On Periodisation: Some thoughts on waves of techno-economic and cultural change

Following on to Brian's listserv post, I would like to add a few more points on periodisation. Although Kondratieff cycles or long waves do play a role here, the intention is not an in-depth discussion of the long wave theory. The intention is rather to create a foundation for a narrative that describes the second half of the 20th century as an interplay of economic, political, technological and cultural forces, seeking out turning points that allow to identify specific characteristics of techno-economic changes as an explanatory framework for specific cultural or artistic phenomena, such as participatory media and / or media art and technology practices.

A key book that serves as one important starting point for this undertaking is The Economics of Industrial Innovation by Freemand and Soete (1997). [Freeman, Chris, Soete, Luc, 1997. The Economics of Industrial Innovation. Third Edition. MIT Press]

The authors follow a long-waves or long-cycles approach but rather than looking only at economic factors such as the development of the profit rate, they take into account the forces that shape, drive forward or hinder technological innovation through a systematic literature review which brings together economics with, what they call, science-related technology. This term is justified because, according to Freeman and Soete, at around 1890 a step change happened in industrial innovation. From then on, the majority of innovations came no longer from inspired individuals, highly motivated private experimentors, experienced mechanics and so on, but from organised research within large firms. What the term implies is that science and technology can not be categorically separated, as technology, from the late 19th century onwards, increasingly depends on scientific 'book knowledge' and not on on the spot innovations carried out by craftsmen. (Today many science scholars speak, for the same reasons, of technoscience). Yet the key point is that Freeman and Soete treat innovation not as a factor exogenous to economics.

So, according to Freeman and Soete, the 1st Industrial Revolution lasted from 1780 till 1840 and was based on factory production for textiles, the 2nd from 1840 to 1890 was based on steam and railways, the 3rd from 1890 to 1940s was the age of electricity and steel, the 4th from 1940s - 1990s was the age of mass production, of Fordism in automobiles and synthetic materials and in the 1990s began the age of microelectronics and computer networks (Table 1.3, p.19). The authors acknowledge that many of those inventions were made much earlier compared to how they are periodised here, but argue that their periodisation only considers the time when that particular technology was truly widespread and of a defining character. What really matters is the diffusion of technologies in society, not the date when they were invented. So, while micro-electronics have been around much longer, truly only the 1990s saw the breakthrough of PCs and the net in terms of mass usership, which makes this table plausible.

Moreover, the authors point out the systemic nature of leading technologies, the 'interdependence of many innovations themselves' and the 'interdependence of technical and economic change' (op. cit., p. 21). Usually, a technological paradigm change needs a motive force or energy source to take place, such as steam, electricity or oil/the internal combustion engine, plus a new material technology (steel, plastic) and / or a new way of production (for instance mass production using assembly lines). Those leading technologies are also accompanied by other innovations in the domain of communication, such as the telegraph, the telephone, radio. The interdependence of those technologies means that they are mutually re-enforcing each other and together lead to change of a system-.wide nature. Each of those name-giving technological revolutions was based on clusters of innovations, some of them involving big changes and discontinuities ('radical' innovations) and others involving many small improvements ('incremental' innovations) pp. 21-22 (NOTE: In another passage the authors claim that also incremental change can lead to radical innovation and therfore paradigm change). Freeman and Soete's model is also based on ideas put forward by Joseph Schumpeter, who 'included in his definition of 'innovations' not only technical innovations, but also marketing and organisational innovations. [...] The [industrial] revolution involved a very fundamental organisational change from a system of cottage production of textiles to a system of factory production and this could not take place without political change and conflicts as well as cultural changes, such as the work discipline of factory hours and supervision' (op.cit p. 36)

