Five Waves of Creative Destruction
Perez identified five great technological revolutions in the history of industrial capitalism: the first Industrial Revolution (1771), the Age of Steam and Railways (1829), the Age of Steel and Heavy Engineering (1875), the Age of Oil and Mass Production (1908), and the Age of Information and Telecommunications (1971). Each revolution deployed a new techno-economic paradigm that transformed the productive structure of the global economy. Each followed the same two-phase structure — installation driven by financial capital, deployment driven by production capital, separated by a turning point typically marked by crisis. AI, by this analysis, is the engine of a possible sixth wave, though whether it constitutes a genuinely new paradigm or a continuation of the ICT revolution remains contested.
In the AI Story
Perez's framework extended Schumpeter's intuitive theory of waves into a systematic historical architecture. Her distinctive contribution was to specify the phase structure (installation/deployment) and to identify the institutional conditions under which each transition succeeded or failed.
The five waves share structural features but differ in specifics. Each produced massive increases in aggregate productivity. Each produced distributional asymmetries that generated political crises. Each eventually produced institutional responses that distributed the gains more broadly — though in each case the response arrived late and incompletely. The Factory Acts of the 1830s and 1840s responded to the first wave. The progressive era responded to the second and third. The New Deal responded to the fourth. The ICT revolution is still awaiting its corresponding institutional response.
The AI question is whether it constitutes a sixth wave or the long-delayed deployment phase of the fifth. Perez herself has been ambivalent, arguing in recent work that the ICT revolution's full deployment phase was never fully realized and that AI may be its culmination rather than its successor. Others, including many of the scholars cited in this volume, treat AI as a distinct sixth wave with its own characteristic paradigm.
The practical consequence of the framework, regardless of whether AI is a fifth or sixth wave, is that the institutional response required is substantial. Each previous wave required decades of institutional construction. The AI wave compresses the technological timeline without compressing the institutional one, making the question of whether institutions can catch up in time more urgent than at any previous moment in the history of the process Schumpeter described.
Key Ideas
Five revolutions since 1771. Industrial Revolution, Steam and Railways, Steel and Heavy Engineering, Oil and Mass Production, Information and Telecommunications.
Shared structure. Each wave follows the installation-deployment pattern with a turning point typically marked by crisis.
Distinct paradigms. Each revolution deployed a new techno-economic paradigm that transformed the productive structure of the global economy.
AI as sixth or fifth-culmination. Whether AI is a new wave or the deferred deployment of the ICT revolution remains contested.
Appears in the Orange Pill Cycle
Further reading
- Carlota Perez, Technological Revolutions and Financial Capital (2002)
- Carlota Perez, Beyond the Technological Revolution (2015)
- Chris Freeman and Francisco Louçã, As Time Goes By (2001)