Foreword and Postscript

When I was invited to give a contribution to the Festschrift for Carlota Perez, I proposed that my contribution should be based upon a paper on ‘the new economy’ and its crisis that I started to draft before Christopher Freeman's 80th birthday, September 2001. This choice was quite natural, since the original paper was written in honour of both Chris Freeman and Carlota Perez. In the light of the current crisis, this choice of an ‘old paper’ has become even more appropriate. Much of the argument in the paper relating to the ICT bubble is highly relevant also for the current crisis. I have therefore decided to leave the text in its original shape while adding this postscript as a foreword.

The basic message in the paper is that while Information and Communication Technologies (ICT) offer a great potential for productivity growth, it was naïve to assume that it could bolster permanent high rates of noninflationary economic growth. What Greenspan and others neglected was the central insight in Carlota Perez’ work that the productivity potential can be fully exploited only after a sequence of radical institutional changes. The institutional changes that did take place – the weakening of trade unions, the deregulation of financial markets, the increased used of share options and, in general, the increased freedom for capitalists to move capital across borders and to change the form of capital through leveraging – was highly biased and it certainly did not establish a framework supportive for technical, organizational and institutional learning.