Carlota Perez’s Technological Revolutions and Financial Capital “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”:
On a day like any other in November 1971, a small event in Santa Clara California was about to change the history of the world. Bob Noyce and Gordon Moore launched Intel’s first microprocessor, the precursor of the computer on a chip. It was the big-bang of a new universe, that of all-pervasive computing and digital telecommunications. Chips were powerful, they were cheap and they opened innumerable technological and business possibilities.
At that time not many people had heard of venture capital or ‘angels’. Though many common citizens in the USA had stocks and bonds, few followed the daily changes in the stock market. The word ‘derivative’ was generally confined to mathematics. Most middle-class people kept their money in the bank or in the savings and loan society and the self-made millionaires, although a core element of the American dream, were few and far between. In the decades to follow, all this was to change radically. Millionaires would abound and finance was to become the central concern of people with old and new wealth. By the end of the 1990s, even people with modest salaries had turned into hopeful ‘investors’.
Henry Ford had been the central character in a similar event in 1908. The low-cost Model-T, with its internal combustion engine powered by cheap gasoline, was the big-bang opening the world of the automobile and of mass production and mass consumption.
By the mid-1920s, the New York Stock Market was perceived as the engine moving the American economy and even the world’s. As was to happen later, in the 1980s and 1990s, financial geniuses appeared by the dozens and investment in stocks or real estate seemed almost guaranteed to grow and grow in an unending bull market. Great wealth for the players was the result; irrational exuberance was the mood. By the end of the 1920s even widows, small farmers and shoe-shine boys were putting their money into that glorified casino. The crash was unexpected; the following recession and depression were exceptionally deep and prolonged.
This sequence had happened three times before in a similar — though each time specific — manner. A decade after the first industrial revolution opened the world of mechanization in England and led to the rapid extension of the network of roads, bridges, ports and canals to support a growing flow of trade, there was canal mania and, later, canal panic. About 15 years after the Liverpool–Manchester rail line inaugurated the Age of Steam and Railroads, there was an amazing investment boom in the stock of companies constructing railways, a veritable ‘railway mania’ which ended in panic and collapse in 1847. After Andrew Carnegie’s Bessemer steel mill in 1875 gave the big-bang for the Age of Steel and heavy engineering, a huge transformation began to change the economy of the whole world, with transcontinental trade and travel, by rail and steamship, accompanied by international telegraph and electricity. The growth of the stock markets in the 1880s and 1890s was now, not only in railways but also in industry, not mainly national but more and more truly international. The crashes happened, in different forms, in the USA and Argentina, in Italy and France and in many other parts of the world.