Big Pictures of Technology and Industry/Business: Part II

http://danieleewww.yolasite.com/

Daniel Hao Tien Lee

Outline• Kondratiev Wave• Big Pictures of Carlota Perez’s: : The Dynamics

of Bubbles and Golden Ages• Video Course: Prof Carlota Perez at FINNOV

Final Conference 2012, ICI, London, UK http://www.youtube.com/watch?v=k8S0OSxWmuo&list=UUX6QveqMpgeaEIPJvndQ90Q&index=1&feature=plcp

• Fun Drill !

Kondratiev Wave

• The Kondratieff Wave is an economic theory that states that Western capitalist economies are susceptible to extreme performance volatility as they expand and contract over the years. Unlike what is referred to as the business cycle, the Kondratieff Wave holds that these fluctuations are in fact part of a much longer cycle periods known as “super cycles” that last between 50-60 years or longer depending upon factors such as technology, life expectancy, etc

Kondratiev Wave

Kondratiev WavePeriod

Date (Prosperity to prosperity)

Innovation Saturation point

First Industrial Revolution (Mechanical Age)

Circa 1787–1843

Cotton-based technology: spinning weaving; atmospheric stationary steam engines replaced by high pressure engines, wrought iron, iron displaces wood in machinery, canals, turnpikes. Development of machine tools

Cotton textiles: British market saturated ca. 1800. By 1840, 71% of British cotton textiles were exported

Railroad and Steam Engine Era

Circa 1842–1897

Age of steam railways, steam shipping and machinery. First inexpensive steel, telegraph, animal powered combine harvesters, etc. Final development of and diffusion of machine tools and interchangeable parts. Emergence of petroleum and chemical industries and heavy industries after 1870. Beginning of public water and sewer systems.

Canals: Late 1840s1870: Steam exceeds water power and animal power. 1890s: Railroads. Track mileage continued to grow but much is later abandoned.

Age of steel, electricity and internal combustion

1897–1939

Steel, electric motors, electrification of factories and households, electric utilities, aluminum, chemicals and petrochemicals, internal combustion engine, automobiles, highway system, Fordist mass production, telephony, beginning of motorized agricultural mechanization, radio. Electric street railways help create streetcar suburbs. Build out of urban public water supply and sewage systems.

1917: Railroads nationalized. Post World War I short depression. Railroads and electric street railways decline after 1920. Horses, mules and agricultural commodities: 1919. After 1923 industrial output rises as workforce slowly declines. Depression of 1930s: Overcapacity in manufacturing, real estate. Work week reduced from 50 to 40 hours in mid-1930s. Total debt reaches 260% of GDP during early 1930s.

Kondratiev WavePeriod

Date (Prosperity to prosperity)

Innovation Saturation point

War and Post-war Boom: Suburbia 1939–1982?

Oil displaces coal. Suburban growth and infrastructure. Greatest period of agricultural productivity growth 1940s-1970s. Consumer goods, semiconductors, business computers, plastics, synthetic fibers, fertilizers, television and electronics, green revolution, military-industrial complex, diffusion of commercial aviation and air conditioning, beginning nuclear utilities.

1940s-50s: Diesel locomotives replace steam.1971: Peak U.S. oil production 1973: Peak steel consumption in U.S. Pennsylvania steel cities and industrial midwest turn into "rust belt".1973: Slow economic and productivity growth noted. 1980s: Highway system near saturation

Post Industrial Era: Information Technology and care of elderly

1982? – ??

Fiber optics and Internet, personal computers, wireless technology, on line commerce, biotechnology, Reagan's "Star Wars" military projects. Energy conservation. Beginning of industrial robots. In the U.S. health care becomes a major sector of the economy (16%) and financial sector increases to 7.5% of economy.

1984: Peak U.S. employment in computer manufacturing. Long term decline in U.S. capacity utilization1990s: Automobiles, land line telephones, chemicals, plastics, appliances, paper, other basic materials, commercial aviation. 2001:Computers, fiber optics 2000s: Crop yields approach limits of photosynthesis. 2008: Developed world on verge of depression. Widespread overcapacity except some nonferrous metals and oil. Large housing and commercial real estate surplus. GDP no longer responds to increases in debt. Total debt exceeds 360% of GDP by late 2009.

