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December 09, 2008

Technological Revolution and the Coming Golden Age - An Update From Nobel Week Public Sector Innovation Summit

The opening plenary at this year’s Public Sector Innovation Summit was highlighted by a keynote by Professor Carlota Perez author of the 2002 book, TECHNOLOGICAL REVOLUTIONS AND FINANCIAL CAPITAL: The Dynamics of Bubbles and Golden Ages.

In his Noble lecture yesterday, economist Paul Krugman painted a picture of the emergence of a new phase in the global economy characterized in many ways as a classical system of comparative advantage defining new winners and losers. As I noted yesterday, Krugman’s life work helped us better understand the post-war international economic regime. Classical theory of international trade, according to Krugman, missed at least 50 percent of the real economic dynamics unfolding in the dynamic globalizing economy. His work in new trade theory helped us better understand geography, the role of the firm, an intra-regional trade patterns. His prognosis for the future, however, appears to be framed in terms of an emerging neo-classical system of comparative advantage resulting from the current disruptions and the financial credit markets.

Professor Perez’s presentation leaves one with a very different sense of possible outcomes. Her sweeping analysis of 240 years of paradigms links technological revolutions, financial capital in the introduction (in her words “installation”) of new configurations of state, capital, and society. In each and every of the 5 technological revolutions the ‘introductory’ phase is followed by a financial market collapse (creative destruction) and then by a maturing phase (in her words “deployment”) ushering in a golden age. This phase involves production capital and state regulation to help drive adoption.

In her view, the emergence of the new IT-enabled technological revolution is now entering the deployment phase (of another approximate 25 years) following the current financial (casino) credit crisis. The emergent new paradigm could shift us from the mass consumption model of the antecedent era. What might emerge is a world based on privileging diversity and respecting differences within the context and at the intersection of IT and Green. Rather than a world of traditional winners and losers, Perez sees the capacity to shift to IT-green consumption not by guilt and fear but by desire and aspiration. The definition of the good life and our notion of luxury is clearly shifting from the post-war mass consumption society towards a green and boutique solutions scalable through deploying advanced technologies.

The language in the United States and the forthcoming stimulus package appears to privilege and tilt the playing field in favor of the technology-enabled green economy. Perez sees the need for supra national regulation of financial markets in order to move us beyond the jolts of casino financial markets. While ironic, this choreography of diversity enabled by a highly distributed technology system combined with an apparent high degree of centralized authority is at the heart of the challenge ahead, Indeed, in Krugman’s world I expect that he dismisses the likelihood (if not the desirability) of this kind of choreography and thus sees the emerging new state-supported role in the economy as leading to a more classical comparative advantage international trade regime. Perez for her part is not sanguine nor naïve but believes that the choice is at the heart of the new public agenda.

Lev Gonick
December 8, 2008
Stockholm, Sweden

Posted by lsg8 at December 9, 2008 06:13 AM

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