Periodization, again

Here's the difficulty I have with Kondratiev waves: it really seems to take two waves to create a complete cycle. What Perez calls a "technological style" actually unfolds over two Kondratiev waves. Between the two there is a regulation crisis with some kind of "successful" resolution (although it is very hard to call WWII "successful"); and then at the end, a kind of chaotic period during which the technological style begins to change.

Here is Perez's basic thesis, first stated in a 1983 article in the journal Futures:

“We propose that the capitalist system be seen as a single very complex structure, the sub-systems of which have different rates of change. For the sake of simplicity we can assume two main subsystems: on the one hand a techno-economic, and on the other a social and institutional, the first having a much faster rate of response. The long waves would be successive phases in the evolution of the system, or successive modes of development. The root cause of the dynamics of the system would be the profit motive as generator of innovations, understood in the broadest sense as a way of increasing productivity. Each mode of development would be shaped in response to a specific technological style understood as a paradigm for the most efficient organization of production.”
[...]
"A structural crisis (ie the depression in a long wave), as distinct from an economic recession, would be the visible syndrome of a breakdown in the complementarity between the dynamics of the economic subsystem and the
related dynamics of the socio-institutional framework. It is, in the same movement, the painful and conflict-ridden process through which a dynamic harmony is reestablished among the different spheres of the total system."

http://carlotaperez.org/papers/scass_v04.pdf

The problem is, Perez never makes it clear that the "technological style" unfolds over TWO waves. Yet if you look in the article above at her discussion of the way that Fordism emerged during the Third Kondratiev, it is clear. In fact, she begins with a discussion of Taylor's organizational innovations at Bethlehem Steel in 1898-1901. So the technological style originates directly with the key capital-goods industry of the Third Kondratiev, namely steel. After the regulation crisis of the 30s and its successful Keynesian resolution, it then expands from capital goods (Marx's Dept. 1) to a vast range of consumer goods in the Fourth Kondratiev. In this sense, the "technological style" of factory mass production extends from the late 1890s all the way to the early 1970s (with plenty of residual effects in our time, for sure).

What this gives you, I think, are three major technological styles and three corresponding regulation crises:

--Steam power and railway development - with innovation by individual inventor-entrepreneurs under the organizational form of the joint-stock company - begins in the 1830s and produces significant results in the 40s, followed by the crisis of 1848 and then a long period of development (Second Kondratiev). During this mature phase, craft-based manufacturing (and in the US, the so-called "American System of Manufactures") provides the basis of mass employment.

--Mass manufacturing - with national innovation systems under the organizational form of the vertically integrated corporation - begins in the first decade of the 20th century and produces significant results by the 20s, followed by the institutional crisis beginning in '29, then a long period of development in the postwar period (Fourth Kondratiev). During this mature phase, assembly-line factories provide the basis of mass employment, with a major expansion of the middle strata for management, engineering, research, social services etc.

--Informationalism - with a transnational open-innovation system under the form of the networked enterprise - begins in the 70s and produces significant results by the 90s, followed by the institutional crisis which begins in 2008. If the crisis is resolved, the information-based technological style could expand (nano-bio-cogno, health and ecological services) and produce the Sixth Kondratiev. What's missing now is exactly what the new wave would supply, a basis of mass employment and a new role for the educated middle strata.

For me, the above periodization finally works. In this scheme, the five historical Kondratiev waves each have their own key technologies and their own upswing and downswing, but waves 1, 3, and 5 are all marked by the rollout of a new capital-goods sector, while 2, 4, and potentially 6 would give the new technological style a basis in mass prosperity. The currently declining wave, number 5, has already produced a lot of prosumer technology (the PC is comparable to the ModelT! and Steve Jobs is the Alfred P. Sloan of the Fifth Kondratiev!) but the new productive technology and the networked organizational form has totally destroyed the former social basis of capitalism in the advanced economies. Mass prosperity was on credit-drip life support till 2008 and has now collapsed. The working classes have been destroyed in the core countries and therefore, the middle-managerial classes too.

