S+B: On the airplane here, I read two articles about the future. One predicted economic clear sailing and the other foresaw crisis and collapse.
Perez: They’re probably both right. We may well have a jolt or two in the near future, and then a great boom probably lies ahead. But the Nasdaq collapse of 2000 was not big enough to force the changes necessary to get there.
S+B: For people who lost their retirement savings, that’s a difficult statement to hear.
Perez: I couldn’t agree more, but that’s the price we’ve historically paid for our ability to reach great booms. The collapse has to be disastrous enough to make it clear to everyone that the time when the stock market drives the growth of the economy is finished. Finance capital has done its job; it’s brought forth the resources to pave the way for the next wave of technology. Along the way, it’s created an environment in which companies like Microsoft, Intel, and Google could emerge and flourish. Now we need to spread out the new paradigm of our era through all the economies of the world, just as in the past.
S+B: We’ve been here before?
Perez: Yes, and more than once. There are historical regularities in the way technological revolutions form and become assimilated into society. You and I both have seen the changes wrought by information technology, and we think it is uniquely momentous. Yet previous technological revolutions made equally momentous changes. When you go back and read contemporary accounts of life in the 1880s and ’90s, you could replace the words steamships and telegraph with computers and Internet and the text would sound completely modern.
Five Great Surges
S+B: Tell us more about these previous technological revolutions.
Perez: There have been five since the late 18th century. Each lasted 45 to 60 years. They each produced a great surge of development: growth, employment, new products, new industries, and — most important of all — new infrastructures for carrying goods, energy, people, and information farther, faster, and more cheaply. And while they were extremely different technologically, each revolution followed a similar pattern of phases and changing business climates.
S+B: And they were…?
Perez: The first surge was the classic Industrial Revolution that started in 1771. It brought mechanization, factories, and canals. The second, centered in Victorian England, began around 1829: the age of steam engines, coal, and iron railways. The third was the age of steel and heavy engineering. Civil, electrical, chemical, and naval engineering developed impetuously then.
S+B: When did that surge start?
Perez: Around the mid-1870s. That was when cheap Bessemer steel made possible transcontinental railways, major tunnels and bridges, and rapid steamship lines. Those, along with telegraphy, led to the first great globalization — which, by the way, was coordinated by the British Central Bank and the City of London. With those technologies, Argentina, Australia, and others in the Southern Hemisphere could send grain and meat in refrigerated ships to the northern winter markets.
In the fourth surge, which started with Henry Ford’s Model T in 1908, the center of gravity shifted to America. This was the age of oil, mass production, and the automobile. Our present, fifth, surge, the age of information technology and telecommunications, began in 1971 with Intel’s microprocessor. If the historical pattern holds, this surge still has 20 to 30 years left to realize its potential.
I could guess that the next wave will involve biotechnology, bioelectronics, nanotechnology, and new materials. But those are still in gestation, just like the transistor of the 1950s represented the microprocessor in gestation.
S+B: How does our current semiconductor surge differ from the age of oil?
Perez: Last time, producers were all seeking homogeneous markets. Henry Ford said you could have any color car as long as it was black. Most products, from shirts to eggs, came in three sizes: small, medium, and large. The cost advantages of mass production depended on high-volume standardization and economies of scale.