Prof. Carlota Perez Cambridge and Sussex Universities, U.K. and Tallinn University of Technology, Estonia Presentation

1. Technology, globalisationand the environment CAN THE CRISISOPEN THE WAYTO A SUSTAINABLE GLOBAL GOLDEN AGE? Prof. Carlota Perez Cambridge and Sussex Universities, U.K.and Tallinn University of Technology, Estonia Presentation at the Sogeti Executive Summit 2010 “Don’t Be Evil”, Venice 2010

2. THE CURRENT CRISISIS NOT AN ACCIDENTAL EVENT IN THE FINANCIAL SYSTEM • It is a historically recurrent phenomenon • It is endogenous to the market system • It results from the way technological revolutions are assimilated • It affects the whole economy The collapse marks a structural shiftin the forces guiding growth and innovation from financial to production capitaland towards the return of an active state

3. From a “gilded age” under the control of financein order to install the technological revolution THE MAJOR BUBBLE COLLAPSE MARKS THE SWING OF THE PENDULUM BECAUSE IN MARKET ECONOMIES TECHNICAL CHANGE OCCURS BY REVOLUTIONS Capitalism experiences pendular swings about every three decades To a “golden age” under the controlof productionin order to fully deploy the installed potential What worked before will not work from now on

4. The ‘Industrial Revolution’ (machines, factories and canals) 1771 Age of Steam, Coal, Iron and Railways 1829 1875 Age of Steel and Heavy Engineering (electrical, chemical, civil, naval) Age of the Automobile, Oil, Petrochemicals and Mass Production 1908 Age of Information Technology and Telecommunications 1971 Age of Biotech, Bioelectronics, Nanotech and new materials? 20?? FIVE TECHNOLOGICAL REVOLUTIONS IN 240 YEARS Each revolution drives a GREAT SURGE OF DEVELOPMENTand shapes innovation for half a century or more

5. NEW INDUSTRIESand NEW PARADIGM FOR ALL A powerful cluster of new dynamic industriesand infrastructureswith increasing productivity and decreasing costs New generic technologies, infrastructures and organisational principles for modernising the existing industries too Explosivegrowthand structural change A quantumjump ininnovation andproductivityfor all A massive change in managerial common sense Why call them revolutions? Because they transform the whole economy! TRANSFORMING THE OPPORTUNITY SPACE AND THE WAYS OF LIVING, WORKING AND COMMUNICATING

6. The paradigm shift taking place since the 1970s MASS PRODUCTION FLEXIBLE PRODUCTION CLOSED PYRAMIDS OPEN NETWORKS STABLE ROUTINES CONTINUOUS IMPROVEMENT HUMAN RESOURCES HUMAN CAPITAL SUPPLIERS AND CLIENTS VALUE NETWORK PARTNERS FIXED PLANS FLEXIBLE STRATEGIES THREE TIER MARKETS HYPER-SEGMENTED MARKETS INTER - NATIONALISATION NEGLECT OF ENVIRONMENT GLOBALISATION ENVIRONMENT AS CHALLENGE A radical change in managerial “common sense”brought on by a different set of enabling technologies

7. Due to resistance and difficulty in assimilating such changes DEPLOYMENT (20-30 years) INSTALLATION (20-30 years) DEPLOYMENT(20-30 years) INSTALLATION(20-30 years) TurningPoint “Creative destruction” Battle of the new paradigmagainst the old Concentration of investment in new-tech Income polarisation LED BYFINANCIAL CAPITAL “Creativeconstruction” Use of new paradigmfor innovation and growthacross all sectors Spreading of social benefits LED BYPRODUCTION CAPITAL Degree of diffusion of the new technological potential Recessions, institutional change and role shift Financialbubble Financialbubble Time Next big-bang We are here big-bang EACH GREAT SURGE GOES THROUGH TWO DIFFERENT PERIODS From irruption to bubble collapse From “golden age”to maturity Nextbig-bang

