Re-Engineering the U.S. Economy

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Re-Engineering the U.S. Economy

This trend is the third installation in a multi-part series that explores the dynamics of the "fifth techno-economic revolution" — the fifth wave.

Part One appeared in the April 2010 issue of Trends, under the title A New Golden Age…When People Least Expect It.1 In it, the Trends editors described each of the five waves, or "60-year cycles of capital," typically referred to as the Kondratieff Waves,2 named after Russian theorist Nikolai Kondratieff, who first intified them.

Let's quickly review the five waves:

  • The first wave, the Industrial Revolution, began in 1771, introducing the age of great factories and mechanization. During this wave, canals became a newly efficient means of transportation.
  • The second wave, beginning around 1829, took place in England when the coal-powered steam engine was perfected and railways were introduced.
  • Heavy engineering ushered in the third wave starting in the 1870s. The fields of mechanical and civil engineering experienced rapid expansion. The introduction of cheap steel, produced by the Bessemer process, led to the development of trans-continental railroads, fast trans-oceanic steamships, and the construction of tunnels and bridges that were previously unthinkable.
  • The fourth wave was marked by the introduction of the Model T Ford in 1908. This ushered in an age of mass production fueled by petroleum. That's when the United States took center stage in the global economy. The auto and steel industries were the industrial giants.
  • Finally, the fifth wave, involving the widespread use of information technology, began around 1971 when Intel introduced the first computer-on-a-chip — the microprocessor.

A 60-Year Cycle of Capital

We then explained that each of these revolutions goes through three phases:3

  1. Installation — when an initial boom expands, inevitably leading to a bursting bubble.
  2. Transition when disappointed investors revalue the assets of the bubble.
  3. Deployment — when the dominant technology matures and becomes the foundation for everything else in the economy...

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