THE RESEARCH PROJECT AND THE BOOK
As an interdisciplinarian, Carlota Perez studies the relationship between technology and economic development, between finance and technological diffusion and between technical and institutional change. Her work looks at the impact of technical change and technological revolutions on society and the economy at the national and global levels. Her previous book, Technological Revolutions and Financial Capital: the Dynamics of Bubbles and Golden Ages (2002, Edward Elgar), examined the roles of finance and markets in unleashing technological revolutions. Her current book project — Beyond the Technological Revolution: the role of the state in the transition to golden ages — is a continuation of this work. The research involves studying the role of government and society, past and present, in shaping technological revolutions to generate economic development and inclusive growth. As in her previous work, the analysis of history aims at identifying recurring patterns that will help policymakers to comprehend the present and identify potential paths of action in the advanced countries capable of leading from economic malaise, social discontent and populism to a ‘golden age’ – a positive-sum game between business and society. Although the research is centred on the core countries of each revolution, it will also try to identify historical lessons for catching up in development as well as the conditions for forging ahead.
The global economy is at a turning point
Focusing on the evolution of economic variables only, even in the case of those who study social inequality, has masked attention to the deep structural shift that has been occurring and needs to be accelerated: from a model of development based on mass production of tangible products, mass consumerism, oil and plastics, to the installation of a new technological age based on services and guided by the information technologies. Microelectronics brought computerisation from the 1970s; then, from the mid 1990s, the Internet enabled globalisation, with computers and smartphones reaching every corner of the planet, while containerships move parts and products across the oceans, with bar and QR codes keeping track of them. From the 2020s, a third wave of transformation has begun with artificial intelligence (AI). The logic of networking, flexibility and intangible value has become the universal paradigm for entrepreneurship and innovation, displacing or reshaping industry after industry, creating completely new ones and opening trajectories of massive economic and societal transformation. While some view this disruption to the status quo optimistically, many are concerned at the threat of jobless growth due to AI and robotics and at the reality of rising inequality. At the same time, unexpected world power shifts resulting from rapid globalisation and the threat of global warming and environmental degradation have created a raft of new global concerns.
There are historical parallels
Humanity has found itself at similar turbulent moments in history before. In her 2002 book, Technological Revolutions and Financial Capital (2002 Elgar, translated into Spanish, Chinese, Russian and Korean), Carlota Perez presented her theory of technological revolutions, which builds on the work of Schumpeter, Kondratiev, Freeman and other evolutionary economists. According to her research, the world has gone through five major technological and economic upheavals since the start of the Industrial Revolution in the 1770s. Each of these shifts has brought with it a quantum jump in productivity and quality in key industries and, together with the new infrastructures that are part of these revolutions – such as canals, railways, electricity, highways, telecoms and the Internet – has extended and deepened market penetration, shifted the centres of industrial dynamism and changed the rankings in world power. And in each case, society has had to learn to guide the unleashing of these new forces to increase the social benefits that can be gained from their deployment. In essence, deep changes in technology and the economy require equally deep changes in the socio-institutional framework to shape the new potential for the greater benefit of society. It is only when such changes are made that market economies have experienced golden ages.
Five technological revolutions
The first of these major transformations was the so-called Industrial Revolution in the 1770s, which unleashed a new national economy in Britain that was based on machine manufacturing rather than hand-driven production and the use of a network of canals for goods transportation. The 1830s heralded the age of coal, steam, iron and railways; the 1870s brought steel and heavy engineering (electrical, chemical, civil and naval), with fast transcontinental railways, transoceanic telegraph and rapid steamships, leading to the first major ‘globalization’. By the mid-1910s, the age of oil, petrochemicals and the automobile was beginning, leading to an economy of mass consumption, highly intensive in energy and materials, with welfare states improving the lives of the many, in the advanced countries. And the early 1970s witnessed the start of the telecommunications and information technology revolution, which was given a second boost with the internet in the mid-1990s and a third with artificial intelligence AI) in the 2020s. . Each of these revolutions to date has driven what Carlota Perez calls a Great Surge of Development lasting about 50-60 years from irruption of the technological revolution, through an installation period, mainly led by finance and witnessing increasing inequality and ending in one or more crashes and recession. This becomes the ‘Turning Point’, which, if politicians understand the required changes, is followed by a golden age that broadens the benefits of the new technologies until they reach maturity and bring forth the next revolution. On this occasion the process has lasted much longer and that is one of the questions to be answered by the research for the new book.
