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TOWARDS A SUSTAINABLE
GLOBAL GOLDEN AGE
Reshaping Globalization
and redesigning well being



Prof. Carlota Perez
Universities of Cambridge, Tallinn and Sussex

CUD Global Conference 2008
City and County of San Francisco and Cisco Systems
San Francisco, February 20th – 21st
How feasible is
sustainable global growth?

Is full globalization compatible
with the so-called “American way of life”?

Why do we (and so many around the world)
think
that the “American way of life”
is the best?

Could there be better?



UNDERSTANDING
TECHNOLOGICAL REVOLUTIONS
AND PARADIGM SHIFTS
CAN HELP ANSWER THOSE QUESTIONS
A crucial relationship to examine




TECHNOLOGY                   SOCIETY




   The historical analysis reveals
    a process of mutual shaping
 in a periodically changing context
FIVE TECHNOLOGICAL REVOLUTIONS IN 240 YEARS

                                   Britain   1771    The ‘Industrial Revolution’ (machines, factories and canals)
Each begins in a core country…




                                   Britain   1829    Age of Steam, Coal, Iron and Railways

                                   Britain
                                     USA     1875    Age of Steel and Heavy Engineering (electrical, chemical, civil, naval)
                                 Germany

                                     USA     1908    Age of the Automobile, Oil, Petrochemicals and Mass Production


                                     USA     1971    Age of Information Technology and Telecommunications

                                    USA?
                                  Europe?    200??   Age of Biotech, Bioelectronics, Nanotech and new materials?
                                    Both?
                                   Other?

                                 Each takes 40-60 years to spread across the world and reach maturity
Why call them revolutions?
           Because they transform the whole economy!
   NEW INDUSTRIES              and   NEW PARADIGM FOR ALL
                                        New generic technologies,
       A powerful cluster                   infrastructures and
  of visible new and dynamic         organizational principles capable
            industries                        of modernizing
       and infrastructures              the existing industries too




         Explosive                             A quantum
          growth                                 jump in
       and structural                        innovation and
          change                               productivity
                                             potential for all

          A massive techno-economic paradigm shift

CHANGING THE OPPORTUNITY SPACE AND RESHAPING SOCIETY
WHAT IS
A TECHNO-ECONOMIC PARADIGM SHIFT?

It is the appearance
of an enormous
new wealth creating potential


Enabling and requiring
A CHANGE
IN THE DIRECTION OF CHANGE
across all industries…


…and gradually across society
A FAR REACHING TRANSFORMATION


              A new way of                   New ways of
                 LIVING                      PRODUCING



                               EACH
                             PARADIGM
                               SHIFT
               New ways of                   A new way of
             TRANSPORT AND                    WORKING
             COMMUNICATION




Each generation sees itself as the embodiment of progress and comfort
  and sees the previous way of living as old fashioned and backward
Each technological revolution provides a new inter-related set
       of life-shaping goods and services at ‘affordable’ prices

                                                            The British ‘middle classes’ establish
Age of Steam, Coal,      VICTORIAN                              an industry-based urban lifestyle
iron and railways        LIVING             different from that of the country-based aristocracy.
                                                     It spreads to new upper classes elsewhere


Age of Steel and                                               British, European and American
Heavy Engineering        THE BELLE EPOQUE                  upper and middle classes establish
First Globalization                                                      a cosmopolitan lifestyle
                                                    spreading to the upper classes of the world

                                                American upper and middle classes establish
Age of the Automobile,                                   a suburban energy-intensive lifestyle
Oil, Petrochemicals      THE AMERICAN                        spreading to the working classes
and Mass Production      WAY OF LIFE
                                                                    of the advanced countries
                                             and to the middle classes of the developing world
                                            Will the affluent educated classes of the developed


                                       ?
Age of Information       SUSTAINABLE                                       and emerging countries
Technology and           GLOBAL                    establish an ICT-intensive knowledge society
Telecommunications       LIFESTYLES                     with a variety of environmentally friendly
                                                          lifestyles and consumption patterns???