Kondratieff cycles – long waves of prosperity.Rolling 10-year yield on the S&P 500 since 1814 till March 2009 (in %, p. a.)

Five Successive Technological Revolutions, 1770s to 2000s

Technological revolution

Popular name for the period

Core country or countries

Big-bang initiating the revolution

Year

FIRST The ‘Industrial Revolution’

Britain Arkwright’s mill opens in Cromford

1771

SECOND Age of Steam and Railways

Britain (spreading to Continent and USA)

Test of the ‘Rocket’ steam engine for the Liverpool-Manchester railway

1829

THIRD Age of Steel, Electricity and Heavy Engineering

USA and Germany forging ahead and overtaking Britain

The Carnegie Bessemer steel plant opens in Pittsburgh, Pennsylvania

1875

FOURTH Age of Oil, the Automobile and Mass Production

USA (with Germany at first vying for world leadership), later spreading to Europe

First Model-T comes out of the Ford plant in Detroit, Michigan

1908

FIFTH Age of Information, Computing, and Telecommunications

USA (spreading to Europe and Asia)

The Intel microprocessor is announced in Santa Clara, California

1971

Source: Carlota Perez 2002

Big-Bang

• For society to veer strongly in the direction of a new set of technologies, a highly visible ‘attractor’ needs to appear, symbolizing the whole new potential and capable of sparking the technological and business imagination of a cluster of pioneers.

• This attractor is not only a technical breakthrough. What makes it so powerful is that it is also cheap or that is makes it clear that business based on the associated innovations will be cost-competitive. That event is defined here as the big-bang of the revolution.

Big-Bang of Each Revolution(initiated by a narrow community of entrepreneurs and technical people)

• Arkwright’s Cromford mill opened in 1771: the future paths to cost reducing mechanization of the cotton textile and other industries were powerfully visible

• Stephenson’s ‘Rocket’ steam locomotive announced and triumphed in 1829: the world of railways and steam power were non-stoppable

• Carnegie’s highly efficient Bessemer steel plant opened in 1875: inaugurating the Age of Steel

• Ford’s the first Model-T prototype in 1908: layout of the future of production patterns for standardized, identical products, and choice of Age of Oil

• Intel’s first microprocessor in 1971: the original and simplest ‘computer on a chip’ seen as the birth of the Information Age, based on the amazing power of low-cost microelectronics

Double Nature of Technological Revolutions

Source: Carlota Perez 1998

A CLUSTER OF NEW DYNAMIC PRODUCTS, TECHNOLOGIES

INDUSTRIES AND INFRASTRUCTURESgenerating explosive growth

and structural change

NEW INTERRELATEDGENERIC TECHNOLOGIES

AND ORGANIZATIONAL PRINCIPLEScapable of rejuvenating and upgrading mature industries

New engines of growthfor a long-term upsurge

of development

A higher level of potential productivity

for the wholeproductive system

A CHANGE OF TECHNO-ECONOMIC PARADIGM

Big-Bang as Creative Destruction

Five Great Surges of Development in 240 Years (driven by successive technological revolutions with collapse and readjustment)

Courtesy of Source: Based on Technological Revolutions and Financial Capital: The Dynamics of Bubbles and Golden Ages, Carlota Perez; IBM 2004 Annual Report

Scientific Technology Revolution Cycles (Nominal Time 50-60 Years: Perez 2002, Hirooka, 2003)

Courtesy of John. P. Dismukes, U. Toledo 2005

Is modern technology revolution driven by model or luck, or spirit ?

