Carlota Perez on technological revolutions and capitalism
Aug 7, 2023
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Renowned scholar Carlota Perez discusses her framework for studying technological change and the adoption of digital technologies, exploring topics such as technology cycles, the role of capitalism, and the impact of government in accelerating digital adoption. Other topics include the intersection of technology and economics, the role of the state in innovation and entrepreneurship, the relationship between technological revolutions and economic growth, and the impact of technological revolutions on capitalism.
The role of governments in technological revolutions is to drive changes through finance while supporting and assisting victims to prevent skill destruction.
The framework for studying technological change involves understanding successive revolutions, their complementing technologies, infrastructure, and core technologies, and the need for win-win games between business and society.
The current information and communication technological revolution differs from previous ones in terms of replacing mental labor, starting with microprocessors, and failing to address environmental risks.
Capitalism and technological revolutions are driven by finance and entrepreneurs, not science, and the role of the state is crucial in ensuring the benefits of capitalism reach the many.
To achieve sustainability and prosperity, major lifestyle changes, a business model that funds the global south, and incentivizing green technologies are crucial.
Deep dives
The Role of Governments in Technological Revolutions
The role of governments in the early stages of technological revolutions is to allow finance to drive the changes and get out of the way. However, governments must also support and assist the victims of the revolution, preventing widespread skill destruction. Governments should intervene early enough to avoid a catastrophic boom and subsequent collapse. The ultimate goal of governments is to establish a win-win game between business and society, modernize themselves, and create a global institution to regulate the decoupled and global nature of finance. Setting up a global financial transaction tax would help fund the green transition in the developing world and generate dynamic demand for digital production and capital goods in the global market. Additionally, governments should promote a shift from the possession model to a rental model, where products are rented, maintained, and recycled, ensuring universal access to essential goods like refrigerators while minimizing waste.
The Framework for Technological Change
The framework for studying technological change involves understanding that progress is not continuous but occurs through successive technological revolutions. Each revolution consists of complex technologies that complement each other, encompassing key factors, infrastructure, and core technologies. Diffusion of these revolutions is not continuous, leading to initial displacement and destruction, resulting in increased inequality. The cycles of innovation and creative destruction are followed by financial booms and subsequent crashes. However, governments have failed to create golden ages by favoring the financial sector over the victims of the revolution. Governments should recognize the changing context of each revolution and set up win-win games between business and society, focusing on productivity growth, good employment, and shared prosperity.
Differences in the Current Technological Revolution
The current information and communication technological revolution, driven by microelectronics, differs from previous revolutions in several ways. Firstly, it replaces mental labor instead of manual labor, leading to different consequences. Secondly, unlike previous revolutions, it started with microprocessors, computers, and software rather than infrastructure. This revolution has also witnessed the globalization of capitalism, particularly with the opening up of the Soviet Union and China. Additionally, the current revolution has failed to address environmental risks, contributing to the production of high amounts of non-recyclable waste. The revolution also coincides with a longer life expectancy, which necessitates younger generations taking active roles in decision-making and innovation within governments and companies. Overall, understanding the convergence of technology, economy, and social institutional context is critical to effectively navigate and shape technological change.
Capitalism, Technological Revolutions, and the Role of the State
Carolina discusses the relationship between capitalism and technological revolutions, highlighting that technical change by revolution has little to do with technological and scientific reasons. She emphasizes that it is finance and entrepreneurs, not science, that ultimately decide when a technological revolution should occur. Furthermore, Carolina argues that the role of the state in capitalism is crucial in ensuring that the greed of some benefits the many. She proposes that the state should make it more profitable to invest in the green transition than in the old, unsustainable models. Carolina also explores the potential for universal basic income to address societal challenges, promote innovation, and improve living conditions for all.
The Need for Major Lifestyle Changes and Regulatory Frameworks
Carolina stresses the need for major lifestyle changes and regulatory frameworks in order to achieve a sustainable and prosperous future. She advocates for designing products that are long-lasting and promoting the concept of importation only when companies take responsibility for their products throughout their lifecycle. She suggests that introducing a business model that funds the global south, implementing a basic income system, and reshaping the welfare system to adapt to the realities of the current technological revolution are essential steps. Carolina also emphasizes that governments should create a favorable framework to incentivize investments in green technologies and make the transition to sustainable practices more profitable for businesses.
Carlota Perez is a pre-eminent multi-disciplinarian, scholar, and author. Carlota studies the nature of technological change and economic systems, and the lessons provided by the history of technological revolutions. Her book, Technological Revolutions and Financial Capital, is a landmark contribution to the study of technological innovation and change. She has received numerous awards and accolades including most recently an Honorary Doctorate by Utrecht University in the Netherlands.
Our conversation with Carlota centers around her framework for studying technological change and the adoption of digital technologies. We discuss the ideas behind technology cycles, the role of capitalism in influencing change, the difference between the current digital paradigm and prior technology revolutions, the role government can play in accelerating the adoption of digital technologies, and get a preview of her upcoming book which features the role of governments in shaping technological revolutions.
