My friend and colleague Jim Lee, the eminent financial futurist, has a great post about why everything is mess, why it is heading in a good direction – but why we won’t feel right for some time to come. We’re at the midpoint of a sixty-year long economic transition.
Economic historian Carlota Perez says that we’ve been here before, many times in the past. For over two centuries, we’ve seen new technologies wreck and repeatedly rebuild our social institutions.
• The Industrial Revolution (started 1770)
• Age of Railways (1829)
• Age of Steel and Electricity (1875)
• The Age of Oil, Automobiles and Mass Production (1908)
• The Information Age (1971)
Each technology boom follows a pattern: an initial breakthrough, followed by speculative frenzy and misallocation of resources, leading to a collapse in finances and public restructuring, eventually transitioning into a period of broader deployment, productivity and rising affluence. The process finishes with near-universal integration of revolutionary technologies into existing systems.
Productivity has been skyrocketing in the West for four decades while real wages are largely frozen. If Perez’s theory is correct, it is because we have enough information technology to mess up existing institutions, but not enough to revolutionize them.
The best is yet to come – but it might take time and effort.