                     Each style becomes “the good life”
                shaping the desires and dreams of the majority
The emergence of the ‘American Way of Life’
                      as the paradigm shift from the 1910s…
    FROM ENERGY-SCARCE LIVING                        TO ENERGY-INTENSIVE HOMES AND MOBILITY
Energy is expensive and often inaccessible            Energy is cheap and its availability unlimited
     Trains, horses, carriages, stage coaches,          Automobiles, buses, trucks,
                            ships and bicycles          airplanes and motorcycles

  Local newspapers, posters, theaters, parties          Mass media, radio, movies and television

                      Ice boxes and coal stoves         Refrigerators and central heating

                     Doing housework by hand            Doing housework with electrical equipment

 Natural materials (cotton, wool, leather, silk..)      Synthetic materials

 Paper, cardboard, wood and glass packaging             Preference for disposable plastics of all sorts

                        Fresh food bought daily         Refrigerated, frozen or preserved food
                     from specialized suppliers         bought periodically in supermarkets

           Urban or country living and working          Suburban living separate from work

          …all strongly aided by advertising, business strategies
                         and government policies
The current paradigm shift
                 taking place since the 1970s



       THE LOGIC                           THE LOGIC
  OF CHEAP ENERGY                    OF CHEAP INFORMATION
for transport, electricity                PROCESSING
and synthetic materials             AND TELECOMMUNICATIONS




    A radical change in the innovation opportunity space
                and in life-changing potential
Three of the many new directions of the current paradigm shift
      Mass production                         ICT- Flexible production

                                      Adaptability (including upgrading as change)
                                                        Niche markets; ‘the long tail’
  HOMOGENEITY               DIVERSITY
                                           Potential for a great variety of lifestyles
                                                         on a common ICT platform


                                                                     Global economy
                                                                    with differentiated
  NATIONAL ECONOMIES        GLOBALIZATION
                                                               national, supranational
                                                                     and local spaces


                                                Measurement, monitoring and control
                            CAPACITY FOR                Recycling and refurbishing
  UNAVOIDABLE
                            ENVIRONMENTAL        Conservation; closed-loop systems
  ENVIRONMENTAL DAMAGE      PROTECTION                 Avoiding pollution and waste


      Each paradigm opens different new routes for making profits
            as well as for achieving socially desirable goals
THE POTENTIAL PARADIGM SHIFT IN PRODUCTION PROCESS INNOVATION
            Activity    Practices enabled by ICT

       FABRICATION     Minimum energy and materials use; custom designed materials
        INDUSTRIES     Zero defects, zero resource waste. Design for low energy use in operation.
                       Planned upgradeability (not obsolescence), disassembly, recycling

           PROCESS
                       Energy saving and “intelligent” process controls. Low energy processes
         INDUSTRIES    By-products seen as source of value: trend toward closed-loop systems
                       Custom-made materials; development of nanotechnology and biotech
                       More services than tangible products (pleasure in quality leisure; not in objects)
    PRODUCT PROFILE    Very high quality products, smaller, multi-purpose, durable. High tech + hand-made
                       Widely differentiated range by style of living (equivalent satisfaction)
          PERSONAL     Information-based variety of means, revaluing of time, flexibility of location
         TRANSPORT     Innovation in individual and collective transport. Car as last resort

            FREIGHT    Full awareness of environmental impact (and full costing)
         TRANSPORT     Optimizing of routes by bulk and weight. Innovation in vehicles
                       Innovation in packaging and distribution

                       Variety of sources, local diversity, interactive users. Conservation
           ENERGY
                       Combined heat and power; intelligent controls in home and office

            URBAN      Integrated cities: living, work, education and leisure
      DEVELOPMENT      Full connectivity for multiple activities. Transport avoiding design
                       Environmentally intelligent buildings

 But the realization of the potential will depend on the policy context
BUT THE NEW WAY OF LIVING IS STILL WRAPPED IN THE OLD!
    Even ICT adopted the consumerist mode of marketing!
       It is like early automobiles
       that looked like horse carriages




       One of the early automobiles 1898


                                           WHY?
CIRCUMSTANCES HAVE GIVEN
A NEW LEASE OF LIFE
TO THE OLD PARADIGM


The low price of oil in the 1980s and 1990s

The low price of labor in China and Asia

The old ‘American Way of Life’
is still seen as the model of well being to imitate
(because it has not been replaced in America)


YET, GIVEN THE WAY GLOBALIZATION
IS EVOLVING TODAY,
WE WOULD NEED SEVEN PLANETS!!!
AFTER THE OIL SHOCK, PRICES CAME BACK DOWN
                                                                 Index of real oil prices 1910-2007

