Technological Revolutions and Financial Capital: The Dynamics of Bubbles and Golden Ages by Carlota Perez is a must read. In it Dr. Perez, speaking from 2002, gives us a wonderful history of five technological revolutions that followed a similar pattern of bang, bust and, hopefully, renewal.
So during this period, financial capital generates a powerful magnet to attract investment into the new areas, hence accelerating the hold of the paradigm on what becomes the 'new economy'.In Perez's account finance is necessary for technological progress because otherwise there would not be enough money available to the fledgling industry. And so at the beginning of each technology period, the industrial revolution, steam and railways, steel, electricity and heavy engineering, oil, automobile and mass production, and information and telecommunications, finance leads a big bang into a new paradigm. Then, unfortunately, the big bang leads to an unregulated casino that eventually bubbles and pops.
In a world of capital gains, real estate bubbles and foreign adventures with money, all notion of the real value of anything is lost. Uncontrollable asset inflation sets in while debt mounts at a reckless rhythm; much of it to enter the casino.
Below I explain why even this account might be too slanted in favor of finance and why Romney stands for the end of progress as we have known it for almost 250 years.
According to Perez, every cycle thus far has reached a "turning point" where the forces of sanity, usually the government, steps in reestablishes order and regulation. The turning point phase could last a few years or over a decade; eventually people have had enough of out of control finance and the divorce of money from social benefit. After the turning point a new golden age is possible where prosperity is fueled by the incorporated technology without the destructive debt and financial turmoil.
Romney represents, embodies, lives a dystopic ideal that denies a golden age in favor of endless casino. Romney's election will be seen by casino owners as a mandate for continuing an economy where profit is picked out of bankruptcy just as Bain Capital and Too Big to Fail banks have perfected. And if Perez is right then, as long as the turning point is denied, not only will computers not reach their full benefit but no new technological age can begin.
But is Perez right about the necessity of financial capital at the beginning of a new technology phase? According to the book legacy companies remain committed to the old and so cannot support the new technology and its paradigm. However that is a difficult claim to prove. In all five technology revolutions the casino was always opened early on so no one knows what would happen if development had been attempted without heavy financial backing.
So without even any proof that their industry ever serves any purpose, casino banks are running a candidate that can potentially freeze our economy in a forever high stakes gambling state where the house always wins.
Without Romney in the white house there is some hope that Perez's turning point could happen
Goldman Sachs Group Inc's quarterly profit fell 12 percent as investment income plunged, reflecting the pressure the bank faces as demand for its services remains tepid and regulators clamp down on bank risk-taking.And of course, beyond the turning point, getting from here to the next technology will require investment in research. Something that Romney will find difficult to do while he all but shuts down government. The more likely vision from Romney would be eternal war and finance intertwining like the serpents on a caduceus.
Reading this book one is struck by just how fragile progress is. Progress requires new technology because without it there are no new paradigms in our economy. Progress requires new research. But most of all progress requires subduing the parasites that ride in with technological revolution.