Technological Revolutions and Financial Capital

Perez, an economist working in the neo-Schumpeterian tradition, argues that technological revolutions follow a recurring pattern across roughly fifty years, and that financial bubbles are a structural part of the process rather than an aberration.

Her model identifies five revolutions since 1771: the industrial revolution, steam and railways, steel and heavy engineering, oil and mass production, and information technology. Each follows the same sequence. An installation period begins when a new technology appears, during which financial capital separates from production capital and funds the build-out speculatively. This period ends in a frenzy phase and a crash, which she argues is necessary rather than incidental because it destroys the speculative valuations, forces institutional reform, and shifts control from financial capital back to production capital. A deployment period then follows in which the technology diffuses through the whole economy, productivity gains become general, and the benefits spread. The turning point between the two is a political moment requiring institutional change, and its outcome is not determined by the technology.

She places the information technology revolution's crash in 2000 and argues that the deployment period requires institutional reforms that had not occurred, which is why the gains did not spread as previous deployments did.

The model is a pattern identified across five cases, which is a small sample fitted after the fact, and periodisation of this kind is contested among economic historians. Its value is the argument that bubbles fund infrastructure build-out that no rational allocation would, which connects directly to Janeway's account.