Technology, globalisation
and the environment
CAN THE CRISIS
OPEN THE WAY
TO A SUSTAINABLE
GLOBAL GOLDEN AGE?
Prof. Carlota Perez
Cambridge and Sussex Universities, U.K.
and Tallinn University of Technology, Estonia
Presentation at the Sogeti Executive Summit 2010
“Don’t Be Evil”, Venice 2010
THE CURRENT CRISIS
IS NOT AN ACCIDENTAL EVENT
IN THE FINANCIAL SYSTEM
• It is a historically recurrent phenomenon
• It is endogenous to the market system
• It results from the way
technological revolutions are assimilated
• It affects the whole economy
The collapse marks a structural shift
in the forces guiding growth and innovation
from financial to production capital
and towards the return of an active state
BECAUSE IN MARKET ECONOMIES
TECHNICAL CHANGE OCCURS BY REVOLUTIONS
Capitalism experiences pendular swings
about every three decades
From a “gilded age”
under the control
of finance
in order to install
the technological revolution
To a “golden age”
under the control
of production
in order to fully deploy
the installed potential
THE MAJOR BUBBLE COLLAPSE
MARKS THE SWING OF THE PENDULUM
What worked before will not work from now on
FIVE TECHNOLOGICAL REVOLUTIONS IN 240 YEARS
1771
The ‘Industrial Revolution’ (machines, factories and canals)
1829
Age of Steam, Coal, Iron and Railways
1875
Age of Steel and Heavy Engineering (electrical, chemical, civil, naval)
1908
Age of the Automobile, Oil, Petrochemicals and Mass Production
1971
Age of Information Technology and Telecommunications
20??
Age of Biotech, Bioelectronics, Nanotech and new materials?
Each revolution drives a GREAT SURGE OF DEVELOPMENT
and shapes innovation for half a century or more
Why call them revolutions?
Because they transform the whole economy!
NEW INDUSTRIES
and
NEW PARADIGM FOR ALL
A powerful cluster
of new dynamic industries
and infrastructures
with increasing productivity
and decreasing costs
New generic technologies,
infrastructures and
organisational principles
for modernising
the existing industries too
Explosive
growth
and structural
change
A quantum
jump in
innovation and
productivity
for all
A massive change in managerial common sense
TRANSFORMING THE OPPORTUNITY SPACE AND
THE WAYS OF LIVING, WORKING AND COMMUNICATING
The paradigm shift taking place since the 1970s
MASS PRODUCTION
FLEXIBLE PRODUCTION
CLOSED PYRAMIDS
OPEN NETWORKS
STABLE ROUTINES
HUMAN RESOURCES
SUPPLIERS AND CLIENTS
FIXED PLANS
THREE TIER MARKETS
INTER - NATIONALISATION
NEGLECT OF ENVIRONMENT
CONTINUOUS IMPROVEMENT
HUMAN CAPITAL
VALUE NETWORK PARTNERS
FLEXIBLE STRATEGIES
HYPER-SEGMENTED MARKETS
GLOBALISATION
ENVIRONMENT AS CHALLENGE
A radical change in managerial “common sense”
brought on by a different set of enabling technologies
Due to resistance and difficulty in assimilating such changes
EACH GREAT SURGE GOES THROUGH TWO DIFFERENT PERIODS
“Creative destruction”
Battle of the new
paradigm
against the old
Concentration of
investment
in new-tech
Financial
Income
Financial
bubble
polarisation
bubble
LED BY
FINANCIAL CAPITAL
From irruption
to bubble
collapse
Turning
Point
DEPLOYMENT (20-30 years)
Recessions, institutional change and role shift
Degree of diffusion of the new technological potential
(20-30 years)
years)
INSTALLATION (20-30
“Creative
construction”
Use of
new paradigm
for innovation and
growth
across all sectors
Spreading
of social benefits
LED BY
PRODUCTION CAPITAL
From “golden age”
to maturity
Time
big-bang
We are here
Next
Next
big-bang
big-bang
THE HISTORICAL RECORD
Bubble prosperities, recessions and golden ages
INSTALLATION PERIOD
GREAT
SURGE
1st
2nd
Bubble prosperity
1771
Britain
1829
Britain
1875
rd
3 Britain / USA
Germany
TURNING
POINT
Collapse &
Recessions
DEPLOYMENT PERIOD
“Golden Age” prosperity
Maturity
The Great
Canal mania 1793–97 British leap
Railway mania
1848–50
The Victorian
Boom
Bubbles of
Belle Époque (Europe)
1890–95
first globalisation
“Progressive Era” (USA)
4th
1908
USA
The roaring
twenties
5th
1971
USA
Internet mania
and financial casino
Europe
1929–33
USA
1929–43
2007
/08
-???
