Technological revolutions don’t start with an invention—they start with the deployment of an invention. This means it’s useful to understand how deployment plays out.
The last time the world was transformed by a new technology, the invention in question was the electric dynamo. The deployment of that invention came when Henry Ford realised that dynamos could be used to reconfigure, from the ground up, the way cars were made, and this entailed a basic rethink of how manufacturing worked.
Ford’s insight prompted the rapid deployment of electric dynamos, this time in truly transformative ways, across many sectors, unleashing a productivity boom. This rapid deployment helps to explain (although not solely) America’s 1920s bubble. There’s also a case for seeing it as an explanation for the much later, more sustainable boom of the 1950s and 1960s—the effects of Fordism continued to play out.
What’s interesting about the later stage of this story is the way the state had to reimagine itself in order to make possible sustained and stable growth. Carlota Perez describes the public policy denouement of this process as follows:
“Keynesianism and Bretton Woods were the transformative set of policies that created the new context to achieve both better business and better lives for all, through a sort of covenant between government, business and society, where all benefited.”
In other words, the short version of the story runs as follows:
The dynamo was invented; a few decades later Ford used dynamos to re-imagine manufacturing; the economy then lurched upward (and then downward) for a few decades; and, a few decades after that, the state re-imagined itself, ushering in a new era of stable and broadly-based economic growth. This is the period in which the American people and, to a lesser degree the people of Europe, thrived.
The longer version of this story is expertly-told by Paul A. David in this early version of his classic 1989 essay Computer and Dynamo. David’s article deserves to be read in full but, if you’re pressed for time, here’s a summary (albeit paraphrased, bastardised, and expanded in places):
- The electric dynamo was invented in a practical form sometime around 1850-1870. In the next few decades, dynamos became increasingly widespread in manufacturing but they weren’t used in a particularly revolutionary way—in the main, they simply replaced steam as a safer, cleaner, more efficient power source.
- Then, around 1908, Henry Ford took his plant at Highland Park Michigan and used it to rethink fundamentally how a factory could work in the electrical age. Ford took advantage of the flexibility of electric motors (a fascinating point, which Devine expands upon here). Specifically, Ford combined four non-revolutionary principles in a revolutionary way: he standardised car parts, mechanised their production, moved to specialised (Taylorised) roles for his workers, and stood his workers at an assembly line, so that parts moved past workers, rather than moving workers to parts. This made the Model T ten times cheaper than craft-built cars.
- The four principles of Fordism proved to be easily transferable to manufacturing in other sectors and, because the principles were also so economically effective, they spread quickly. This did nothing less than change how things were made and, from around 1910, this began to show up in productivity figures, drawing an end to the productivity slowdown of 1890-1910 with strong growth from 1910 onwards.
- These decades saw a rapidfire process of creative destruction which became the roaring 1920s. This did not, of course, end well, and the subsequent crisis made clear quite how fundamentally the economy had changed. Ultimately, it became clear that a new settlement in economic policy was needed. To give one example, Fordist principles prompted firms to spend a lot on specialised machinery so that they could produce large volumes of standardised products; that is, Fordism was capital-intensive and low marginal cost. This did funny things to demand in the economy, with widespread implications for financial- and consumer-capitalism.
- Fast forward to the end of WWII and new economic thinking had percolated. A range of new ideas, previously either unimagined or highly unorthodox, came together into a new view of how the state should operate in the Fordist economy. Keynes, Polanyi, Galbraith—a range of thinkers fed into this process to different extents. Ultimately, the new settlement changed all three aspects of the state’s work: how it steered the market (demand management, the pursuit of full employment), how it compensated for market outcomes (social security, the welfare state), and how it ran non-market services (Medicaid and the NHS).
- But the new settlement was not just about new policy content—it was also about the way the state did its work. In essence, it applied Ford’s organisational philosophy to government itself. The Fordist state thus took shape alongside the Fordist economy. It was built around a technocratic, hierarchical, and specialised civil service, and this civil service engaged in activities such as the active management of the labour market, prices, or demand, and the mass provision of standardised public services.
- This new policy settlement provided the final part of a powerful trinity—and it was this trinity that explained the incredible success of America (and, again, to a lesser extent Europe) in the 1950s and 1960s. The trinity was: (i) a mutually-supporting cluster of technologies (electricity, steel, etc); (ii) an organisational approach that was fully-calibrated to make the most of this particular cluster of technologies; and (iii) a state that had adapted to complement a private sector that was geared in this way. These are the three legs that made growth sustained, stable, and broad-based.
Nice story. So let’s admit, right away, that this account is impressionistic. It blurs a host of vital details and it exaggerates for simplicity and clarity. Plus, of course, there are more empirically-rooted, economically literate, and nuanced accounts available. Take, for example, the excellent work of Nicholas Crafts, of which a fine example here).
Even so, I do think storytelling helps—not least because it prompts one particularly useful question: What is the equivalent story for the ICT revolution?
We are now, after all, 50 years on from the advent of the personal computer—the moment Bill Gates and others worked out how to deploy the transistor, our own general purpose technology, equivalent to the electric dynamo. We’ve even clocked up experiences familiar to Ford’s contemporaries: financial crisis, productivity slowdown.
So how many legs of our technology trinity are in place?
I’d say one and a half. We certainly have a full set of mutually complementary technologies, built around the transistor. And I’d argue we’re halfway toward a rethink in the way companies, at least at the vanguard of the economy, are calibrated, so as to take advantage of these technologies (think agile working, UX, multidisciplinary teams, autonomy, etc). Where we fall down, I would argue, is with the state. We have a Fordist state in a Gatesian world. Little wonder things feel so unstable.