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.
I’m back and it feels great. I missed blogging the past 2 days. Though, there was something nice about not touching a computer all weekend.
This morning I got up extra early and listened to a brief conversation between Aaron M. Renn of The Urbanophile and urbanist Richard Florida. The topic is New York’s “Great Reset”, and the impetus was a recent report (of the same name) that was put out by New York University.
The conversation starts by talking about the resilience of New York City and its ability to accept and then reinvent itself in the wake of “creative destruction.” Destruction such as the financial crisis of 2008/2009.
But they then go on to talk about the challenges that New York, as well as many other cities, are now facing. Challenges brought about, not by failure, but by their tremendous success. Challenges such as income inequality and the dwindling middle class.
The overarching premise is that we are still in the early stages of a new urban and creative economy. And that there’s lots of work to be done in order to figure out how to make it an inclusive one.
There’s even mention of former Toronto mayor, Rob Ford.
You can listen to the talk below. If you can’t see the embedded play button, click here.
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New York Magazine recently published a really great conversation between Marc Andreessen and Kevin Rose. Marc cofounded Netscape way back when, and now runs a venture capital firm.
In addition to technology, the conversation touches on a bunch of different topics such as why it’s beneficial to be an optimist and why change can be difficult for people to accept.
But they also hit on a number of broader economic shifts, such as the replacement of labor by machines, and the rise and decline of industrial production in the US. Here’s a snippet on that latter point:
You’ve described the middle class of the 20th century as a myth.
There are two middle classes. There’s the historical middle class—which is the bourgeoisie—starting in the, like, 1600s. This was the businesspeople and the traders, the merchants, the butcher, the baker, the general-store manager, the guy who was going off to China to go get silk and bring it back. Businesspeople.
But in the 1940s something really significant happened, which is we bombed the rest of the industrialized world. And so the industrial base of Germany was obliterated. Japan was reduced to rubble. The rest of Continental Europe was bombed. England was bombed. The industrial base of the world was bombed. The one major industrial country that wasn’t bombed was the United States. So the United States became the monopoly producer of industrial goods.
The army bombed the American middle class into existence?
It was an accident of history. We had a window of opportunity which we took full advantage of. We had this window from basically 1945 to 1966, 1968, in which we were basically running unopposed. In that window, all kinds of wonderful things happened. One of the things that happened was the rise of this new idea of the middle class, which there was no historical precedent for, which was college-level wages for high-school-level education. As long as there’s no competition, it’s all well and good. The minute the Japanese show up, the minute the Germans show up, it just all falls apart.
Click here for the full conversation. It’s an interesting read.