Technological Revolutions and Financial Capital

Book: TECHNOLOGICAL REVOLUTIONS AND FINANCIAL CAPITAL. The Dynamics of Bubbles and Golden Ages. Carlota Perez. Edward Elgar, Cheltenham, UK, 2002

URL = http://www.carlotaperez.org/Articulos/TRFC-TOCeng.htm

Introduction at http://www.carlotaperez.org/TRFCbook/TRFCintrod.pdf ; Conclusion at http://www.carlotaperez.org/TRFCbook/TRFCepilogue.pdf

Summary

From a working paper that is very similar to the book:

"Ever since Kuznets published his review of Business Cycles questioning the sudden clustering of entrepreneurial talent that was supposed to accompany each technological revolution, Schumpeter's followers have felt uneasy about this unexplained feature of his model. Yet apparently no one has stopped to question Schumpeter's treatment of the clustering of 'wildcat or reckless banking', dismissing it as a random and unnecessary phenomenon to be excluded from his model, together with speculative manias.

Keeping Schumpeter's basic assumptions about innovations based on credit creation as the force behind capitalist dynamics, this chapter will present an alternative model of the process of propagation of technological revolutions. On that basis it will propose:

a) An explanation of the clustering and the spacing of technical change in successive revolutions;

b) An argument for the recurrence of clusters of bold financiers together with clusters of production entrepreneurs and

c) An interpretation of major financial bubbles as massive episodes of credit creation, associated with the process of assimilation of each technological revolution

The model is a stylized narrative, based on a historically recurring sequence of phases in the diffusion of each technological revolution, from its visible irruption after a long period of gestation, through its assimilation by the economic and social system to the exhaustion of its innovation potential at maturity. But it is not merely descriptive. It is constructed through the identification of possible causal chains between agents and spheres in capitalist society. What the model attempts to do is identify the repetition of certain underlying patterns and to propose plausible explanations. The reader is asked to keep this purpose in mind, together with the additional caveat that neither the evidence nor much subtlety can be included in the limited space of a chapter. Suffice it to say that this model is not a straitjacket to be forced upon history. Rather than ignore the immense richness of historical evolution, it emphasizes the uniqueness of each occurrence and recognizes the many irregularities and overlaps that cannot be captured by abstraction. Its only claim is to serve as a useful heuristic tool for historical exploration and as a framework for theoretical analysis." (http://www.carlotaperez.org/papers/basic-Finance-technology.htm)