Innovation and Long-Term Economic Growth

NOT FOR QUOTATION WITHOUT PERMISSION OF THE AUTHOR

INNOVATION AND LONG-TERM ECONOMIC GROWTH

George F. Ray November, 1980 CP-80-3 6

C o l l a b o r a t i v e P a p e r s report work which has not been performed solely at the International Institute for Applied Systems Analysis and which has received only limited review. Views or opinions expressed herein JG not necessarily represent those of the Institute, its National Member Organizations, or other organi- zations supporting the work.

INTERNATIONAL INSTITUTE FOR APPLIED SYSTEMS ANALYSIS A-236 1 Laxenburg, Austria

PREFACE

T h i s C o l l a b o r a t i v e P a p e r i s a r e v i s e d v e r s i o n o f a c o n t r i b u t i o n made by G e o r g e F . Ray t o a T a s k F o r c e M e e t i n g o n " I n n o v a t i o n a n d I n d u s t r i a l S t r a t e g y " . T h e a u t h o r g i v e s a h i s t o r i c a l o v e r - v i e w o f t h e i m p a c t o f i n n o v a t i o n s o n e c o n o m i c g r o w t h , p o i n t i n g o u t t h e d e v e l o p m e n t c h a i n s a r i s i n g f r o m b r e a k t h r o u g h s i n c e r t a i n a r e a s . H i s p h i l o s o p h y c a n b e i l l u s t r a t e d b y h i s s t a t e m e n t :

"The s i n g l e p i s t o l s h o t a t S a r a j e v o w a s n o t t h e u n i q u e r e a s o n f o r t h e o u t b r e a k o f t h e Great War i n 1 9 1 4 , n o r w a s W a f t ' s p e r - f e c t i o n o f t h e p r i m i t i v e steam e n g i n e t h e u n i q u e c a u s e o f a n e c o n o m i c u p s w i n g . " T h e e c o n o m i c mechanism o f l o n g w a v e s c a n n o t be d e s c r i b e d i n a o n e - d i m e n s i o n a l way i n d e e d . G e o r e g e F. Ray p r e s e n t s a l s o a n h y p o t h e s i s o n t h e c o n t e n t o f a f u t u r e u p s w i n g o f w o r l d economy, i n c l u d i n g i n i t e n e r g y , f o o d , e n v i r o n m e n t a n d s o c i a l i n s t i t u t i o n s . I n h i s o p i n i o n t h e m i c r o p r o c e s s o r i s o n l y a n i m p o r t a n t t o o l f o r t e c h n o l o g i c a l c h a n g e s i n v a r i o u s f i e l d s . I t i s l i k e a c h a m a l e o n , i t t a k e s o n t h e c h a r a c t e r o f w h a t e v e r p r o g r a m h a s b e e n f e d t o i t .

H e i n z - D i e t e r H a u s t e i n I n n o v a t i o n T a s k G r o u p Management a n d T e c h n o l o g y November, 1 980

iii

T h i s p a p e r was o r i g i n a l l y p r e p a r e d u n d e r t h e t i t l e " M o d e l l i n g f o r Management" f o r p r e s e n t a t i o n a t a N a t e r R e s e a r c h C e n t r e

(U.K. ) Conference on " R i v e r P o l l u t i o n C o n t r o l " , Oxford, 9 - 1 1 A s r i l , 1979.

IIASA

,

J u l y 1980

I N N O V A T I O N AND LONG-TERM ECONOMIC GROWTH

G F Ray

National I n s t i t u t e of Economic & S o c i a l Research

My personal p r e f e r e n c e f o r a t i t l e would be 'Once again: Innovation and t h e long c y c l e s '

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s i n c e I have r e c e n t l y expressed elsewhere ( 1 )(2) c e r t a i n views on t h e p a r t played by innovations i n t h e c o n s t a n t l y debated long c y c l e s ; it i s not 'icy i n t e n t i o n t o r e p e a t h e r e what has been s a i d i n considerably more d e t a i l t h e r e . Let me j u s t mention b r i e f l y one o r two p o i n t s t h a t seem t o me r e l e v a n t t o t h e new m a t e r i a l t h a t follows.

