17
jacket: ‘to offer a comprehensive, realistic and soundly based alternative to Marx’ theory of how
societies evolve’.
Rostow’s stages are 1. The traditional society, 2. The preconditions for take-off, 3. The take-
off, 4. The drive to maturity, and 5. The age of high mass-consumption. However, he fundamen-
tally traces these stages as they are reflected in the relationship between two ratios: the propor-
tion of income saved (the savings ratio) and the productivity of new investments (the output-
capital ratio). His model is typical for the rather simplistic views about economic growth which
were prevalent for many years following World War II, and which are still deeply embedded in
the world economic order. Rostow’s model clearly represents what Schumpeter calls ‘the pedes-
trian view that it is capital per se which propels the capitalist engine’. Rostow is silent on the
mechanisms whereby society converts savings to investments and to production: on Man’s intui-
tion, skills, tools, will and leadership, on Nietsche’s Geist- und Willenskapital.
[203]
4.6 Porter and the Possibility of Regression (1990)
As already mentioned, Michael Porter’s book The Competitive Advantage of Nations
50
contains
an interesting example of a stage theory where the possibility for retrogression is clearly present
-almost unavoidable if great care is not taken to prevent it. The model is clearly of a Schumpete-
rian brand, where society passes through the following stages of progress: 1. The factor-driven
stage, 2. The investment-driven stage, and 3. The innovation-driven stage. The 4
th
stage – repre-
senting retrogression – Porter calls the wealth-driven stage.
This stage of decline sets in when the wealth created in the past is not able to create new
wealth. The motivation of investors, managers, and individuals in general shifts in ways that un-
dermine sustained innovation. Powerful companies are able to protect themselves – often with
the help of government – from the need to innovate. Management-labour relations harden as
each side strives to keep its share of a shrinking pie. At the same time the social burdens in-
crease, and ultimately outgrow society’s ability to sustain them.
Porter’s book received world-wide attention in the early 1990’s, much as Rostow’s book had
in the early 1960’s. However, Porter’s ideas of industry clusters – already known under different
names from Marshall, Perroux and from Swedish economist Erik Dahmen -received most of the
attention. His Schumpeterian stages deserved much more attention than they got.
4.7 Techno-economic Paradigms – Perez and Freeman (1983/1991)
As mentioned in the introduction, historians traditionally divide the early history of Mankind
into historical periods named after the technologies that dominated the period: e.g. stone cutting
technology in the Stone Age and iron technology in the Iron Age. Carlota Perez and Christopher
Freeman have broken down the historical period
[204] since the industrial revolution into differ-
ent periods: techno-economic paradigms.
51
50
London, Macmillan, 1990, pp. 545-573.
51
See Perez, Carlota, ‘Structural Change and the Assimilation of New Technologies in the Economic and Social
System’, in
Futures, Vol. 15, 1983, No. 4, pp. 357-375, Freeman, ‘The Nature of Innovation and the Evolution of
the Productive System’, in Technology and Productivity. The Challenge for Economic Policy, Paris, OECD, 1991.
18
These periods are in may ways a continuation of Bacon’s insight that the arts – the profes-
sions – are the most important factor determining Man’s conditions of life. These periods may
be looked upon as different modes – different methods – of increasing Man’s material standard
of living. Towards the end of each period it becomes increasingly clear that the previous tech-
nology is ‘used up’, its potentials are exhausted. There is no more room for improvements along
the previous technological path – the world does not change anymore without fundamental
changes to the technological base. Such periods are closely related to the long waves in eco-
nomic history.
Techno-economic paradigms are clearly stage theories in the same way that Bucher’s is, but
focusing on the basic technologies driving the economy. They can be interpreted as a continua-
tion of List’s and Ely’s stage theories. In modern history, Perez and Freeman distinguish be-
tween five such different ways of increasing the standard of living, all of which dominated a
long historical period. Below we show, after Perez and Freeman, an overview of the characteris-
tics of these periods, the industries which carry the paradigm, the inexpensive resources which
become available in seemingly unlimited supply at rapidly falling prices, and the necessary in-
frastructure which is needed to reduce the Transportwiderstand.
The Perez/Freeman model is easily compatible with Porter’s stages – both models are funda-
mentally Schumpeterian and innovation-driven. In both cases the risk of falling behind is ac-
knowledged – the process of creative destruction may be easily develop in such a way that the
creation takes place in one nation and the destruction in another.
[205]
The historical techno-economic paradigms
Period
from-to
Name of
Period
Important
Industries
Inexpensive
Resource
Infra-
Structure
1. 1770-1840 Early mecha-
nisation
Textiles
Wool
Water power
Cotton
Canals
Roads
2. 1830-1890 Steam and
railway
Iron Transporta-
tion
Steam
Coal
Railroad
Steam ships
3. 1880-1940 Electricity and
Ships
Electr. machinery
heavy industry
Chemical ind.
Electricity
Steel Roads
4. 1930-1990 Mass produc-
tion (Fordism)
Cars Synthetic
mater
Oil
Roads,
Planes
Cables
5. 1990- ?
Information
and communi-
cation
Data/Software
Biotechnology
Microelec-
tronics
Digital tele-
com Satel-
lites
The fundamental driving force behind the changing techno-economic paradigms is the changing
level of Man’s knowledge. Only by assuming away this factor, neo-classical economics pro-
duces factor price equalisation. Part of an alternative theory based on this vision is also the fact
that nations exporting products based on old and commonplace knowledge will have a lower
standard of living than nations exporting products containing advanced, new and scarce knowl-
edge – regardless of their relative efficiency. The world’s most efficient producers of baseballs