplained feature of his model. Yet apparently no one has stopped to question Schumpeter’s treatment of the clustering of ‘wildcat or reckless banking’, dismissing it as a random and unnecessary phenomenon to be excluded from his model, together with speculative manias (3)

Keeping Schumpeter’s basic assumptions about innovations based on credit creation as the force behind capitalist dynamics, this chapter will present an alternative model of the process of propagation of technological revolutions. On that basis it will propose:

a) An explanation of the clustering and the spacing of technical change in successive revolutions;
b) An argument for the recurrence of clusters of bold financiers together with clusters of production entrepreneurs and
c) An interpretation of major financial bubbles as massive episodes of credit creation, associated with the process of assimilation of each technological revolution

The model is a stylized narrative, based on a historically recurring sequence of phases in the diffusion of each technological revolution, from its visible irruption after a long period of gestation, through its assimilation by the economic and social system to the exhaustion of its innovation potential at maturity. But it is not merely descriptive. It is constructed through the identification of possible causal chains between agents and spheres in capitalist society. What the model attempts to do is identify the repetition of certain underlying patterns and to propose plausible explanations.

The reader is asked to keep this purpose in mind, together with the additional caveat that neither the evidence nor much subtlety can be included in the limited space of a chapter (4). Suffice it to say that this model is not a straitjacket to be forced upon history. Rather than ignore the immense richness of historical evolution, it emphasizes the uniqueness of each occurrence and recognizes the many irregularities and overlaps that cannot be captured by abstraction. Its only claim is to serve as a useful heuristic tool for historical exploration and as a framework for theoretical analysis.

(1) Kuznets (1940), pp. 261–2
(2) Schumpeter (1939:1982) p. 223
(3) Schumpeter (1939:1982), pp. 792, 877
(4) For a more complete presentation of the model, see Perez (2002)

A. The entrepreneur and the banker
B. The double character of routines as obstacles and guides for innovation
C. Techno-economic paradigms as the meta-routines for a long period
D. Production and financial capital: different and complementary agents
E. Technological revolutions and great surges of development
F. The sequence of diffusion of each technological revolution
G. Why technical change occurs by revolutions

Embedded paradigms as inclusion-exclusion mechanisms

Exhaustion of opportunity trajectories leading idle money to search elsewhere

The role of finance in fostering the new paradigm

An endogenous process with a specific rhythm

E. Financial bubbles as massive processes of credit creation

The power of finance backing the paradigm shift

The making of the bubble

When the job is done, it’s time for the changeover in leadership

F. Summary and Conclusion

Finance and paradigm shifts

Clusters of bold financiers and the invisible hand for credit creation

The research ahead

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"Technological Revolutions and Financial Capital: The Dynamics of Bubbles and Golden Ages"

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"Structural Crises of Adjustment, Business Cycles and Investment Behaviour"

1988. With C. Freeman “Structural Crises of Adjustment, Business Cycles and Investment Behaviour”, in G.Dosi et al. eds. Technical Change and Economic Theory, London: Francis Pinter, pp. 38-66.

1998. Reprinted in H. Hanusch ed. The Economic Legacy of Joseph Schumpeter, Elgar, London.

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Introduction

This chapter discusses the revival of interest in long-term fluctuations in the growth of the world economy and particularly in the Schumpeterian theory of business cycles. After reviewing the common ground in relation to investment behaviour and business cycles, it goes on to discuss the failure of Keynesian economics to come to terms with the influence of technical change. The central theme of the chapter is that certain types of technical change – defined as changes in ‘techno-economic paradigm’ – have such widespread consequences for all sectors of the economy that their diffusion is accompanied by a major structural crisis of adjustment, in which social and institutional changes are necessary to bring about a better ‘match’ between the new technology and the system of social management of the economy – or ‘regime of regualtion’. Once, however, such a good match is achieved a relatively stable pattern of long-term investment behaviour can emerge for two or three decade. This point is illustrated with respect to the rise of information technology. It is argued that this pervasive technology is likely to heighten still further the instability of the system before a new, more stable pattern of growth is attained.

The resurgence of interest in Schumpeter’s ideas (e.g. Elliott, 1985) is associated with the slow-down in the growth of the world economy in the last decade. Whereas during the prolonged post-war boom of the 1950s and the 1960s there was some tendency to assume that the general adoption of Keynesian policies would prevent the recurrence of the any depression comparable to that of the 1930s and would smooth out small fluctuations, this confidence was somewhat undermined by the deeper recessions of the 1970s and 1980s and the return of much higher levels of unemployment. Not surprisingly, this has led to renewed interest in long-cycle or long-wave theories, which make analogies between the 1930s and 1980s. This chapter concentrates on the explanation of these deeper structural crises of adjustment, without making any assumptions about fixed periodicity or statistical regularity.

We start by looking at the common ground in the analysis of business cycles. We shall quote extensively from Samuelson for several reasons. First of all, he is probably the most authoritative neo-Keynesian economist, and one who commands respect through the profession. Secondly, business cycles have always been one of his central professional interests. Thirdly, as author of the most widely read economics textbook in the Western World, he provides in the successive edition of this book a convenient synthesis of the changing state of the art (Samuelson and Nordhaus in the most recent and thorough revision, i.e. the 12th edition)

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"The new technologies: An integrated view"

1986. From the original Spanish, ”Las Nuevas Tecnologías, una Visión de Conjunto” in Carlos Ominami ed., La Tercera Revolución Industrial: Impactos Internacionales del Actual Viraje Tecnológico, RIAL, Grupo Editor Latinoamericano, Buenos Aires, pp. 43-90 ISBN : 950-9432-65-2

Also published en Estudios Internacionales, Año XIX, Oct.-Dic. 1986 No.76, pp. 420-459, Santiago de Chile

English translation by the author

WP: “The new technologies: An integrated view”, July, 1986, TOC/TUT WP No. 19, WPs in Technology Governance and Economic Dynamics The Other Canon Foundation, Norway and Tallinn University of Technology, Tallinn

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Introduction

Interest in technical change has grown explosively in the last decade. Industrial policy, both in developed and developing countries, increasingly includes an explicit technology component. For this reason technological forecasts are becoming a prerequisite for planning. Two questions then arise: How reliable are technological forecasts? How useful are they as a guide for development strategies?

Past experience is highly uneven. In general there would seem to be a gap between the capacity for extrapolating trends in technology itself and that for predicting rates of diffusion in the productive sphere. This gap is wider the newer the technology and becomes narrower as the diffusion process develops, when related social and economic factors have become manifest revealing the selection criteria.

In fact, the world of the technically feasible is far greater than that of the economically profitable and that of the socially acceptable. And the two latter sets do not coincide either. This could mean that pure technological forecasting would be of limited use as a guide for development policy. A fuller exploration is required in order to identify the economic and social forces that drive and influence the course of technical change, as well as the forms in which technology influences the economy and society. This paper is an attempt in that direction.

The first part presents a set of categories with which to approach the analysis of technical change. In the second part, a hypothesis is presented about the constitution and diffusion of successive “techno-economic paradigms”. The crystallization of each paradigm would produce a radical shift in the course of evolution of the technologies of a given period, resulting in profound structural change in the economic sphere. The third part examines the way in which such a process of structural change would demand equally profound transformations in the socio-institutional sphere.

Following this general model of analysis, it is suggested that we are at present in a period of global technological transition, which offers new opportunities for outlining development strategies. Profiting from these new possibilities would require understanding the defining features of the new techno-economic paradigm, which, in the present case would be the system of technologies based upon microelectronics. Part four, then, examines some of these features, pointing to the specific ways in which they influence the direction of technological evolution in products, production processes and in the forms of organization of the firm. Part five explores the possible impact of the new prevailing technological model upon other new technologies, specifically: new energy sources, new materials and biotechnology. The final section is a discussion of some of the implications of the technological transition for development strategies.

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"Structural Change and Assimilation of New Technologies in The Economic and Social Systems"

1983: In Futures, Vol. 15, Nº 4, October, pp. 357-375. ISSN: 0016-3287,

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Also appeared as “Structural Change in Industry and Kondratiev Cycles”, in C. Freeman, ed. Design, Innovation and Long Cycles in Economic Development, Department of Design Research, Royal College of Art, London, 1984

Reprinted in C. Freeman, ed. The Long Wave in the World Economy, International Library of Critical Writings in Economics, Edward Elgar, Aldershot, 1996.

In Italian translation in “Cambiamento Strutturale e Assimilazione di Nuove Tecnologie nei Sistemi Economici e Sociali”
in P. Bisogno ed., Paradigmi Tecnologici: Saggi Sull Economia del Progresso Tecnico, Prometheus No. 2, Milan, pp. 155-186.

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Abstract

Through generating a set of hypotheses about the inter-relationship between diffusion of new technologies and economic development, the author seeks to identify the causal mechanisms of the depressions of the trough of the Kondratiev long waves. A model of the capitalist economy and an analysis of its structural patterns and processes are proposed, and from an examination of the techno-economic and socio-institutional characteristics of the fourth Kondratiev, some institutional requirements for the next upswing are elaborated.

Development and Sustainable Growth

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“The green transformation as a new direction for techno-economic development”

Lema, Rasmus and Perez, Carlota (2024) The green transformation as a new direction for techno-economic development. UNU-MERIT Working Paper #2024–001. United Nations University, Maastricht Economic and social Research institute on Innovation and Technology, the Netherlands.

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Abstract

In this chapter we argue that the ongoing debate about the green transformation and latecomer development must consider two key conditions. First, it must recognize that the green transformation is primarily a direction-driven phenomenon, shaped by aspirational, political, and institutional changes, rather than a technology-driven phenomenon per se. Second, it must acknowledge the potential of information and communication technology (ICT) to both accelerate and deepen the green transition and to foster latecomer development. Governments may unlock crucial synergies and opportunities by pursuing green development with the power of ICT.

