The ICT Revolution in Historical Perspective: Progressive Capitalism as a Response to Marxist Complaints, Piketty Pessimism and Free Market Fanaticism About the Deployment Phase of the Digital Economy

Abstract

Over the course of a quarter of a millennium industrial capitalism has emerged from four deep recessions brought on by the bursting of commodity bubbles to achieve sustained economic growth by instituting progressive policies. These policies promote market success by reinforce entrepreneurial experimentation and investment, while simultaneously reducing income inequalities to stimulate demand. The bursting of the tech stock bubble and the financial meltdown of the early 21st century are the fifth such challenge. Using historical, comparative analysis, this paper shows that the building blocks for a successful institutionalization of the digital mode of production are in hand, awaiting strong policy initiatives to center the economy on sustainable growth. Section I presents the analytic approach, describing the pattern of development of industrial revolutions based on a framework for analyzing long-term innovation offered by Carlota Perez that extends and combines Schumpeter and Keynes into a theory of progressive capitalism. Section II, applies the analytic framework to the ICT revolution in qualitative and quantitative terms. The radical changes in organizational structure and core competence of organizations, driven by the dramatic changes in communications resources are described and quantified. The ultimate payoff of each of the great industrial technology revolutions has not come within the sectors in which they originated, but their ability to spread through and transform the entire economy. Section III, identifies the challenges that must be overcome to set the economy on a stable development path. The key to the transformation is the convergence of the information and energy sectors, the two most important resource systems of an advanced economy. Information and control technologies are hollowing out the energy sector. However, convergence is too weak a word to reflect the radical nature of the transformation that is needed and has already begun and to passive a word to capture the need for vigorous policy implementation to overcome institutional inertia and guide investment toward a coherent constellation of goals. Section IV explains why progressive policies is the key to building the road to the future. Excessive pessimism on the left (e.g. Piketty) and excessive optimism on the right (e.g. repeal of progressive era legislation) about what the market can do on its own are not justified by historical experience. The road to a stable growth path lies neither in the 19th century policy of Laissez faire nor 20th century policy of utility regulation, but the development of a 21st century model that extends the successful approach of the Carterphone, the Computer Inquiries and Spread Spectrum decisions. These policies were quintessential progressive capitalism by using state power to create a space of guaranteed access to essential communications resources, but refusing to regulate behavior within that space. The result was an explosion of entrepreneurial experimentation and a virtuous cycle of innovation and investment and ensured the ICT revolution would be overwhelmingly an American revolution.