Life Cycle of a Technological Revolution

Courtesy of Carlota Perez 2002

Phase One Phase Two Phase Three Phase Four

Gestationperiod

Big-bang

Paradigm configuration

Introduction of successive new products, industries and technology systems, plus modernization of existing ones

Early new products andindustries.Explosive growthand fast innovation

Full constellation (new industries, technology systemsAnd infrastructures)

Full expansion of innovation and market potential

Last new productsand industries. Earlier ones approachingmaturity and marketsaturation

Constriction of potential

Around half a century

Two Different Periods in Each Great Surge

Courtesy of Carlota Perez 2002

Big-bang

-- INSTALLATION PERIOD

Next Big-bang

-- DEPLOYMENT PERIODTurning point

MATURITYSocio-political splitLast products and industriesMarket saturation and technological maturitiesof main industriesDisappointment vs. complacency

FRENZYFinancial bubble timeIntensive investment in the revolutionDecoupling of the whole systemPolarization of rich and poorGilded Age

SYNERGYGolden AgeCoherent growth withIncreasing externitiesProduction and employment

IRRUPTIONTechno-economic splitIrruption of the technological revolutionDecline of old industriesUnemployment

Recurring Phases of Each Great Surge in the Core Countries

Courtesy of Carlota Perez 2002 Big-bang

--------INSTALLATION PERIOD

Next Big-bang

-- DEPLOYMENT PERIODTurning point

CrashInstitutionalrecomposition

Previous Great surge

The Irruption Phase:A Time for Technology

• It begins with the big-bang of the technological revolution amidst a world threatened with stagnation, as in Britain in the 1830s and 1870s or the USA in the 1970s.

• This period is marked by increasing unemployment stemming from various sources, ranging from economic stagnation, through rationalization efforts, to technological replacement. – The world seems to be falling apart and the old behaviors and polices are impotent to save it.

• Meanwhile, the new entrepreneurs are gradually articulating the new ideas and successful behaviors into a new best-practice frontier that serves as the guiding model or techno-economic paradigm.

The Frenzy Phase:A Time for Finance

• A phase characterized by very strong centrifugal trends in society at large – a small but growing portion at the top is rich and getting richer while there is deterioration and growing outright poverty at the bottom

• A time of speculation, corruption and unashamed love of wealth – ‘The Gilded Age’ which appears of shinning prosperity and its socially insensitive inside of base metal

• Frenzy phase is also one of intense exploration of all the possibilities opened up by the technological revolution – though bold and diversified trial and error investment

• A phase of fierce ‘free’ free competition with tremendous excess money poured into the infrastructure (e.g. canal mania, railway mania, Internet mania), often leading to overinvestment that might not fulfill expectations – a sort of gambling economy with asset inflation in the stock market, looking like a miraculous multiplication of wealth so late Frenzy phase becomes “Financial Bubble time” Recession time

The Turning Point:Rethinking and Rerouting Development

• A process of contextual change to move the economy from a Frenzy mode, shaped by financial criteria, to a Synergy mode, solidly based on growing production capabilities– e.g. Bretton Woods meetings, enabling the orderly international Deployment

of the fourth surge– e.g. The repeal of the Corn Laws in Britain, facilitating the Synergy of the

second• The turning point has to do with the balance between individual and

social interests within capitalism – it is the swing of the pendulum from the extreme individualism of Frenzy to giving greater attention to collective well being, usually through the regulatory intervention of the state and civil societies

• The unsustainable structural tensions that build up the economy and society, especially during Frenzy, must be overcome by a recomposition of the conditions for growth and development

The Synergy Phase:A Time for Production

• Synergy is the early half of the deployment period. This phase can be the true ‘Golden Age’– e.g. Victorian England after the Great exhibition– e.g. America after the Second World War

• A mode of growth based on social cohesiveness, moral principles are in force, ideas of confidence flourish and business is satisfied about its positive social role – it’s a time of advance in labor laws and other measures for social protection of the weak, a time for income redistribution in one form or another, leading to enlarged consumption markets. It’s above all the reign of the ‘middle class’. Fast and easy millionaires are rare, though investment and work lead to persistent accumulation of wealth. “ Production is the key word in this phase”

The Maturity Phase:A Time for Questioning Complacency

• All the signs of prosperity and success are still around. Those who reaped the full benefits of the ‘golden age’ continue to hold on to their belief in the virtues of the system and to proclaim eternal and unstoppable progress, in a complacent blindness, which could be called the ‘Great Society Syndrome’

• Markets are saturating and technologies maturing, therefore profits begin to feel the productivity constriction, leads to concentration through mergers or acquisitions, as well as export drives and migration of activities to less-saturated markets abroad

Approximate Timeline of Each Great Surge of Development

(1770s and early 1980s)

(late 1780s and early 1790)

1793-97

1848-50

1893-95

Europe1929-33

USA1929-43

2001-?