To recapitulate: leading or paradigm changing technologies, appearing in pairs or clusters, start to reshape key industries and by doing so provide an incentive for changing the whole economic system, as the new energy sources, materials and ways of operation diffuse into other areas of the economy. Those paradigm changes appear with a certain regularity of app. 40 to 60 years. However, considering the title 'Economics of Industrial Innovation' there is astonishingly little economics in this book. The constant drive for profit and the ways in which companies can achieve profits is given very little space. Another area which is given relatively little attention is the agency of workers; for instance, how 'innovation' reacts to labour struggles, and / or the recomposition of the class structure after ca. 1970 are hardly mentioned.The main aim seems to be to bring innovation into the heart of economic thinking, as well as attempting to theorise problems such as how innovation generally happens within industrial society, how to measure innovation, how to relate the process of technological R&D to market sources, etc. While the book accounts for organisational and institutional change as well as the potential for social tensions and disturbances, thereby avoiding technological determinism, concrete and specific historic developments of a political dimension are mentioned, but not emphasised. The role of new media, while presented as part of the bigger picture of the development of technologies, is not concptualised as different from being purely aids to production technologies, except with regard to some aspects of ICT as reshaping the nature of information and knowledge.

Techno-economic Paradigms

The model of Freeman and Soete is further developed by Carlota Perez in Technological Revolutions and Financial Capital (2002). Perez distinguishes her model from Kondratieff cycles putting into doubt the validity of metaphors such as waves or cycles for a number of reasons, first of all, because they assume a stable median along which a sinus-like wave swings. Rather than of waves she speaks of 'great surges of development' enabled by paradigm changing technologies which appear roughly every 50 years. Those technological revolutions can become the foundation of a new techno-economic paradigm. As the usage of the word paradigm suggests Perez' model relates more to Kuhnian paradigm shifts than to long-wave theory as proposed by, for instance, Ernest Mandel (1975). Contained in this notion of the paradigm is a relationship between a before and an after. Following Freeman and Soete, there have been five techno-economic paradigms so far. The shift from one paradigm to another is neither abrupt nor frictionless as the new paradigm has to overcome resistance put forward by social institutions created during the deployment and maturity phase of the previous paradigm. This involves a great deal of creative destruction in which financial capital plays a specific role. According to Perez, when a 'technological revolution errupts in the scene, it does not just add some dynamic new industries to the previous production structure. Through the configuration of a techno-economic paradigm, it provides the means for modernising all the existing industries and activities. The process of both the revolution and its paradigm across the eocnomy constitutes a great surge of development' (Perez, op.cit. p. 151). Each surge has two distinct periods which are themselves divided into further two phases: a period of installation and a period of deployment who are separated by a financial crisis in between them. While an existing paradigm, which has reached maturity phase, is still in place, the big bang of the next coming revolution occurs. This big bang can be rather silent at the time, known only by a few specialists, like the production of the first microprocessor by Intel in 1971 for example. The grown up, mature paradigm in place will have created social institutions specific to its needs. It will also have lost its initial economic dynamics which is expressed by a low profit rate. While the mainstream of the economy will still keep producing the same things in the same way, financial capital, looking for a higher profit rate, will start to support the new innovation through venture capitals of various kinds. In this first half of the first phase, called 'irruption' time, the new technology will have a hard time finding a foothold in the economy. Gradually it will succed finding more acceptance. It will start growing at a higher rate than other industries still belonging to the old paradigm. This will create higher profits, the betting of venture capitals will pay off. This gets increasingly recognised by other players in the financial industry who also want to enjoy participation in the higher profit rate. A stage of 'frenzy' sets in, when ever more investors buy into the new sector. Over-investment into the still young sector creates a financial bubble, a level of investment and believe in future returns not founded by rational assumptions or fundamentals, suchs the earnings to price ratio. The frenzy becomes unsustainable but before the bubble bursts, financial capital changes its face from its initially beneficial role with regard to the support of the new technology to a stage when it completely decouples itself from the real economy and becomes 'innovative' in a peculiar sense. The bubble starts to feed on itself and creates profits by paper speculation and practices bordering on fraud or being actually fraudulent. Once the bubble bursts, however, the frenzy phase will have allowed enough money to flow into installing the base of the new infrastructure - for instance the creation of the backbone of new fibre optic networks in the late 1990s. Once the bubble has burst it is up to political and institutional players to create a new regulatory framework which is beneficial to the by now pardigm changing technology. It reaches the second phase of deployment. The first half of the deployment phase is a stage of 'synergy'. The new paradigm will by now have become common sense, engineers, entrepreneurs, politicians, it all makes sense to them. It starts to diffuse into other areas of industry and allows them to grow, which pushes up productivity in those area. Once the process of diffucion into all areas is more or less finished, the stage of maturity starts. Change will only be incremental and limited to specific areas, whil profit rates will start to fall and equalise across the economy. Later developing countries will adopt the new technology, which throws it another lease of life but the dynamics that initially drove the establishment of the paradigm have played themselvs out. Under the surface, noticed by a few, a new technological revolution happens in one of the core countries of the mature one. The strength of this model is that it gives space to 'complex processes of social assimilation. They encompass radical changes in the patterns of production, organisation, management, communication, transportation and consumption, leading ultimately to a different 'way of life' (ibid,.p. 153). Perez points out that 'any dogmatic or rigid application of the model will defeat its prupose. Its main value is serving as a tool to help organise the richness of real life but not to hammer facts into tight boxes' (p. 160). She also readily acknowledges that the proposed model contains a high level of abstraction and refers to long term dynamics so that it cannot explain individual events (ibid). While the model can explain a certain type of financial bubble and crisis, there are other types of financial crises for which it should not be used. Perez also warns that while some paradigm changing technologies can lead to a new Golden Age, there is no automatism behind it and that it ultimately depends on circumstances and the wisdom of policy and decision makers to take the right steps to reach 'synrgy' and 'maturity'. It is those qualifications which make the model even more convincing and support the conclusion that the current pardigm of the information society demands, at the very point of it where we are now, the right steps need to be taken to create a sustainable knowledge society (ibid., pp. 169 - 171, see also, Perez, Carlota, 2009. Technological roots and structural implications
of the double bubble at the turn of the Century http://www.carlotaperez.org/papers/CERFWorkingPaper.html).