THE LONG CYCLES

This i s not t h e p l a c e t o g e t involved i n t h e a r g m e n t o f whether long cycles i n economic a c t i v i t y do indeed e x i s t o r n o t . The controversy s t a r t e d immediately following t h e p u b l i c a t i o n o f Kondratiev's study i n t h e 1920s, h a s been going on ever s i n c e , and w i l l probably continue. More r e c e n t l y , however, a s one outcome of t h e gloomy s t a t e o f t h e world economy

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i n c l u d i n g h e r e East and West a s w e l l a s t h e T h i r d World, with t h e s o l e exclusion o f some o i l producers

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t h e s t u d y of long c y c l e s has again come t o t h e f o r e and has l e d t o t h e p u b l i c a t i o n of some v a l u a b l e views with t h e o r e t i c a l and e m p i r i c a l

s t a t e m e n t s by both new c o n v e r t s and o l d d i s c i p l e s , among them such w e l l known names a s Rostow and F o r r e s t e r . ( 3 )

hfy i n t e r e s t i n v a r i a b l y l i e s not d i r e c t l y i n t h e t h e o r y

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o r t h e r e a l i t y

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o f t h e Kondratiev c y c l e b u t i n i t s relevance t o innovation ( o r v i c e v e r s a ) and i n t h e manner innovative a c t i v i t y can i n f l u e n c e , indeed g i v e a push, t o t h e whole economic system.

The t h r e e long c y c l e s i d e n t i f i e d by Kondratiev and accepted by Schumpeter i n h i s t h e s i s were a l l i e d , i n t h e most s i m p l i f i e d form, t o t h e dissemination of steam power, t o t h e railway boom, and t o t h e j o i n t e f f e c t s o f t h e motor car and e l e c t r i c i t y . These a r e obviously crude g e n e r a l i s a t i o n s , s i n c e t h e 'steam power' p e r i o d cannot b e divorced from t h e development of t h e c o a l and c o t t o n

i n d u s t r i e s ; t h e railway boom could not have happened without an i r o n and s t e e l

i n d u s t q of new dimensions; and t h e t h i r d upswing included

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a p a r t from t h e somewhat l o o s e a t t r i b u t i o n t o t h e motor c a r and e l e c t r i c i t y - t h e b i r t h of t h e modern chemical i n d u s t r y , among o t h e r t h i n g s . It i s never a simple m a t t e r t o f i n d a unique cause of h i s t o r i c a l developments i n t h e economic a r e n a ; t h e s i n g l e p i s t o l shot at Serajevo was not t h e unique reason f o r t h e outbreak of t h e Great War i n 1914, nor w a s Watt's p e r f e c t i o n o f t h e

p r i m i t i v e steam engine t h e unique cause o f an economic upswing.

EXCURSION INTO HISTORY

If we s t a r t s e a r c h i n g f o r reasons f o r upswings, and e s p e c i a l l y i f

we b e l i e v e t h a t innovation i s , g e n e r a l l y speaking, a 'Good Thing' which o f f e r s t h e innovator advantages over l a g g a r d s , t h e n we can f i n d p l e n t y o f evidence p o i n t i n g t o i t s importance and t o t h e r o l e played by v a r i o u s i n n ~ ~ a t i o n s i n t h e f o r t u n e s o f t h e c o u n t r i e s implementing them. The l e a d i n g r o l e a f

B r i t a i n i n t h e 19th c e n t u r y was i n no s m a l l measure due t o t h e r a p i d i n t r o d u c t i o n of s t e m , t o t h e s e r i e s of major innovations i n t h e v a r i o u s phases of t h e c o t t o n i n d u s t r y , as w e l l as t o t h e development of coalmining i n t h a t country. I t continued w i t h t h e growth of t h e coal-based i r o n and s t e e l indust-ry which made t h e railway boom p o s s i b l e . B r i t a i n was l a t e r overtaken by o t h e r s , e s p e c i a l l y Germany

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again 'due t o t h e g r e a t German innovations i n s t e e l and chemicals. And f i n a l l y , by t a k i n g up b o t h

e l e c t r i c i t y and t h e motor c a r b e f o r e t h e o t h e r s , t h e United S t a t e s not o n l y a r r i v e d on t h e scene, but overtook everybody e l s e .

