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.