Carlota Perez, professor of Technology and Socio-Economic Development ,  is the author of the book “Technological Revolutions an Financial Capital” (2002). In her book she further develops the earlier work of Nikolai Kondratiev (waves) and Joseph Schumpeter (creative destruction). She defines the concept “Techno-Economic Paradigm Shift”, in which she explains how a new technology lies at the base of every revolution (Kondratiev wave). She distinguishes several technologies which have caused a great impact on the economy. According to Perez we are now experiencing the fifth wave of Kondratiev. ICT is the technology that started this wave and it’s causing a new paradigm shift.

"When the economy is shaken by a powerful set of new opportunities with the emergence of the next technological revolution, society is still strongly wedded to the old paradigm and its institutional framework. The world of computers, flexible production and the internet has a different logic and different requirements from those that facilitated the spread of the automobile, synthetic materials, mass production and the highway network. Suddenly in relation to the new technologies, the old habits and regulations become obstacles, the old services and infrastructures are found wanting, the old organisations and institutions inadequate. A new context must be created; a new ‘common sense’ must emerge and propogate."

There is however one very big difference with the earlier economic cycles we have experienced. The other cycles (water, steam, steel and oil) were all focused on producing tangible resources. The outcome of the ICT cycle is completely different. We are now producing intangible resources. It is a shift from atoms to bits.

In the Industrial Revolution we were faced with the concept of scarcity. Now we have abundance of information. With a click on a button data can be copied and distributed freely on the internet. Transaction costs are reduced to zero. We need new rules. We need a new framework for the new economy. And it is not just our economy, it affects our society as wel. We are now defining the network society!

In my humble opinion, the current credit crunch is just the tip of the iceberg. It may be caused by ICT, but the implications go much further than we now can foresee.