Technological Revolutions and Financial Capital is a slim (171 pages of text) book with a hefty punch. In it Carlota Perez charts major technological changes over two centuries that drew in massive amounts of speculative capital, created a bubble that then burst, and then continued in a quieter fashion to spread through the world drawing on production capital. She is Visiting Senior Research Fellow at the Judge Business School of the University of Cambridge and is also affiliated with the University of Sussex and a number of other institutions. 

She says hers is the first account of bubbles and panics to link technology innovation to capital. Joseph Schumpeter, in his accounts of business cycles, devoted a lot of attention to financial capital, but his followers “strangely” seem to have missed this, she adds. 

Her examples of technological innovations are: 

The Industrial Revolution, Britain, 1771

Age of steam and Railways, Britain, spreading to America, 1829

Age of Steel, Electricity and Heavy Engineering, USA, Germany, Britain, 1975

Age of Oil, the Automobile and Mass Production, USA, Germany then Europe, 1908

Age of Information and Telecommunications, USA spreading to Europe and Asia, 1971

 They move in roughly 50-year segments, similar to Kontratiev long waves, but she brings the technology revolutions into the account, while he is completely economic.

 (I looked for the telegraph, which was sometimes mentioned as a world changer bigger than the Internet – she has it with the Age of Railroads, which makes sense because the lines ran along the rails and were often used to coordinate train schedules.)

Each new surge of innovation dramatically lowers cost and has a widespread impact on the economy, society and politics.  Until the 1980s, she says, the best form of organization to support mass production was the centralized pyramid, but with the advent of computers and the Internet, that structure appeared rigid and clumsy. And along came Michael Hammer and James Champy with their books on how to re-engineer the corporation.  

Configuring institutions around the technology advances often takes a decade or more and is accompanied by a lot of turmoil, she adds. 

“The full unfolding of its wealth-creating potential at first has rather chaotic and contradictory social effects; it later will demand a significant institutional re-composition.” The Big Bang, a period of years or decades which she calls Installation, pulls in money through market frenzies. It is often followed by a recession which leads to demands for change – sometimes violent — which in turn leads to a calmer Golden Age she calls Deployment with new regulation, business practices and standards adapted to the new technology. Once a technological surge is widely adopted and spreads out globally from its source, the way is open for the next wave of innovation.