Carlota Perez is a Visiting Scholar at the London School of Economics and since 2006 Professor of Technology and Socio-Economic Development a Tallinn University of Technology, Estonia. Furthermore she is Honorary Professor at the University of Sussex and Research Affiliate at CFAP/CERF, Cambridge Finance, Judge Business School,University of Cambridge. She is the author of „Technological Revolutions and Financial Capital: The Dynamics of Bubbles and Golden Ages.“
Carlota, you were recently featured in the british Wired with the programmatic headline “Sustainability is the new space race“.
You are an internationally recognized professor and researcher in technology and socio-economic development. According to you, we’ve lived through four technological revolutions until now – always strongly interconnected with social revolutions, of course. The current fifth one started at the beginning of the 70s with the Age of Information Technology and Telecommunications. Every technological revolution enabled a techno-economic paradigm shift – always followed by changes in lifestyles and behaviors. In a presentation at Stanford in 2011 you made a clear distinction between the first half and the second half of every revolution. Could you elaborate this?
Every revolution starts with a new set of industries and infrastructures capable of modernizing the old economy. These new, highly innovative technologies and forms of organization are supported by finance in their early turbulent growth. This „bubble-period“ of creative destruction ends in collapse and leads to recessions, social unrest and uncertainty among investors. This is the time where the state or public structures have to introduce policies that will unleash all the installed potential and that is how the new technologies leave the niche and become game-changing for the whole economy. Then, a new Golden Age could begin, with innovations across the whole economy and with major changes in lifestyles.
Your contention is that we are precisely at this transition moment now and that governments are far from understanding their role. You are arguing that we could enter now „a Sustainable Global Golden Age“, equivalent to the last Post-War boom, but across the entire world. What were the conditions then and what are they now?
The last golden age was in the 1950s and 60s, it was the deployment across the economy of the mass production revolution, which drove the fourth great surge of development. It involved suburbanization and home ownership with a house full of electrical appliances and a car at the door; universal electricity, oil fueled transport by land, air and water, refrigerated and frozen foods, plastics for every imaginable use, from textiles to packaging, creating a culture of disposability and waste and so on. It was a time when the advanced countries of the West turned the workers into consumers and significantly raised their standard of living through the availability of credit, the security provided by the Welfare State and by collective bargaining with officially recognized trade unions.
All that was questioned when the technologies of that Age approached exhaustion in the 1970s, the oil crisis raised the price of fuels and plastics, and the ICT revolution began to change the industrial landscape. A new paradigm displaced some of the old technologies (such as traditional printing methods) and modernized most of them, not only with new computerized equipment but also changing them organizationally. The biggest change, of course, has been globalization and the relocation of production and markets through outsourcing and the use of internet.
The bubble prosperities of the 1990s and 2000s are the equivalent, for the ICT revolution, of what the ″roaring twenties″ were for the mass production one. A time of turbulent growth with easy millionaires and income polarization, where the rich got richer and the poor poorer.
Perhaps you have seen the income data gathered by Piketty and Saez. In the figure below you can see how, in the 1920s and in the 1990s and 2000s, the top 10% of US tax payers got about 50% of all income declared to the tax authorities (without counting avoidance and evasion, something that is perhaps even easier to do now than in the 1920s). You can also see how the real golden age, when the benefits spread across society, was in the 1950s and 60s. And it was not that the rich got less in absolute terms. Growth was greater and it benefited a higher proportion of the population. It was the flourishing of what was called the “middle class”, which was basically about middle income consumption.
You are arguing that we now need a structural shift away from the casino economy – how could this happen?
Through a radical shift in the tax structure and other measures that will make it more profitable for finance to invest in the real economy than to continue in the casino.
We live in the middle of a paradigm shift, which could be observed very well in the trend of sharing instead of owning. But still: The old economical structure and its big shots, with their business models based on selling products instead of services like leasing or contracting, is struggling with this new consumer behaviors.
