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On Kondratieff’s Hill

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Chris McCann, WhichPLM Expert and Director of Resilient.World, is a key figure in sustainability. Here, he shares his latest views on the times in which we live. Referencing the five technological revolutions we have seen over the past two centuries, Chris shares his thoughts on the ‘Green Age’ of the very near future, and the possibilities it holds. 

“Study the past if you would define the future”Confucius

“History never repeats itself, but it rhymes”JR Colombo, ‘A Said Poem’

 

Anyone who has ever walked into a bookmaker’s understands that there is (quite literally) gold to be found through an understanding of probability and statistics. Patterns in the past, the predictability of human nature – bookmakers set odds based on a mixture of statistical probabilities and public opinion. Bookies certainly don’t speculate (gamble)- that’s left to the ‘punter’. Instead, their priority is balancing the books.

We’re living through turbulent times. If popular culture is anything to go by, at any moment we’re poised to descend into a Dante’s inferno where Mad Max rules and Soylent Green is standard fare. Except …we’ve been here before. Five times, in fact, over the past 240 years. And far from dropping into some dystopian nightmare there are those who have crunched the numbers, and argue quite convincingly that what lays in the very near future is a new golden age (or more accurately, a Green Age). An age of sustainable living, the good life driven by revised values and technological innovation.

Carlota Perez is a Venezuelan scholar with an impressive résumé. She researches the concept of techno-economic paradigm shifts and the theory of great surges, a further development of Schumpeter’s work on Kondratieff waves. Sounds like heavy stuff, but in a nutshell Perez lays out the history of five technological revolutions which follow a similar pattern of bang, bust and, hopefully, renewal. What she says about the current revolution and where we’re headed next is inspiring, and offers a tremendous vision of possibilities.

Perez has examined the work of Soviet economist Nikolai Kondratieff, best known for proposing the theory that Western capitalist economies have long-term (50 to 60 years) cycles of boom followed by depression. These business cycles of expansion, stagnation and recession have today been expanded into four periods, with a turning point (collapse) between the first and second phases. Termed ‘Kondratieff Waves’, they were first brought to international attention in his book The Major Economic Cycles (1925), and modern versions of his work credit technology and/or cycles as the driving force(s) behind these waves. Perez is somebody who holds the view that technological shifts are the key drivers, with 5 technological cycles over the past 240 years:

  1. The Industrial Revolution – 1771. Typified by machines, factories and canals
  2. The Age of Steam and Railways – 1829. Typified by coal, iron and rail
  3. The Age of Steel and Heavy Engineering – 1875
  4. The Age of Oil, Electricity, the Automobile and Mass Production – 1908
  5. The Age of Information and Telecommunications – 1971

Each cycle takes approximately 40-60 years to spread across the world, and to reach real maturity. Why revolutions? Because, and this is the key point, these technologies transform the whole economy. In each cycle there is the potential for enormous new wealth creation, requiring a new direction of change across all industries and eventually across society. Each generation then sees itself as progressive, and the previous mode of living as ‘old fashioned’ and backward.

Perez gives the example of the USA at the dawn of mass production. President of General Motors, Charles Erwin, famously made the observation that “what is good for our country is good for General Motors, and vice versa”. And in many ways he was correct – the automobile was at the centre of that technological wave, enabling the development of suburban housing, the creation of Fannie Mae (to fund federal housing), the innovation in electrical appliances to equip new housing as a result of huge demand, and spawning a thousand products and industries. The same effect was seen in each of the other 4 technological cycles, in each case driving change not just in the industry of origin but acting as an enabler for change throughout society.

Aerial Groups

Perez understands that each technological revolution propagates in two different periods. The first half (known as ‘installation’ and taking 20/30 years) establishes infrastructure and allows the market to pick the winners. It’s a period of ‘creative destruction’, a period of ‘out with the old and in with the new’, and is led by financial capital that always ends in a crash, because financial capital is speculative in nature; a lot of the wealth creation is false ‘betting’, with no real increase in productivity in the ‘real’ economy. Witness canal mania and canal panic, the same for rail, the same in the roaring twenties and the 1929 crash, and most recently in the Age of Information (the NASDAQ crash of 2001, which followed the establishment of new technologies during the internet and dotcom bubbles, and the 2008 crash following the period when finance innovated using software and internet technologies, developing a global reach but creating a globalisation bubble).

The second half (known as ‘deployment’ and, again, taking 20/30 years) reaps the full economic and social potential. This is the period of ‘post-crash’, where painful lessons from the crash produce a better understanding of its causes, and prompts institutional change; business and government come together to begin understanding how to generate a true wave of wealth creation. It is this period that comes to be known as the ‘golden age’, where the new technology has been fully installed and can act as a catalyst to help the other industries to innovate. In this second period the alliance between production and the state serves as a driver and innovator, and finance takes a service and facilitator role.