(1798-1812) (1813-1829)

(1850-1857) (1857-1873)

(1830s)

(1840s)

(1875-1884)

(1884-1893)

(1895-1907)(1908-1918)

(1908-1920) (1920-1929) (1943-1959) (1960-1974)

(1971-1987) (1987-2001)

Geographic Outspreading of Technologies as They Mature (USA case)

Phase I Phase II Phase III Phase IV Phase V

All production in USA

Production started in Europe

Europe exports to LDCs

Europe exports to USA

LDCs exports to USA

US Exports to many countries

US Exports mostly to LDCs

US Exports to LDCs displaced

Net exporter

Net importer

New products Mature products

Time

LDC: less developed country

Mass-Production Paradigm and Information Revolution

• 1950s was a period of expansion in the USA, which served to pull the front-running European countries

• By the 1960s the main dynamism moved towards Europe and Asia, producing the so-called ‘miracles’ in Germany, Italy and Japan

• In the 1970s, it was Brazil, Taiwan and Korea that had taken over the baton

• After the mid-1970s, some of the oil countries were able to attempt growth using the mature energy-intensive technologies in aluminum, petrochemicals and so on. But by then, the information revolution was already taking force in the USA and other core countries and the organizational revolution was catapulting Japan to the front ranks while the stagflation of the irruption phase was entering he scene of the old advanced countries.

Definition of Financial Capital and Production Capital

• Financial capital (paper wealth/economy)– Represents criteria and behavior of possessing wealth in the form of money or

other paper assets – to use money to make more money by receiving interest, dividends or capital gains

– Tools: deposits, stocks, bonds, oil futures, derivatives, diamonds or whatever– Services: banks, brokers and other intermediaries who provide information to

make paper wealth growth– Mobile and footloose in nature– Flee from danger but enable the rise of the new entrepreneurs

• Production capital (real wealth/economy)– Generate new wealth by producing goods or performing services (including

transport, trade and other enabling activities)– Typical with borrowed money from financial capital or use their own money– Purpose of production capital is to produce in order to be able to produce more –

objective is to accumulate greater and greater profit-making capacity– Tied to concrete products, and knowledge about product, process and markets is

the very foundation to potential success– Roots in an area of competence and even in a geographic region– Has to face every storm by holding fast, ducking down or innovating its way

forward or sideways – but when it comes to radical changes, incumbent production capital can become conservative

FRENZYDecoupling FK-PK

Bubble economyDivorce between paper and real valueAsset inflation

IRRUPTIONLove affair of FK with revolution

Financial RevolutionIntense funding of the new technologiesDisdain of old assets

Recurring sequence in the relationship between financial capital (FK) and production capital (PK)

Courtesy of Carlota Perez 2002 Big-bang

--------INSTALLATION PERIOD

Next Big-bang

-- DEPLOYMENT PERIODTurning point

CrashInstitutionalrecomposition

Previous Great surge

MATURITYSigns of Separation

Financial capitalsearching on its own Decreasing investment opportunitiesIdle money moving to new area, sectors and regions

Next Great Surge

SYNERGYRecoupling FK-PK

Production capital at the helmRecoupling of real and paper wealthCoherent growth

Five successive surges, recurrent parallel periods and major financial crises

?

Financial and Social Impact by Technology Revolution

• National market in the Victorian boom, from the mid-nineteenth century after the 2nd. technology revolution: That prosperity was brought about on the basis of a whole set of new institutions that ordered national markets and regulated the national banking and financial worlds, which facilitated the continued expansion of the railway system and the network of steam-powered factories in the growing industrial cities.

• International markets arisen, two decades after the big-bang of Age of Steel, required worldwide regulation (from the general acceptance of the London-based Gold Standard to universal agreements on measurement, patents, insurance, transport, communications and shipping practices), which the structural changes in production, including the growth of important science-related industries had to be facilitated by deep educational reforms and social legislation.