                      1,000                           Mass production paradigm                                                   ICT paradigm
                                                           Cheap energy                                              Cheap information and communication
                       900

                       800




                                                                                                                                                            NASDAQ
                       700




                                                                                                                                                            collapse
                                                      of 1929
                                                      Crash
     Index 1968=100




                       600

                       500

                       400

                       300

                       200

                       100

                         0
                              1910

                                     1915

                                            1920

                                                   1925

                                                          1930

                                                                 1935

                                                                        1940

                                                                               1945

                                                                                      1950

                                                                                             1955

                                                                                                    1960

                                                                                                           1965

                                                                                                                  1970

                                                                                                                         1975

                                                                                                                                1980

                                                                                                                                       1985

                                                                                                                                              1990

                                                                                                                                                     1995

                                                                                                                                                              2000

                                                                                                                                                                       2005
                                                                             The conservation policies WERE
                                                                           The energy saving practices ALL
                                                                    The alternative energy investments ABANDONED…
                                                                                       of the late 1970s

                                        …just when the diffusion of ICT was most intense!

BUT THEY ARE GOING UP AGAIN, PRECISELY DUE TO GLOBALIZATION
THE “CHINA PRICE”
MADE MOST PRODUCTS CHEAPER AND CHEAPER
Not through technological advance, as in electronics
BUT THROUGH EXTREMELY LOW LABOR COSTS

• The old pattern of consumption
  was revitalized in the advanced countries
  and adopted with fury in the developing ones
• Rather than durability,
  disposability came back as the desired norm
  (it is cheaper to throw out than to repair!)


BUT THE RISING COST OF ENERGY, MATERIALS
AND FREIGHT WILL ERODE THE COST ADVANTAGE
Only ICT and Internet based services
will remain cheap
WILL THE NEW PARADIGM PREVAIL?

YES
If economic circumstances change
If it becomes an aspiration of the majorities
If it is a positive sum game
between business and society



Sustainability must…
“create economic opportunities
and
improve the quality of life”
President Bill Clinton
CUD 2008 Conference, San Francisco
Quality of life is measured by fulfilment of values and aspirations
           Those aspirations are historically determined
by the way society shapes each successive technological potential
          The “luxury” life:                       ENABLERS
        values and aspirations
UNDER THE MASS PRODUCTION PARADIGM             •   Low cost of products
                                               •   Consumer credit
                                               •   Unemployment insurance
 • Brand new is better than old                •   Official trade unions
                                               •   Savings and loan banks
 • Bigger is better than smaller               •   Low cost housing
 • More is better than less
 • Synthetic is better than natural
 • Fabricated is better than hand-made             OPINION SHAPERS

 • Disposable is comfortable
                                               •   Role models
 • Leisure is rest (not exercise)              •   Advertising
 • Shopping is a leisure activity              •   Movies, TV
                                               •   Relative prices
 • If you don’t keep up with the Jones’,
   you are falling behind                      •   Marketing strategies
The shift to “ICT-green”
          consumption patterns is possible
             NOT BY GUILT AND FEAR
               BUT BY DESIRE AND
                   ASPIRATION



           Through shaping and enabling
a change in our notions of luxury and the “good life”



               BUT IT MUST HAPPEN
                FIRST AND VISIBLY
          IN THE ADVANCED COUNTRIES
The notions of luxury and good taste
                  emerge at the top of the income scale
                        and spread by imitation
      PART OF THE PARADIGM SHIFT IS ALREADY HAPPENING


        •   Small is better than big
        •   Natural materials are better than synthetic
        •   Multipurpose is better than single function
        •   ‘Gourmet’ food is better than standard
        •   Fresh organic fruit and vegetables are healthier
        •   Exercise is important for well being
        •   Global warming is a real danger
        •   Not commuting to work is possible and preferable
        •   Solar power is luxurious
        •   Internet communications, shopping, learning
            and entertainment are better than the old ways , etc.

