Towards a new Golden Age

Towards a new Golden Age

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At the launch of Nesta's book “Our Work Here Is Done: Visions of a Robot Economy”, Carlota Perez described how our current economic troubles are an inevitable and necessary part of the process of technological change. We are at a turning point: if we get it right, there could be a new Golden Age. But for this to happen, there needs to be radical change in current social structures and norms. Do we have the vision and courage to make this happen?

Perez argues that technological change does not proceed smoothly, but goes in waves or cycles of 40-60 years. She identifies five waves since the late 18th century:

  • Starting in 1771 - mechanisation, factories, canals. This is what we usually call the “Industrial Revolution”.

  • Starting in 1829 - coal, steam, railways.

  • Starting in the mid-1870s - steel and heavy engineering.

  • Starting in 1908 – oil, cars, mass production. At this point the centre of gravity shifted to America. This is the wave that we are still trying to ride, even though it has actually been superseded by...

  • Starting in 1971 – information technology and communications. Perez argues that if history is any guide, this wave still has another 20-30 years to go. What will follow it? Well...

  • starting in about 2030 (or sooner), Perez suggests maybe biotechnology, bioelectronics, nanotechnology, new materials. I think perhaps cybernetics and the energy revolution. We shall see. Whatever it is, it is not yet “emergent”.

Each wave of technological change produces a great surge of development: growth, employment, new products, new industries, and — most important of all — new infrastructures for carrying goods, energy, people, and information farther, faster, and more cheaply. And although they are very different technologically, each revolution follows a similar pattern of phases and changing business climates.

Perez identifies four phases in each technological wave, with a break in between the second and third. The first phase she calls Gestation, during which the technology is developed and tested, but not widely adopted. The second phase she calls Installation. In this phase financial capital enthusiastically finances widespread use of the new technologies, creating booms. These booms eventually turn to bust, causing financial crisis and destruction of value: the ensuing period of instability and uncertainty she calls the “Turning Point”, and she comments that it can last years. The longest Turning Point she identifies is the 1930s, when the euphoria of the 1920s gave way to depression and eventually to war. And she argues that we are now in the Turning Point period of the information technology wave.

If she is right, then the future is bright. Indeed, the future could be golden. The Turning Point in each of the previous technological revolutions has eventually given way to a period of Deployment, when the technology is widely used not just to benefit the rich, but to the benefit of society as a whole – a Golden Age. So the Victorian Golden Age was a natural development of the Industrial Revolution: the Belle Epoque grew out of the steam and rail revolution: the Roaring Twenties developed from the heavy industrial revolution; and the post-war “you've never had it so good” period grew from the oil and mass production revolution.

But it's not quite that simple. In each age, there is a terrible alternative – social breakdown, famine, war. These were narrowly avoided in the nineteenth centuries and not avoided at all in the 20th: the two 20th century Turning Points both involved cataclysmic wars. Yes, each was then followed by a new Golden Age, though in the case of the 1920s, not for long – but at what cost? Do we have to cross the raging torrent of war and social collapse to reach the next Golden Age?

Whether we reach the next Golden Age relatively painlessly, or via mass destruction, depends on whether we can allow ourselves to transform our social attitudes and institutions. The Installation phase confronts the Mature phase of the old technology, challenging entrenched beliefs and practices. If the beliefs and practices appropriate to the old technology can quickly be discarded in favour of those demanded by the new technology, the period of instability can be short and the transition relatively smooth. But if the cultural norms established to support the old technology fail to adapt – or if powerful interests dependent on the old technology refuse to give way -, the transition is far more traumatic. In the end, the old technology – and the social structures, institutions and belief systems that go with it – must give way to the new: the question is simply how difficult we make this change for ourselves.

In the past, the direction of change has been set by visionaries. In the 1930s, economic thought was led by the British economist John Maynard Keynes, and the American President Franklin D. Roosevelt implemented far-reaching policy reforms. After World War II Keynes' economic ideas, together with the social reforms of William Beveridge, created the social and economic paradigm that helped to bring in the post-war Golden Age. But now, it is hard to see who the visionaries are. “Where is the Keynes of today?” asked Perez at the NESTA presentation.

I think I have an answer. One of the defining features of the information technology and communications revolution is the decline of the individual decision-maker and the growth of collaboration, teams and sharing. We have seen this most obviously in music-making, where much of the greatest music of the late 20th Century was created not by individual composers but by groups. But we are now seeing the same phenomenon in other areas too. The “hive mind” created by social media and similar technologies is far more powerful than any individual could possibly be, and from it can come not only original ideas but a real impetus for change. The “visionaries” of this technological age are not individuals, but groups. That is why they are hard to see. But it is also why they are hard to resist.

We saw this effect in action at the launch of NESTA's book. In the Q&A after the presentations, the entire panel agreed that some form of basic income would best address the shortage of demand that is becoming the defining economic characteristic of this technological wave. And in the book, the American economist Noah Smith also suggested something similar. We each reached that conclusion by individual routes, although we may have influenced each other's thinking. But we spoke as one, and it was that consensus that attracted the attention of the audience, and indeed of watchers on social media. Individually, we would find it difficult to persuade people of the benefit of such an idea: but collectively, we punch far above our individual weight. Groups can move the Overton window far more effectively than individuals.