8. TURNINGPOINT INSTALLATION PERIOD DEPLOYMENT PERIOD GREATSURGE Collapse & Recessions Maturity Bubble prosperity “Golden Age” prosperity The GreatBritish leap 1771Britain 1st Canal mania 1793–97 The Victorian Boom 1829Britain 2nd Railway mania 1848–50 1875 Britain / USAGermany Bubbles of first globalisation Belle Époque (Europe)“Progressive Era” (USA) 3rd 1890–95 Europe1929–33USA 1929–43 The roaring twenties Post-warGolden age 1908 USA 4th 2007/08 -??? Internet maniaand financial casino Global Sustainable ”Golden Age”? 1971 USA 5th THE HISTORICAL RECORD Bubble prosperities, recessions and golden ages The shift from financail mania and collapse to Golden Ages is enabled by regulation and policies to shape and widen markets

9. What is this structural shift about? What are its consequences? What are its requirements for action

10. INSTALLATION = supply- push DEPLOYMENT = demand- pull FINANCEand THE NEW ENTREPRENEURS as drivers and innovators PRODUCTION and THE STATE as drivers and innovators THE STATEin a facilitatingservice role FINANCEin a facilitatingservice role The full flourishing of the installed potential A vast free market experiment The structural shift involves A CHANGE IN THE DRIVERS OF INNOVATION During deployment innovation in production depends on EFFECTIVE INSTITUTIONAL AND POLICY INNOVATION

11. DEPLOYMENT PERIOD LIFESTYLE Urban, industry-based VICTORIAN LIVING in Britain Age of Steam, Coal, Iron and Railways 1850s-1860s Urban, cosmopolitan lifestyle of THE BELLE EPOQUE in Europe Age of Steel andHeavy Engineering 1890s-1910s Age of the Automobile, oil and Mass Production Suburban, energy-intensive AMERICAN WAY OF LIFE 1950s-1960s Will the developed and emerging countries develop a variety of ICT-intensive and “glocal” SUSTAINABLE LIFESTYLES? Age of global ICT 2010s-20??s EACH GREAT SURGE HAS BROUGHT A CHANGE IN LIFESTYLESwith new life-shaping goods and services at ‘affordable’ prices Each style became “the good life” redefining people’s desires and guiding innovation trajectories

12. An example: The emergence of the ‘American Way of Life’ as the paradigm shift from the Belle Époque… FROM ENERGY-SCARCE LIVING Energy is expensive and often inaccessible TO ENERGY-INTENSIVE HOMES AND MOBILITY Energy is cheap and its availability unlimited Trains, horses, carriages, stage coaches, ships and bicycles Automobiles, buses, trucks, airplanes and motorcycles Local newspapers, posters, theaters, parties Mass media, radio, movies and television Ice boxes and coal stoves Refrigerators and central heating Doing housework by hand Doing housework with electrical equipment Natural materials (cotton, wool, leather, silk..) Synthetic materials Paper, cardboard, wood and glass packaging Preference for disposable plastics of all sorts Fresh food bought daily from specialized suppliers Refrigerated, frozen or preserved food bought periodically in supermarkets Urban or country living and working Suburban living separate from work …all strongly aided by advertising, business strategies and government policies

13. FROM THE LOGIC OF CHEAP ENERGY (oil)for transport, electricity, synthetic materials, etc. TO THE LOGIC OF CHEAP INFORMATIONits processing, transmissionand productive use Preferencefor servicesand intangible value Huge potential for savingsin energy and materials Preference for tangible productsand disposability Unthinking use of energy and materials Capacity for environmental friendliness Unavoidable environmental destruction THE TECHNOLOGICAL POTENTIAL changes the relative cost structure and marks the direction of change The techno-economic paradigm shift happening since the 1970s-80s It is a huge opportunity space for innovation, growthand radical changes in lifestyles

14. A horse carriage? 10-15years An automobile! 1898. YET, THE NEW PARADIGM IS STILL WRAPPED IN THE OLD Disposability and high use of energy and materials are still with us THE ASSIMILATION OF A NEW PARADIGM IS A BATTLE AGAINST INERTIA …asnd in the crucial 1990s we hadCHEAP OIL AND CHEAP ASIAN LABOUR which favoured the stretching of the old marketing and consumption patterns

15. Technologicallyfeasible Economicallyprofitable Sociallyacceptable TECHNOLOGY ONLY DEFINES THE SPACE OF THE FEASIBLE The factors defining the space of the acceptable and the profitable change over time … AND ARE ALSO CHANGEABLE!