I would have some further remarks about how the decline of British hegemony influences the Third Kondratiev, and how the decline of American hegemony influences the Fifth, but that's for another day.

best, Brian

Comments

Periodization

Dear Brian

I've read the Carlota Perez book and I'll share my understanding of it. I wish I could draw it ..

The key to understanding it for me was to see that the technological innovation occurs midway when the ascending curve becomes a descending curve.

So, you have structural system crisis, which occurs when the social-instituutional can no longer support the old wave, nor yet support the new one (1929, 2008). The SSS is followed by 8-15 years of crisis AND a resulting new adaptation, which when in place creates the basis for ascending wave.

The reason it can eventually do that is because the innovation already took root midway in the previous wave.

So 1929, crisis; 1945 institutional adaptation, 1945-1973, high ascend period; 1973: crisis of the ascending wave PLUS start of new wave of tech innovation in the margins (microchip); 1973-2008 descending wave with financialization; 2008: SSS; followed by chaotic period; 2025: institutional adaptation (if it occurs): new wave based on green and p2p elements; 2040-2050; new crisis marks end of ascending wave;

However, the difficulty we have now is that there seems to be no adaptation; hence also no resolution, and thus, because of the convergent mother of all negative evolutions concerning the biosphere and resource scarcities, the new ascending wave may never occur; thus a more radical phase transition to either negative or positive post-capitalist transition must be envisaged say around 2030 (as pretty much argued by wallerstein and others)

I've seen essays arguing that the big prevoius SSS of 1873 was similarly marked by a lack of resolution and structural adaptation, hence a chaotic period well until WWII.

And now the remarks on hegemonic transition...

Hi Michel -

Greets, I know you're interested in these things and it's always a pleasure to exchange with you.

I have also read Perez's book (Technological Revolutions and Financial Capital, 2003) and I agree that the important thing she has added to our understanding of techno-economic development is the idea of an institutional crisis, where the social system has to adapt to the disruptive force of a new and powerful set of productive possibilities. That idea brought her and the SPRU researchers much closer to the French regulation school, as Freeman and Louça recognize in another good book, As Time Goes By (2001). The interesting thing in the 1983 article I link to above is that Perez actually goes deeper into what these institutional adaptations entail, whereas the book is overly preoccupied with the 1990s tech bubble and its collapse.

The thing I am trying to suggest here is that a "technological style" - which includes a set of scientific concepts, technological tools and organizational forms - can actually span two distinct waves. This happened in the past, with the Fordist approach spanning the Third and Fourth Kondratievs. It could also happen in the future.

After the decline of Fordism in the 70s, I believe we have experienced a full-fledged long wave of development, with an emergence period in the 80s and a major rollout of infrastructure and initial products in the 90s and 2000s. To be sure, there was only limited growth in the US and the EU in the '90s, but there has been *major* growth in Asia in both the 90s and the 2000s, growth in infrastructure, urbanization, shipbuilding and aerospace technology, as well as manufacturing. There has also been tremendous educational and cultural development. All of this growth has been made possible by the new communications tools and by the just-in-time organizational forms that are characteristic of the Fifth Kondratiev. What there has not yet been - I totally agree with you - is any kind of institutional adjustment that would stabilize the growth and transform it into prosperity, health and well-being for the earth's populations. Instead, finance has acted to channel this growth in the worst ways, for immediate profit, without care for the future. For all these reasons, I think another crisis is ahead, worse than 2008. Things will not change until they have to, because there are too many vested interests in the economy as it is.

In this whole context, it becomes valuable (though sobering) to look back on what happened in the late 19th and early 20th century. Here we have to consider interstate relations and Arrighi's notion of hegemony (developed in The Long 20th Century, but also in Chaos and Governance in the Modern World System). I think Arrighi's schema of hegemonic cylces can actually be mixed into the long waves chronology, in a way that really helps to understand where we are today.