BUT RELATIVE PRICES AND WIDER INTERESTS HAVE TO FOLLOW! WILL THEY?
THE UNAVOIDABLE PATH OF THE CURRENT GLOBALIZATION PATTERN

          Rising prices of oil                 Visible effects of
          and raw materials                    increasing global
                                                   warming
         Rising packaging and
              freight costs                   Rising climatic risk


          CHANGE IN THE ECONOMICS OF THE PRODUCTION,
         TRANSPORT AND DISTRIBUTION OF TANGIBLE GOODS


              CHANGE                             CHANGE
            IN BUSINESS                      IN GOVERNMENT
            STRATEGIES                           POLICIES



Massive relocation and geographic re-specialization of physical production
             into optimal local, regional and global networks
    Gradual redesign of the consumption patterns for the “good life”
UTOPIAN OR REALISTIC?
 It sounded utopian to say             But it was realistic:
   in mid-1930s DEPRESSION:
  Blue collar workers will have      Increasing wages created
  lifetime jobs and                  many more millions of consumers
  fully equipped suburban houses     for mass production and sustained growth
  with a car at the door             Rising middle classes in the developing world
  Most colonies                      adopted the “American Way of Life”
  will gain independence             widening world markets for mass production


 …or in the late 1960s:

  Some of the values
  of the hippie movement             Innovation in natural textile fibers
  [back to natural materials,        have transformed the world of fashion
  organic food, etc.]                Innovation in distribution logistics
  will become                        have made organic foods the premium
  the luxury norms                   segment in supermarkets



Shifts in consumption patterns shift profit-making opportunities
A SUSTAINABLE POSITIVE SUM FUTURE IS POSSIBLE

                          Fast growing global demand (new consumers)
                          Changing and widening space for innovation and investment
           FOR BUSINESS
                          Huge environmental industry
                          Profits from quality and adaptability, etc.

                          Better job prospects from a less skewed production geography
        FOR CONSUMERS     High quality durable products
                          New patterns of “desirable living” fulfilled, etc.

          FOR THE ASIAN   Better balance between outward and inward growth
      DEVELOPING WORLD    Reduced dangers from the environment, etc.

                          Growing prices of raw materials exports
           FOR THE REST   New possibilities for development, growth and innovation
OF THE DEVELOPING WORLD
                          Attracting more global investment, etc.


 But it will not happen automatically: the market cannot do it alone
       WE ARE PRECISELY AT THE HISTORICAL MOMENT
     WHEN THE STATE MUST COME BACK INTO THE PICTURE
EACH TECHNOLOGICAL REVOLUTION PROPAGATES IN TWO DIFFERENT PERIODS
                           The first half sets up the infrastructure and lets the markets pick the winners
                                    the second half reaps the full economic and social potential
                                                   INSTALLATION                                                                        DEPLOYMENT
                                                    INSTALLATION                                                                       DEPLOYMENT
                                                                           Turning
                                                                            Point




                                                                            Uncertainty, institutional recomposition and role shift
                                               “Creative destruction”                                                                              “Creative
                                               Learning the new                                                                                construction”
                 Degree of diffusion
   of the new technological potential




                                               unlearning the old                                                                                      Led by
                                               A great                                                                                    production capital
                                               market experiment                                                                      Applying the paradigm
                                               Led by                                                                                            to innovate
                                               financial         Major                                                                     across all sectors
                                                              technology                                                                       and to spread
                                               capital          bubble
                                               Ending in                                                                                  the social benefits
                                               a stock market                                                                                   more widely
                                               crash                                                                                           Until maturity
                                                                                                                                             and exhaustion


                                                                            ???                                                                              Next
                                                                                                                                                                      Time
                                        big-bang    2O - 30 years                                                                        2O - 30 years     big-bang

                                                                     We are here
The historical record: bubbles, recessions and golden ages
                                                  TURNING
                  INSTALLATION PERIOD              POINT             DEPLOYMENT PERIOD
                                         Bubble              Golden Age

     1771                                                    Great
     Britain                         Canal mania 1793–97
                                                 1793–
                                                             British leap


     1829
     Britain                       Railway mania 1848–50
                                                 1848–       The Victorian Boom

      1875           London funded global market
  Britain / USA                                              Belle Époque (Europe)
                           infrastructure build-up 1890–95
                                                   1890–
   Germany             (Argentina, Australia, USA)           “Progressive Era” (USA)
                                                   Europe
     1908                             The roaring 1929–33
                                                  1929–      Post-war
     USA                                 twenties            Golden age
                                                    USA
                                                   1929–43
                                                   1929–
     1971                 Telecom mania, Internet
                               emerging markets 2001–??
                                                  2001–      Sustainable global
     USA                                                     knowledge society ”golden age”?
                                   and NASDAQ