Table 1: Green direction compared to Post war suburbanization

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“Redirecting growth: Inclusive, sustainable and Innovation-led”

2022 Mazzucato, M and Perez, C. “Redirecting growth: Inclusive, sustainable and Innovation-led”. In Modern Guide to Uneven Economic Development edited by Erik S. Reinert and Ingrid Harvold Kvangraven. Cheltenham: Elgar.

Chapter 3

IIPP-UCL Working Paper

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Abstract

The advanced world is facing a crucial moment of transition. We argue that a successful outcome requires bringing innovation to the centre of government thinking and action and that, in order to do this, we must apply our knowledge of how innovation occurs and how to repair what has gone wrong. We look first at the role that innovation has always played as the driver of economic growth, and at its relationship with finance. Arguing that the challenge today is not to ‘fix’ finance while leaving the economy sick, but rather to change the way that the real economy works, we then identify the solution: a policy direction that is smart, inclusive and takes advantage of ‘green’ as the next big technological and market opportunity. We then explain why the role of the State is key to ensuring that such opportunities are taken, and the importance of direct public investment for promoting the creation of public value and courageous risk-taking in research and innovation in both the public and private sectors. We then examine the potential of such innovation-oriented policies to promote inclusive growth. We consider concrete steps that could be taken, at various government levels, to create the ‘smart governance’ necessary to implement such a direction. The paper closes with suggestions for policies that aim to construct a prosperous, smart, green and fairer global economy.

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"A smart green direction for innovation: the answer to unemployment and inequality?"

2022 Perez, C and Murray Leach, T. in Benner, Marklund and Schwaag Serger editors Smart Policies for Societies in Transition, Cheltenham: Elgar (open access)

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Introduction
Technological revolutions and innovation
Recurring inequality and unemployment
The social shaping of technologies: providing a direction for deployment
The proactive State promoting growth and employment
The social State promoting general wellbeing and reversing inequality
A global route to full employment and well-being

Introduction

With the increasing impact of robotics on manufacturing, the rise of services such as Uber and internet shopping, and the emergence of artificial intelligence, one cannot blame the many voices that fear increasing unemployment and job insecurity into the future. Is innovation at fault? No. It is the lack of appropriate policies.

Our research shows that technological progress follows a pendular pattern. Ever since the first ‘Industrial Revolution’, each major technological shift has created entirely new avenues for innovation, capable of offering a leap in productivity – which, by definition, means less labour per unit of output. Such a leap also means that the same output in money terms can potentially fulfil more needs for more people, with less work; with more (if different) products and services at lower prices. This could therefore be seen as a definition of progress. The current technological age has even resulted in the provision of free welfare goods through Google, Wikipedia, YouTube, Skype, WhatsApp, GPS, Linux and so on. Yet at the same time, stagnant salaries for the majorities, rising inequality, the likelihood of increasing unemployment, and the predictions of secular stagnation (due to insufficient or inconsequential innovation) are seriously calling into question the role of innovation in social advance – or simply in growth.

In this chapter we shall argue that, after those initial contradictory effects, each technological revolution can transform the whole economy and bring greater growth and wellbeing to increasing portions of the population –in our current case, on a global scale. But that has never been – and cannot today be – the result of technology by itself or of markets alone. That outcome has each time required the mediation of an active State tilting the playing field to entice convergent innovation and investment. It is a socio-political choice for guiding the revolutionary industries – using policies, taxation, subsidies and regulation – in a recognisable direction for profitability, while being beneficial to society. Such a direction has always involved a shift in lifestyles, which induce multiple lower productivity activities that have counteracted technological unemployment.

In this article we begin by laying out the regular pattern in the process of assimilation of the successive technological upheavals, since the first ‘Industrial Revolution’ in the 18^th century. We show that, even though the early period of each technological revolution is turbulent and financialised, breeding inequality whilst also creating bubbles, what has followed after the inevitable crashes and recessions has been recognised as the ‘golden ages’ of each of those major transformations. We then explain how, in order to bring about such periods of prosperity, the state has – consciously or unconsciously – through its coherent actions, provided a synergistic direction that shaped the context and expanded the market. Then we look at the recurring patterns of inequality and unemployment that have accompanied the early decades of diffusion of each of the great surges of development driven by these revolutions, at the way that government has acted to reverse or mitigate these issues, and at the specific directions that have unleashed the ‘golden ages’, and spread prosperity across society. On that basis, we will propose ‘smart green growth’ and full global development as the most promising directions for achieving a sustainable global golden age with the ICT revolution and argue that this change has already begun. We end by arguing the need for consciously placing innovation policy at the core of growth policy.

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‘Transitioning to Smart Green Growth: Lessons from History’

Perez, C. (2019) In Fouquet, R. (ed.) Handbook on Green Growth, Cheltenham: Elgar, pp 447-463

Places to find the book

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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

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

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.

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“Smart & green. A new “European way of life” as the path for growth, jobs and well-being”

Perez, Carlota and Murray Leach, Tamsin (2018): Smart & green. A new “European way of life” as the path for growth, jobs and well-being. In: Council for Research and Technology Development (ed.): Re-thinking Europe. Positions on Shaping an Idea. Vienna: Holzhausen, pp. 208-223.

SSTR Working Paper Series 2018-1

From the publishers in English: RE:THINKING Europe and German: RE:THINKING EUROPE – Positionen zur Gestaltung einer Idee

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1. Introductions
2. Technological revolution and social change
3. New products, new lifestyles, new jobs
4. The last lifestyle shift: the American Way of Life
5. The emergent lifestyle shift today
6. The interplay of markets and policy in lifestyle changes
7. A European Way of Life
8. Conclusion
References

Introduction

In the history of technological revolutions, there is a moment in each revolutionary surge of development when the wild period of Schumpeterian creative destruction subsides, and the future promised by the new technologies looks uncertain. We are at this juncture today – when something must occur to foster investment, employment and innovation. The saviour in the past has been demand. And the source of that demand? A change in lifestyle: an aspiration to a new ‘good life’, underpinned by the new technology and fostered by government policy.

In this chapter we look at why this is the case, and examine the lifestyle shifts that have occurred in previous technological revolutions. We examine the legacy of the mass consumption American Way of Life, which is still with us today, and argue that a new smart, green, way of living is slowly replacing it. And we conclude with the claim that Europe is in a unique position to adopt this way of life as its own, and play a formative role in creating a global golden age in the years to come.

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“Searching For An Alternative Economic Model”

2018 – Rodrik, Perez et al. In IPPR Progressive Review. Perez: “Turning environmental problems into opportunities for growth and jobs”

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Highlights

“The key to economic growth is the nature of demand – and the combination of the information revolution and the pressing need for sustainability is the key to shaping it”

“Today’s pro-growth lobbyists are correct about one thing: there are many people still to be lifted out of poverty in the world”

“The planet cannot sustain the mass production model of consumption, but the transition needs to be presented as a desirable future without sacrifices”

Carlota Perez

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“Innovation as Growth Policy: The Challenge for Europe”

2015. (Mazzucato Mariana and Carlota Perez) in Fagerberg, J., S. Laestadius and B. Martin (eds.) The Triple Challenge for Europe: Economic Development, Climate Change and Governance. Oxford: Oxford University Press, Ch. 9, pp. 227-262

SPRU Working Paper series, No. 13, 2014

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Abstract

The advanced world is facing a crucial moment of transition. We argue that a successful outcome requires bringing innovation to the centre of government thinking and action and that, in order to do this, we must apply our knowledge of how innovation occurs and how to repair what has gone wrong. We look first at the role that innovation has always played as the driver of economic growth, and at its relationship with finance. Arguing that the challenge today is not to ‘fix’ finance while leaving the economy sick, but rather to change the way that the real economy works, we then identify the solution: a policy direction that is smart, inclusive and takes advantage of ‘green’ as the next big technological and market opportunity. We then explain why the role of the State is key to ensuring that such opportunities are taken, and the importance of direct public investment for promoting the creation of public goods and courageous risk-taking in research and innovation in both the public and private sectors. Paying particular attention to Europe, we then examine the potential of such innovation-oriented policies to promote inclusive growth. We consider concrete steps that could be taken, both at the national and EU levels, to create the ‘smart governance’ necessary to implement such a direction. The chapter closes with suggestions for policies that aim to construct collective competitiveness across the European Union.

Introduction

The advanced world is facing a crucial moment of transition. The 2008 bubble collapse left behind it the polarisation of incomes, high unemployment, low growth and a fearful financial sector that is steering away from funding the real economy and stays in a casino world, harming the prospects of revival. Indeed, the current emphasis on ‘fixing finance’, while leaving the real economy sick, risks setting the stage for the next bubble.

In this chapter, we argue that the theories underlying current policies are misguided and that the aim of returning to ‘business as usual’ is therefore mired in a fundamental misunderstanding. Current problems are structural and date back to decades before the crisis began. In particular, we take issue with the prevailing beliefs about private and public investment and about the role of the State in such investment. We also provide a different narrative of the State, in which what is needed is not just counter7cyclical spending, but an investment7driven, ‘mission7oriented’ (Foray et al., 2012) and courageous State that can not only guide Europe out of the crisis but also steer and direct growth when it returns (Mazzucato, 2013a). As increasing numbers of policy makers are recognising, dogged subscription to orthodoxy is a dead end: markets alone cannot return us to prosperity. Our work has shown that investment is driven by innovation; specifically by the perception of where new technological opportunities lie (Pavitt, 1984; Perez, 2002). Private investment only kicks in when those opportunities are clear; public investment must be directed towards creating those opportunities across all policy spaces and affecting the entire economy. Furthermore, the State’s role as an investor involves taking risks: win some, lose some. Such risks must be rewarded so that taxpayers not only socialise the risks, but also share in the rewards (Lazonick and Mazzucato, 2013).

