Carlota Perez is a professor that specializes in the social and economic impact of technological change. In 2002, she published an influential book called Technological Revolutions and Financial Capital: The Dynamics of Bubbles and Golden Ages.
One of her arguments is that economic growth since the Industrial Revolution has occurred through a series of cycles and surges, ultimately culminating in a fifth great surge centered around information and telecommunications. This is our current economic environment.
Perez was recently interviewed by strategy + business and they published this diagram (if it’s too small, click through to the article):
The five surges of capital and technology since 1771 are:
Industrial Revolution
Steam and Railways
Steel, Electricity, and Heavy Engineering
Oil, Automobiles, and Mass Production
Information and Telecommunications
Number 4 – oil, automobiles, and mass production – is what produced widespread suburbanization, a middle class filled with homeowners, and new forms of retail employment. And I am sure that most of you would agree that it’s not quite over yet.
According to Perez, each cycle has two phases: an installation phase and a deployment phase. This latter phase is a “golden age.” But in between these two phases is a turning point that is typically characterized by some sort of crisis and recession.
Her belief is that we are in this turning point right now. You see it with Brexit. The demagogues being elected. And more. If you buy this, the key question naturally becomes: How do we cross this chasm and enter our next golden age?
What’s also important to keep in mind about this theory is that it means that what we are seeing today, socio-economically, is not in fact new. We’ve been through this before. I’ll end with this quote from the interview with Perez:
In the 1920s, wealth distribution looked the same as it does today. The top 1 percent received 25 percent of society’s total income. By the 1950s it was down to 10 percent. Every installation period brings inequality until the state comes back actively to reverse it and relieve social unrest.
So what’s happening today may be temporary and it may be history repeating itself. If you’re interested in this topic, you can read the full interview here.
“If I meet one more anti-gentrification activist who moved to Seattle ten minutes ago, I shall scream.” -Dan Savage
So it’s not just developers who are frustrated by the many paradoxical desires that we have of cities. We are concerned about housing affordability and we want to minimize displacement, but we do things that restrict new supply and put increasing pressure on our existing housing stock.
Below is another excerpt from Dan Savage. It’s from an article called: Doing Something Real About Gentrification and Displacement. Dan writes a sex-advice column, but clearly also feels passionate about urban issues. When he talks about “this city” he’s talking about Seattle.
“Housing scarcity—exacerbated by the ridiculous amount of this city zoned for single-family housing—deserves as much blame for the displacement crisis as gentrification. More. And unlike gentrification (“a once in a lifetime tectonic shift in consumer preferences”), scarcity and single-family zoning are two things we can actually do something about. Rezone huge swaths of the city. Build more units of affordable housing, borrow the social housing model discussed in the Rick Jacobus’ piece I quote from above (“Why We Must Build”), do away with parking requirements, and—yes—let developers develop. (This is the point where someone jumps into comments to point out that I live in a big house on Capitol Hill. It’s true! And my house is worth a lot of money—a lot more than what we paid for it a dozen years ago. But the value of my house is tied to its scarcity. Want to cut the value of my property in half? Great! Join me in calling for a radical rezone of all of Capitol Hill—every single block—for multi-family housing, apartment blocks and towers. That’ll show me!)”
His overarching point is that lots of highly-educated people with money are choosing, today, to live in urban centers. And whether we like it or not, that is going to cause gentrification. We can’t stop that. But what we can do is try and alleviate housing scarcity.
His other solution involves building lots of transit to address geographic isolation. I agree with him on this point and I’ve argued it before on the blog. If we can all agree that one of the issues is land/housing scarcity, then transit is certainly another way to “pull in” new supply. Though I think we need to be realistic about the level of service required to make areas desirable.
If you have a few minutes, check out Dan Savage’s article. It’s a good and entertaining read.
Carlota Perez is a professor that specializes in the social and economic impact of technological change. In 2002, she published an influential book called Technological Revolutions and Financial Capital: The Dynamics of Bubbles and Golden Ages.
One of her arguments is that economic growth since the Industrial Revolution has occurred through a series of cycles and surges, ultimately culminating in a fifth great surge centered around information and telecommunications. This is our current economic environment.
Perez was recently interviewed by strategy + business and they published this diagram (if it’s too small, click through to the article):
The five surges of capital and technology since 1771 are:
Industrial Revolution
Steam and Railways
Steel, Electricity, and Heavy Engineering
Oil, Automobiles, and Mass Production
Information and Telecommunications
Number 4 – oil, automobiles, and mass production – is what produced widespread suburbanization, a middle class filled with homeowners, and new forms of retail employment. And I am sure that most of you would agree that it’s not quite over yet.
