On the heels of the economic crashes of 2000 and 2008, a leading economist says we’re due for a “golden age,” but we need this generation’s tech titans to get political and lead the way.
At the Web 2.0 Expo in New York Tuesday, venture capitalist Fred Wilson interviewed Carlota Perez, an internationally known economist whose book, Technological Revolutions and Financial Capital, guided the investment thesis for Wilson’s firm Union Square Ventures.
Since the 1770s, the Venezuelan-born Perez said, there have been five revolutions—powered by machines and factories (the Industrial Revolution), railways and steam, heavy engineering and cheap steel, the automobile and the assembly line, and, finally, information.
Each revolution has been marked by an “installation phase” and a “deployment phase,” with a bubble in the middle; but, she said, because the current revolution is about information, which is also what drives finance, it yielded two bubbles.
“The first bubble . . . was about setting up the technologies. That was about investing in the technology,” she said. “The second one was really about finance innovating with software and with the Internet.”
Now that both bubbles have burst, she said, it means that the installation phase of the technological revolution is over and the deployment phase is under way.
“[The technology] can help the rest of all industries innovate,” she said. “What we have is a huge capacity for wealth creation across all industries thanks to these new technologies . . . and we also have the possibility of a huge wave of well-being across the globe.”
When asked exactly where in the cycle the economy is now, Perez said it’s in the “turning point” when people realize that under the false prosperity of the bubble, real problems, such as unemployment, were taking root.
“Much of that money was not invested in producing real wealth,” she said. “It was just a lot of betting. It’s a casino, really.”
What’s needed now is a “whole recomposition” of the economy, by business leaders and the government, to institutionally innovate and create the conditions for sustainable wealth creation, Perez said.
Each new revolution spawned a new paradigm and new social policies—the welfare state and unemployment insurance, for example, grew out of the automobile revolution, she said. America’s culture of consumerism emerged from that revolution, too.
National policies still reflect much of the previous revolution’s values and infrastructure, Perez said, but it’s time for leading industrialists of the information age to engage with government leaders to craft the policies for a less materialistic, more environmentally focused economy.
“We have to make it sustainable and we have to make it lovely. It has to be aspirational—that this is the good life,” she said.
But she emphasized that the way to get there is for the information revolution’s leading voices, the entrepreneurs and technologists, to step up and lead the charge.
“Right now, it’s the dinosaurs in government and in business that are leading what’s happening,” Perez said. “We need the new people to take a real political stand and to think of the future and to push forth the future by acting and by acting politically, clearly."