• Mass production and massive consumption, based on the mass-production technologies of the fourth paradigm had been diffusing since the 1910s and 1920s demanded institutions facilitating massive consumption, by the people or by the governments. Only is such a context could full flourishing be achieved.

• Cohesive growth based on the information revolution, would seem to require a global network of institutions, involving the supranational, national and local regulatory levels --- Globalization

Impact of War Expenditure

• War served to spread technology among the adversaries and thus create future peace-time competitors.– The massive war expenditures of the First and Second

World War came to rescue of investment opportunities and profits in the maturity phase of the third and fourth surge ,respectively, in the main advanced countries.

– Vietnam war plus the intensification of the Cold War and the Space Race, had a similar effect for the US economy during Maturity in the fourth surge.

Attributes of Past Revolutions • Each begins in a core country and later becomes dominant

both in economy and politics worldwide.• Each defines new/or redefines industries and

infrastructures.• Each generates new techno-economic paradigm

– New “common sense” innovation principles which define best competitive practices.

• Each takes 40-60 years going through Carlota Perez’s 3-stage model to spread across world:– Installation period (Irruption and Frenzy Bubble)

• Each generates technology bubble (massive over-investment) and later spearheads into financial panic and collapse.

– Turning point• Each turning point required collective vision.

– Deployment period (Golden Age (Synergy) and Maturity)• Each Golden Age has been facilitated by enabling regulation and

policies for shaping and widening markets.

Attributes of Past Revolutions • Resistance from established firms/institutions• Functional separation between financial capital and

production capital• Paradigm shift led by financial capital, which forms

bubble, which bursts, leading to hyper-adaptation (common-sense)

• Production capital then controls propagation• Huge surge is divided into two extremely different periods.

Installation period vs. Deployment period

What’s the status we have now:Still stuck at the turning Point ;

Perez’s Recent Presentation

Courtesy of Carlota Perez 2008

The Historical Record: Bubble Prosperities, Recessions and Golden Ages

Courtesy of Carlota Perez 2008

Courtesy of Carlota Perez 2008

Courtesy of Carlota Perez 2008

Sources ofDEMAND

DIRECTIONALITY

Sources ofDEMANDVOLUME

THE ELEMENTS OF THE DEMAND OPPORTUNITY SPACE

Generic technologiesInfrastructures

EXTERNALITIES

Supplyopportunity spacefor INNOVATION

The coherence and synergy among the elements generates self-reinforcing loopsCourtesy of Carlota Perez 2010

Cold war

Welfare StateLabour unions

Public procurementCredit system

DEMANDVOLUME, PROFILE

AND TRENDS

SuburbanisationPost-war reconstruction

SPECIFICDEMANDAS DIRECTIONFOR INNOVATION

Cheap oil and materialsUniversal electricity

Road and airway network

The demand opportunity space that shaped the Post War Golden Age

INNOVATIONENABLERSFOR MASSPRODUCTION

The various elements were provided in different proportionsin each “First World” country

The currentopportunity spacefor a globalpositive-sum

CheapICT

game

FULL

Full internet accessat low cost is equivalent

to electrification andsuburbanisation

in facilitating demand(plus education)

“GREEN”

Revampingtransport, energy,products and production systemsto make them sustainableis equivalent topost-war reconstructionand suburbanisation

GLOBALDEVELOPMENT

Incorporatingsuccessive new millions

into sustainable consumption patternsis equivalent to the Welfare State

and government procurementin terms of demand creation

Courtesy of Carlota Perez 2010

The three forces defining the opportunity space are interdependent

There is enough space and potential to lift all boatsbut the markets cannot do it without the support of enabling policies

Only with sustainableproduction and consumption patterns

Is full globalisation possible

THE DIRECTION THE VOLUME

THE FACILITATOR

ICTs are the mainenabling instruments

of sustainability

“GREEN”

Internet access isthe social, economic

and geographicfrontier of the global market

FULLGLOBAL

DEVELOPMENT

ICTInformation and communications

technologies

Courtesy of Carlota Perez 2010

Each style became “the good life” that shaped people's desires and valuesand guided innovation trajectories

Each technological revolution has led to a change in consumption patternswith new life-shaping goods and services at „affordable prices‟

2010s-20??s Will the developed and emerging countriesdevelop a variety of ICT-intensive

“GLOCAL” SUSTAINABLE LIFESTYLES ???