So first let's look back. The Fordist approach - vertically integrated corporation, in-house research, continuous-flow mass production, high wages, consumer financing and what you might call "lifestyle advertising" - all developed during the decline of the British empire and the UK-centered world trading system. And in fact, the whole development of modern American industry profited from British overseas investment in the early phases. In the 1890s and the 1900s, that was a belle epoque for Britain and especially the City of London, because of global finance. But then there was a very nasty war in 1914, a severe recession afterwards in 1920-21, and finally the Great Crash in 1929 and throughout most of the '30s. The UK went into definitive decline in that period, with the collapse of the Empire and what was essentially national bankruptcy after WWII. In the meantime, the institutional adjustment to Fordism was achieved during and after the war in the US and we got the full deployment of corporate mass production under the umbrella of the Keynesian welfare state.

Now consider today. The new technological style of the informationalism and just-in-time production was definitely invented in the US, but during a financialized period which in some respects is comparable to the belle epoque of the British empire. The early growth of this technological style, however, has mainly been in Asia: first in Japan, where the very notion of "just-in-time" was invented along with the new personalized marketing techniques; and then in China, which has seen far and away the biggest growth during the current Kondratiev wave. This growth clearly profited from direct foreign investment and technology transfer from the West, particularly the US. Meanwhile, American-led wars have increased in intensity throughout this period, with disastrous results compounded by the recurrence of American-centered financial crises. What's happening now is US decline. Since the richest Americans (individuals, corporations and banks) obviously have a lot to lose from decline, they resist it with all their power. In fact they have been doing so for decades. That resistance to decline is what we call neoliberalism.

Looking forward, I think the decisive crisis will have to start in China, just as the definitive crisis of the British Empire had to start in the US. Where else is the mismatch between the technological style and the institutional order so blatant as in China? The country (or empire) is not only repressive and authoritarian, but it now has levels of inequality comparable to the US. Yet unlike the US, it is everywhere in flux, it's changing every day and people's aspirations are changing with it. Plus, China is the new epicenter of the ecological crisis, especially in the north where desertification and the damage wrought by older industrial phases are combined with the excesses of the present. What's more, China is the linchpin of the US economy, both for its production of cheap goods and its provision of money to prop up the US dollar and the global monetary system - so ny crisis there will have deep consequences for the US. I predict a major clash in China whose resolution will be decisive for the entire world system. What's more, I think this clash will probably come right on time - that is to say, in the next ten years, right in the trough of the current Kondratiev wave, in this present period which is so comparable to the 1930s.

Will the clash and (hopefully) resultant institutional adjustment have to involve a major war? Well, there is clearly a good chance of it. But as you know, the US will have a hard time fighting a war with China, because the two are codependent. There are strong possibilities for wars all throughout Asia, however, and obviously the US could get involved in more and worse wars in many parts of the globe, even though its treasury is being depleted and it is losing support for those wars. Instead of that scenario there could easily be a process of more-or-less violent civil war inside China itself, provoked not only by inequality but also by the intense ecological problems that are currently driving dissent and rebellion in the country. Whatever the scenario, though, I think it will take some major conflict, plus a powerful institutional resolution of that conflict, to change anything in the world system.

Now, what can we do in the face of this scenario? In a networked world system, good ideas and beneficial practices have global reach. The ideas and practices of the commons have technological, organizational, cultural and ecological implications. By developing these ideas and practices now, we create positive possibilities that can be seized upon at the moments of greatest need. You can already see this happening in Latin America. I think the present holds real constructive possibilities. It is during the depressions and the periods of decline that new ideas emerge and take hold. We are living through such a moment, in my view.

Well, Michel, I learned much of this from you so I don't think it will come as a big surprise!

all the best, Brian

PS - I would very much like to read the essays on the structural system crisis beginning in the 1870s... because that is exactly where Arrighi dates the beginning of the British decline.