                Each Golden Age has been facilitated
by enabling regulation and policies for shaping and widening markets
Different periods: different roles for the agents


       INSTALLATION                        DEPLOYMENT


THE STATE            FINANCE and       FINANCE           PRODUCTION
         in a            THE NEW              in a                  and
 facilitating    ENTREPRENEURS        facilitating         THE STATE
    service              as drivers      service             as drivers
         role       and innovators            role      and innovators




                  As the roles shift to enable deployment
       collective interests become part of the guiding mechanisms
John Chambers, Cisco CEO
CUD 2008 Conference, San Francisco
“It is important to have supportive governments…
I wouldn’t have said this ten years ago”

The pure market ideology has already played its role
in the installation of the ICT paradigm.
THE TIME IS RIPE FOR THE STATE
TO COME BACK INTELLIGENTLY
at all levels, nationally, regionally, globally
and --especially– locally!
IN COLLABORATION WITH
  - Business
  - Civil society (NGOs)
  - Universities and
  - Media

“We must all collaborate to paint a vision
and realize a new architecture”
The answer to whether
sustainable global growth is feasible
is, therefore, YES!

But neither pure “free markets”
nor simple “environmentalism”
will get us there

The innovation potential of the ICT paradigm
can and must be collectively redirected
towards new patterns
of environmentally friendly well being
and a new profit-making dynamic for business

AND THE TIME TO ACT IS NOW!

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Prof Carlota Perez - Universities of Cambridge, Tallinn, Sussex - Towards a Sustainable Global Golden Age