DEPLOYMENTPERIOD

1850s-1860s

1890s-1910s

1950s-1960s

LIFESTYLE

Urban industry-aidedVICTORIAN LIVING in Britain

Urban cosmopolitan lifestyle ofTHE BELLE EPOQUE in Europe

Suburban energy-intensiveAMERICAN WAY OF LIFE

Courtesy of Carlota Perez 2010

Carlota PerezCambridge, LSE and Sussex Universities, U.K.Tallinn University of Technology, Estonia

9TH Triple Helix ConferenceStanford, July 2011

The direction of innovation

after the financial collapse

ICT for green growth

and global development

Technology Institutions

Perhaps the most important lesson that Chris Freeman taught us is:

THAT ECONOMICS IS INCAPABLE OF UNDERSTANDING GROWTH

WITHOUT INTERDISCIPLINARITY

Economics

HISTORY

That wider framework helps us identify long-term regularities

ANDALLOWS US TO GLEAN POSSIBLE FUTURES

FIVE TECHNOLOGICAL REVOLUTIONS IN 240 YEARS

The ‘Industrial Revolution’(machines, factories and canals)

Age of Steam, Coal, Iron and Railways

Age of Steel and Heavy Engineering (electrical, chemical, civil, naval)

Age of theAutomobile, Oil, Petrochemicals and Mass Production

Age of InformationTechnology and Telecommunications

Age of Biotech, Nanotech, Bioelectronics and New Materials?

1771

1829

1875

1908

1971

20??

EACH ONE DRIVES AGREAT SURGE OF DEVELOPMENTAND CHANGES THE TECHNO-ECONOMIC PARADIGM GUIDING INNOVATION

The second half is theDEPLOYMENT PERIOD

led by production aided by the Statewhen innovation

spreads across the boardto reap the full

economic and social benefits

The first half is theINSTALLATION PERIOD

led by finance and free marketswhen innovation concentratesto set up the new infrastructure,

to let markets pick the new winnersand to modernize the old economy

THE MAJOR BUBBLE COLLAPSEMARKS THE SWING OF THE PENDULUM

Due to the massive “creative destruction” requiredDIFFUSION TAKES PLACE IN TWO DISTINCT PERIODS

The shift from financial mania and collapse to Golden Ages occurswhen enabled by regulation and policies to shape and widen markets

THE HISTORICAL RECORDBubble prosperities, recessions and golden ages

Infrastructure bubblesof first globalisation

(Argentina, Australia, USA)

Belle Époque (Europe)“Progressive Era” (USA)1890–95

The roaringtwenties

Internet maniaand financial casino

Post-warGolden age

Global Sustainable”Golden Age”?

Europe1929–33

USA1929–43

2000 &2007/8-????

INSTALLATION PERIOD

Bubble prosperity

Canal mania

Railway mania

DEPLOYMENT PERIOD

“Golden Age” prosperity Maturity

The GreatBritish leap

The VictorianBoom

TURNINGPOINT

Collapse &Recessions

1793–97

1848–50

1908USA

1971USA

31875

rdBritain / USAGermany

4th

5th

GREATSURGE

1st

2nd

Yearcountry

1771Britain

1829Britain

WHY TWO PERIODS? WHY THE BUBBLE?

RESISTANCETO THE NEW

UNCERTAINTY

NATURE OFINFRASTRUCTURES

Old industriesold habits

old methods

Which products?Which technologies?Which companies?Which markets?

All or nothingInvest up-front

Revenues come later

Need a period ofCREATIVE DESTRUCTIONto force modernization

Need to experimentin ferocious “free market”COMPETITION

Need credit creationthrough bubble boom andshort-term CAPITAL GAINS

Once the bubbles collapse, the job is done

THE NEW PARADIGM IS INSTALLED AND CAN BE DEPLOYED

But that requires a structural shift away from the casino economy

?

HOW WASTHE MASS PRODUCTION

GOLDENAGE

UNLEASHED?

• Through very strict financial regulation in each countryGlass Steagall, “Chinese walls”, deposit insurance, capital export controls, etc.