We hold that success in the current transition requires bringing innovation to the centre of government thinking and action. Innovation policy must become growth policy and vice versa. In doing so, innovation7growth policy will affect all other policies: financial market reform, labour market policy and especially taxation. A clear understanding of the innovation potential inherent in the current historical moment will inform the direction that such policies take. Naturally, different pathways can be chosen while moving in this direction, but recognising the role of policy in choosing it enables a better understanding of the ‘boundaries’ within which civil society and other forces can operate (Stirling, 2009).

This chapter focuses on applying our knowledge of the ways in which innovation occurs (clustered and wave-like; collective; uncertain; and cumulative² ) in order to understand what must be done to generate long run growth which is both ‘smart’ and ‘inclusive’. It fundamentally seeks to both understand what has gone wrong and how to repair those failings. We will first look at the role that innovation has played as the driver of economic growth since the start of the Industrial Revolution, using the long-term lens of technological regimes and paradigms (Dosi, 1988; Perez, 2002, 2010) to characterise the current transition period in its historical context. These insights enable us to understand that the challenge today is not to ‘fix’ finance while leaving the economy sick, but rather to change the way that the real economy works. This change must include de-financialising the economy and redirecting investments towards productive mission-oriented areas.

We argue that the way to get the real economy to operate in the current context is to employ a policy direction that is smart, inclusive and green. ‘Green growth’ can become the next big technological and market opportunity, stimulating and leading private and public investment. This brings us to a discussion on the that the government plays in ensuring that such opportunities exist, and particularly the importance of being able to invest – welcoming the underlying risk and uncertainty – along the entire innovation chain, not only in areas characterised by positive externalities (such as research and development (R&D)). We then offer some criteria for specific fiscal/tax policies in order to achieve such a reorientation (making it more profitable for productive investments and less profitable for speculative ones), and for creating the ‘smart’ governance necessary to implement such policies. Without smart government at the organisational level, smart (innovation-led) growth is impossible. We look at the effect that such policies have on steering missions and promoting more inclusive growth, where the State not only socialises risks but also rewards. We argue that such policies are themselves innovation policies and conclude by summarising eight key criteria that we believe can help growth policy be guided by long-run value creation.

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"Could technology make natural resources a platform for industrialization? Identifying a new opportunity for Latin America (and other resource-rich countries)"

Perez, C. (2016). In Noman, A. and J. Stiglitz (eds.) Efficiency, Finance, and Varieties of Industrial Policy. New York: Columbia University Press. Ch. 11.

Available as Working Paper: The new context for industrializing around natural resources: an opportunity for Latin America (and other resource rich countries)?

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Abstract

This chapter argues that development is a moving target, and that windows of opportunity to both ‘catch up’ and ‘leap ahead’ present themselves at certain times and in specific regions due to technological revolutions and paradigm shifts. Having examined the historical precedents, it observes that the exploitation and processing of natural resources (NR), once seen as a ‘curse’ for developing nations, present such an opportunity for Latin America and other resource-rich countries at this stage in the diffusion of the ICT revolution. The factors changing the context and conditions around NR are analyzed, from the new nature of markets and the growing influence of environmental factors to the significant increase in technological dynamism and potential for innovation in developing countries brought about by ICT and market segmentation. Examining the specificity of Latin America in its ability to respond to these different conditions, and identifying the capabilities gained in the previous opportunity with import substitution, the article argues that success today would depend upon building natural resource-based networks of innovation aimed at the dynamic Asian markets. Given the low labor intensity of most NR processing industries, a dual-integrated strategy of ‘resourceintensive industrialization’ is proposed which promotes both top-down economic growth for global positioning and bottom-up wealth creation in each corner of the territory generating employment and well-being for all. It is finally argued that such a converging process of growth and innovation is both possible and necessary to ensure that Latin America benefits from the current window of opportunity while building a platform of innovative potential, networks and social capabilities in order to be able to leap forward with the next technological revolution. The many obstacles and limitations are not ignored; they can only be faced successfully if the nature of the opportunity is fully recognized.

Introduction

Those who doubt the potential dynamism of natural resources (NR) assume that there are truths about certain sectors that do not change over time. This is reflected in much of the literature on development, and has filtered into the beliefs of policy makers. Yet evolutionary economists hold that technological change is at the very heart of economic growth, with constant shifts in the relative dynamism of companies, industries and sectors. And indeed, even a cursory glance at the natural resources sector reveals that the context has significantly changed since the postwar period, when many of the current ideas about development evolved. The character of energy, materials and food markets has shifted dramatically; the potential for innovation in developing countries is much greater than before; all markets have segmented into niches; global corporations have changed their behavior; and, last but not least, environmental factors have come into play as a challenge and as a growth opportunity for both developed and developing nations.

This paper will examine the implications of such technological changes for resource-endowed countries, building on the notable shift in the level of awareness, both in theory and in practice, of the role of innovation in growth and development. In line with the neo-Schumpeterian and evolutionary tradition, the article starts from the idea that some industries3 , in some periods, offer more opportunities for innovation and dynamism than others. It will argue that the reasons for not seeing the natural resource industries among those with higher opportunities for most of the twentieth century are largely historical and that the context has changed significantly.

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“Natural Resource Industries as a Platform for the Development of Knowledge Intensive Industries”

2015 (with Marin, A. and Navas-Aleman). Tijdschrift Voor Economische en Sociale Geografie. Vol 106, Issue 2, p. 154-168

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In the innovation and development literature, natural resources (NR) are generally viewed as a curse for developing nations and NR-based industries as having little potential to innovate and drive long-term growth. This has led policy and development experts to opt for strategies to induce a shift in the pattern of specialization towards other sectors. This paper proposes a different approach. By exploring recent evidence from the Argentinean agricultural sector and the mining industry in Chile, it points to the window of opportunity that NR industries offer as a platform to develop knowledge intensive industries with which to support economic development in resource-endowed countries. The lessons drawn from these findings suggest that development strategies can also promote more innovative knowledge intensive NR-based industries rather than moving away from them.

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“Technological Change and Sustainable Development: A World of Opportunities for the Region”

2015. With A. Marín, in Integration and Trade (INTAL-IDB) October 2015

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Abstract

Taking into account the lessons of history, this article proposes to analyze the opportunities and challenges for integration, trade, growth, and sustainable development in Latin America in the present historical period. The period of growth dominated by mass production, based primarily on cheap energy for transportation, electricity, and synthetic materials, and the expansion of markets for standardized products, has generated significant tensions between trade, growth, and sustainable development. At present, however, we are leaving behind the logic of mass production and moving at full speed into the information and communications technologies (ICTs) revolution, whose expansion is based on information, telecommunications, and low-cost microelectronics. In this shift many opportunities are opening up for sustainable development. In this article, we discuss these new opportunities and analyze their implications for Latin America. We argue that Latin America can, by using its historical advantage in natural resources (NRs) and the lessons learned during the import substitution period, take advantage of new technological and market opportunities tied to NRs in order to develop technological capabilities, and new activities and products that will be at the center of the new styles of production and lifestyles coming into place. We conclude that these opportunities can be exploited only through significant political and institutional innovations that may accompany the new processes unfolding.

Introduction

The transformation of natural resources from new technologies offers a wealth of opportunities for growth in the region. New information-based intangible services and products are appearing, from smart phone applications and social networking to mass data collecting (big data), the Internet of Things, 3D printing, and robotics. How to generate greater production and trade from the revolution under way, and what policies contribute to an equitable social distribution of progress.

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"A Green and Socially Equitable Direction for the ICT Paradigm"

(2012: updated 2014) Chris Freeman Memorial Lecture, GLOBELICS 2012, Hangzhou, P.R. China, Globelics Working Paper No. 2014-01, ISSN: 2246-0616

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This paper takes up Chris Freeman’s challenge of facing the environmental limits with science, technology and innovation in order to keep open the possibilities of the developing world along a sustainable “green” growth path. It analyses the differences between the energy intensive paradigm of mass production and consumerism in mid-20th Century and the potential shift to sustainability generally provided by the ICT revolution. It then focuses on the developing world and examines the changes in the global market context that are creating windows of opportunity for local innovation, social inclusion and green growth. It finally discusses the alliances and conditions for taking full advantage of the available transformative potential.

List of Figures

● Figure 1. Hyper-segmentation of markets in the ICT paradigm
● Figure 2. Some examples of market segmentation
● Figure 4. Growth of global middle class consumers – Forecast to 2030
● Figure 5. The technical and institutional drivers of the Post War Golden Age
● Figure 6. Potential drivers of the demand opportunity space for building a global sustainable golden age with the ICT revolution
● Figure 8. A dual integrated model for development in natural resource producing countries (A proposal for Latin America)

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"The possible dynamic role of natural resource-based networks in Latin American development strategies"

2014 (with A. Marín and L. Navas-Aleman) in Dutrénit, G. and J. Sutz (eds), Innovation Systems For Inclusive Development: The Latin American Experience, Ch. 13. Cheltenham: Edward Elgar.

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This paper explores the potential of natural-resource (NR) based networks for serving as platform for development strategies. The main argument against such potential use is the claim that they have low technological dynamism. If that were the case, natural resources would indeed be incapable of serving as core of a development effort. The paper holds that the changes induced by the ICT paradigm in the organization of global corporations, the process of globalization of production and the hyper-segmentation of markets have profoundly modified the conditions in all sectors, including natural resources. It analyses the recent and prospective forces driving innovation towards the “decommoditization” of the natural resources themselves as well as the conditions that are making it more likely to weave networks of innovation up and downstream as well as laterally from the natural resource base, constructing a production and innovation network.