Where are we today?

If history is anything to go by, we’re moving out of the crash phase and heading into the deployment, or ‘wealth creation’, phase. Granted, progress this time is slow, as government and business appear reluctant to embrace new opportunities at pace. Governments usually suffer from inertia; it’s very difficult to get a bureaucracy moving unless it comes under enormous pressure. At present, however, this exacerbated by the fact that the financial sector and established industries have a vested interest in maintaining the status quo, and indeed apply pressure to governments to maintain status quo. Nevertheless, fortune always favours the brave, and it is becoming more apparent that the new rallying cry will be “what’s good for technology is good for the world, and what’s good for the world is good for technology”.

Green age

So, what will this new revolution look like? In a sentence, it will be a Green Age enabled by information and technology. It is now comprehensively understood that we live in a world bound by finite realities – that there’s only so much natural capital available, and certainly not enough to meet the global expectation of a current North American lifestyle for every person living. We will begin to see a move away from mass production, and mass consumerism. The future will be less about buying the same thing 17 times in a lifetime and more about living the good life using less materials, less energy, more communication, more creativity, more social living. We will see sustained efforts to reduce enormously the amount of materials needed to make the good life, and a greater emphasis on making the good life aspirational – a move back to durable products but with greater emphasis on maintenance, and elimination of planned obsolescence.

This creates enormous possibility for innovation, for jobs that replace those lost through industry off shoring. In the fabrication industries, for example, we will see custom designed materials, minimum energy and materials use, zero defects, zero waste, planned upgradability instead of built in obsolescence, disassembly and recycling. In the process industries we will see an emphasis on energy saving, on intelligent process controls, where by-products are seen as a source of value (waste valorisation). In freight transport we will see a full awareness of environmental impact and full costing, optimising routes by bulk and weight, innovation in packaging and distribution. In the energy sector we will see multiple energy sources, local production, interactive users that buy and sell. And in urban development we will witness the ushering in of integrated cities where living, work, education and leisure all take place in close proximity and in environmentally intelligent buildings to reduce the need for transportation and maximise natural capital.

Practically speaking, the fashion industry is already witnessing technology driven change. The Innovation Forum (IF) recently reported on developments outlined in ‘Climate Change: Implications and Strategies for the Luxury Fashion Sector’. Developed by Kering and in partnership with US consultants, BSR, the report suggests a number of ways to build more resilient business models and states that in the future “the quality and quantity of raw materials will be affected by the impacts of climate change”. IF also describes the outcome of a new £1m competition launched by H&M’s Conscious Foundation, calling for “new ideas to help the industry become more circular and to drive out waste within the supply chain”. Proposals from finalists include polyester-eating microbes that allows polymers to be broken down and sold back to polyester manufacturers; a process that turns citrus by-products into yarn; algae-based fabrics; cotton that can be re-spun into new fibres; and waste tracking on factory floors.  IF also report Wal-Mart is getting in on the act, creating a $2.84m fund to explore ways of reducing the cost of textile manufacturing in the US and improving common manufacturing processes. Such work would go a long way in removing barriers to domestic manufacturing, and thereby build greater resilience and sustainability into their apparel supply chain.

A shift to technologically enabled green consumption patterns is possible, but only through using desire and aspiration as drivers and not fear and guilt. What was the luxury life / good life under the mass production paradigm? Brand new is better than old; bigger is better than smaller; more is better than less; fabricated is better than handmade. Keep up with the Joneses or fall behind. Under the new paradigm it will become increasingly vulgar to be a consumerist, and instead the aspiration will be high quality and durability.

Sat on Kondratieff’s Hill, the view is becoming clearer and brighter. For technology providers this is particularly true, as these will be the enablers for the coming deployment phase and beneficiaries of the new wealth creation. However, this will only be true for those providers who understand and capitalise on the threats and opportunities presented by the new reality, exploiting their strengths and addressing their weaknesses. For those who take a back seat, who prefer to remain ‘in the pack’, or even worse ‘behind the curve’, history has proven to be less kind.

Lydia Mageean Lydia Mageean has been part of the WhichPLM team for over six years now. She has a creative and media background, and is responsible for maintaining and updating our website content, liaising with advertisers, working on special projects like the Annual Review, and more.Joining mid-2013 as our Online Editor, she has since become WhichPLM’s Editor. In addition to taking on writing and interviewing responsibilities, Lydia has also become the primary point of contact for news, events, features and other aspects of our ever-growing online content library and tools.