  • 1. TOWARDS A SUSTAINABLE GLOBAL GOLDEN AGE Reshaping Globalization and redesigning well being Prof. Carlota Perez Universities of Cambridge, Tallinn and Sussex CUD Global Conference 2008 City and County of San Francisco and Cisco Systems San Francisco, February 20th – 21st
  • 2. How feasible is sustainable global growth? Is full globalization compatible with the so-called “American way of life”? Why do we (and so many around the world) think that the “American way of life” is the best? Could there be better? UNDERSTANDING TECHNOLOGICAL REVOLUTIONS AND PARADIGM SHIFTS CAN HELP ANSWER THOSE QUESTIONS
  • 3. A crucial relationship to examine TECHNOLOGY SOCIETY The historical analysis reveals a process of mutual shaping in a periodically changing context
  • 4. FIVE TECHNOLOGICAL REVOLUTIONS IN 240 YEARS Britain 1771 The ‘Industrial Revolution’ (machines, factories and canals) Each begins in a core country… Britain 1829 Age of Steam, Coal, Iron and Railways Britain USA 1875 Age of Steel and Heavy Engineering (electrical, chemical, civil, naval) Germany USA 1908 Age of the Automobile, Oil, Petrochemicals and Mass Production USA 1971 Age of Information Technology and Telecommunications USA? Europe? 200?? Age of Biotech, Bioelectronics, Nanotech and new materials? Both? Other? Each takes 40-60 years to spread across the world and reach maturity
  • 5. Why call them revolutions? Because they transform the whole economy! NEW INDUSTRIES and NEW PARADIGM FOR ALL New generic technologies, A powerful cluster infrastructures and of visible new and dynamic organizational principles capable industries of modernizing and infrastructures the existing industries too Explosive A quantum growth jump in and structural innovation and change productivity potential for all A massive techno-economic paradigm shift CHANGING THE OPPORTUNITY SPACE AND RESHAPING SOCIETY
  • 6. WHAT IS A TECHNO-ECONOMIC PARADIGM SHIFT? It is the appearance of an enormous new wealth creating potential Enabling and requiring A CHANGE IN THE DIRECTION OF CHANGE across all industries… …and gradually across society
  • 7. A FAR REACHING TRANSFORMATION A new way of New ways of LIVING PRODUCING EACH PARADIGM SHIFT New ways of A new way of TRANSPORT AND WORKING COMMUNICATION Each generation sees itself as the embodiment of progress and comfort and sees the previous way of living as old fashioned and backward
  • 8. Each technological revolution provides a new inter-related set of life-shaping goods and services at ‘affordable’ prices The British ‘middle classes’ establish Age of Steam, Coal, VICTORIAN an industry-based urban lifestyle iron and railways LIVING different from that of the country-based aristocracy. It spreads to new upper classes elsewhere Age of Steel and British, European and American Heavy Engineering THE BELLE EPOQUE upper and middle classes establish First Globalization a cosmopolitan lifestyle spreading to the upper classes of the world American upper and middle classes establish Age of the Automobile, a suburban energy-intensive lifestyle Oil, Petrochemicals THE AMERICAN spreading to the working classes and Mass Production WAY OF LIFE of the advanced countries and to the middle classes of the developing world Will the affluent educated classes of the developed ? Age of Information SUSTAINABLE and emerging countries Technology and GLOBAL establish an ICT-intensive knowledge society Telecommunications LIFESTYLES with a variety of environmentally friendly lifestyles and consumption patterns??? Each style becomes “the good life” shaping the desires and dreams of the majority
  • 9. The emergence of the ‘American Way of Life’ as the paradigm shift from the 1910s… FROM ENERGY-SCARCE LIVING TO ENERGY-INTENSIVE HOMES AND MOBILITY Energy is expensive and often inaccessible Energy is cheap and its availability unlimited Trains, horses, carriages, stage coaches, Automobiles, buses, trucks, ships and bicycles airplanes and motorcycles Local newspapers, posters, theaters, parties Mass media, radio, movies and television Ice boxes and coal stoves Refrigerators and central heating Doing housework by hand Doing housework with electrical equipment Natural materials (cotton, wool, leather, silk..) Synthetic materials Paper, cardboard, wood and glass packaging Preference for disposable plastics of all sorts Fresh food bought daily Refrigerated, frozen or preserved food from specialized suppliers bought periodically in supermarkets Urban or country living and working Suburban living separate from work …all strongly aided by advertising, business strategies and government policies
  • 10. The current paradigm shift taking place since the 1970s THE LOGIC THE LOGIC OF CHEAP ENERGY OF CHEAP INFORMATION for transport, electricity PROCESSING and synthetic materials AND TELECOMMUNICATIONS A radical change in the innovation opportunity space and in life-changing potential
  • 11. Three of the many new directions of the current paradigm shift Mass production ICT- Flexible production Adaptability (including upgrading as change) Niche markets; ‘the long tail’ HOMOGENEITY DIVERSITY Potential for a great variety of lifestyles on a common ICT platform Global economy with differentiated NATIONAL ECONOMIES GLOBALIZATION national, supranational and local spaces Measurement, monitoring and control CAPACITY FOR Recycling and refurbishing UNAVOIDABLE ENVIRONMENTAL Conservation; closed-loop systems ENVIRONMENTAL DAMAGE PROTECTION Avoiding pollution and waste Each paradigm opens different new routes for making profits as well as for achieving socially desirable goals