From enabling ‘creative destruction’ to unleashing golden ages
Technological Revolutions and Financial Capital focused on the first stage of this process: on installation, and particularly on the role of finance in what Schumpeter referred to as the ‘creative destruction’ brought by major waves of radical innovation. The aim of this research project — and of the book that will follow from it, Beyond the Technological Revolution — is to make an in-depth exploration of the role of the state in previous revolutions in order to draw lessons for the present and the future. If the current information revolution is to lead to a golden age deployment, such as the Victorian Age, the Belle Epoque and especially the Post War boom, and be beneficial for society while also being profitable for business, an equivalent set of measures must be taken by governments. Currently, the bold and imaginative visions of those who understand the potential of the new paradigm confront the resistance of those who see inevitable stagnation and structural unemployment ahead. Such pessimism, rooted in the legacy of past ideas and institutions, is characteristic of every ‘Turning Point’, as we shall show in our research. We are currently in a similar moment to the 1930s, when most found it impossible to imagine that the soup kitchens and skid rows of Depression-era America would presage a vast improvement in living conditions for the majorities and the greatest economic boom in history. Today, as then, such pessimism is holding back what we believe could be a golden age, with ICT deployed along the ‘green transition’ recovering and even increasing the levels of wellbeing achieved after WWII in the Western democracies while lifting the global majorities into good lives.
Turning points as times of socio-political choice
Our existing research of the social record suggests that the deployment period of each technological revolution has the potential to be a period of flourishing industry, in which the benefits of the new technology are spread more widely across society. However, a cursory glance at the evidence shows that there is nothing mechanical about how society assimilates technology; the range of the possible with each new paradigm is very wide. In the case of mass production, the same technologies were used very differently by Hitler, Stalin and the Western democracies. What cannot be done today is to assume that the same policies that worked either in the previous (mass production) revolution or in the installation period of this one can be applied now to bring back business as usual and unleash a golden age. Rather, the turning point marks the moment when different groups show inertia or boldness, exercise imagination or dogmatism, aim to construct a better future for all or for the few, and reach a positive-sum game or a conflict-ridden one. What history can help us understand is that the best outcomes are within the range of the viable.
Learning from history to combine State and markets
Beyond the Technological Revolution aims to study the history of previous deployment periods in depth and, as in the previous book, use the patterns identified to analyse the present and explore possible future paths. The multi-disciplinary research process thus combines the historical with the current: history serving to deeply understand the causal mechanisms of past transformations and how business and society shaped the specific potential of each revolution, while the exploration of the current situation focuses on the nature of the new disruptive phenomena and of the inertial forces. Our existing research suggests not only that markets cannot unleash a golden age alone – but that the dichotomy between state and market is a false one. While a ‘hands-off’ state is helpful during the initial period of disruption, the evidence thus far suggests that an active state is a crucial element of the golden ages in the final deployment. Therefore this project is particularly interested in examining the role of government in past deployment periods, particularly in ‘tilting the playing field’ to create ‘mission-oriented’ innovation and growth.
Timely and relevant research questions
Throughout the project, we will attempt to answer a number of questions that are currently up for debate in both the academic and policy worlds:
● Are the current fears of unemployment and/or secular stagnation justified or short-sighted? Can we foresee the present and future impact of ICT and globalisation on full global employment?
● Is income polarisation inevitable or cyclical and reversible?
● Where are we in the ICT revolution: at the turning point, or, as others suggest, already in deployment – or even exhaustion?
● And what further evidence is there to show that we are in a fifth technological revolution, rather than a ‘Second Machine Age’ or a ‘Third (or Fourth) Industrial Revolution’? Does the interpretation of the context make a difference for policy design?
● At this time of global unrest, marked by the rise of xenophobia, populism, violence, wars and protest, is there a possibility of peaceful alternatives leading to the type of progress and socially fairer outcomes that have marked previous shifts from turning points to golden ages?
● Does the welfare state have a future? Or futures? What changes can or has the ICT revolution induced in the labour market that require changes in the welfare policies and in the way they are handled?
● What are the relative roles of finance, government and the social economy in deployment?
● What opportunities have the emerging nations taken to catch-up in development, what role has the state played? Have they adopted or modernised mass production? Has leapfrogging into the new paradigm been possible?
● What is the potential role of full global development in the creation of dynamic demand-pull effects for the ICT industries and for investment, innovation, growth and jobs in the advanced countries? Are there historical examples to learn from?
● What role has directionality played in inducing synergies in the economy, as was the case of suburbanisation and the Cold War in the mass production golden age? Could ‘green growth’ be a synergistic direction for resource-efficient innovation in the age of ICT?