Post-war
Golden age
Global Sustainable
”Golden Age”?
The shift from financail mania and collapse to Golden Ages
is enabled by regulation and policies to shape and widen markets
What is this structural shift about?
What are its consequences?
What are its requirements for action
The structural shift involves
A CHANGE IN THE DRIVERS OF INNOVATION
INSTALLATION = supply- push
THE STATE
in a
facilitating
service
role
FINANCE
and
THE NEW
ENTREPRENEURS
as drivers
and innovators
A vast free market experiment
DEPLOYMENT = demand- pull
FINANCE
in a
facilitating
service
role
PRODUCTION
and
THE STATE
as drivers
and innovators
The full flourishing
of the installed potential
During deployment innovation in production depends on
EFFECTIVE INSTITUTIONAL AND POLICY INNOVATION
EACH GREAT SURGE HAS BROUGHT A CHANGE IN LIFESTYLES
with new life-shaping goods and services at ‘affordable’ prices
DEPLOYMENT PERIOD
LIFESTYLE
Age of Steam, Coal,
Iron and Railways
1850s-1860s
Urban, industry-based
VICTORIAN LIVING in Britain
Age of Steel and
Heavy Engineering
1890s-1910s
Urban, cosmopolitan lifestyle of
THE BELLE EPOQUE in Europe
Age of the Automobile,
oil and Mass Production
1950s-1960s
Suburban, energy-intensive
AMERICAN WAY OF LIFE
Each style became “the good life” redefining people’s desires
and guiding innovation trajectories
Age of global ICT
2010s-20??s
Will the developed and emerging
countries develop a variety
of ICT-intensive and “glocal”
SUSTAINABLE LIFESTYLES?
An example: The emergence of the ‘American Way of Life’
as the paradigm shift from the Belle Époque…
FROM ENERGY-SCARCE LIVING
Energy is expensive and often inaccessible
Trains, horses, carriages, stage coaches,
ships and bicycles
Local newspapers, posters, theaters, parties
TO ENERGY-INTENSIVE HOMES AND MOBILITY
Energy is cheap and its availability unlimited
Automobiles, buses, trucks,
airplanes and motorcycles
Mass media, radio, movies and television
Ice boxes and coal stoves
Refrigerators and central heating
Doing housework by hand
Doing housework with electrical equipment
Natural materials (cotton, wool, leather, silk..)
Synthetic materials
Paper, cardboard, wood and glass packaging
Preference for disposable plastics of all sorts
Fresh food bought daily
from specialized suppliers
Urban or country living and working
Refrigerated, frozen or preserved food
bought periodically in supermarkets
Suburban living separate from work
…all strongly aided by advertising, business strategies
and government policies
THE TECHNOLOGICAL POTENTIAL
changes the relative cost structure and marks the direction of change
The techno-economic paradigm shift happening since the 1970s-80s
FROM THE LOGIC
OF CHEAP ENERGY (oil)
for transport, electricity,
synthetic materials, etc.
Preference
for tangible products
and disposability
TO THE LOGIC
OF CHEAP INFORMATION
its processing, transmission
and productive use
Preference
for services
and intangible value
Unthinking use
of energy and materials
Huge potential for savings
in energy and materials
Unavoidable
environmental destruction
Capacity for
environmental friendliness
It is a huge opportunity space for innovation, growth
and radical changes in lifestyles
YET, THE NEW PARADIGM IS STILL WRAPPED IN THE OLD
Disposability and high use of energy and materials are still with us
A horse carriage?
10-15
years
An automobile!
1898.
THE ASSIMILATION OF A NEW PARADIGM IS A BATTLE AGAINST INERTIA
…asnd in the crucial 1990s we had
CHEAP OIL AND CHEAP ASIAN LABOUR
which favoured the stretching of the old marketing
and consumption patterns
TECHNOLOGY ONLY DEFINES THE SPACE OF THE FEASIBLE
Technologically
feasible
Socially
acceptable
Economically
profitable
The factors defining the space of the acceptable and the profitable
change over time
… AND ARE ALSO CHANGEABLE!