Introduction

The success of the four Asian Tigers in catching-up in development and the major growth leaps of China and India have posed a double challenge to the Latin American countries. It demonstrates that development is achievable; however the window of opportunity used by the Asian countries is no longer available to newcomers. It is then necessary to identify a viable technological opportunity space and to develop an adequate strategy for taking advantage of it. Given the rich endowment of natural resources enjoyed by the region, and the accumulated experience in the exploitation of these resources, this paper approaches the question of whether natural resource (NR) based industries, together with the processing industries, can provide such a space for innovation, in which case, they could serve as a platform for successful development strategies.

In line with the neo-Schumpeterian and evolutionary tradition we start from the idea that some industries offer more opportunities for innovation and dynamism than others, and that in the past NR industries have not been in the list of industries with higher opportunities. However we believe that the reasons for this view are largely historical, i.e. they are mostly linked to the manner in which these industries developed since the 1920s (within the mass production paradigm) and to the typical behavior of Multinational Corporations (MNCs) active in the raw materials sector during the 20th Century. In our view these conditions are changing. NR based industries and their user-markets are becoming more dynamic. Instead of remaining a multidimensional ‘curse’ and a constraint on development, they may become the basis for a technologically dynamic and sustainable development strategy. This is crucial for most developing countries that rely heavily on exports of primary goods. Three quarters of the states in Sub-Saharan Africa and two thirds of those in Latin America (LA), the Caribbean, North Africa and the Middle East still depend on primary commodities for at least half of their export income. And this question is all the more relevant, given the fact that globalization has up to now concentrated fabricating production in Asia.

The paper is organized as follows. Section 2 is a brief overview of the main arguments in the literature contributing to the generalized perception that natural resources are unsuitable as a platform for development. Section 3 identifies the changes in the world economy that are enlarging the opportunity space for innovation and dynamism in all sectors, including natural resources. It also argues that these changes imply widening the analysis from the primary product to the whole network of activities up and downstream, from the initial investment to the final user. Section 4 discusses the forces that are now driving or influencing innovation in the natural resource-based networks and defining a new opportunity space for dynamism. The concluding section summarizes the argument for a strategy based on combining natural resources with technology in this particular period, with a brief discussion of the main challenges and risks facing policy makers when engaging in such a strategy, including the need for a complementary strategy to overcome social inequality.

Figure 1. Innovative interactions in a natural resource-based network

Figure 2. Forces driving innovation in natural resource-based production networks

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"A New Age of Technological Progress"

2014, In Umunna, C. ed. Owning the Future. London: Policy Network & Rowman & Littlefield International, [pp. 19-31]

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To seize the opportunity of our great surge of technological devel-opment, we need a national and global consensus between business, government and society that will do for the 21st century what social democracy did for the 20th.
The world appears to be changing at an unprecedented pace. Infor-mation technology is displacing or reshaping industry after industry; rapid globalisation is leading to power shifts between nations, and the threat of global warming is becoming ever more present.
In fact, we have been here before. A deeper understanding of both history and technology can help us respond to these challenges and find a prosperous path ahead. What we can see is that there is nothing inevitable about how these forces will reshape our world. This will be dependent not on the technological, global and environ-mental forces, but on the socio-political choices we make to take best advantage of them.

“Innovation systems and policy for development in a changing world”

Perez, Carlota (2013). In E, S, Andersen, J. Fagerberg and B. Martin (eds.) Innovation Studies: Evolution and Future Challenges, Oxford: Oxford University Press, pp. 90-110

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Abstract

Whether innovation systems and policies are just for the rich or not was the question originally posed to me by the editors of this book. Its implication is clear: the general thrust of innovation has until recently been seen as mainly serving the interests of the rich countries. Could innovation systems and policy favour advance in the poor countries? Is there a particular reason to ask that question now? Probably yes. Would the answer be the same today as it was in the 1960s and ’70s? Certainly not!

Could it be that this issue is not inherent to innovation or innovation systems themselves (or to capitalism), but that it changes with the stages of diffusion of technological revolutions and the nature of their paradigms? This is what I will suggest, arguing that such a dynamic understanding would have consequences for innovation studies, for evolutionary economics and for innovation policy.

"Innovation systems and policy: Not only for the rich?"

2012. Working Papers in Technology Governance and Economic Dynamics, The Other Canon Foundation, Norway, and Tallinn University of Technology, WP No. 42. July.

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This article argues that the conditions for innovation by and for the poor have changed considerably in the last four decades in ways that can be related to the paradigm shift in technology and to the resulting changes in behaviour of the major corporations. It suggests that innovation studies and evolutionary economics should consciously and constantly pursue an understanding of such changes by fully incorporating history in the interdisciplinary mix. In essence it holds that evolutionary thinking needs to strike an appropriate balance between universal and changing truths, especially when studying innovation with a view to making policy recommendations.

"Technological dynamism and social inclusion in Latin America: a resource-based production development strategy"

2010. CEPAL Review Nº 100, pp. 121-141.

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2008. Longer version downloadable as Working Paper: “A Vision for Latin America: a resource-based strategy for technological dynamism and social inclusion” Globelics WP Series No. WPG0804, ISBN: 978-970-701-963-8, July.

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This paper sets out a strategy for invigorating development in Latin America by taking advantage of specific opportunities in the current context and the advantages offered by the region. It briefly analyses the characteristics of globalization and the techno-economic paradigm of the information and communications technology revolution in order to identify new opportunities in terms of markets, positioning in global networks and technological options. From this perspective, it argues that natural resource-based process industries can complement the specialization of Asia in assembly industries. Given the low rate of employment in the former, it proposes a dual strategy that includes promoting “bottom-up” wealth creation by taking advantage of the new flexibility in technological diversity, transport and trade. The idea is to stimulate policy debate and experimentation and signpost some avenues of research.

"Technological revolutions and techno-economic paradigms"

2009. Cambridge Journal of Economics, Vol. 34, No.1, pp. 185-202

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Working paper: January 20, 2009, TOC/TUT WP No. 20 Working Papers in Technology Governance and Economic Dynamics The Other Canon Foundation, Norway and Tallinn University of Technology, Tallinn.

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This paper locates the notion of technological revolutions in the Neo-Schumpeterian effort to understand innovation and to identify the regularities, continuities and discontinuities in the process of innovation. It looks at the micro- and meso-foundations of the patterns observed in the evolution of technical change and the interrelations with the context that shape the rhythm and direction of innovation. On this basis, it defines technological revolutions, examines their structure and the role that they play in rejuvenating the whole economy through the application of the accompanying techno-economic paradigm. This over-arching meta-paradigm or shared best practice ‘common sense’ is in turn defined and analysed in its components and its impact, including the influence it exercises on institutional and social change.

1. Innovation as the dynamic space for the study of technical change
2. The regularities of technical change: innovation trajectories
3. New technology systems and their interactions
4. Technological revolutions and techno-economic paradigms
5. The structure of technological revolutions
6. The emergence of a techno-economic paradigm

The changes in the cost structure

The perception of opportunity spaces

New organisational models

7. Diffusion, resistance and assimilation of successive techno-economic paradigms
8. Putting it together: Regularities, continuities and discontinuities in technical change

References

Introduction

The growing impact of the Information Revolution and the visibly increasing importance of innovation and entrepreneurship has resulted in a resurging interest in Schumpeterian ideas. Brad De Long (2007) suggested in his review of McCraw’s biography of Schumpeter that the late 20th and early 21st Century should be as much a Schumpeterian reign as the mid 20th Century was Keynesian.

Indeed, Schumpeter (1911, 1939) is among the few modern economists to put technical change and entrepreneurship at the root of economic growth. Yet, strangely enough, he saw technology as exogenous and -together with institutions and social organisations- “outside the domain of economic theory”. His focus was the entrepreneur and his goal was to explain the role of innovation in economic growth and on the cyclicality of the system.

It is the Neo-Schumpeterians who have endeavoured to analyse technical change and innovation as such, with their regularities and evolution; who have delved into the characteristics and dynamics of innovation, from individual technical changes through clusters and systems to technological revolutions. This task has been performed by looking at technology, engineering and business organisation from the perspective of the economist and the social scientist, identifying the common features in the processes of evolution, in the interrelations and in the breakthroughs that occur in the most diverse technical areas. These regularities then inform an understanding of the relationship between technical and organisational change, between these and economic performance as well as the mutual relationships between technology, the economy and the institutional context.

This paper will concentrate on technological revolutions and techno-economic paradigms, their definition, the causal mechanisms that bring them about, their impact on the economy and institutions and their relevance for economic analysis. Yet, since these macro phenomena are deeply rooted in the micro-foundations of technical change, the following section will refer to some of the basic theoretical advances made at the micro and meso levels.

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"Technological change and opportunities for development as a moving target"

2001. Cepal Review, No. 75, December, pp. 109-130.

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This article puts forward an interpretation of development as a process of accumulation of technological and social capabilities dependent upon taking advantage of successive and different windows of opportunity. These windows are determined from the core countries, through the technological revolutions which occur every half-century and the four phases of their deployment. The possibilities of progressing at each opportunity depend on the achievements made in the previous phase, on identifying the nature of the next one, understanding the technoeconomic paradigm of the revolution in question, and being able to design and negotiate, in each case, a positive-sum strategy, taking account of the interests of the most powerful firms. On the basis of this interpretation, a summary review is made of the successive development strategies applied since the 1950s. The author then outlines the likely nature of the next phase and, applying the principles of the current techno-economic paradigm, explores some aspects of the institutional changes to be carried out.

"Technology and competitiveness in Latin America: beyond the legacy of import substitution policies"

2001. In Dutrenit, G., C. Garrido and G. Valenti (eds.) Sistema Nacional de Innovación: Temas para el debate en México. Ciudad de México: UNAM, pp. 85-127

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Introduction

The process of transforming a protected and subsidized economy into one that is structurally competitive requires efforts on many fronts against formidable odds. At every turn it involves abandoning old habits and ideas, dismantling or reforming obsolete institutions, modifying behaviors, revising regulatory frameworks, while at the same time it demands constructing the new institutions, regulations, infrastructure, linkages and support systems. In fact, it would be justified to say that the biggest obstacles faced by firms and governments in Latin America on the way to competitiveness are neither financial nor technical but rather institutional and ideological.