According to Perez, each cycle has two phases: an installation phase and a deployment phase. This latter phase is a “golden age.” But in between these two phases is a turning point that is typically characterized by some sort of crisis and recession.
Her belief is that we are in this turning point right now. You see it with Brexit. The demagogues being elected. And more. If you buy this, the key question naturally becomes: How do we cross this chasm and enter our next golden age?
What’s also important to keep in mind about this theory is that it means that what we are seeing today, socio-economically, is not in fact new. We’ve been through this before. I’ll end with this quote from the interview with Perez:
In the 1920s, wealth distribution looked the same as it does today. The top 1 percent received 25 percent of society’s total income. By the 1950s it was down to 10 percent. Every installation period brings inequality until the state comes back actively to reverse it and relieve social unrest.
So what’s happening today may be temporary and it may be history repeating itself. If you’re interested in this topic, you can read the full interview here.
“If I meet one more anti-gentrification activist who moved to Seattle ten minutes ago, I shall scream.” -Dan Savage
So it’s not just developers who are frustrated by the many paradoxical desires that we have of cities. We are concerned about housing affordability and we want to minimize displacement, but we do things that restrict new supply and put increasing pressure on our existing housing stock.
Below is another excerpt from Dan Savage. It’s from an article called: Doing Something Real About Gentrification and Displacement. Dan writes a sex-advice column, but clearly also feels passionate about urban issues. When he talks about “this city” he’s talking about Seattle.
“Housing scarcity—exacerbated by the ridiculous amount of this city zoned for single-family housing—deserves as much blame for the displacement crisis as gentrification. More. And unlike gentrification (“a once in a lifetime tectonic shift in consumer preferences”), scarcity and single-family zoning are two things we can actually do something about. Rezone huge swaths of the city. Build more units of affordable housing, borrow the social housing model discussed in the Rick Jacobus’ piece I quote from above (“Why We Must Build”), do away with parking requirements, and—yes—let developers develop. (This is the point where someone jumps into comments to point out that I live in a big house on Capitol Hill. It’s true! And my house is worth a lot of money—a lot more than what we paid for it a dozen years ago. But the value of my house is tied to its scarcity. Want to cut the value of my property in half? Great! Join me in calling for a radical rezone of all of Capitol Hill—every single block—for multi-family housing, apartment blocks and towers. That’ll show me!)”
His overarching point is that lots of highly-educated people with money are choosing, today, to live in urban centers. And whether we like it or not, that is going to cause gentrification. We can’t stop that. But what we can do is try and alleviate housing scarcity.
His other solution involves building lots of transit to address geographic isolation. I agree with him on this point and I’ve argued it before on the blog. If we can all agree that one of the issues is land/housing scarcity, then transit is certainly another way to “pull in” new supply. Though I think we need to be realistic about the level of service required to make areas desirable.
If you have a few minutes, check out Dan Savage’s article. It’s a good and entertaining read.
His argument, as the title suggests, is that we need to dig deeper and look at how our land markets are functioning if we want to address some of the challenges facing our cities today.
The post is obviously written from a UK perspective, but many of his points will probably ring true for a lot of you in the industry. One remark that stood out for me was his point about developers always operating at the margins:
“The result of the land auction process is that the worst scheme, the one that offers the least to the community, the poorest quality homes, and charges the most for them, is generally the one that will happen, because this is the one that offers the most cash up front to the landowner. As a result, development is always already at the margins of viability. Even a relatively small shock can see construction grind to a halt rapidly, because there is simply not enough margin left after the landowner’s cut has come out for the developer to want to build.”
When it comes to building, most people tend to think about the developer, the architect, and so on. But what I think many people overlook is that this entire process starts with a land input and a landowner. And the cost, availability and usability of that land input has a significant impact on everything that happens downstream.
His argument, as the title suggests, is that we need to dig deeper and look at how our land markets are functioning if we want to address some of the challenges facing our cities today.
The post is obviously written from a UK perspective, but many of his points will probably ring true for a lot of you in the industry. One remark that stood out for me was his point about developers always operating at the margins:
“The result of the land auction process is that the worst scheme, the one that offers the least to the community, the poorest quality homes, and charges the most for them, is generally the one that will happen, because this is the one that offers the most cash up front to the landowner. As a result, development is always already at the margins of viability. Even a relatively small shock can see construction grind to a halt rapidly, because there is simply not enough margin left after the landowner’s cut has come out for the developer to want to build.”
When it comes to building, most people tend to think about the developer, the architect, and so on. But what I think many people overlook is that this entire process starts with a land input and a landowner. And the cost, availability and usability of that land input has a significant impact on everything that happens downstream.
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