''Technological Revolutions and Financial Capital: The Dynamics of Bubbles and Golden Ages'' is an
academic book by
Carlota Perez that seeks to describe the connection between
technological development and
financial bubbles as seen in the emergence of long term technology trends. The model described by Carlota Perez shows repeated surges of technological development over the past three centuries with examples such as: the age of steam and railways, the age of steel and electricity, mass production and the automobile and the current information/knowledge society.
Five technological revolutions
The book identifies five bursts of technological innovation that have occurred in industrial history.
Financial cycles
Carlota Perez has found that these cycles of technological revolutions are coupled with financial cycles. Each cycle, which may take 50 – 60 years, consists of the following four phases:
Irruption phase: There is an intense funding of innovation in new technologies. Clusters of new revolutionary inventions appear. New industries are established, and the construction of new
infrastructure
Infrastructure is the set of facilities and systems that serve a country, city, or other area, and encompasses the services and facilities necessary for its economy, households and firms to function. Infrastructure is composed of public and priv ...
begins.
Frenzy phase: Increased
speculation
In finance, speculation is the purchase of an asset (a commodity, good (economics), goods, or real estate) with the hope that it will become more valuable shortly. (It can also refer to short sales in which the speculator hopes for a decline i ...
and
financialization leads to a decoupling between
financial capital and
production capital. Capital is invested more in
financial innovations than in
technological innovation
Technological innovation is an extended concept of innovation. While innovation is a rather well-defined concept, it has a broad meaning to many people, and especially numerous understanding in the academic and business world.
Innovation refers t ...
s.
Asset bubbles are inflated.
Synergy phase: Growing
inequality and political unrest. A need for political
regulation of the financial sector is acknowledged. Asset bubbles may burst. The link between financial capital and production capital is repaired.
Maturity phase: The market for the new technology begins to become
saturated
Saturation, saturated, unsaturation or unsaturated may refer to:
Chemistry
* Saturation, a property of organic compounds referring to carbon-carbon bonds
** Saturated and unsaturated compounds
**Degree of unsaturation
** Saturated fat or fatty ac ...
.
Social structure and infrastructure have adapted to the new technologies. Opportunities for investment are decreasing. The idle financial capital is moving to new sectors and new regions where it may lay the foundation of the next great surge.
Critical reviews
A ''
Foreign Affairs
''Foreign Affairs'' is an American magazine of international relations and U.S. foreign policy published by the Council on Foreign Relations, a nonprofit, nonpartisan, membership organization and think tank specializing in U.S. foreign policy and ...
'' review said "A broad-sweep 'think piece' in the Schumpeterian spirit, this book discusses the relationship between major technological innovations and financial booms and busts."
An ''
Economist'' article summarizes her work, "In her book, “Technological Revolutions and Financial Capital”, Ms Perez traces five boom-and-bust cycles of technological innovation: the industrial revolution; steam and railways; steel, electricity and heavy engineering; oil, cars and mass production; and information technology and telecommunications.
References
{{Reflist
Books about economic growth