From Golden Age to Long Decline

While Carlota Perez model operates on such a level ov abstraction that it cannot explain individual events, some of the gaps in the periodisation of the 2nd half od the 20th century are filled by The Boom and the Bubble, by Robert Brenner (2002).[The Boom and the Bubble, The US in the World Economy, London and New York, Verso 2002] Brenner looks at long term developments of economic indicators such as productivity and the profit rate in order to assess if the New Economy of the 1990s did indeed mark a turnaround for the USA economy to a more sustained growth phase after the long slump from the 1970s to the early 1990s. Economic factors are investigated in close relationship with technological innovation especially in key areas of manufacturing, together with other factors such as monetary policies.

As many economists agree, from the 1940s to the early 1970s, the core countries of industrial development, first the USA, then West Germany, Japan and other European countries, experienced a long phase of economic growth with high levels of productivity growth and relatively high levels of profit rates. This phase is often referred to as a Golden Age with comparatively rising levels of welfare for a majority of the populations of core countries. The underlying technologies are, as Freeman and Soete pointed out, mass production of consumer goods, in particular automobiles, but also consumer durables and electric/electronic consumer goods (radio and tv sets, washing machines, fridges, etc), oil and later atomic energy as energy sources, and plastic as a generic term for synthetic materials made from oil. The according social-political form of organisation is referred to as Fordism-Keynesianism by various authors. Fordims, because the form of production is derived from the Ford auto factory with the use of the assembly line since 1908, Keynesianism because of a range of policies initiated by John Maynard Keynes in the wake of the Great Depression of the 1930s and agreed on in the form of the Bretton Woods agreement by major Western powers towards the end of WWII. Keynesianism is in its social aspects also described as a middle-way between socialism and capitalism whereby the state mediates between class interests and state expenditure supports demand as well as aspects of reproduction of the workforce. Regarding aspects of monetary policies it was underpinned by fixed exchange rates set by governments, the dollar as a world reserve currency and the IMF and the World Bank as institutions to supervise developments and provide stability. These are of course generalised concepts explained in very simple terms here.

What Brenner explains is how the crisis of the US economy began much earlier than is generally conceived and how the economies of Germany and Japan who were for a time catching up and then even surging ahead would then experience similar problems. The infrastructure for the mass production of consumer goods was put into place in the USA already during the boom of the 1920s which produced a stock market frenzy and a crisis of over-accumulation so that a lot of plant and equipment lay idle during the long depression in the USA. Yet despite the depression, US industry kept improving and investing to a certain degree so that at the end of the 1930s the US had the most advanced indudstrial infrastructure in the world. The is paid off when the US entered the war and high levels of profit and productivity could be achieved. When, after the immedeate reconstruction effort after the end of the war Germany and Japan relaunched their industries, they could play a catching up game.

