Technological Revolutions and Financial Capital: The Dynamics of Bubbles and Golden Ages

The main contention is that the full fruits of the technological revolutions that occur about every half century are only widely reaped with a time-lag. Two or three decades of turbulent adaptation and assimilation elapse, from the moment when the set of new technologies, products, industries and infrastructures make their first impact to the beginning of a ‘golden age’ or ‘era of good feeling’ based on them.

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Each time around, what can be considered a ‘new economy’ takes root where the old economy had been faltering. But it is all achieved in a violent, wasteful and painful manner. The new wealth that accumulates at one end is often more than counterbalanced by the poverty that spreads at the other end. This is in fact the period when capitalism shows its ugliest and most callous face. It is the time depicted by Charles Dickens and Upton Sinclair, by Friedrich Engels and Thorstein Veblen; the time when the rich get richer with arrogance and the poor get poorer through no fault of their own; when part of the population celebrates prosperity and the other portion (generally much larger) experiences outright deterioration and decline. It is certainly a broken society, a two-faced world. But while the poor can usually see the conspicuous consumption of the ostentatious members of the new ‘leisure class’, to these, the poor are often hidden from view.

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This book holds that the sequence technological revolution–financial bubble–collapse–golden age–political unrest recurs about every half century and is based on causal mechanisms that are in the nature of capitalism. These mechanisms stem from three features of the system, which interact with and influence one another: the fact that technological change occurs by clusters of radical innovations forming successive and distinct revolutions that modernize the whole productive structure; the functional separation between financial and production capital, each pursuing profits by different means; and the much greater inertia and resistance to change of the socio-institutional framework in comparison with the techno-economic sphere, which is spurred by competitive pressures.

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A technological revolution can be defined as a powerful and highly visible cluster of new and dynamic technologies, products and industries, capable of bringing about an upheaval in the whole fabric of the economy and of propelling a long-term upsurge of development. It is a strongly interrelated constellation of technical innovations, generally including an important all-pervasive low-cost input,6 often a source of energy, sometimes a crucial material, plus significant new products and processes and a new infrastructure. The latter usually changes the frontier in speed and reliability of transportation and communications, while drastically reducing their cost.

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The major breakthroughs in the advance of human knowledge, those that constituted the dominant sources of sustained growth over long periods and spread to a substantial part of the world, may be termed epochal innovations. And the changing course of economic history can perhaps be subdivided into economic epochs, each identified by the epochal innovation with the distinctive characteristics of growth that it generated.9

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