Import Substitution Industrialization (ISI) which was the dominant development strategy in this continent from the 1950’s to the 1980’s was much more than a government policy. It gradually became a thoroughly coherent set of behaviors, notions and practices, involving firms, workers, government, banks, consumers, politicians, etc. and was eventually ingrained in mutually reinforcing institutions. This legacy is the most powerful obstacle to the assimilation of the modern technologies and modern management practices that determine competitiveness in the new international environment.

Yet the Latin American version of ISI was very successful until relatively recent times. Contrary to what some people now hold, these policies were not always an obstacle. In fact, it is precisely because once, in a different world context, they were responsible for high growth rates and visible social progress that they became so deep-rooted ideologically and politically, as well as in practice, in most Latin American countries.

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"Technical change and the new context for development"

1994. In Mytelka, L. ed, South-South Co-Operation in a Global Perspective, OECD, Paris, pp. 55-87 ISBN : 92-64-04033-1

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Introduction

For the past two decades the world has been shaken by three successive waves of change. First there was the all-pervasive impact of information technology on products, production, services and communication. Then there was the managerial revolution with the diffusion of organizational practices pioneered by the Japanese and other challenges to traditional mass production emerging in various countries of Europe and elsewhere. Now, while those two are still unfolding, there is a wave of political and institutional change involving processes as diverse and complex as the dissolution of the Soviet system, the movement towards trade liberalization, the adoption of market systems and the creation of regional blocs in every continent.

These waves of transformation in technology, management, economics and politics are interrelated. They point to a world in transition where the rules of the game are changing at every level. The conditions under which competition takes place in international markets are moving further and further away from those that prevailed in the 1960s and 1970s or even the early 1980s. In this changing environment, it is wise to reassess afresh every policy, every development strategy, because the previous success or failure of a particular policy is unlikely to be a good predictor of future performance [1].

One of the most striking examples of how a once effective policy can become inadequate under changing conditions is the Import Substitution Industrialization (ISI) strategy adopted by many developing countries from the 1950’s onwards. Although initially it did achieve significant results in developing industrial capacity, infrastructure, skills and managerial competence, by the early eighties to persist in these policies became counterproductive. A basic necessity for the development of new strategies, however, is an understanding of the processes of technical, organizational and institutional change which, though starting in the North, are transforming the entire world economy, North, South, East and West. This paper, therefore, will examine the way in which technical and organizational innovations have changed the context for development strategies and consequently for any complementary actions in terms of cooperation between countries. It will attempt to indicate some of the new opportunities and constraints confronting the developing countries in the 1990’s.

The first section looks at intangible investment. The new development strategies will need to increasingly stress knowledge accumulation, in contrast with traditional development strategies which were heavily oriented towards fixed capital accumulation. Among the most important components of intangible investment are education and training, scientific and technical services and technology infrastructure. These are discussed in Sections 3 and 4. However the appropriate scale and direction of these types of intangible investment must be carefully considered to increase their effectiveness. For this reason Section 2 analyzes the organizational changes which are needed at the enterprise level for developing countries to succeed in the new competition. This analysis shows that even though the initial intangible investment in reorganization may be quite modest, it is an essential pre-condition for the success of the other tangible and intangible investments which may follow. Moreover the pattern of organizational change which is required, with its strong emphasis on flexibility, initiative at all levels and multi-skilling has rather strong implications for the human resource strategies discussed in Section 3 and the technology strategies which are the subject of Section 4.

Successful development strategies in the 1990’s and the early decades of the 21st Century will however depend not only on these kinds of tangible and intangible investment but also on appropriate specialization within the international economy. Such specialization must clearly vary a great deal with size of the economy, level of development, human resources, factor costs and of course the endowment of each country in natural resources.

In the past developing countries have been wary of excessive dependence on primary commodity export specialization because of the extreme vulnerability to price fluctuations and to shifts in the patterns of demand. However the new technologies and the new organizational principles are revitalizing and upgrading all branches of the economy, including the primary sector. The resource endowment of each country and the experience accumulated in their exploitation can be a great source of competitive strength provided they are used as a platform for a whole constellation of new developments. The historical examples of Sweden and Finland show that export strength in primary commodities can be the starting point for strengthening many related branches of manufacturing and services which are mutually reinforcing and provide greater security and breadth of development. The question of achieving appropriate strategic specialization and market targets in the new forms of global competition are the subject of Section 5.

Whatever the specialization, collaboration with partners in other countries has become an imperative. The importance of global networking for education and technology already emerges in Sections 3 and 4 but Section 5 explores some aspects of global networking in production and marketing. A wide variety of possible forms of international collaboration is opening up, most of which depend on the initiative and flexibility of the relevant enterprises. There are of course many barriers and great difficulties confronting firms in developing countries, not the least of which is the heritage of established and now obsolete attitudes, customs and institutions. The final section sums up the constructive new approaches which can help developing countries to overcome this dead weight from the past and to embark on a new forward trajectory. Some of the emerging possibilities for South-South cooperation are considered in this overall context.

Notes:

[1] Elsewhere we have suggested that these technological, organizational and institutional changes can be seen as interrelated and constituting a favorable opportunity for a leap in development. See PEREZ, C., (1989); as well as FREEMAN, C. and PEREZ, C., (1988)

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"Catching up in technology: entry barriers and windows of opportunity"

1988 (with L. Soete). In G.Dosi et al. eds. Technical Change and Economic Theory, London: Francis Pinter, pp. 458-479.

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Introduction

The importance of ‘foreign’ technology and its international diffusion is undoubtedly a historically well-recognised factor in the industrialisation of both Europe and the United States in the nineteenth century, and even more strikingly of Japan in the twentieth century. That importance emerges again and significantly stronger from the evidence of the rapid industrialisation of some so-called newly industrialising countries, such as South Korea, over the last two decades.

In this chapter we begin to look at some of the Specific conditions under which technological catching up and imitation could take place. In a short introductory section, we set out, in line with the chapter by Metcalfe on diffusion, some of the most salient points with regard to diffusion theory which appear of relevance to theories of industrial development and economic growth. In the second section, we go in more detail into the conditions for imitators to enter and effectively catch up.

We begin with a static view of technologies in order to look at how the actual costs of developing, imitating or buying a production technology are influenced by the characteristics of the acquiring firm and by those of its location. We then introduce technological dynamism and examine how the various elements of those costs (and the barriers they erect for new entrants) increase or decrease as technologies evolve from introduction to maturity. This leads us to identify the importance of the timing of entry in terms of individual technologies. Finally, we introduce the interrelatedness of technologies in complex technology systems and the notion of changes in techno-economic paradigms, i.e. the emergence of radical discontinuities in overall technological evolution. This brings us to the concluding argument that catching up involves being in a position to take advantage of the window of opportunity temporarily created by such technological transitions.

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"New Technologies and Development"

1986. In Freeman and Lundvall eds. Small Countries facing The Technological Revolution, London: Francis Pinter, pp. 85-97.

1989. In Italian as “Nuove tecnologie e sviluppo”, en Eugenio Bennedetti ed.,Mutazioni tecnologiche e condizionamenti internazionali, Milan: FrancoAngeli, pp. 71-89.

2007. Reproduced in L. Mytelka, ed. Innovation and Economic Development, volume 213 in The International Library of Critical Writings in Economics series. Cheltenham: Edward Elgar, Part I, Ch. 2.

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"Microelectronics, Long Waves and Structural Change: New Perspectives for Developing Countries"

1985. World Development, Vol. 13, Nº 3, pp. 441-463

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Introduction

At present, the prospects for developing countries seem bleaker than ever. As general stagnation continues, with short-lived spurts of growth in the industrialized world, export opportunities for the Third World are significantly reduced. This, combined with the rising cost of imports and a reduction la investment flows, is putting unbearable pressures on weak debt-ridden economies. At the same time, the electronics revolution seems to have widened the technological gap to unbreachable proportions.

This article will present an alternative view. It will argue that the world is experiencing a structural crisis, during which, in spite of the obvious difficulties, there would be greater – rather than lesser – scope for a major positive change in development prospects.

The argument is based on a somewhat Schumpeterian (1) interpretation of the so-called Kondratiev long waves (2). The explanation proposed here for the recurrence of cycles of about 50 years’ duration in economic growth, attributes a central role to the diffusion of successive technological revolutions, representing a quantum jump in potential productivity for all or most of the economy. The reason for the long wave pattern would be that, to yield its full growth potential, each of these “techno-economic paradigms” – as we shall call them – requires a fundamental restructuring of the socio- institutional framework, on the national and international levels. The resulting social and institutional transformations then determine the general shape of economic development, or the “mode of growth” of the next long wave. A Kondratiev wave is thus defined here as the rise and fall of a mode of growth and each crisis as the painful transition from one mode of growth to the next.

The present period is seen as one such transition. The mode of growth that led to the boom of the 1950s and 1960s has run its course. The world must now make the transition from a set of social and institutional arrangements, shaped by the characteristics – and fostering the full deployment – of a constellation of mass production technologies based on low-cost oil, to another capable of fruitful and appropriate interaction with a new system of flexible technologies, based on low-cost electronics.

This means that extrapolations from the past or from the turbulent present are misleading. If and when a new upswing is unleashed in the world economy, it is likely to be framed by a set of national and international institutions, which will differ as much from those of the l950s and 1960s as these differed from the prevailing conditions in the “Belle Epoque” at the turn of the century. It also means that the present is precisely the period of creation of those future conditions and that all social actors, including the deve loping countries, can and should take an active part in that complex – and obviously conflict ridden – trial-and-error process.