TWO COMPLEMENTARY OPPORTUNITY SPACES
FOR INNOVATION
THE SUPPLY
opportunity space
The range
of the technologically feasible
together with
the capabilities
to make it happen
THE DEMAND
opportunity space
The range of the
economically profitable
and socially acceptable
as defined --and modified-by policy and social
or other factors
THE BETTER THE MATCH
BETWEEN THE DEMAND AND SUPPLY SPACES
THE MORE DYNAMIC THE ECONOMY
THE ELEMENTS OF THE DEMAND OPPORTUNITY SPACE
Availability of new
generic technologies
Infrastructures
EXTERNALITIES
Sources of
DEMAND
DIRECTIONALITY
Supply
opportunity
space
Sources of
DEMAND
VOLUME
The coherence and synergy among the elements
generates self-reinforcing loops
HOW WAS
THE PREVIOUS
GOLDEN AGE
UNLEASHED?
?
THE DEMAND OPPORTUNITY SPACE
THAT SHAPED THE POST WAR GOLDEN AGE
INNOVATION
ENABLERS
FOR MASS
PRODUCTION
Cheap oil
and materials
Universal electricity
Road and airway
network
Suburbanisation
Post-war
reconstruction
Cold war
SPECIFIC
DEMAND
AS DIRECTION
FOR INNOVATION
Welfare State
Labour unions
Public procurement
Credit system
DEMAND VOLUME,
PROFILE
AND TRENDS
The various elements were provided in different proportions
in each “First World” country
A POSITIVE-SUM GAME
THAT BROUGHT
THE GREATEST BOOM
IN HISTORY
The new global
positive-sum
game
ICT
“GREEN”
Revamping
transport, energy,
products and production systems
to make them sustainable
is equivalent to
post-war reconstruction
and suburbanisation
Full internet access
at low cost
is equivalent
to electrification
and suburbanisation
in facilitating demand
(and, this time,
also education)
FULL
GLOBAL
DEVELOPMENT
Incorporating
successive new millions
into sustainable
consumption patterns
is equivalent to the Welfare State
and government procurement
in terms of demand creation
And the elements are interconnected
ICT
ICTs are the main
enabling instruments
of sustainability
“GREEN”
Internet access is
the social
and geographic frontier
of the global market
FULL
GLOBAL
DEVELOPMENT
Only with sustainable
production and consumption patterns
Is globalisation possible
But we need policy consensus
involving government, business and society
“GREEN” is not only about
saving the planet
It is about saving the economy
and having a high (but different)
quality of life
GLOBAL DEVELOPMENT
is not only
a humanitarian goal
it is about healthy growth,
markets and employment for all
THE CHANGE IN PREFERENCES BEGINS AT THE TOP OF THE INCOME SCALE
AND SPREADS BY IMITATION …AND AFFORDABILITY
Part of the paradigm shift
is happening
among sophisticated
consumers
•
•
•
•
•
•
•
•
•
Natural vs. synthetic
Minimalist design
‘Gourmet’ and organic food
Exercise for well being
Small vs. big
Multipurpose products
Working from home
Solar power as luxurious
as well as electric cars
Intense Internet use
There is still
a long way to go
•
•
•
•
•
•
•
•
•
Durability
Very high quality vs. quantity
Reparability and upgradability
Anti-waste, pro-recycling
Low carbon footprint
Customised vs. standard
Services vs. tangible products
Active & creative “prosumer”
vs. passive consumer
Etc. etc.
THE NEW LUXURY LIFE WOULD INCREASE SATISFACTION
WHILE MAXIMISING THE PRODUCTIVITY OF RESOURCES
But the change will not come
by guilt, fear or obligation
But by desire and aspiration
“GREEN” HAS TO BECOME
FASHIONABLE!
THE QUESTION IS HOW TO GO
FROM AN ENLIGHTENED MINORITY
(by education, consciousness or wealth)
TO THE GREAT MAJORITIES
The new green
luxury life pattern
becomes fashionable
Advertising and
company strategies
and lobbying
go in a green direction
Government
tilts the playing field
strongly in
favour of green
However it starts, the process goes through
multiple self-reinforcing feedback loops
THE TECHNOLOGICAL STAGE
IS SET TODAY
FOR THE GLOBAL GOLDEN AGE
OF THE 21st CENTURY
It is up to business, government and society
to agree on the convergent actions
for making it a reality
Will it be a success or a wasted opportunity?
WE SHALL ALL BE RESPONSIBLE
FOR THE OUTCOME