Technological Revolutions and Financial Capital
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Technological Revolutions and Financial Capital

The Dynamics of Bubbles and Golden Ages

Carlota Perez

Technological Revolutions and Financial Capital presents a novel interpretation of the good and bad times in the economy, taking a long-term perspective and linking technology and finance in an original and convincing way.
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Chapter 5: The Four Basic Phases of Each Surge of Development

Carlota Perez


47 5. The Four Basic Phases of Each Surge of Development This chapter will take a closer look at the installation and deployment periods, distinguishing two different phases in each. As shown in Figure 5.1, the period of installation of each techno-economic paradigm goes through an early irruption phase, just after the big-bang, when the new products and technologies, backed by financial capital, are showing their future potential and making powerful inroads in a world still basically shaped by the previous paradigm. The second half is the frenzy phase, when financial capital drives the intense build-up of the new infrastructure and the new technologies, so, in the end, the potential of the new paradigm is strongly installed in the economy and ready for full deployment. But this phase develops growing structural tensions in the system, which make it unsustainable. Thus, full deployment cannot be unleashed without overcoming such tensions. There is then a turning point, usually in the recession that follows the collapse of the financial bubble, when the required regulatory changes are made to facilitate and shape the period of deployment. This period begins with a synergy phase, when all conditions are favorable to production and to the full flourishing of the new paradigm, now clearly predominant. It ends with a maturity phase, when the last industries, products, technologies and improvements are introduced while signs of dwindling investment opportunities and stagnating markets appear in the main industries of the revolution. The sequence being described involves profound changes that upset...

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