From Leader to Laggard?

The USA's initially advanced technology was embodied in great masses of sunk fixed capital which was one among another factors which discouraged further capital accumulation so that from after the Korean war onwards Germany and Japan became the more dynamic economies because their advantage was to be later developers who could buy cheap but advanced US technology (Brenner, op.cit, p. 11, paraphrased and abbreviated). America experienced an internationalising thrust of its banks and corporations - the new markets in Germany and Japan encouraged US multinational firms to increase investment abroad while high costs at home discouraged investment there and the catching up economies could keep wages down because they commanded a reserve army of rural workers and workers in overstaffed family businesses, plus they benefitted from close ties with government institutions and banks who gave them cheap credit and government protection for home industries by import barriers, subsidies, securing undervalued currencies and by repressing finance (pp. 12-13 paraphrased). The US economy gre less by exports than by 'means of the relocation of industry, carried through by dynamic multinational corporations and banks. The US government strongly supported this effort and, throughout the period, constituted a powerful force for the liberalization of the world economy - not only free trade, but also the free movement of both long- and short-term capital- sometimes at the expense of domestically based manufacturing' (ibid., p. 13). Within this scenario, 'post-war international economic development within the advanced capitalist world could, for a brief time, manifest a relatively high degree of international cooperation - marked by high levels of US aid to and politico-economic support for its allies and competitors ... One therefore witnessed, at least for a time, a symbiosis, if a highly conflictual and unstable one, of leader and followers, of early and later developers, and of hegemon and hegemonized' (ibid., p. 15)

Some problems not addressed by Brenner: The economic miracles of Germany and Japan and the also catching up economies of Italy and France were far less free from conflict as it appears in sanitised TV documentaries. Author collectives such as Socialisme ou Barbarie in France and the operaio movement in Italy were involved in self-organisational efforts by workers committees and to their research efforts we owe insights into the levels of discontent on behalf of workers in the Fordist factory long before this culminated in May 1968, while in Japan a powerful movement of dissent against the renewal of contracts for naval bases of the USA forged alliances between students and workers which challeneged the hegemony of the Japanes version of Fordism-Keynisianism. It would be a subject of further research to show a high level of official and inofficial strike activity during the 1950s which are often made to look as such a docile period from the viewpoint of generalising histories. Furthermore, such research could also show how concessions from capital were not granted by a benevolent state but won exactly through those workers actions and how emergent youth cultures in the 1950s and 1960s were not just expressions of an increasingly wealthy consumer culture but of dicsontent with an outlook on life in a Fordist factory regime. A text by Federucci Gambino furthermore highlights how the use of the term Fordism can be misleading, especially with regard to the construction of a post-Fordism after the end of the so called Golden Age (see http://www.wildcat-www.de/en/zirkular/28/z28e_gam.htm).

Yet to return to Brenner's narrative. The conditions described above lead to the onset of over-capacity and the crisis of profitability between 1965 -73. From the end of the 1950s currencies became convertible and trade barriers were lowered (op.cit. p. 16). Japanese and Germans started producing the same goods as the Americans and increasingly flooded international markets, whereby especially Japanese companies were able to put pressure on prices because of their own relatively low labour costs. Thus, while Japan and Germany enjoyed still a relatively high profit rate, the US economy started feel the squeeze. The result was 'a declining aggregate rate of profit in the international manufacturing sector, which manifested system-wide over-capacity and over-production' (ibid., p. 17). As Brenner will show throughout the rest of the book, this condition of system-wide and structural over-capacity will remain the same up till today, aggravated by new entrants into world markets such as Korea, Taiwan, Mexico and Brasil in the 1970s and east Asian and south-east Asian countries in the 1990s. Because of a dramatic fall of the rate of profit in the US from 1967 onwards and for Germany and Japan after 1973, a long phase of stagnation set in, from 1973 to 1993 - a period of intensified international competition which would again and again lead to over-capacity which would force down profit rates.

