Beyond the Technological Revolution


Research Project

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. Beyond the Technological Revolution: the role of the state in the transition to a golden age is a continuation of this work; a four-year research project established to study the role of government and society, past and present, in promoting and propagating innovation to generate inclusive growth. As in previous work, the analysis of history we will be doing is carried out with the aim of identifying patterns that will help policymakers to comprehend the present and identify potential paths of action, ones with the potential to lead from the current economic crisis to a ‘golden age’ – a positive-sum game for business and society.


The global economy is at a turning point

Focus on the economic crisis has masked a much deeper structural shift: from a model of development based on mass production, mass consumerism and oil, to the installation of a new technological age based on the information technologies. Today, thanks to the Internet, the economy has become global and computers and smartphones reach every corner of the planet. With this, the logic of networking and flexibility has become the universal paradigm for entrepreneurship and innovation, displacing or reshaping industry after industry 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 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), 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.

Five technological revolutions

The first of these paradigm shifts was the Industrial Revolution itself, which unleashed a new national economy in Britain that was based on machine manufacturing and factories rather than agriculture and local production. The 1820s heralded the age of coal and steam, iron and railways; the 1870s brought steel and heavy engineering (electrical, chemical, civil and naval), leading to international shipping and the first real wave of ‘globalization’. By 1910, the age of oil, petrochemicals and the automobile was beginning, leading to an economy of mass consumption highly intensive in energy and materials. And the early 70s witnessed the start of the telecommunications and information technology revolution that we are in the grip of today. Each of these revolutions to date has driven a great surge in development that has taken half a century or more to spread unevenly across the economy, and each has occurred in two distinct phases – installation and deployment – with a transitional period in the middle that is marked by a bubble collapse and recession. It is in this transitional period, or ‘Turning Point’, that we find ourselves today.

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, as Schumpeter would put it, the ‘creative destruction’ that occurs in the early decades of a new technological revolution. The aim of this research project and the book that will follow from it, Beyond the Technological Revolution, is to make an in-depth exploration into the steps necessary to ensure that the deployment phase of the information revolution is one that results in a ‘golden age’, a route that is beneficial for society while being profitable for business. 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 what we call the ‘green direction’ doing for the global majorities what the mass production age did for the people of the Western democracies.

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.

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 explorations of the current situation focus 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 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 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 that interpretation of the context make a difference for policy design?
  • At this time of global unrest, marked by the rise of xenophobia, fundamentalism and protest, is there a possibility of peaceful alternatives to the crises and wars that have marked previous turning points?
  • Does the welfare state have a future? Or futures?
  • What are the relative roles of finance, government and the social economy in deployment?
  •  Are the emerging nations playing catch-up to the age of oil – or could they leapfrog into the new paradigm? Are they already doing so?
  • 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?
  • How is ‘green growth’ a synergistic direction for resource-efficient innovation in the age of ICT? Can aiming at increasing the productivity of resources be as effective a means of wealth creation as concentrating on labour productivity?