  • 12. THE POTENTIAL PARADIGM SHIFT IN PRODUCTION PROCESS INNOVATION Activity Practices enabled by ICT FABRICATION Minimum energy and materials use; custom designed materials INDUSTRIES Zero defects, zero resource waste. Design for low energy use in operation. Planned upgradeability (not obsolescence), disassembly, recycling PROCESS Energy saving and “intelligent” process controls. Low energy processes INDUSTRIES By-products seen as source of value: trend toward closed-loop systems Custom-made materials; development of nanotechnology and biotech More services than tangible products (pleasure in quality leisure; not in objects) PRODUCT PROFILE Very high quality products, smaller, multi-purpose, durable. High tech + hand-made Widely differentiated range by style of living (equivalent satisfaction) PERSONAL Information-based variety of means, revaluing of time, flexibility of location TRANSPORT Innovation in individual and collective transport. Car as last resort FREIGHT Full awareness of environmental impact (and full costing) TRANSPORT Optimizing of routes by bulk and weight. Innovation in vehicles Innovation in packaging and distribution Variety of sources, local diversity, interactive users. Conservation ENERGY Combined heat and power; intelligent controls in home and office URBAN Integrated cities: living, work, education and leisure DEVELOPMENT Full connectivity for multiple activities. Transport avoiding design Environmentally intelligent buildings But the realization of the potential will depend on the policy context
  • 13. BUT THE NEW WAY OF LIVING IS STILL WRAPPED IN THE OLD! Even ICT adopted the consumerist mode of marketing! It is like early automobiles that looked like horse carriages One of the early automobiles 1898 WHY?
  • 14. CIRCUMSTANCES HAVE GIVEN A NEW LEASE OF LIFE TO THE OLD PARADIGM The low price of oil in the 1980s and 1990s The low price of labor in China and Asia The old ‘American Way of Life’ is still seen as the model of well being to imitate (because it has not been replaced in America) YET, GIVEN THE WAY GLOBALIZATION IS EVOLVING TODAY, WE WOULD NEED SEVEN PLANETS!!!
  • 15. AFTER THE OIL SHOCK, PRICES CAME BACK DOWN Index of real oil prices 1910-2007 1,000 Mass production paradigm ICT paradigm Cheap energy Cheap information and communication 900 800 NASDAQ 700 collapse of 1929 Crash Index 1968=100 600 500 400 300 200 100 0 1910 1915 1920 1925 1930 1935 1940 1945 1950 1955 1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 The conservation policies WERE The energy saving practices ALL The alternative energy investments ABANDONED… of the late 1970s …just when the diffusion of ICT was most intense! BUT THEY ARE GOING UP AGAIN, PRECISELY DUE TO GLOBALIZATION
  • 16. THE “CHINA PRICE” MADE MOST PRODUCTS CHEAPER AND CHEAPER Not through technological advance, as in electronics BUT THROUGH EXTREMELY LOW LABOR COSTS • The old pattern of consumption was revitalized in the advanced countries and adopted with fury in the developing ones • Rather than durability, disposability came back as the desired norm (it is cheaper to throw out than to repair!) BUT THE RISING COST OF ENERGY, MATERIALS AND FREIGHT WILL ERODE THE COST ADVANTAGE Only ICT and Internet based services will remain cheap
  • 17. WILL THE NEW PARADIGM PREVAIL? YES If economic circumstances change If it becomes an aspiration of the majorities If it is a positive sum game between business and society Sustainability must… “create economic opportunities and improve the quality of life” President Bill Clinton CUD 2008 Conference, San Francisco
  • 18. Quality of life is measured by fulfilment of values and aspirations Those aspirations are historically determined by the way society shapes each successive technological potential The “luxury” life: ENABLERS values and aspirations UNDER THE MASS PRODUCTION PARADIGM • Low cost of products • Consumer credit • Unemployment insurance • Brand new is better than old • Official trade unions • Savings and loan banks • Bigger is better than smaller • Low cost housing • More is better than less • Synthetic is better than natural • Fabricated is better than hand-made OPINION SHAPERS • Disposable is comfortable • Role models • Leisure is rest (not exercise) • Advertising • Shopping is a leisure activity • Movies, TV • Relative prices • If you don’t keep up with the Jones’, you are falling behind • Marketing strategies
  • 19. The shift to “ICT-green” consumption patterns is possible NOT BY GUILT AND FEAR BUT BY DESIRE AND ASPIRATION Through shaping and enabling a change in our notions of luxury and the “good life” BUT IT MUST HAPPEN FIRST AND VISIBLY IN THE ADVANCED COUNTRIES
  • 20. The notions of luxury and good taste emerge at the top of the income scale and spread by imitation PART OF THE PARADIGM SHIFT IS ALREADY HAPPENING • Small is better than big • Natural materials are better than synthetic • Multipurpose is better than single function • ‘Gourmet’ food is better than standard • Fresh organic fruit and vegetables are healthier • Exercise is important for well being • Global warming is a real danger • Not commuting to work is possible and preferable • Solar power is luxurious • Internet communications, shopping, learning and entertainment are better than the old ways , etc. BUT RELATIVE PRICES AND WIDER INTERESTS HAVE TO FOLLOW! WILL THEY?