To undertake this task successfully however, it is essential to identify the new range of the possible. The deeper the understanding of the potentialities and limitations of the new “techno-economic paradigm”, the greater the scope for shaping it imaginatively and effectively through innovative action in the social and institutional spheres. Section 2 of this paper will introduce the concept of “techno-economic paradigms” and present an outline of the long wave argument 3 . This theoretical framework is a necessary prerequisite for understanding the relevance of the discussions that follow. Section 3 undertakes the analysis of the defining features of the presently diffusing microelectronics paradigm, touching upon some of the questions it raises for development strategies. Section 4 is a brief exploration into the challenges and opportunities facing the developing countries in the present transition. As a whole, the article is intended as food for thought. The reader will find no statistics; references will be sparse, though hundreds could be given; examples will be provided only when they seem indispensable to illustrate an idea rather than to prove it. This is fully intentional. The paper is conceived mainly as a contribution for opening new paths in development thinking. As the argument evolves, it will become increasingly clear that we are making a case for defining the present period as a time for informed speculation and bold experimentation.

1 See Schumpeter (1939)

2 Kondratiev (1935)

Technology Policy

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"Change of paradigm in Science and Technology Policy"

2000. In Cooperation South, TCDC-UNDP, No.1-2000, pp. 43-48. ISSN 0259-3882

Presentation at the Forum for South South Cooperation in Science and Technology, UNDP/Government of the Republic of Korea, Seoul 14-17 February.

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We all know we are in the midst of a change of paradigm, in the midst of a change in the rules and principles for effective techno-economic behaviour. What is changing is simply the “common sense” for achieving best practice, be it in business or in the conduct of government, at all levels, from international organizations to the smallest local NGO.

We know this has been brought about by the information technology revolution. Yet the transformation goes far beyond the power of computers and Internet; it entails the adoption of organizational models that are adequate for taking advantage of that potential; it involves the modernization of both the structures and the forms of operation of every organization in any field of activity.

From rigid mass production to flexible networks
From centralized pyramids to decentralized adaptable structures
From people as human resources to people as human capital

And, in the developing world:

From protected subsidized industrialization to competitive production in a globalized world

We all know that and we also understand both the difficulties of such a transformation and the opportunities it opens, both the uncertainty involved and the inexorable nature of those trends. They are precisely the direct consequence of the technological revolution that emerged in the 1970s and is fully taking root as the main productive potential into the 21st Century.

The question is:

What does this transformation mean when we look at science and technology in the developing world?

What does it mean when we examine South-South cooperation in S&T and want to achieve concrete and meaningful results?

It simply means that, just as managers of firms have had to do, painful as it may have been, the science and technology community needs to revise, redefine, reassess and rethink every single thing we thought about S&T in the 1960s and 1970s.

We must recognize that the body of knowledge and experience about S&T, that we now have, was shaped by the conditions of mass production technologies and the import substitution model of industrialization.

In my view we are far behind in the necessary reassessment. This is part of the explanation for the meager results. Without that rethinking, our actions can miss the target. Without that, our chances for success are minimal.

One of our basic tasks is to redefine the field of activity by widening the scope of what we call technology. The changes are quite dramatic and fundamental:

Further still, there is a difference between the old and the new paradigm that has far reaching consequences for developing countries:

Because mass production required very high volumes of identical products for maximum profitability, the whole world was pushed into homogenous patterns of production and consumption. Cultural differences and identities were ironed out in the melting pot of the “American way of life.” So transfer of technology was often seen as imposed from abroad and, even when welcome, was in practice judged inadequate.

This situation could change dramatically. The flexible technologies of the new paradigm are essentially adaptable and can cater to diversity. The world is far from reaping the full fruits of this characteristic because the habits of mass production are still too deeply ingrained. This has happened with each paradigm change. The first automobiles looked likes carriages without horses and we are still measuring engines in “horse-power.” But, as we learn to use the new potential, we will discover that appropriate technology is possible, profitable and natural in this paradigm.

Those are only a few of the many fundamental changes in outlook that we need to make in order to guarantee that we can take proper advantage of the opportunities offered by this paradigm.

But the essential thing we must be clear about is the need to re-examine our ideas and our experience:

What worked yesterday will probably not work today.
What failed yesterday could work tomorrow.

Now I would like to advance some ideas about what, in my own view, are the ways forward, the concepts and attitudes we need to change in order to take full advantage of the new conditions:

1. -Let us break the “marriage of convenience” between science and technology.
We need to bring technology in full contact with production. We need it to become technological development and engineering so we can really change the quality and productivity of our productive activities.
But we also need scientific and technological research.
What we don’t need is to have technology working in isolation, with the methods, criteria and pace that characterize, rightfully, the production of scientific knowledge.
In Import Substitution times, technological activities had to take refuge inside the scientific laboratories. Mature technologies from the North were in no need of local innovation. So there was no real demand for technology and it had to “marry” science and adopt its behavior. Now, technology is needed side by side with every production activity and with every social service. Now it must come out from the temples of science and fully join the action.
2. – Let us widen the scope of what we call “technology” to include organizational, managerial and social apabilities and know-how.
Scientific, technical and social disciplines need to be put to the task in problem-solving both in directly wealth creating activities and in those that are geared to enhancing the quality of life of the population. If firms need to be world competitive, governments and social services need to modernize even more urgently, to deliver management and social well being with maximum efficiency and effectiveness.
Unless we believe in the “trickle down effect” (and are also willing to wait for it to work its way through) there is no reason why technological development efforts should concentrate on competitive activities only. The whole range needs to be covered, though probably by different people.
3. – Let us extend the range of actors in producing innovation
In accordance with the new paradigm, continuous improvement needs to become the way of working for all, from the top managers and specialists to every single worker, and it needs to become a way of approaching activities, from the production world right into the community and the home.
Learning to analyze processes, to identify ways of improving them, reducing efforts and costs, adapting them to specific conditions and even changing them radically is necessary for all citizens. Educational reform should include the introduction of such habits as a key component and so should job training programs. But the almost “cultural” change that this implies for all those that are now in industry or government is very deep and very necessary.
A huge social contribution could be made by the S&T community by becoming the champions of generalized innovativeness in society.
4. – Let us stop trying to build a “bridge” between university and industry. Let us instead take the dividing river away.
We need to learn to live in constant interaction between technology users and producers. We need to open universities to all social actors and move researchers and engineers out into the field, out into where their work is used.
We are coming from long decades of mutual distrust. Researchers looked down on “business people who are only interested in money, “and business people considered researchers “impractical dreamers who don’t know the real world.” These attitudes resulted in a lack of common language between the two worlds.
We now need to build a platform of mutual trust and respect, which can only result from frequent cooperation, probably beginning with small simple things and growing from there.
5. – Finally, let us clearly distinguish four areas of action which are all equally crucial:
1. Scientific and technological research understood as the creation of knowledge capital for today and tomorrow
2. Technological development for world competitiveness geared to modernizing the export sectors and their support network, involving incremental and radical innovations (with full consciousness of the international knowledge frontier)
3. Technological development for improving the general wealth creating capacity of the country, the regions, industries and firms (including SMEs). This includes educational reform, technical infrastructure, development of consultancy, financial and technical services (from information to maintenance) and so on.
4. Technology for the people geared to enhancing the quality of life of each portion of the population on each portion of the territory. It would involve the development and implementation of appropriate technology, the enhancement of human capital with the specific needs of each particular locality and stimulating general innovativeness to solve local problems.
We need to move strongly on all four fronts!
Yet, each of those four distinct areas of action must be approached differently
Each requires:

Different criteria of priority
Different ways of funding and different sources
Different actors and ways of organizing
Different mechanisms for promotion and conditions for diffusion (for instance, scientific research and technology for the people should be vastly disseminated, while technology for competitiveness should be patented and closely guarded)
Different ways of measuring results

What works of fails in one front, does not necessarily work or fail in another.
As with everything else in this paradigm, segmentation, diversity and adaptability are essential for effectiveness and for successful efforts.
So, let us segment and diversify our efforts in South-South cooperation for Science and Technology. Let us differentiate the goals in research, development, engineering and organizational modernization and let us gear them carefully to the various objectives to pursue.
Let us also adapt them to the various realities of the developing world, between and within our countries. This was not easy to do in the mass production world. It is not easy either in the flexible networks world we are now building, but it is certainly feasible. Let us make sure we don’t miss the opportunity.

i

"Paradigm change and the role of technology in development"

2000. Only in the original Spanish: “Cambio de paradigma y rol de la tecnología en el desarrollo”, Keynote speech in the series of seminars Science and Technology for the future of the country, organized by the Ministry of Science and Technology, Caracas, Venezuela. June.

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"Reconceptualizing technology and the National System of Innovation"

1996. Only in the original Spanish: “Nueva Concepción de la Tecnología y Sistema Nacional de Innovación”, Cuadernos de CENDES, Año 13, Nº 31, Segunda Epoca, January-April, pp.9-33.

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Keywords

Technology, Technological Change, Technology Policy, Innovation, Competitiveness, National System of Innovation, Institutional Change.

Abstract

This paper is a contribution to the debate about the role and nature of technology policy in Latin America in the new context for development. On the basis of the present transition in the world economy and the changes ocurring in the technological paradigm and management models, three areas of transformation are explored:

1- The change in the role of technology, showing its growing importance as a strategic tool for the firm;

2- The change in the way technology is understood, pointing to the widening of the field for innovative activity and to the multiplication of the agents and of the places for making technological innovation, and

3- The change in the character of technological policies, suggesting criteria to guide the design of effective and coherent ways of giving support to reconversion processes and to achieving sustained capabilities for competitiveness in the new conditions.

The final section discusses the question of the appropiate institutional framework to deal with the new issues of technology and development. For this purpose the notion of a National System (or Network) of Innovation is presented as an organizing concept to define the many different types of interactive linkages required among the various public and private actors involved.

