The Dynamics of Bubbles and Golden Ages
Introduction: An Interpretation
chapter title xvii Introduction: An Interpretation The last quarter of the twentieth century witnessed the apparently boundless rise of two forces: the information revolution and financial markets. Many have chanted the virtues of the one for increasing productivity and of the other for unleashing the drive for wealth that moves the economy forward. In fact, the twenty-first century was inaugurated with claims about the advent of a ‘new economy’ characterized by the flourishing of both those forces and capable of relentless growth. The collapse of the Internet bubble and the ensuing recession have shaken these beliefs and led to doubt and confusion. This book will argue that similar productivity explosions and bursts of financial excitement leading to economic euphoria and subsequent collapses of confidence have occurred together before. They are interrelated and interdependent phenomena; they share the same root cause and are in the nature of the system and its workings. They originate in the way technologies evolve by revolutions, in the peculiar manner in which these great upsurges of wealthcreating potential are assimilated by the economic and social system and in the functional separation of financial and production capital. The main contention is that the full fruits of the technological revolutions that occur about every half century are only widely reaped with a time-lag. Two or three decades of turbulent adaptation and assimilation elapse, from the moment when the set of new technologies, products, industries and infrastructures make their first impact to the beginning of a ‘golden age’ or...
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