The i n d u s t r i a l r e v o l u t i o n i n B r i t a i n

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and t h e v a r i o u s innovations

l e a d i n g t o it and a r i s i n g from it

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are t o o w e l l known from economic h i s t o r y ; t o an e x t e n t , almost t h e same i s t r u e o f t h e ascendence of t h e United S t a t e s . Somewhat l e s s i s g e n e r a l l y known

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e s p e c i a l l y o u t s i d e Germany

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of t h e German developments. The German s t e e l i n d u s t r y was indeed t h r i v i n g on t h e t h e n new Thomas process: from 1880 t o 1900 i t s output r o s e t e n f o l d , l e a v i n g B r i t a i n far behind. The c o s t o f steelmaking i n Germany dropped t o one t e n t h of t h e l e v e l of t h e 1860s a s t h e com5ined r e s u l t of t e c h n o l o g i c a l p r o g r e s s and s c a l e

economies. A s e a r l y a s 1900 Germany s u p p l i e d 90 per c e n t o f t h e world production of dyes. The e l e c t r i c a l i n d u s t r y owed much t o t h e s y s t e m a t i c

c o n c e n t r a t i o n ( e s p e c i a l l y of siemens) on i n v e n t i o n and t o t h e e a r l y l a r g e - s c a l e adoption of Edison' s p a t e n t s

.

Kondratiev p a i d g r e a t a t t e n t i o n t o t h e French economy when he c o n s t r u c t e d h i s s t a t i s t i c a l s e r i e s supporting h i s long waves. However, France

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c e r t a i n l y t h e l e a d i n g country i n 18th century Europe, w i t h t h e l a r g e s t population

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was not among t h e l a t e r i n d u s t r i a l p i o n e e r s . F o r a w h i l e , i n t h e times of t h e r e v o l u t i o n and t h e Napoleonic wars, it w a s c u t

o f f from t h e world o u t s i d e and l o s t c o n t a c t w i t h t e c h n i c a l p r o g r e s s t h e r e ; t h e i n d u s t r i a l advance t h a t s t a r t e d i n t h e second h a l f of t h e 18th c e n t u r y , helped by new techniques imported from England, was h a l t e d . France remained f o r a long time, c e r t a i n l y u n t i l t h e middle o f t h e 19th c e n t u r y , a l a r g e l y a g r i c u l t u r a l country. The c o n t r i b u t i o n o f a few major i n d u s t r i a l i n n o v a t i o n s was n e v e r t h e l e s s important t o French (and g e n e r a l ) i n d u s t r i a l p r o g r e s s

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^such

a s J a c q u a r d ' s loom, Thimonnier's sewing machine, B e r t h o l l e t ' s c h l o r i n e - b l e a c h e r o r G i r a r d ' s f l a x s p i n n e r . The l a t e r s p r e a d o f i n d u s t r i a l i s a t i o n c o i n c i d e d i n France w i t h Kondratiev's second c y c l e c h a r a c t e r i s e d by t h e r a i l w a y boom.

Among t h e major European powers o f t h e t i m e , Austria-Hungary was l a g g i n g f a r behind t h e above West-European t r i o . The A u s t r i a n i n d u s t r y was v e r y slow i n t h e i n t r o d u c t i o n of steam power and t h e m a j o r i t y o f p i g i r o n production was e x c l u s i v e l y charcoal-smelted u n t i l about 1870. We cannot even speak o f I t a l y proper b e f o r e i t s u n i f i c a t i o n i n 1860; by about t h e middle o f t h e 19th c e n t u r y t h e l e a d i n g i n d u s t r y i n Piedmant and Lombardy w a s silk-throwing; most o f t h e s e m i l l s worked by water power. Up t o 1860 a l t o g e t h e r 1800 lan o f r a i l w a y s were b u i l t ; l a c k o f c o a l c h a r a c t e r i s e d t h e i n d u s t r i a l scene: h e r e t o o ironmaking was based on c h a r c o a l . Although r a i l w a y b u i l d i n g was speeded up, i n d u s t r i a l p r o g r e s s was slow t o 1880 and t h e r e a l s p u r t followed i n . t h e p e r i o d 1899-1913, i n t h c t h i r d Kondrat:'.ev c y d e o n l y , i n i - i a t e d by two new products o f i n n o v a t i o n : automobiles and t y p e w r i t e r s .