Yet before that happened the Bretton Woods system had to be dismantled. The Vietnam war brought about a skyrocketing US balance of payments deficits. Because the number of dollars held abroad rose enormously, relative to demand for US products and assets, huge downward pressure was exerted on the US currency, and the world monetary system was propelled into crisis. Between 1971 and 1973 the Bretton Woods system of fixed exchange rates was jettisoned and the US dollar sharply devalued, while the mark and the yen were correspondingly revalued' (pp. 17-18). In August 1971 the Nixon administration ended dollar convertibility (into gold) and in February 1973 the Bretton Woods system of fixed exchange rates was ended and currencies started to float' (ibid., p. 27).

The conditions were created for the rise of neo-liberalism.What contributed to that were the new possibilities for financial speculation. The US had during the early 1960s already taken 'a decisive step to nurture the re-emergence of free international capital markets when it sanctioned the rise of the unregulated Eurodollar market in London' (ibid., p. 29). Together with the Bretton Woods agreement, the US ended its tolerance for capital controls of its trading partners. And whereas US allies wanted to have the IMF organise the recycling of Arab oil surpluses especially to hard-hit third world economies, the US insisted on its big investment banks performing this task so that
'a handful of US and other international banks were thus enabled to gain private control over this process. They ended up channeling hundreds of billions of dollars to the governments of a small number of leading Less Developed Countries (LDCs) - such as Brazil, Mexico and a few others - enabling them for a time to accelerate their industrializing efforts but opening the way to the LDC debt crisis of the early 1980s' (ibid., p. 29). This plan was implemented also with a view on strengthening domestic financal interests' (ibid., p. 28). Thereafter the US tried an expansionary monetary and Keynesian budget deficit policy with the goal of stimulating domestic demand, devaluating the dollar in aid of manufacturing competitiveness, and deprecating the dollar overhang - dollar reserves held by foreign firms, governments and individuals - (ibid., p. 27). The strategy of the US was that speculative capital flows away from the dollar would force the value of currencies of competitors up even more which would also force those competitors to engage in expansionary macroeconomic policies which would a) facilitate higher US exports, b) create flows of capital into US capital markets by which US could cover its high budget deficits caused by Keynesian growth stimulance' (ibid., p. 28).

As Brenner summarises, 'during the long downturn that followed, between the early 1970s and the mid-1990s, the growth of investment fell sharply and issued in much-reduced productivity increase and sharply slowed wage growth (if not absolute decline), along with depression level unemployment (if we leave aside the United States) and a succession of recessions and financial crises, the like of which had not been seen since the 1930s' (ibid., p.7). The change in policies allowed to reverse gains that had been made by labour movements. 'Supported by government, employers across the advanced capitalist world unleashed an ever more aggressive attack on workers organisations and workers living standards. They succeeded in asphyxiating the growth of real wages and social spending (from the 1970s onwards yet without being ableto restore profit rates of the golden age)' (ibid., p. 24). This was made worse, from the point of view of workers, by the increasing practice of out-sourcing, of moving first production but then also other activities to low wage countries. Those practices were pioneered by US high-tech industries in the areas of electronics and semi-conductors from the early 1960s onwards. Those companies appear to have been on the forefront of anti-union practices (cf. David Bacon. The New face of union-busting, http://dbacon.igc.org/Unions/02ubust4.htm).

Cultural and Theoretic Questions

It would be wrong to say that at around 1973 there happened a straight forward leap into neo-liberalism, but that the conditions were set for neo-liberalism to become hegemonic by the end of that decade. And as David Harvey rather convincingly showed, the period from 1968 to 1973 marked a turning point, which created conditions supportive to postmodern cultural and political theories. It could tentatively be said that there is a connection between the re-emergence of financial markets after a long phase of enforced quietude from 1929 to 1973, the beginning of the computer revolution marked by the burning of the first microchip by Intel in 1971, an intensified process of globalisation by outsourcing and other overseas investments and the decline of labour power. While for a period during the 1970s, there was a strong interest in Marxist economic theories, those were sidelined by post-1968 cultural politics (or the personal as political) and finally by the triumph of postmodernism facilitated by turncoat former Marxists. Questions that could be asked in the cultural field are how strategies of dematerialisation in conceptual art (Lippard) coincided with an increased interest of corporations in 'cultural capital' on one hand and the emergence of currency speculation with petro-dollars and the breaking down of the Bretton Woods system on the other hand. Furthermore, how dematerialisation in the conceptual art corresponded with a turn to an 'Information Aesthetics' (Bense and Moles) and an interest in Software (Burnham) in technologically based art forms, as well as how they could gain such prominence between 1968 and 1970 but move underground so quickly again soon afterwards.