16. TWO COMPLEMENTARY OPPORTUNITY SPACESFOR INNOVATION THE SUPPLY opportunity space THE DEMANDopportunity space The range of the economically profitableand socially acceptable as defined --and modified-- by policy and social or other factors The rangeof the technologically feasibletogether with the capabilities to make it happen THE BETTER THE MATCH BETWEEN THE DEMAND AND SUPPLY SPACESTHE MORE DYNAMIC THE ECONOMY

17. Availability of newgeneric technologiesInfrastructuresEXTERNALITIES Supply opportunityspace Sources of DEMAND VOLUME Sources of DEMANDDIRECTIONALITY The coherence and synergy among the elements generates self-reinforcing loops THE ELEMENTS OF THE DEMAND OPPORTUNITY SPACE

18. HOW WASTHE PREVIOUSGOLDEN AGEUNLEASHED? ?

19. INNOVATION ENABLERSFOR MASS PRODUCTION Cheap oiland materialsUniversal electricityRoad and airway network Welfare StateLabour unionsPublic procurementCredit system Suburbanisation Post-war reconstructionCold war SPECIFIC DEMAND AS DIRECTION FOR INNOVATION DEMAND VOLUME, PROFILE AND TRENDS THE DEMAND OPPORTUNITY SPACE THAT SHAPED THE POST WAR GOLDEN AGE The various elements were provided in different proportionsin each “First World” country

20. A POSITIVE-SUM GAME THAT BROUGHT THE GREATEST BOOM IN HISTORY

21. ICT “GREEN” FULL GLOBAL DEVELOPMENT The new global positive-sum game Full internet accessat low costis equivalentto electrification and suburbanisation in facilitating demand(and, this time, also education) Incorporatingsuccessive new millionsinto sustainable consumption patterns is equivalent to the Welfare Stateand government procurementin terms of demand creation Revamping transport, energy, products and production systems to make them sustainable is equivalent topost-war reconstructionand suburbanisation

22. And the elements are interconnected ICT “GREEN” FULL GLOBALDEVELOPMENT Internet access is the social and geographic frontier of the global market ICTs are the main enabling instruments of sustainability Only with sustainableproduction and consumption patterns Is globalisation possible But we need policy consensus involving government, business and society

23. “GREEN” is not only about saving the planetIt is about saving the economyand having a high (but different) quality of life GLOBAL DEVELOPMENT is not onlya humanitarian goalit is about healthy growth,markets and employment for all

24. Part of the paradigm shiftis happeningamong sophisticated consumers There is still a long way to go THE CHANGE IN PREFERENCES BEGINS AT THE TOP OF THE INCOME SCALEAND SPREADS BY IMITATION …AND AFFORDABILITY • Durability • Very high quality vs. quantity • Reparability and upgradability • Anti-waste, pro-recycling • Low carbon footprint • Customised vs. standard • Services vs. tangible products • Active & creative “prosumer” vs. passive consumer • Etc. etc. • Natural vs. synthetic • Minimalist design • ‘Gourmet’ and organic food • Exercise for well being • Small vs. big • Multipurpose products • Working from home • Solar power as luxurious as well as electric cars • Intense Internet use THE NEW LUXURY LIFE WOULD INCREASE SATISFACTIONWHILE MAXIMISING THE PRODUCTIVITY OF RESOURCES

25. But the change will not comeby guilt, fear or obligation But by desire and aspiration “GREEN” HAS TO BECOME FASHIONABLE!

26. Advertising andcompany strategiesand lobbyinggo in a green direction Governmenttilts the playing field strongly infavour of green THE QUESTION IS HOW TO GOFROM AN ENLIGHTENED MINORITY(by education, consciousness or wealth)TO THE GREAT MAJORITIES The new greenluxury life patternbecomes fashionable However it starts, the process goes throughmultiple self-reinforcing feedback loops

27. THE TECHNOLOGICAL STAGEIS SET TODAYFOR THE GLOBAL GOLDEN AGEOF THE 21st CENTURY It is up to business, government and societyto agree on the convergent actionsfor making it a reality Will it be a success or a wasted opportunity? WE SHALL ALL BE RESPONSIBLE FOR THE OUTCOME