The h i s t o r y of t h e economies of s m a l l e r i n d u s t r i a l c o u n t r i e s a l s o provides support t o t h e o u t s t a n d i n g importance of innovations. The Swiss economy n o t only s u r v i v e d B r i t i s h competition, which at one t i m e j e o p a r a i s e d t h e e x i s t e n c e o f t h e once f l o u r i s h i n g Swiss c o t t o n i n d u s t r y , b u t by means of i n n o v a t i o n s

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m o n g them, some i n t e r e s t i n g o r g a n i s a t i o n a l changes

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^recovered

t o become a s e r i o u s competitor t o t h e B r i t i s h , i n c o t t o n manufactures and t e x t i l e machinery a l i k e . From t e x t i l e s t o machinery znd t h e n onwards t o dyes

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t h i s was t h e s e l f - s u s t a i n e d way o f advance o f Swiss i n d u s t r y b a s e d o n i n d u s t r i a l and o r g a n i s a t i o n a l i n n o v e t i o n s , g r e a t f l e x i b i l i t y , and t h a t s p e c i a l a g i l i t y and managerial t a l e c t t h a t seems t o b e a c h a r a c t e r i s t i c of t h e i n d u s t r i e s o f some s m a l l e r c o u n t r i e s , of which Switzerland i s one t y p i c a l example and

Belgium another.

The l o c a l a v a i l a b i l i t y of c o a l and i r o n o r e , p l u s motive power by w a t e r , were t k e 'cases o f e a r l y i n d v . s t r i a l i s a t i o n o f t h e r e g i o n t h a t by

1830 had come t o be c a l l e d Belgium. The a d o p t i o n o f steam power was slow b u t i n 1807 Huart-Chapel i n v e n t e d a r e v e r b a t o r y f u r n a c e f o r m e l t i n g down

s c r a p i r o n and i n t r o d u c e d s e v e r a l major changes

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such a s puddling f u r n a c e s t o convert p i g i r o n i n t o wrought i r o n (1821)

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and b u i l t t h e f i r s t coke b l a s t f u r n a c e i n t h e C h a r l e r o i a r e a . New t y p e r o l l i n g m i l l s were a l s o added a t about t h e same t i m e . Coming over from England, C o c k e r i l l s t a r t e d making s p i n n i n g machines i n V e r v i e r s as e a r l y as 1799; a number o f o u t s t a n d i n g i n n o v a t o r s h e l p e d t h e Ghent t e x t i l e i n d u s t r y t o prominence, as w e l l as t h e metal i n d u s t r i e s i n C h a r l e r o i and elsewhere. By 1840 t h e c o u n t r y w a s h i g h l y i n d u s t r i a l i s e d , comparable o n l y t o B r i t a i n , and had r e l a t i v e l y t h e d e n s e s t r a i l network i n Europe.

I n c o n t r a s t , Holland d i d n o t have any noteworthy i n d u s t r i e s ; t h e r i s e o f Dutch m e t a l i n d u s t r i e s p a r a l l e l l e d t h a t of t h e g r e a t maritime i n n o v a t i o n : t h e steamship, t h e f i r s t of which appeared i n Rotterdam i n 1823.

S w i t z e r l a n d and B e l g i u a have been t a k e n a s examples of small c o u n t r i e s which i n d u s t r i a l i s e d e a r l y . The s i t u a t i o n w a s v e r y d i f f e r e n t f o r Sweden.

During t h e f i r s t h a l f of t h e l a s t c e n t u r y Sweden was one o f t h e p o o r e s t c o u n t r i e s i n Europe. The l a t e s t a r t o f i n d u s t r i a l i s a t i o n was, however, followed by r a p i d advance. The f i r s t Kondratiev c y c l e d i d n o t t o u c h Sweden a t a l l . Towards t h e end of t h e second

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t h e r a i l w a y boom

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Sweden's i n d u s t r y was t h e f a s t e s t growing i n t h e whole of Europe and i n t h e t h i r d c y c l e Sweden w a s a l r e a d y i n t h e f o r e f r o n t , e s p e c i a l l y i n t h e a r e a of e l e c t r i c i t y , w i t h hydropower and p a r t i c u l a r l y t h e p i o n e e r i n g work i n power t r a n s m i s s i o n . One of t h e b a s e s o f t h e expansion of Swedish e n g i n e e r i n g i n d u s t r i e s w a s an e a r l y i n v e n t i o n , t h e milk s e p a r a t o r ( 1870 ) which g r e a t l y c o n t r i b u t e d t o t h e c r e a t i o n o f an e x p o r t i n g d a i r y i n d u s t r y i n t h e Nordic c o u n t r i e s