Table of Contents (Spanish)

Resumen

Introduccion

1. Cambio en el papel de la tecnologia en el desarrollo

2. Cambio en la concepcion de la tecnologia

● Ampliación del ámbito de la innovación tecnológica
● Multiplicación de los actores y los escenarios
● Revalorización de los recursos humanos
● Revalorización de la ciencia como inversión estratégica

3. Cambio en la politica tecnologica

● El apoyo en la búsqueda de la competitividad estructural
● El nivel micro: la empresa
● Financiamiento
● Recursos humanos
● Servicios técnicos y de información
● La cuestión de los subsidios
● Nivel macro: el espacio nacional
● Nivel meso: la red, cadena o complejo productivo

4. El sistema (o red) nacional de innovacion y

● Las nuevas formas de accion del estado

5. Bibliografia

Introduction (Spanish)

América Latina confronta hoy un reto sin precedentes. Después de los años ochenta, unánimemente denominados la década perdida y de los inciertos procesos de recuperación de la primera mitad de los noventa, se plantea la imperiosa necesidad de reemprender el crecimiento en medio de críticas condiciones sociales. A nadie se le escapa la complejidad de la tarea. El contexto que influye sobre las posibilidades de éxito se caracteriza por la turbulencia y el cambio.

Entre las múltiples transformaciones que se están produciendo se encuentra una modificación profunda en el papel que juega -o puede jugar- la tecnología en el desarrollo. De haberse visto como una “variable” a tomar en cuenta, la tecnología, entendida en un sentido mucho más amplio, pasa a convertirse en la principal herramienta de la transformación productiva y su dominio en la condición fundamental para alcanzar y mantener la competitividad.

Esto lleva naturalmente a que se modifiquen las concepciones acerca de la tecnología y a que cambie también la política científico-tecnológica para responder acertadamente dentro del nuevo contexto. Este trabajo explora esas tres áreas de transformación. En la primera parte se examina el sentido en el cual se modifica el papel de la tecnología en el desarrollo. En segundo lugar se discuten los cambios necesarios en la forma de concebir la tecnología dentro del nuevo paradigma tecnológico y organizativo. Por último, se analizan las necesidades de apoyo a los procesos de reconversión, planteando las consecuencias prácticas en el terreno de las políticas y las acciones.

Todos estos puntos se desarrollan con el fin de enmarcar la noción de sistema nacional de innovación en el nuevo contexto. También se persigue fundamentar la necesidad de concebir las políticas tecnológicas y de desarrollo, no en sistemas centrales, sino en redes descentralizadas de múltiples actores y múltiples acciones, orientadas a fortalecer la capacidad innovativa de cada país.

La intención es contribuir, con un conjunto de reflexiones, a un amplio debate que consideramos urgente sobre las formas específicas que debe tomar la acción del Estado en esta nueva fase del proceso de desarrollo.

Indeed, Schumpeter is among the few modern economists to put technical change and entrepreneurship at the root of economic growth.3 Yet, strangely enough, he saw technology as exogenous and –together with institutions and social organisations– “outside the domain of economic theory”4. His focus was the entrepreneur and his goal was to explain the role of innovation in economic growth and on the cyclicality of the system.

It is the Neo-Schumpeterians who have endeavoured to analyse technical change and innovation as such, with their regularities and evolution; who have delved into the characteristics and dynamics of innovation, from individual technical changes through clusters and systems to technological revolutions. This task has been performed by looking at technology, engineering and business organisation from the perspective of the economist and the social scientist, identifying the common features in the processes of evolution, in the interrelations and in the breakthroughs that occur in the most diverse technical areas. These regularities then inform an understanding of the relationship between technical and organisational change, between these and economic performance as well as the mutual relationships between technology, the economy and the institutional context.

This paper will concentrate on technological revolutions and techno-economic paradigms, their definition, the causal mechanisms that bring them about, their impact on the economy and institutions and their relevance for economic analysis. Yet, since these macro phenomena are deeply rooted in the micro-foundations of technical change, the following section will refer to some of the basic theoretical advances made at the micro and meso levels.

Organizational Change

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“Learning from history: Succeeding in the digital age”

2023. In Oeij, P., Kirov, V., and Pomares, E. editors, Beyond 4.0. The Practical side of Digital Transformation: A Tool book for Practitioners. Publishing House Bulgarian Academy of Sciences. Chapter 3, pp. 42-60

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Abstract

Although each technological revolution is unique, there are certain patterns that recur across the history of capitalism that can be of great use for the challenges of the present. This chapter will share the lessons learned from such experience, especially those that seem to determine the requirements for the golden ages, such as the Victorian boom, the Belle Époque, and the Post War prosperity. The contention is that the ICT revolution has the potential to bring about a sustainable global golden age for the information society and that the time is ripe to do what is needed to bring it about.

Keywords

Technological revolutions; technological determinism; golden ages; government policy; regulation; green transition; devolution; institutional innovation.

"Technological revolutions, paradigm shifts and socio-institutional change"

2004. In E.Reinert, ed. Globalization, Economic Development and Inequality: An alternative Perspective. Cheltenham: Edward Elgar, pp. 217-242. ISBN: 1 85898 891 8

1998. Based on the original German, “Neue Technologien und sozio-institutioneller Wandel”, in H. THOMAS and L. NEFIODOW (Eds.), Kondratieffs Zyklen der Wirtschaft, BusseSeewald. Herford, Germany pp.17-51. ISBN : 3-512-03177-3

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Introduction

The last decades of the 20th Century were a time of uncertainty and extremely uneven development. People in many countries and in most walks of life feel uncertain about the future for themselves and their workplaces, about the prospects for their own countries and for the world as a whole. Inside each country and between countries there were strong centrifugal trends generating unprecedented growth and wealth, at one end, and increasing poverty deterioration and degradation, at the other. Among those old enough to remember, there was widespread recognition that the erratic, uneven and unstable climate of the 1980’s and 1990’s was profoundly different from the “Golden Age” of growth of the 1950’s and 1960’s. This recognition is probably at the root of the revival of interest in long waves.

This chapter puts forth a particular interpretation of the long wave phenomenon, which offers to provide criteria for guiding social creativity in times such as the present. Basically, the present period is defined as one of transition between two distinct technological styles -or techno-economic paradigms- and at the same time as the period of construction of a new mode of growth. Such construction would imply a process of deep, though gradual, change in ideas, behaviours, organizations and institutions, strongly related to the nature of the wave of technical change involved.

Indeed, contrary to what is usually assumed, we suggest that long waves are not merely an economic phenomenon, though they certainly have economic manifestations. Long waves would affect the whole system, the entire structure of society, worldwide. This would explain why economists have such a difficult time proving or disproving the existence of long waves, while historical memory and the people of each period clearly distinguish the “good times” from the “bad times.” In fact we will argue that the instability of the present period has a techno-economic origin and a socio-institutional solution.

According to our interpretation, the long term fluctuations that we call long waves would be the result of successive couplings and decouplings of two spheres of the system: the techno-economic, on the one hand, and the socio-institutional, on the other. When a good coupling is achieved between those two spheres, there is a long period of two or three decades of stable growth, perceived as times of prosperity. When a decoupling occurs, it results in equally long periods of irregular growth, recessions and depressions, perceived as bad times. But, why should this mismatch come about and what is the nature of the recoupling?

The causes for this behaviour of the system would lie in important differences between the techno-economic and the socio-institutional spheres, in terms of rhythms and modes of change.

We suggest that there are mechanisms inherent to the way technologies diffuse which result in technological revolutions or changes of paradigm every fifty or sixty years. This results in long term patterns of continuity and discontinuity in the techno-economic sphere which require matching transformations at the socio-institutional level. Yet, there are inertial forces which make the socio-institutional framework more resistant to change and rather slow to adapt to new conditions, except under critical pressure. Thus the mismatch occurs with each technological revolution and it takes decades to reestablish the coherence of the total system. But, once the good match is achieved, a period of prosperity ensues, giving way to the full deployment of the new wealth creating potential.

If this is an acceptable explanation of the occurrence of long waves, the question remains as to what guides the adequacy of change in the institutional sphere. We suggest that each technological revolution, as it spreads, generates a set of best practice principles which serve as a conscious or unconscious paradigm for steering institutional change and for designing the social tools with which to master the new techno-economic potential.

Let us develop the argument beginning with the question of the great continuities and discontinuities in technology. For this, we must examine the manner in which technologies evolve. This will be the content of the first part. Then, in the second part, we will see how and why technological revolutions gradually transform the whole productive system. In the third part: we discuss how the matching changes in the socio-institutional framework take time to occur. Finally, in the fourth part, we present the way in which an understanding of the nature and characteristics of the emerging technologies can help in designing appropriate responses at the institutional level.

h

"The social and political challenge of the present paradigm shift"

1997. Oslo: Norwegian Investorforum, May 15-16.

(Text based on a presentation at the Workshop on “Evolutionary Economics and Spatial Income Inequality”; Oslo: The Other Canon Foundation)

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Introduction

The world is approaching the twenty-first century under the stress of very powerful centrifugal trends. The forces that are leading to social exclusion are putting great strain on the idea that welfare could continue, increase and expand, on the national and international levels, as was a widely believed until the 1970’s when the North-South Dialogue created high hopes for world development. Since the 1980’s, unlimited wealth has been growing at the upper end of the income scale, leading to unimaginably luxurious and ostentatious life-styles, very difficult to justify socially, since they are often seen not as the result of investment in wealth production but of financial manipulation. Meanwhile, though unemployment has fallen in the U.S. in the midst of sustained asset inflation, it has remained stubbornly high in many European countries all through the 1990’s and has even become a problem in Japan, a country that was characterized by full employment even while most of the world was immersed in stagflation in the 1980’s. Income distribution has become more unequal in many developed countries and brutally so in Russia and Eastern Europe, after the collapse of the Soviet System. Critical poverty has grown to unbearable levels in most of Africa and Latin America, reversing many of the gains of the 1960’s and 1970’s.

