Much has been written about our digital technology revolution and its impact on economies, societies and individuals. But few have brought the kind of historical perspective to the subject that helps us better understand our turbulent times like scholar and consultant Carlota Perez in her 2002 book Technological Revolutions and Financial Capital: The Dynamics of Bubbles and Golden Ages and related publications.
According to Perez, over the past few centuries, we’ve had a technology revolution every 40 to 60 years, starting with the Industrial Revolution in 1771, which was characterized by the emergence of machines, factories and canals. This was followed by the age of steam, coal, iron and railways starting in 1829; steel, electricity and heavy engineering in 1875; and oil, autos and mass production in 1908. Our present age of information and communication technologies (ICT), whose starting point she pegs at 1971, is the fifth such major revolution.
Technology revolutions have two distinct periods, each lasting 20 to 30 years. The installation period is the time of creative destruction, when new technologies emerge from the lab into the marketplace, entrepreneurs start many new businesses based on these new technologies, VCs encourage experimentation with new business models, and the new ventures attract considerable investments and financial speculation. Inevitably, this all leads to bubbles and crashes like the recent dot-com and subprime mortgage bubbles.
After the crash, comes the deployment period, a time of institutional recomposition. The now well accepted technologies become the norm. New paradigms emerge for guiding innovation and for determining winners and losers in the marketplace. Over time, these new paradigms significantly transform the economy and everything around it, as well as re-shaping social behavior and the institutions of society.
Last year Perez published Capitalism, Technology and a Green Global Golden Age: The Role of History in Helping to Shape the Future. In this recent article, she argued that we’re going through a crucial moment in history similar to the 1930s, which requires the kind of creative thinking and bold measures for which we justifiably celebrate statesmen like Franklin Delano Roosevelt and John Maynard Keynes. Let me summarize her argument.
The devastating impact of the Great Depression led to extreme right- and left-wing movements and the rise of populist, xenophobic, anti-immigrant groups around the world. But technological innovations continued unabated, including mass market advances in consumer appliances, automobiles, communications and entertainment. Once more, the demands of war, - WW2, - accelerated technological innovations, culminating with what Perez calls “the golden age of the 1950s and 1960s… a great surge of consumer-pulled growth, given direction by the practice of suburbanisation and the ideology of the American Dream.”
“This consumerist way of life that went on to fuel economic expansion for decades was not merely the sum of the new products and infrastructures made possible by the mass production paradigm, but resulted from a synergistic combination of political and societal choices… which made it possible for the growing numbers of the population - including blue collar workers - to aspire to a suburban home and the new lifestyle.”
We’re still recovering from the crash of our recent bubbles. “Unemployment and inequality are increasing due to globalisation, new technologies and the decoupling of finance from the economy during the prosperous bubble period. Critically, the American Way of Life of the last paradigm brought patterns of consumerism, disposability and profligate use of energy and materials that now confront the world with major environmental challenges, not least that of climate change. Up until now the ICT revolution has done little to change this: mass use of computing technologies has indeed added to global energy and materials demand. But our current information era is only half way through its diffusion path. If history is a guide, it has twenty to thirty years of deployment ahead…. There is a huge potential for innovation that is technologically feasible but still risky and uncertain in terms of markets and profitability. What is lacking is a direction that responds appropriately to the current contextual conditions and the specific wide-ranging innovation potential now installed.”
Perez envisions the potential for a sustainable global golden age based three inter-related policies:
- Cheap Universal ICT: “Full internet access at low cost is equivalent to electrification and suburbanisation in terms of facilitating demand (and also increasing user and worker skills).
- Sustainable growth: “Promoting the revamping of transport, energy, products and production systems to make them sustainable is equivalent to the Cold War, the Space Race and the spread of suburban homes in terms of directionality for innovation.
- Full Global Development: “Incorporating successive new millions across the world into sustainable production and consumption patterns is equivalent to the Welfare State, Post-War reconstruction and government procurement in terms of demand creation.”
Her prescription brought to mind a report by the US National Intelligence Council released four years ago, - Global Trend 2030: Alternative Worlds. The report took an in-depth look at the key megatrends expected to shape and transform the world over the next couple of decades. It identified four such overarching megatrends, two of which in particular are very much along the sustainable, global direction envisioned by Perez.
Individual empowerment: “Individual empowerment will accelerate owing to poverty reduction, growth of the global middle class, greater educational attainment, widespread use of new communications and manufacturing technologies, and health-care advances.”
“Significant numbers of people have been moving from well below the poverty threshold to relatively closer to it due to widespread economic development… Under most scenarios - except the most dire - significant strides in reducing extreme poverty will be achieved by 2030… Middle classes most everywhere in the developing world are poised to expand substantially in terms of both absolute numbers and the percentage of the population that can claim middle-class status during the next 15-20 years.”
Digital technologies have been playing a central role in this global development. The Internet has enabled a truly global digital economy, one connecting people and companies all over the world. Continuing technology advances, - e.g., smartphones, broadband wireless networks, cloud-based services, - are bringing the empowerment benefits of the digital revolution to just about everyone in the planet.
The growing nexus among food, water, energy and climate change: “Demand for these resources will grow substantially owing to an increase in the global population. Tackling problems pertaining to one commodity will be linked to supply and demand for the others.”
“An expanding middle class and swelling urban populations will increase pressures on critical resources - particularly food and water… aggravated by changing weather conditions outside of expected norms… The questions will be whether management of critical resources becomes more effective, the extent to which technologies mitigate resource challenges, and whether better governance mechanisms are employed to avoid the worst possible outcomes.”
With billions rising out of poverty and joining the middle class, we can expect increased demands for natural resources as well as for products and services of all kinds. But, meeting these demands and hopefully unleashing an age of prosperity will only be possible in an economy based on sustainable production and consumption patterns.
In her article, Carlota Perez reminds us that “Capitalism is only legitimate when enabling the successful ambitions of the few to benefit the many… The breadth and depth of the changes brought about by the spread of each technological revolution require an equivalent redesign of the institutional framework in order to unleash their full transformative potential… We need serious rethinking, intense consensus building, global negotiations and determined leadership. The technologies capable of driving a sustainable global golden age are available; unleashing them successfully requires an understanding of the historical moment and the willingness to make a clear socio-political choice.”