There is also the question of how the earlier paradigm of cybernetics fits into this narrative and how the emergence of the 'open artwork' and participatory practices in arts from the 1950s onwards relate to the rise of real cybernetics and automation in industry. Those tendencies need also to be addressed in correlation with an increased suspicion by artists about the notions of progress, the linearity of time and the notion of Cartesian space. Those are surely big questions to be asked and they of course need much closer inspection with reference to much more specific events in time, yet the methodological suggestion is that those artistic movements and tendencies cannot be explained by aesthetic categories alone or phenomenological introspections into the nature of this or that technology. It needs to be emphasised at the same time, that the techno-economic developments described here do not simply 'determine' the artistic practices and that there are various time-lags and time-shifts between art and the socio-economic structure. Art can be ahead of its time as well as a child of its time as well as a reflective practice re-assessing events of the past.

Returning to Brenner's narrative for a moment, without following it to the end, The Boom and the Bubble of the 1990s, what he appears also to be able to show is how non-innovative so called advanced capitalism actually is. During the crises of the 1970s, manufacturers failed to switch to new product lines, they kept producing the same goods because the had already huge masses of sunk fixed capital, paid for machinery, with which they could produce even at a loss. Manufacturers thought therefore their best chance was to invest into accelerated technical change in their own industries rather than switching to new ones' (op.cit. p. 26 paraphrased). At the same time, despite already existing overcrowding, it was possible for 'emergent low cost producers based in still later developing regions' (p 26) to enter the market on a profitable basis because they could pay much lower wages. This, however, could guarantee only a very temporary success.

US policies forced the German and Japanese economies to invest into upgrading their production capacities to improve productivity which increased the organic composition of capital. In other words, profit rates remained relatively low, while unemployment grew, especially in Germany. Austria, economically very much an appendix to Germany, albeit with some historically founded specifics (Vienna as a 'cultural capital' despite little industrial significance) started restructuring its industries away from steel and other heavy industries. (In the city of Linz in upper Austria, economic restructuring was accompanied by founding the festival Ars Electronica in 1979.) The story is somehow different in Japan, where 'manufacturing firms, with the collaboration of their associated banks and other members of their industrial groups (keiretsu), unleashed an extraordinary process of across-the-board industrial restructuring, which succeeded, before the decade was out, in transforming the focus of Japanese industry from the 'heavy', energy-intensive and labour-intensive lines to high-technology, energy-efficient lines that combined electronics and machinery ('mechatronics')' (ibid., p. 31). By the mid-1980s Japanese companies had such an advantage in productivity that the US enforced import restrictions in Japanese cars and electronics. (It is no surprise then that Japanese media artists played a strong role in the emerging media arts scene of the late 1970s and early 1980s.)

While some of the correspondences between techno-economic paradigm shifts and new artistic and cultural movements appear vague and hard to pin down, others are quite straight forward and can even be attributed to conscious strategic movements by specific actors. What is surprising is that while the 1980s go down in technological history as a period of accelerated technological change, triggered, in the USA, by military-Keynesian spending by Reagan into Star War technologies, the actual rate of spending in R&D in core countries in the 1980s and up to a certain point in the 1990s is much lower than it had been during the 1950s and the 1960s. The perception of the expanding paradigm of the information age is not supported by actual figures in R&D expenditure (see Freeman and Soete, op.cit). While high-tech is seen as a force transforming all aspects of society during the second half of the 20th century, the philosopher and historian of science Simon Schaffer points out that by far the majority of truly ground breaking innovations had been made during the first half of the 20th century and not thereafter (interview with the author). Those are just some hints and signposts I would like to flag up for further investigations as part of this shared effort of periodising interdependencies and correlations between techno-economic, socio-cultural and theoretic changes.