(2017-08-28) Are We On The Verge Of A New Golden Age

Carlota Perez, Leo Johnson, and Art Kleiner: Are We on the Verge of a New Golden Age? We are in the midst of the fifth great surge (as Perez calls them) of technological and economic change since the Industrial Revolution.

Our current surge started around 1970 and has rolled out information and communications technology around the world

widening wealth disparity leads to a bubble, which bursts in spectacular fashion, and is followed by a crisis period that Perez calls the turning point. This phase of economic and social turbulence has varied in length from two years to 17. Many efforts to get back to normal are made, usually involving the regulation of financial excesses or the stimulation of production and employment. When the crisis ends, the third part of the cycle begins; it consists of 30 years or so of stable economic growth

The participants in this roundtable were three longtime observers of the Perez hypothesis — including Carlota Perez

Art Kleiner

longest such cycle we’ve seen — and the longest period of crisis

it has brought a dangerous political shift, the separation of the interests of major global corporations from interests of the national societies where they are based. To turn the corner from crisis to golden age would require a major economic and political consensus.

as Kentaro Toyama, the former Microsoft research director, says: “Technology is not the answer…. In project after project…information technology amplified the intent and capacity of human and institutional stakeholders, but it didn’t substitute for their deficiencies

there are two critical issues. Does an endeavor aim to increase productivity, and thus create wealth? And does it then aim to distribute that wealth among the many, rather than concentrate it among the few?

It’s not just redistributing income that’s needed, but also fostering multiple novel job-creating activities, which historically have been associated with changes in lifestyles.

The Internet was originally seen as a vehicle for decentralizing ownership and control. Instead, we’ve moved to the era of Google and Facebook

The last time a period of crisis ended, after World War II, there was a concerted effort by many government and business leaders to create a unified, prosperous, long-lasting recovery. The Marshall Plan, the Bretton Woods Agreement, the conversion of wartime industries to peace, and the rebuilding of Europe and Japan all played a role

To get there, perhaps we need to have a crisis that is truly felt as a crisis

But now the people are angry. They are ready to follow demagogues

Much of the unrest can be traced back to the austerity policies

After the collapse in 2008 (credit crisis 2008), financial institutions stopped funding business, because they saw business as risky, and took refuge in pure speculation with bonds, debts, and derivatives. Only the new ICT giants, which live in their own bountiful world doing what they please with abundant cash, are investing

The market is not working and won’t take us out of feeble, jobless economic growth

as in every previous technological revolution, the public sector has to lead the way back after the major bubble collapses.

business leaders tend to oppose government intervention on principle. Last time, it took the experience of World War II for them to discover the advantages of working together with government

things could also get much worse before they get better.

Every technological revolution destroys old jobs

there is always a counterbalance, and it is linked to a new vision of the good life, which becomes a prevailing theme of the golden age. In the second surge, it was urban living, as defined in the cities of Victorian Britain from the 1850s. In the third it was the cosmopolitan living of the Belle Époque. In the fourth, it was the American way of life from the 1950s, which compensated for the jobs lost to technology with massive employment in construction, retail, services, and government.

This next golden age will probably involve smaller carbon footprints, a collaborative economy, preventive healthcare, creativity, experiences, exercise, lean use of materials, and industrial ecology.

It would mean a general shift from products to services, from tangibles to intangibles, and from mass production to customization

There may also be a further shift away from owning to renting or sharing products

Let credit cards evolve into rental portals

mean massive employment in maintenance and installation workers

I’d like to play devil’s advocate. Once we fully enter the age of the algorithm, the age of zero marginal cost machine production, our skills become close to redundant. We’re ornaments, complements to the machine. Another option is to stop prioritizing AI and the triumph of capital over labor

We don’t need the death of big. We only need the death of “mass.”

Keynes was right. Someone needs to create demand before innovation and investment can come forward. The last time it was by building houses on suburban land. But how do you create demand now? For what products and services?

That’s where emerging economies are important. The so-called developing countries were not included in the mass production surge of the 20th century, because the advanced world was more interested in their natural resources than in their consumer market. But that is changing now

Ultimately, when things get bad enough, we will need an equivalent of the Marshall Plan, to help develop all countries.

The critical question is: Can a positive-sum game be established among all the world’s nations? The need for full global development today is enormous, if only because of the growth in consumer demand that’s needed

It’s essential for every economy to specialize, so that it can participate competitively in global markets

I think the advanced industrial countries will end up specializing in capital-intensive goods, high-level engineering, and luxury products. The lagging countries will have to build their own manufacturing bases. Some may specialize in raw materials–based industries, including those producing sophisticated food and chemical products. Some will have their own entrepreneurs, innovating in products and services that reflect their culture and identity

the advantage of ICT is that it thrives in variety. When I talk about a possible European way of life, I imagine multiple innovations that define different variants of the aspirational “good life” with lots of technology and human-based services, plus health and creativity

Ultimately, in my opinion, the most feasible solution — however difficult and complex it may seem — is probably universal basic income.