Skip to main content
The Globe and Mail
Support Quality Journalism
The Globe and Mail
First Access to Latest
Investment News
Collection of curated
e-books and guides
Inform your decisions via
Globe Investor Tools
Just$1.99
per week
for first 24 weeks

Enjoy unlimited digital access
Enjoy Unlimited Digital Access
Get full access to globeandmail.com
Just $1.99 per week for the first 24 weeks
Just $1.99 per week for the first 24 weeks
var select={root:".js-sub-pencil",control:".js-sub-pencil-control",open:"o-sub-pencil--open",closed:"o-sub-pencil--closed"},dom={},allowExpand=!0;function pencilInit(o){var e=arguments.length>1&&void 0!==arguments[1]&&arguments[1];select.root=o,dom.root=document.querySelector(select.root),dom.root&&(dom.control=document.querySelector(select.control),dom.control.addEventListener("click",onToggleClicked),setPanelState(e),window.addEventListener("scroll",onWindowScroll),dom.root.removeAttribute("hidden"))}function isPanelOpen(){return dom.root.classList.contains(select.open)}function setPanelState(o){dom.root.classList[o?"add":"remove"](select.open),dom.root.classList[o?"remove":"add"](select.closed),dom.control.setAttribute("aria-expanded",o)}function onToggleClicked(){var l=!isPanelOpen();setPanelState(l)}function onWindowScroll(){window.requestAnimationFrame(function() {var l=isPanelOpen(),n=0===(document.body.scrollTop||document.documentElement.scrollTop);n||l||!allowExpand?n&&l&&(allowExpand=!0,setPanelState(!1)):(allowExpand=!1,setPanelState(!0))});}pencilInit(".js-sub-pencil",!1); // via darwin-bg var slideIndex = 0; carousel(); function carousel() { var i; var x = document.getElementsByClassName("subs_valueprop"); for (i = 0; i < x.length; i++) { x[i].style.display = "none"; } slideIndex++; if (slideIndex> x.length) { slideIndex = 1; } x[slideIndex - 1].style.display = "block"; setTimeout(carousel, 2500); }

Economist and author Carlota Perez provides a more positive technology-based spin on the "secular stagnation" theme outlined in my Tuesday column. While not underestimating the short-term challenges, the London School of Economics professor predicts the global economy is about to enter a new golden age.

Ms. Perez believes the era of the microprocessor, kicked off by Intel in 1971, is the fifth technological revolution of the past 240 years. The spread of digitization through the economy is following the same predictable pattern – financial boom, financial bust, then production boom – that created vast wealth and higher living standards during previous technological advancements.

In her paper The Advance of Technology and Major Bubble Collapses, Ms. Perez writes that technological revolutions occur in two stages. During the first, called the Installation Period, "investment is led by financial capital, which funds the technological transformation … until it decouples from the real economy [and] ends in catastrophic collapse."

Story continues below advertisement

The collapse of the technology bubble in 2000 is the obvious recent corollary of the theory. But Ms. Perez also includes the financial crisis of 2008 as a symptom of the end of current technological revolution. She writes, "Securitization of mortgage debt would never have been possible without computers and sophisticated software."

The good news is that, according to Ms. Perez's research, the painful part of the transition is largely complete and the second, Deployment Phase "has 20 to 30 years ahead, while serving as a platform for innovation in all sectors and for opening new radical paths in production and lifestyles …. The result is a quantum jump in innovation and productivity for all."

The politics surrounding expansion of the welfare state is a sticking point that might delay the transition from Installation Phase to the new golden age. Ms. Perez writes, "the last time around (after the crash of 1929) it took more than a decade and a world war to establish the Bretton Woods agreements and the welfare state, which were an appropriate framework for deployment of the mass production revolution."

The distribution of wealth in a global economy with rapidly improving productivity is a challenge governments face. Switzerland, for instance, is considering a program of guaranteed income that may provide a partial solution.

In the mid-term, Carlota Perez's outlook is an optimistic and plausible alternative to the dire forecasts that arise from the secular stagnation thesis. Investors have been confronted with so many violent market upheavals in recent years – the Asian financial crisis, the technology bubble and the financial crisis – that it's become all too easy to be pessimistic about the future.

Ms. Perez, with substantial historical backing, is suggesting that the worst is over and we're about to reap the benefits – a sustained period of wealth creation and rising living standards. Investors should be aware that we're talking long-term trends here. There's no hurry, even in the sectors Ms Perez believes will benefit most: biotech, bioelectronics, nanotech and new materials. Still, even if it's a couple of years off, it's a pleasant change to consider an economic environment with the wind at investors' backs.

Report an error Editorial code of conduct
Due to technical reasons, we have temporarily removed commenting from our articles. We hope to have this fixed soon. Thank you for your patience. If you are looking to give feedback on our new site, please send it along to feedback@globeandmail.com. If you want to write a letter to the editor, please forward to letters@globeandmail.com.

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff. Non-subscribers can read and sort comments but will not be able to engage with them in any way. Click here to subscribe.

If you would like to write a letter to the editor, please forward it to letters@globeandmail.com. Readers can also interact with The Globe on Facebook and Twitter .

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff. Non-subscribers can read and sort comments but will not be able to engage with them in any way. Click here to subscribe.

If you would like to write a letter to the editor, please forward it to letters@globeandmail.com. Readers can also interact with The Globe on Facebook and Twitter .

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff.

We aim to create a safe and valuable space for discussion and debate. That means:

  • Treat others as you wish to be treated
  • Criticize ideas, not people
  • Stay on topic
  • Avoid the use of toxic and offensive language
  • Flag bad behaviour

Comments that violate our community guidelines will be removed.

Read our community guidelines here

Discussion loading ...

To view this site properly, enable cookies in your browser. Read our privacy policy to learn more.
How to enable cookies