  • 21. THE UNAVOIDABLE PATH OF THE CURRENT GLOBALIZATION PATTERN Rising prices of oil Visible effects of and raw materials increasing global warming Rising packaging and freight costs Rising climatic risk CHANGE IN THE ECONOMICS OF THE PRODUCTION, TRANSPORT AND DISTRIBUTION OF TANGIBLE GOODS CHANGE CHANGE IN BUSINESS IN GOVERNMENT STRATEGIES POLICIES Massive relocation and geographic re-specialization of physical production into optimal local, regional and global networks Gradual redesign of the consumption patterns for the “good life”
  • 22. UTOPIAN OR REALISTIC? It sounded utopian to say But it was realistic: in mid-1930s DEPRESSION: Blue collar workers will have Increasing wages created lifetime jobs and many more millions of consumers fully equipped suburban houses for mass production and sustained growth with a car at the door Rising middle classes in the developing world Most colonies adopted the “American Way of Life” will gain independence widening world markets for mass production …or in the late 1960s: Some of the values of the hippie movement Innovation in natural textile fibers [back to natural materials, have transformed the world of fashion organic food, etc.] Innovation in distribution logistics will become have made organic foods the premium the luxury norms segment in supermarkets Shifts in consumption patterns shift profit-making opportunities
  • 23. A SUSTAINABLE POSITIVE SUM FUTURE IS POSSIBLE Fast growing global demand (new consumers) Changing and widening space for innovation and investment FOR BUSINESS Huge environmental industry Profits from quality and adaptability, etc. Better job prospects from a less skewed production geography FOR CONSUMERS High quality durable products New patterns of “desirable living” fulfilled, etc. FOR THE ASIAN Better balance between outward and inward growth DEVELOPING WORLD Reduced dangers from the environment, etc. Growing prices of raw materials exports FOR THE REST New possibilities for development, growth and innovation OF THE DEVELOPING WORLD Attracting more global investment, etc. But it will not happen automatically: the market cannot do it alone WE ARE PRECISELY AT THE HISTORICAL MOMENT WHEN THE STATE MUST COME BACK INTO THE PICTURE
  • 24. EACH TECHNOLOGICAL REVOLUTION PROPAGATES IN TWO DIFFERENT PERIODS The first half sets up the infrastructure and lets the markets pick the winners the second half reaps the full economic and social potential INSTALLATION DEPLOYMENT INSTALLATION DEPLOYMENT Turning Point Uncertainty, institutional recomposition and role shift “Creative destruction” “Creative Learning the new construction” Degree of diffusion of the new technological potential unlearning the old Led by A great production capital market experiment Applying the paradigm Led by to innovate financial Major across all sectors technology and to spread capital bubble Ending in the social benefits a stock market more widely crash Until maturity and exhaustion ??? Next Time big-bang 2O - 30 years 2O - 30 years big-bang We are here
  • 25. The historical record: bubbles, recessions and golden ages TURNING INSTALLATION PERIOD POINT DEPLOYMENT PERIOD Bubble Golden Age 1771 Great Britain Canal mania 1793–97 1793– British leap 1829 Britain Railway mania 1848–50 1848– The Victorian Boom 1875 London funded global market Britain / USA Belle Époque (Europe) infrastructure build-up 1890–95 1890– Germany (Argentina, Australia, USA) “Progressive Era” (USA) Europe 1908 The roaring 1929–33 1929– Post-war USA twenties Golden age USA 1929–43 1929– 1971 Telecom mania, Internet emerging markets 2001–?? 2001– Sustainable global USA knowledge society ”golden age”? and NASDAQ Each Golden Age has been facilitated by enabling regulation and policies for shaping and widening markets
  • 26. Different periods: different roles for the agents INSTALLATION DEPLOYMENT THE STATE FINANCE and FINANCE PRODUCTION in a THE NEW in a and facilitating ENTREPRENEURS facilitating THE STATE service as drivers service as drivers role and innovators role and innovators As the roles shift to enable deployment collective interests become part of the guiding mechanisms
  • 27. John Chambers, Cisco CEO CUD 2008 Conference, San Francisco “It is important to have supportive governments… I wouldn’t have said this ten years ago” The pure market ideology has already played its role in the installation of the ICT paradigm. THE TIME IS RIPE FOR THE STATE TO COME BACK INTELLIGENTLY at all levels, nationally, regionally, globally and --especially– locally! IN COLLABORATION WITH - Business - Civil society (NGOs) - Universities and - Media “We must all collaborate to paint a vision and realize a new architecture”
  • 28. The answer to whether sustainable global growth is feasible is, therefore, YES! But neither pure “free markets” nor simple “environmentalism” will get us there The innovation potential of the ICT paradigm can and must be collectively redirected towards new patterns of environmentally friendly well being and a new profit-making dynamic for business AND THE TIME TO ACT IS NOW!