What was clear, though, is that transformation of attitudes is a prerequisite for moving out of the instability and uncertainty of the Turning Point into the new Golden Age. I have to say things don't look good at the moment: entrenched belief in the importance of people doing work, any work, just to survive seems to be winning the day at the moment, along with archaic ideas about the role of government and the nature of money. But work as we know it is changing fundamentally: money as we know it is changing fundamentally. The forces driving these changes are beyond our control: eventually government and social structures, too, must also change fundamentally.

Perez observes that market fundamentalism today is as much an obstacle to change as state fundamentalism was in the 1970s and 1980s. Indeed it is. Artificial antagonism between market and state, private sector and public sector, is a major obstacle to progress. In keeping with the new paradigm of collaboration and sharing, the state should be redefined as a player in the market, rather than a controller of the market, and partner rather than competitor of private sector businesses.

There will be a new Golden Age. And we can have it sooner rather than later, if we are prepared to abandon outmoded ideas and institutions.

But eventually, in its turn, the information technology wave will mature and die, being replaced by something we can't yet see. I hope that when the time comes we will learn from the mistakes of the past. The death of a technological wave does not have to mean mass unemployment and destruction of whole communities. We must find ways of supporting people through these transition times. Technology must die, but people need to be enabled to live.

Related reading:

The changing nature of work

Our work here is done: visions of a robot economy – NESTA (book)

Technological revolutions and financial capital – Carlota Perez (book)

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You've written a lot of great articles lately, which is to say I agree with it all. Technology is moving faster than culture. The older generations, the rural, and those who define themselves by group membership tend to be particularly disturbed by a changing world where they don't see how they fit. They believe in the Protest work ethic, that value is created by scarcity, and that people different from themselves are implicitly sacrilegious. Ideas to the contrary are revolutionary.

The common understanding of morality must evolve. Christianity based on the Gospel rather than the Bible is more compatible. We need to give people a better future to which to aspire rather than a zero sum game of ruthless competition. One way to communicate it is through literature and movies set in a future golden age, perhaps with the twist that the conflicting dystopia is set in today's world.

Frances - I interacted with Dr. Perez and she says the cycles may be longer. After hearing her and your comment about social attitudes - I think I agree.

Another comment about groups replacing the individual. I think it needs to be qualified. I find the overall standard of music has declined horribly. (May be I am too wedded to classics) and synergistic groups are not that ubiquitous. Most of group think is narrowing to common denominator. The music scene of 20th century had synergistic groups (my guess) that allowed expansion not a reduction of talent.

In basketball, cricket, football we see plays structured around individuals. To me that is why Argentina didn't make a dent last time and England fails to make a cut even when it has most promising team on paper. The Wade-LeBron loss in basketball speaks of similar story - since Jordan the plays have been structure on individual brilliance - rest mere feeders.

Maybe we will see a Keynes who must be turning in his grave reading about Keynesian economics.

The 1920s twenties Golden Age was an American phenomenon, for sure, and as an American, I am well aware of my own history. It was also a time when American labor markets were flooded with poor immigrants and wages were falling drastically, as they have been for the last thirty years. I am sure that to most of the world all Americans appeared to be rich by comparison with themselves, just as they do do today, but those huddled in urban tenements and rural shacks and mining towns had a very different perspective then, just as they do today. The wealth that one sees in poor people's home is paid for with easy credit at rates that are usorious and guaranteed to keep them poor.

If bankers (not their lowly clerks) don't benefit from bubbles, then who exactly does? If they don't benefit, then why do they wish to keep markets deregulated so that bubbles will continue to occur?

Frances Coppola


I would seriously suggest you read Perez's work. And some history, too. The foundations of the modern welfare state were laid in the late 19th/early 20th century - the state old age pension, for example, dates back to 1908. And things we take for granted such as universal sanitation also date back to that time. I am talking about the UK here, of course - one of the criticisms of Perez's theory is that the pace of technological change varies from country to country and its social effects also vary. The 1920s Golden Age was really an American phenomenon: Europe, still shattered from WW1, did not see the same effect, apart from Germany where it was unquestionably a bubble built on unsustainable debt.

Are you aware that the majority of people who work for banks are not highly paid, do not benefit excessively from economic booms and are as vulnerable as anyone else to job loss and falling real income when there is an economic downturn? If not, perhaps you should learn about that too.

Suggesting that "bankers like me" benefit from bubbles is laughable. I left banking in 2002, which is before the last boom. I did not benefit from the bubble that burst in 2008, nor indeed from the previous housing crash in 1988. On the contrary, I suffered as much as anyone. Of two businesses that I was running in 2008 - neither of them in financial services - one collapsed completely: the turnover of the other was halved and is still falling. And the 1988 crash destroyed the value of my house and left me with an underwater mortgage for five years. I know all too well what bubbles and busts do to people. And no, I don't have a stash of wealth from my time in banking. I never earned that much.