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a p a r t from i t s

important r o l e i n h e l p i n g e n g i n e e r i n g t o become e s t a b l i s h e d . It was f o l l o w e d l a t e r by o t h e r Swedish i n n o v a t i o n s i n such v a r i e d a r e a s as t u r b i n e s , e l e c t r i c a l machinery, g a s accumulators and b a l l b e a r i n g s .

The c o u n t r y t h a t perhaps b e n e f i t e d most from t h e Swedish m i l k s e p a r a t o r was Denmark: t h e new equipment provided a changed t e c h n i c a l b a s i s f o r d a i r y

farming, an important p a r t of t h e D m i s h economy, and c o n t r i b u t e d t o a

c o n s i d e r a b l e e x t e n t t o t h e development of t h e c o o p e r a t i v e movement i n Denmark.

The l a t t e r w a s i n s t r u m e n t a l i n t r a n s f o r m i n g t h e e x p o r t o f p i g s i n t o t h e s a l e of packed pork, a n o t h e r i c n o v a t i o n t h a t r e q u i r e d t e c h n i c a l and o r g a n i s a t i o n a l change r e s u l t i n g i n t h e s i g n i f i c a n t growth o f a n o t h e r p a r t of Danish

a g r i c u l t u r e .

As i n a l l Nordic c o u n t r i e s , i n d u s t r i a l i s a t i o n s t a r t e d l a t e i n Norway, with t h e development of h y d r o e l e c t r i c i t y around t h e t u r n of t h e c e n t u r y . I n t h e f i v e y e a r s 1900 t o 1905 Norwegian h y d r o e l e c t r i c power production r o s e e i g h t f o l d . I t s b e n e f i c i a l e f f e c t s can b e s t b e i l l u s t r a t e d by t h e growth o f t h e chemical i n d u s t r y : t h e growing production o f f e r t i l i s e r s , calcium n i t r a t e

( b a s e d on German and American i n v e n t i o n s b u t f u r t h e r developed by Norwegian i n n o v a t o r s , Eyde and B i r k e l a n d ) a s w e l l a s c a r b i d e (by 1910 Norwegian o u t p x t amounted t o 20 p e r c e n t of world p r o d u c t i o n ) .

S i n g l e major i n n o v a t i o n s can o f t e n be seen t o have c r e a t e d t h e b a s i s o f whole n a t i o n a l i n d u s t r i e s . For example, t h e Bessemer s t e e h a k i n g p r o c e s s

o f f e r e d t h e o p p o r t u n i t y f o r t h e l a r g e - s c a l e use of Spanish i r o n o r e s and f o r t h e development of t h e s t e e l i n d u s t r y i n Spain.

Another s m a l l e r c o u n t r y whose h i s t o r y i s worth s t u d y i n g from t h i s a n g l e i s Hungarx. Because of h i s t o r i c a l c o n d i t i o n s , i n d u s t r i a l i s a t i 3 n i n Hungary s t a r t e d even l a t e r t h a n i n Sweden. For a long t i m e t h e country remained b a s i c a l l y a g r i c u l t ~ r a l and i t s i n d u s t r y p r i m a r i l y s e r v e d a g r i c u l t u r e . I t was o n l y r e c e n t l y , a f t e r t h e Second War t h a t i n d u s t r y became t h e l a r g e s t s e c t o r . This background makes t h e s ~ e c t a c u l a r development i n a few i s o l a t e d c a s e s even more s t r i k i n g . Among t h e s e achievements, probably t h e most marked were t h o s e of two p a r t i c u l a r e l e c t r i c a l engineering f i r m s which a c q u i r e d

i n t e r n a t i o n a l r e p u t a t i o n s ( ~ a n z a d 'Tungsram' ) and developed v e r y r a p i d l y indeed, thanks t o t h e s i g n i f i c a n t innovations o f a few h i g h l y g i f t e d and s u c c e s s f u l s c i e n t i s t s and e n g i n e e r s i n v a r i o u s a r e a s o f t h e t h e n fast-growing e l e c t r i c a l i n d u s t r y . T h i s example i s of some s i g n i f i c a n c e : it u n d e r l i n e s t h e impcrtence of Cnno~rations even i n a situa:ior, where t h ? whole economic c l i m a t e i s n o t p a r t i c u l a r l y f a v o u r a b l e , e x t e r n a l economies h a r d l y e x i s t , and t h e

domestic market does not provide a ~ y g r e a t s t i m u l u s t o innovatory a c t i v i t y .