• International stability through the Bretton Woods agreementsUS dollar as “gold”, IMF, GATT, World Bank (then IBRD), etc.

• Keynesian policies for stable growth within national bordersCounter-cyclical measures, stimulus spending, etc. and a set of policies…

…INDUCING STRUCTURAL CHANGE IN FAVOR OF MASS CONSUMPTION!

THE SYNERGISTIC CONDITIONS THAT SHAPED THE POST WAR GOLDENAGE

Cheap oiland materials

UniversalelectricityRoad and airway

networks

They were provided in different proportions in each “First World” country

INNOVATION ENABLERSFOR MASS PRODUCTION

FORCES SHAPINGTHE DIRECTION

OF INNOVATION

SuburbanizationPost-war

reconstructionR&D fundingCold war

FACILITATORSOF DEMAND GROWTH

FOR MASSCONSUMPTION

Welfare StatePublic procurementLabour unionsPersonal credit

system

A POSITIVE-SUM GAME

AND BROUGHTTHE GREATEST BOOMIN HISTORY

THAT TURNED WORKERSINTO MIDDLE INCOMECONSUMERS

Cheap Asian labor and the return of cheap oilhave hindered the use of this huge opportunity space

FROM THE LOGICOF CHEAP ENERGY (oil)for transport, electricity,synthetic materials, etc.

Preferencefor tangible productsand disposability

Unthinking useof energy and materials

Unavoidableenvironmental destruction

TO THE LOGICOF CHEAP INFORMATION

its processing, transmissionand productive use

Preferencefor services

and intangible value

Huge potential for savingsin energy and materials

Capacity forenvironmental friendliness

THE NEW TECHNOLOGICAL POTENTIALAMAJOR TECHNO-ECONOMIC PARADIGM SHIFT

A change in relative cost structures changes the direction of innovation

The new globalpositive-sumgame

UniversalICT

Full internet accessat low cost

is equivalentto electrification

and suburbanizationin facilitating demand

(and, this time,also education)

FULLGLOBAL

DEVELOPMENT

Incorporatingsuccessive new millions

into sustainableconsumption patterns

is equivalent to the Welfare Stateand government procurementin terms of demand creation

“GREEN”GROWTH

Revampingtransport, energy, products,production and consumption patternsto make them sustainableis equivalent topost-war reconstructionand the spread of suburbia

And the elements are interconnected

ICT

Internet access isthe socialand geographic frontierof the global market

FULLGLOBAL

ICTs are the mainenabling instrumentsof sustainability

“GREEN”DEVELOPMENT

Only with sustainableproduction and consumption patterns

Is globalization possible

But we need policy consensusinvolving government, business and society

“GREEN” is not only aboutsaving the planet

It is about saving the economyand having a high (but different)quality of life

GLOBAL DEVELOPMENTis not onlya humanitarian goalIt is about healthy growth,markets and employmentin the advanced, emerging anddeveloping worlds

But it cannot happen by guilt or fearbut by desire and aspiration

“GREEN” MUST BECOME THE “LUXURY LIFE”

WHAT LOOKS IMPOSSIBLE NOW MAY SEEM OBVIOUS LATERBut later it was obvious that…

Shifts in consumption patterns shift profit-making opportunities

it seemed impossible to imagine…

…that blue collar workerswould have lifetime jobs andfully equipped suburban houseswith a car at the door

…or that most colonieswould gain independence

And it seemed impossible in the late 1960s…

…to expect some of the valuesof the hippie movement[back to natural materials,organic food, etc.]to becomethe luxury norms

…increasing wages createdmany more millions of consumersfor mass production and sustained growth

…the new middle classesrising in the developing worldwidened world markets for mass productionby adopting the “American Way of Life”

But now it is obvious that…

…innovations in natural textile fibershave transformed the world of high fashion

… and innovations in distribution logisticshave made organic foodsthe premium segment in supermarkets

THE TECHNOLOGICAL STAGEIS SET TODAY

FOR THE GLOBAL GOLDEN AGEOF THE 21st CENTURY

It is up to business, government and societyto agree on the convergent actions

for making it a reality