Yes, it is the ICT paradigm that also favours networking instead of central controls and intangible value instead of physical things (or at least much smaller multi-purpose physical things). Together with that, those same young people that embrace the new paradigm are moving towards a healthier life, with organic food, riding bicycles, exercising, going up mountains and doing extreme sports and so on. They care about the environment and enjoy being creative and communicating socially. Very different from the old “couch potato” lives of the mass production consumerists. That is normal. It always happens like that.
It is the young that embrace the new paradigm and business has to learn. It is when the kids that played Nintendo become the bosses that the change really happens.
The gordian knot on a business model level remains: How could we monetarize services instead of products and keep business running, but much less resource intensive?
There will be three forces driving the change.
The cultural change in demand that you are talking about, the prices of energy and materials that will probably continue rising (even if with ups and downs) and successive climate catastrophes. These will eventually convince politicians and business people that the problem is real and on the other hand the success of those who change in the green direction, both in cost reduction and appeal to customers.
All such paradigm shifts are difficult and take time; but they end up happening.
In other words: What would be your advice to companies in the middle of this transition towards a growing dematerialization?
I would tell them that the world will have to move in that direction anyway, otherwise full globalization is impossible.
The hundreds of millions of new Chinese and Indian consumers cannot have the wasteful resource intensive “American Way of Life” because we don’t have seven planets. So those limits will shape the future sooner or later. The pioneers will win in the end, because they will have more experience and will have gained a hold in the market.
Every paradigm shift has also brought a change in lifestyles. Victorian living was an urban style of living in contrast to the aristocratic country ways. The Belle Epoque brought cosmopolitan lifestyles because easy travel with fast trains and steamships led to the first globalization and to the knowledge of other tastes and fashions. Mass production created the American Way of Life and this paradigm might eventually lead to a set of diversified and sustainable lifestyles.
Those who become the market leaders in the new ways have an advantage.
Looking back at the ending of the 1960s, organic was just for „the hippies“. This changed completely. Today we consume many more organic products – but a bias remains: The growing rebound effects.
If you had told someone at that time that organic and natural materials would become the premium segments in supermarkets and fashion, it would have sounded ridiculous. And yet, thanks to technology and cultural changes, they are now seen as the top of the range. Many more changes towards environmental protection and healthy living still have to happen.
Could we solve that just by means of technology? For instance checking our CO2 Budget every week on our mobile device? Is this sexy enough to get people on board to deal with the tremendous times of change in which we live?
No. Checking the CO2 budget seems like a horrible prospect. The green life has to be wonderful. It has to be the luxury life. The fantastically beautiful, high quality, enjoyable, healthy and creative life that we will all aspire to.
Otherwise it will not happen and our planet will just break down. A lot of innovation will have to take place for that new life to be gradually shaped.
The new buzz word is „resilience“, others call „anti-fragile“ the needed concept. Independent of the fact that these concepts provide a much needed input into the debate, I nevertheless think that this is the knee-jerk reaction of a society that realises that it failed to act in time and is now desperately hoping (and praying) that the system is able to recover itself – am I right that you still favor the more hopeful perspective in the sense of your new Golden Age of Sustainability? If we do not want to put our trust in the god-given resilience of our ecosystem, what are the crucial points to change the course in time?
It will probably have to be a combination of both. What I think is that green is the direction not only to save the planet but also to save the economy. So the worse the economy gets (in Europe and the US) the more likely it is that these suicidal austerity policies will be changed.
And when growth is envisaged in these countries, the only hope is to move towards green. Revamping all the infrastructure, redesigning all products to make them truly durable, increasing the productivity of resources many times (instead of just labour saving).
Because we are not just talking about global warming, we are also talking about resource limits.
I am 33 years’ old researcher – what is your advise for my generation, since we will have to deal with the consequences of the actions of our preceeding generations?
Fight now for what you believe. The sooner the change comes, the better it will be for you.
Do research into the possible changes and into what the vanguard is doing, in business, in governments, in organizations, in architecture, in recycling in sustainable energies and materials and make it known.
Also, look at history. Do you know the work of the Dutch transitions school? Frank Geels, for instance? Take a look. They have done some fantastic work on how such major changes have happened before.
Thank you very much, Carlota!
You are welcome, Anna!