This is all happening in the midst of a world amazed at the power and the potential of information technology and witnessing the accelerated and explosive growth of the industries and firms associated with microelectronics, computers and telecommunications. Yet, those spectacular successes of firms and countries connected with these new industries or riding the high technology wave through modernization and globalization, are also in sharp contrast with the prolonged difficulties experienced by many other firms and industries and with the other parts of the world, which, after having seen better times, are now suffering stagnation or decline, are burdened with unpayable debts and are experiencing acute social deterioration and political dislocation.

The question of sustainability, in social terms, is coming to the foreground. It seems that the time has come to find ways of reestablishing social cohesion.



"Technical Change, Competitive Restructuring and Institutional Reform in Developing Countries"

1989-12, SPR, Discussion Paper Nº 4, World Bank Publications, Washington, D.C.

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"Socio-political challenges of the change of technological paradigm"

1988. Only in the original Spanish: “Desafíos sociales y políticos del cambio de paradigma tecnológico”. en M.Pulido ed., Venezuela: Desafíos y Propuestas, UCAB-SIC, Caracas.

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Table of Contents (Spanish)

Introduccion

1. Cambio de paradigma o el presente como transición

● Doble impacto de las revoluciones tecnológicas

● El difícil cambio de “sentido común”

● Dos ritmos de cambio distintos

● La presión política de las tendencias centrífugas

2. Relación entre cambio de patrón tecnológico y modelos políticos viables

● Cada paradigma como óptimo universal de eficiencia en su época

● Coherencia de las innovaciones socio-institucionales necesarias

● Diferentes formas de acoplamiento para un amplio espectro de modelos viables

● El rango de lo posible y la recomposición del espectro político

3. Construir un modelo deseable: Tendencias y opciones

● Distinguir lo nuevo bajo el envoltorio de lo viejo

● De la homogeneidad a la diversificación

● De la compartimentación a la integración

● De la centralización a la descentralización

● De la confrontación al consenso

4. Conclusion: El tamaño del desafío

Introduction (Spanish)

Vivimos tiempos difíciles, plenos de confusión e incertidumbre. El deterioro del nivel de vida de la mayoría de la población, incluyendo el grueso de la clase media es alarmante, mientras que los esfuerzos por revertir el retroceso desembocan en la frustración y la impotencia. La mayoría de los viejos modelos explicativos y orientadores de la acción política se han derrumbado; los nuevos no logran demostrar su efectividad en términos de crecimiento con equidad. Son, pues, tiempos para la experimentación, la discusión y la apertura a enfoques alternativos.

Hoy, voy a compartir con ustedes una interpretación que ayuda a poner un cierto orden en el caos del presente. El esquema teórico que les voy a presentar brinda dos tipos de herramientas útiles en este período. Por una parte, permite ubicar esta época en el contexto histórico, brindando una estructura explicativa que convierte la experiencia del pasado en fuente de aprendizaje relevante. Por la otra, brinda criterios para la construcción de visiones viables de futuro y para el diseño de formas efectivas de acción inmediata. Me doy cuenta de lo ambiciosa que es mi oferta y espero poder satisfacerlos en alguna medida.

En esencia lo que les voy a proponer es que, aunque parezca lo contrario, estamos ante una ventana de oportunidad para diseñar y construir una sociedad más solidaria. Lo que estamos viviendo actualmente es la transición de un patrón tecnológico a otro en el mundo productivo. Son los períodos de surgimiento de un nuevo e inmenso potencial de generación de riqueza, cuyos verdaderos frutos sólo se dan décadas más tarde, una vez que la sociedad ha logrado “domar” ese potencial, organizándose de modo adecuado para ponerlo al servicio de sus objetivos. Esto significa que el rumbo definitivo y el impacto de cada revolución tecnológica son definidos por las diversas fuerzas sociales en juego. La efectividad con la que cada grupo social y cada país puede influir sobre la forma del futuro depende de hasta dónde comprende -o intuye- el carácter específico de esa revolución y de las opciones que abre.

Estoy entonces planteando algo que muchos de Uds. saben ya, es decir, que nuestras dificultades actuales como país, no son sólo locales, sino también la manifestación específica de un fenómeno de carácter mundial. Ello significa que sus causas fundamentales son generales y afectan a cada país, de una u otra forma, según sus particularidades. Significa también que las soluciones propuestas en distintas partes del sistema sólo serán viables si logran engranar en el rumbo que toma el cambio en el plano mundial. Esta presentación se ubicará en ese contexto general, confiando en que cada uno se servirá de ella para aplicarla en el nivel y al contexto que correspondan a su espacio de acción.

Comenzaré esbozando el marco teórico básico, interpretando el presente como la cuarta vez que se vive el largo y difícil período de transición de un paradigma tecnológico a otro. En la segunda parte, me valdré del ejemplo de la transición anterior para ilustrar la relación entre las características de un patrón tecnológico y los modelos políticos viables. Al final, con miras a la construcción de un modelo deseable, los invitaré a acompañarme en una exploración somera de las principales tendencias que genera el nuevo paradigma y del espectro de opciones que abre.

Education

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“The importance of education and training policies in supporting technological revolutions: A comparative and historical analysis of UK, US, Germany, and Sweden (1830–1970)”

2022. Focacci, C.N. and Perez, C. in Technology in Society. Vol 70 102000

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Abstract

Major technological innovations are not sufficient to enable socio-economic progress without governments creating the institutional framework – in particular via education, welfare and training programs – required for the absorption of the new technical possibilities these innovations create. To support this claim, we provide a comparative historical view of how four different countries tackled the challenge of adapting to three successive technological revolutions, with varying degrees of success. We look at the relationship between the welfare, education and training policies implemented by the governments of the United Kingdom, Germany, the United States, and Sweden and their socio-economic results. The historical period studied spans from 1830 to 1970. This, according to the neo-Schumpeterian view we follow, covers the second, third and fourth technological revolutions, namely, the Age of Iron, Coal, and Railways, the Age of Steel and Heavy Engineering, and the Age of the Automobile and Mass Production; the current Age of Information and Telecommunications being the fifth.

Educational Reform in the New Paradigm

2000. Only in the original Spanish: La reforma educativa ante el nuevo paradigma, UCAB/EUREKA, Caracas

ISBN: 980-244-211-9

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Content (Spanish)

Prólogo. Ignacio Avalos Gutiérrez

“La reforma educativa a la luz del cambio de paradigma productivo“, pp.11-30. Conferencia grabada en video para el seminario Taller para planificadores educativos organizado por OREALC/UNESCO, Agosto 1995.

“La reforma educativa: nuevo paradigma, nuevos conceptos“, (PDF), pp.31-46.
Charla ante la Asamblea Nacional de Educación, Caracas, 1998.

“La universidad en el nuevo paradigma: Formar para la vida en la sociedad del conocimiento“, pp. 47-65. Conferencia en foro de la Asociación de Profesores de la UCV. Originalmente publicado en Reflexiones sobre la Educación Superior en América Latina, FUNDAYACUCHO-FAPUV, Caracas, 1998.

Introduction (Spanish)

El presente volumen reúne tres charlas sobre el actual cambio de patrón tecnológico -o paradigma tecno-económico- y sus implicaciones para la reforma educativa. Cada una explora aspectos distintos de esa amplia temática, con un sesgo algo distinto en función del público de destino.

Las dos primeras se refieren a la educación en general y la tercera se dirige más hacia el nivel universitario. La trama unificadora es la transformación de los modelos educativos con miras a formar personas capaces de vivir creativa y efectivamente en la emergente sociedad del conocimiento.

Más que fines académicos o teóricos, el objetivo que se persigue es brindar criterios para la acción idónea a quienes abordan las modificaciones necesarias del terreno educativo, tanto en su quehacer cotidiano como en los grandes cambios organizativos y conceptuales.
Agradezco el interés por realizar esta edición y su decidido apoyo a la Organización Eureka, siempre al lado de los procesos innovadores en cualquier terreno donde estos ocurran, y a la unidad de publicaciones de la Universidad Católica Andrés Bello, institución francamente abierta a la renovación.

Carlota Pérez
Caracas, Junio de 1999

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"New technological model and higher education: A view from the changing world of work"

1992. In Gustavo Lopez Ospina, compiler, Challenges and Options: Specific Proposals, CRESALC/UNESCO, pp. 121-145

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Introduction

Productions System requirements as a Source of Criteria for Change in Education
A Common Ground for Collective Innovation

Section 1: People Accustomed to Continuous Technical Change for a Flexible and Adaptable Organisation

From Standardization and Optimization to Adaptability and Continuous Improvement
Prompt Response to Changing Needs
Technological Competition
Continuous Improvement as the Norm
Information Technology and Continuous Improvement
Recognition of Personnel as Human Capital
Need for Qualified Professional to Take On and Carry Out Technical Change
Potential for Acquiring New Information
Ability to Be Innovative
Conditions for Keeping Up-to-Date

Section 2: People Capable of Creative Group Work for an Interactive Network Structure

From Rigid Pyramids to Participatory Networks in Open System
Limitations of the Former Hierarchical Organization
A Network of Semi-autonomous Units
Creative Participation
Internal Technical Interaction
Top Management as Leadership
An Open System of Multiple Cooperation
Proliferation of Independent Consultants
Links with Educational and Research Institutions
Coherence between New Organization and Computer Equipment
Same principles in many variants
Need to Train Autonomous Professionals with Interdisciplinary Work Habits
Transdisciplinary Specialization and Integration
Self-discipline and Excellence
Interaction with the Outside World

Section 3: The End Justifies the Means or How to Approach the Process of Transformation

Adoption of the New Efficiency Principles
Bringing Down the Walls that Isolate the Education System
A Virtuous Circle to Accelerate Development