Introduction

This chapter analyses one of Carlota Perez' main insights regarding the contradictory nature of the ‘installation’ period of the current new technoeconomic paradigm, as well as the role of these contradictions in the genesis of the ongoing financial crisis. Basically, despite the enormous potential for increased productivity growth unleashed by the current technological revolution, productivity growth in industrialized countries (and in most of the developing world) has actually declined since the irruption of the new ‘Age of Information Technology and Telecommunications’ (for the case of the US, see Figure 17.18). In essence, the period of ‘installation’ not only creates all the conditions for unleashing economic progress, but also generates ‘tensions’ of an economic, social and political nature that can turn into formidable obstacles to economic growth.

Perez identifies three main ‘tensions’ that are bound to arise during the period of ‘installation’ of a technological revolution: the first is the tension between ‘the paper economy and the real economy’ (i.e., between financial capital and productive capital); the second is the tension between ‘the size and profile of effective demand and those of potential supply’ (i.e., the real-economy effects of increased inequality); and the third is the political tension between ‘the poorer poor and the richer rich’ (Perez 2005, 16–19).

The first ‘tension’ relates to the very essence of the technological bubble that characterizes the period of ‘installation’ (see Figure 17.15); according to Perez: ‘[this is] a process of asset inflation in which the stock market (paper) values decouple from the real value of the companies they represent.