Technological Revolutions and Financial Capital: The Dynamics of Bubbles and Golden Ages

219 Pages·2002·1.5 MB·English

by  Carlota Perez

chapter title i
Technological Revolutions
and Financial Capital
ii Technological Revolutions and Financial Capital
To my mother
Carlota Arenas
the artist
whose joy of work
nourished my own
chapter title iii
Technological
Revolutions
and Financial Capital
The Dynamics of Bubbles and Golden Ages
Carlota Perez
Honorary Research Fellow, SPRU – Science and Technology
Policy Research, University of Sussex, UK
Adjunct Senior Research Fellow, INTECH, Maastricht,
The Netherlands
Visiting Scholar 2002, Cambridge University, UK
International Consultant and Lecturer on change strategies and
technology policy, Eureka A.C., Caracas, Venezuela
Edward Elgar
Cheltenham, UK • Northampton, MA, USA.
iv Technological Revolutions and Financial Capital
© Carlota Perez
All rights reserved. No part of this publication may be reproduced, stored in a
retrieval system or transmitted in any form or by any means, electronic, mechanical or
photocopying, recording, or otherwise without the prior permission of the publisher.
Published by
Edward Elgar Publishing Limited
Glensanda House
Montpellier Parade
Cheltenham
Glos GL50 1UA
UK
Edward Elgar Publishing, Inc.
136 West Street
Suite 202
Northampton
Massachusetts 01060
USA
A catalogue record for this book
is available from the British Library
Library of Congress Cataloguing in Publication Data
ISBN 1 84064 922 4
6
0
chapter title v
Contents
List of tables vii
List of figures viii
PrefaceChris Freeman ix
Acknowledgments xiii
Introduction: An Interpretation xvii
PART I TECHNOLOGICAL REVOLUTIONS AS
SUCCESSIVE GREAT SURGES OF DEVELOPMENT
1. The Turbulent Ending of the Twentieth Century 3
2. Technological Revolutions and Techno-Economic Paradigms 8
3. The Social Shaping of Technological Revolutions 22
4. The Propagation of Paradigms: Times of Installation, Times
of Deployment 36
5. The Four Basic Phases of Each Surge of Development 47
6. Uneven Development and Time-Lags in Diffusion 60
PART II TECHNOLOGICAL REVOLUTIONS AND
THE CHANGING BEHAVIOR OF FINANCIAL CAPITAL
7. Financial Capital and Production Capital 71
8. Maturity: Financial Capital Planting the Seeds of Turbulence at
the End of the Previous Surge 81
9. Irruption: The Love Affair of Financial Capital with
the Technological Revolution 90
10. Frenzy: Self-Sufficient Financial Capital Governing the Casino 99
11. The Turning Point: Rethinking, Regulation and Changeover 114
12. Synergy: Supporting the Expansion of the Paradigm across
the Productive Structure 127
13. The Changing Nature of Financial and Institutional Innovations 138
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vi Technological RevolCutoionntesn atsnd Financial Capital
PART III THE RECURRING SEQUENCE, ITS CAUSES
AND IMPLICATIONS
14. The Sequence and its Driving Forces 151
15. The Implications for Theory and Policy 159
Epilogue: The World at the Turning Point 167
Bibliography 173
Index 183
chapter title vii
List of Tables
2.1 Five successive technological revolutions, 1770s to 2000s 11
2.2 The industries and infrastructures of each technological
revolution 14
2.3 A different techno-economic paradigm for each technological
revolution; 1770 to 2000s 18
8.1 Fluctuations in UK foreign investment (at current prices) as
percentage of total net capital formation, 1855–1914 84
13.1 A tentative typology of financial innovations 139
13.2 The shifting behavior of financial capital from phase to phase
of each surge 141
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viii Technological Revolutions and Financial Capital
List of Figures
2.1 The double nature of technological revolutions 9
3.1 The life cycle of a technological revolution 30
4.1 Two different periods in each great surge 37
4.2 Steel displacing iron as the main engineering material from
the second to the third surge 38
4.3 Decoupling of the system: the differing performance of the
‘high-tech’ sector and the rest of the economy in the USA,
1989–96 40
4.4 Oil and automobile industries replacing steel as engines of
growth from the third to the fourth surge 45
5.1 Recurring phases of each great surge in the core countries 48
5.2 Approximate dates of the installation and deployment periods
of each great surge of development 57
6.1 The geographic outspreading of technologies as they mature 64
7.1 The recurring sequence in the relationship between financial
capital (FK) and production capital (PK) 74
7.2 Five successive surges, recurrent parallel periods and major
financial crises 78
8.1 The recurrence of loan fever and default: the Latin American
case 87
10.1 The diverging growth of the New York Stock Market and
US GDP, 1971–99 112
11.1 The rise and fall of the NASDAQ bubble, 1971–2001 119
14.1 Development by surges: the elements of the model and their
recurring changes 152
14.2 The dynamics of the system: three spheres of change in
constant reciprocal action 156
15.1 Paradigm shift and political cleavage 164
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chapter title ix
Preface
Carlota Perez has made several highly original contributions to the
understanding of long-term technological transformations and the way in which
such changes interact with wider economic, social and political changes. This
book is perhaps her most original and controversial contribution. Her intense
interest in these deep processes was aroused in the 1970s when, as a young
researcher, she was studying the oil industry, then and still today of critical
importance for her own native country, Venezuela. In trying to explain the
causes and consequences of the so-called OPEC crisis of 1973, she became
convinced that the global economy had begun a long-term transition from a
mass-production economy based on cheap oil to an ‘information economy’
based on cheap micro-electronics. The arrival of the microprocessor – a
‘computer on a chip’ – served as a ‘big-bang’ announcing this probability and
she was able to develop her theory at this time through a period of postgraduate
research in California – a state which was already then at the forefront of the
Information Revolution.
As a result of this research and her subsequent work with government and
industry, she was able to publish in 1983 a paper that became an influential
landmark in this field. It was entitled ‘Structural Change and the Assimilation
of New Technologies in the Economic and Social System’ and the title ad-
equately reflects the content. It became influential for three main reasons. First
of all, it demonstrated that very big changes in technology entailed not just the
extraordinarily rapid growth of a few new industries, but also, over a more
prolonged period, the rejuvenation of many ‘old’ industries, which found ways
to use the new technology and to make changes in their organization and man-
agement, influenced by the new industries. She designated this combination
of new ways of thinking about the productive system, including its organiza-
tion, its techniques and its interdependencies as a change of ‘techno-economic
paradigm’. This concept of a paradigm change, with each major technological
revolution, has become very widely accepted, particularly since Alan Greenspan
began to use the expression in the 1990s to explain the upsurge in the Ameri-
can economy at that time.
The second major contribution which Carlota Perez made in that paper was
to point out that such a ‘meta-paradigm’ change, affecting the entire economy
entailed the very widespread use of new inputs. In each technological revolu-
tion, whether in earlier times with iron, coal, steel, or oil or with chips today, it
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