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Published: November 29, 2005

 
 

Carlota Perez: The Thought Leader Interview

Third, as Deployment gets closer, you will see increasingly stable industry structures. Look at the mad price wars of the airline industry; it has a lot of restructuring to do to segment its markets and develop a sustainable set of practices.

Fourth, there need to be innumerable investments and business innovations to complete the fabric of the new economy. Here’s one small example: Millions of self-employed entrepreneurs work from home with uneven sources of income. Where are the financial instruments to smooth out their money flow so they can work and live without anxiety? For them, that innovation could be the equivalent to installment credit in the 1950s, which made possible the consumer base needed for mass production.

Finally, I’m not sure we’ve understood the causes of fraudulence at companies like Enron, nor how to avoid them by means other than excessive bureaucratic controls. The key decision makers, in government and business, do not seem ready to make the changes that could get a golden age under way.

S+B: What role does the government play in this?
Perez:
A big role. I think that market fundamentalism today is as much of an obstacle to world economic growth in the next decades as state fundamentalism was in the 1970s and ’80s. Government needs to be reinvented, using as much imagination as it took to design the welfare state in the first place. It all seems impossible now, but things always seem impossible at this point in the surge. Between 1934 and 1946, a lot of economists believed that high unemployment was inevitable, because both industry and agriculture were shedding labor. But just after that, with an adequate institutional framework for mass production and consumption, the U.S. entered its biggest full-employment period in history.

S+B: What kinds of companies will ride the next half of the surge most effectively?
Perez:
Those that recognize the kaleidoscopic market segmentation that characterizes the process of globalization. If you are in the U.S. or Europe, it makes no sense to insist on trying to produce something that can obviously be provided less expensively from Asia.

S+B: You mean specialization by country.
Perez:
By country or by region. China, with its masses of low-cost labor, is becoming the center of standardized commodity fabrication; India, the center for mass-produced services. Resource-rich areas like Latin America and Russia will probably become centers for chemical, metallurgy, agricultural, and forestry products. Eastern Europe may become a source of heavy industry for Western Europe; maybe Mexico will be the same for the United States.

The U.S., Europe, and Japan will then concentrate on the upper edge of each industry, producing the most differentiated, complex, and high-priced goods and services, the kinds that determine a high quality of life. Have you noticed how good taste has suddenly become fashionable and is moving right down the income scale? That’s what happens when a Deployment period is dawning. The industrialized countries will also coordinate the global networks, which is a much more complex management task than that of the past giants. In addition, they will organize the enormous movement of goods across the planet. I can assure you that DHL, FedEx, UPS, and the others will not be enough. Education will also take on incredible importance. Many of the unemployed in industrialized nations will make a good living selling their skill base to people elsewhere. In fact, I see a thriving global education industry emerging. There will also be a huge environmental industry, dedicated to overcoming the polluting and health consequences both of the mass-production inheritance and of the current globalization — assuming there is strong and stable regulation to allow this industry to flourish.

 
 
 
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