Frances Coppola

Peter, yes, that's a very good point. Looking at this in socio-political terms, we could say that the post-war period was the period of central planning and big state, and 1979-2008 was the period of individualism and "there is no such thing as society". One is a reaction against the other, but both are unstable if taken to extremes. Truth is that the individual and the collective are equally important: individual attitudes and behaviour both influence the collective and are influenced by it.

The 1890s and the 1920s can hardly be called Golden Ages. They represent a very few years of bubble economics from which very few people benefitted. A golden age for bankers like you, perhaps, but not for the rest of populace. If anything, the golden age was the period following the Second World War, when the great fortunes were compressed and the masses benefitted. I don't see anything like that occuring in the future, so long as the Washington Consensus embodies the views of the Left and the followers of Ayn Rand keep tugging things to the Right.

Fascinating read. Perhaps the antagonisms as between State and Market reflect the playing out of the dichotomy between centrally-planned orthodoxies (which, arguably, do not place enough faith in the individual), and unabated free markets (which, arguably, may have placed too much faith in the individual)?

Large scale social groupings are not the spontaneous creations of individuals and families and tribes. "Civilization" is built by people who have a grand plan for "humanity". It is some person's vision, usually some man's vision, that he makes real by rallying political support for his plan of large scale social organization. As the god of his own world, the visionary is the architect and ruler of the civilization he founded. He directs the affairs of the society according to his vision. His "government" serves his vision, and administers it upon the masses who have been organized under his ruling authority. Civilization is inherently and essentially hierarchical and oligarchic. People do not form consensus unless some dominant mind or power drives the consensus. Historically, religions have been the molders of the consensus that justifies rule by the rulers. Civilization has never existed without a priesthood preaching sophistries to the ruled masses, manufacturing consensus in conformity with the ideology that justifies the society's hierarchical social structures.

Since WWII the priesthood role has moved from a religious ideology to an economic ideology. Economists are now the priests who soothsay the mysterious workings of the invisible powers that rule the affairs of humanity. God's hand no longer guides the nations. Now the invisible hand of the market guides the affairs of humanity. Powerful people rule civilizations, and take most of its benefits for themselves, hiding behind a veil of ideology, woven by a priesthood, that blinds the masses to the truth: they are being ruled, not by inhuman powers, but by human beings who rule to serve their own interests, not the interests of "humanity".

Democratic visions of civilization's future are as delusory as democratic visions of civilization's past are blind. Reality is knocking on the veil that covers your mind. The rulers of the world have proven themselves capable of mass murder and inflicting every kind of torment upon humanity. They continue doing this before our very eyes right now, today. Most of the people are as blinded by economic and political dogma today as they were blinded by religious dogma in the past. Pure 100% horse shit. Not even based on a sliver of truth. Cut from whole cloth, all of it spun as a veil of illusion to disguise the reality: civilizations are ruled by rulers.

The rulers are human men and women. The visible servants of the rulers are blinded by their own egos to the fact that they are stupid, and have no understanding at all of the horse shit they peddle as "the facts of reality". The rulers themselves are psychopaths who are genius at gaining and wielding power that serves their personal lusts and urges, their desire to rule humanity to serve their own purposes. Since the time of the Medicis, the rulers rule by controlling the issuance and distribution of money. Civilization is now ruled by bankers, not kings and presidents and prime ministers. The "democratic masses" never have and never will play a role in guiding the course of "civilization". The masses are brainwashed pawns who believe in the priests or economists who spin the webs of horse shit that creates the veil that bends light to make slavery look like freedom and oligarchy look like democracy.

Tribal people who live on this Earth free of the rule of rulers are called primitives and barbarians. The good moral folks of civilization slaughter them and steal their land and resources. But the good folks of civilization are incapable of seeing the evil reality of what they do, because they are wearing veils of ideological horse shit over their eyes as they destroy the Earth and the people who are trying to live here. From behind the veil the past looks glorious and the future looks virtuous. Outside the veil the reality of "civilization" looks decidedly more like hell than paradise.

A longer view is by Alvin Toffler - similar waves. I think the cycle of these waves keep getting shorter and shorter. The agrarian cycle was quite long and thereafter five Perez mentions are progressively shorter. Internet being the latest one.

Disagree with some of the points. I think bigger organisations can change but are constrained as organisation science has not yet fully developed. (Shamelessly plugging my own book - Understanding Firms)

Agree with other points Perez says, we need to reinvent the government and that market fundamentalism is an obstacle.
Superb stuff loving Pieria till now.

Frances Coppola

Hi Rahul,

I don't think I've precluded the idea of large organisations changing. Indeed I would be foolish to do so. Some large firms survive technological transitions largely unscathed, and others reinvent themselves to be at the forefront of the new technology. I would be interested to read your book.

I think the main issue is the need to change social attitudes.

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