SOME POINTS ARISING

Thus, with t h e b e n e f i t of h i n d s i g h t , it i s q u i t e p o s s i b l e t o f i n d h i s t o r i c z l evidence f o r t h e importance o f major inno-i rations a s g e n e r a t o r s of g e n e r a l o r r e g i o n a l economic upswings. It i s much more d i f f i c u l t

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and perhaps impossible - t o acswer c e r t a i n q u e s t i o n s which emerge. I w i l l t r y t o s k e t c h them.

--

Who was t h e ' b a s i c ' i n v e n t o r ? Whoever he was, a l o n g c h a i n of p r e v i o u s i n v e n t i o n s helped h i n . Take Faraday, whose demonstration t o t h e Royal S o c i e t y i n London, anno 1831, i s o f t e n t a k e n a s t h e b i r t h d a y o f t h e much l a t e r developed e l e c t r i c i t y i n d u s t r y . Be could not have p r e s e n t e d h i s t h e o r i e s w i t h o u t t h e out s t a n d i n g achievements of s c i e n t i s t s l i k e Benjamin F r a n k l i n ( 1749), Galvani

( 179 1 )

,

^Volta ( 1800)

,

^Anpsre ( 1822 ) and o t h e r s . It was a l o n g way

-

b e f o r e Faraday and a f t e r him - t o t h e l a r g e - s c a l e e l e c t r i c i t y i n d u s t r y t h a t

' c r e a t e d new s o c i a l b e n e f i t s , new markets and new jobs' ( t o use tile d e f i n i t i o n of a major b a s i c innovation, coined by Mensch ( 4 )

1.

- -

Faraday was a s c i e n t i f i c g e n i u s ; s o were some o t h e r g r e a t i n v e n t o r s . But Watt's simple aim was a b e t t e r engine and Daimler's was a new v e h i c l e he could s e l l . None of them was t h i n k i n g , presumably, o f h i s achievement as t h e s t a r t of a new e r a ; nor were t h e i r immediate contemporaries t h i n k i n g i t . The g r e a t new opening was u s u a l l y recognised somewhat l a t e r by o t h e r s

-

such a s by Henry Ford i n t h e case of t h e automobile. With t h e b e n e f i t o f h i n d s i g h t it may be p o s s i b l e t o a s s e s s t h e fundamental importance o f some major

innovation, b u t it i s d i f f i c u l t - o r perhaps even impossible

-

t o c l a s s i f y any r e l a t i v e l y new development i n t h i s super-class without t h e h i s t o r i c a l p e r s p e c t i v e .

--

F i n a l l y , w h i l s t t h e s ? g n i f i c a n c e of a major b a s i c innovatior, i s obvious, from t h e p o i n t of view of i t s impact on t h e econoloy it is not t h e innovation i t s e l f b u t i t s d i f f u s i o n , a c r o s s t h e economy, ~ n d t h e speed o f t h i s d i f f u s i o n , t h a t m a t t e r s most.

The statements i n t h e above paragraph may seem t o many t o oppose t h e views o f Mensch - who argued ( 4 ) t h a t one of t h e main reasons f o r t h e d e c l i n e of t h e world economy i s t h e d e a r t h of major b a s i c innovations i n r e c e n t decades.

However, I t r u s t t h a t my views do not c o n t r a d i c t Mensch's t h e o r y a t a l l : t h e y supplement i t . There a r e many innovations

'

i n t h e p i p e l i n e ' ; some of them may prove t o be of major importance but only t i m e w i l l show which one( s )

-

^{i f any.}

A t p r e s e n t we cannot know

-

we c a n ' t see t h e f o r e s t f o r t h e t r e e s . The q u e s t i o n i s n e v e r t h e l e s s j u s t i f i e d : what i s l i k e l y t o happen?

Leaving a l l o t h e r important a s p e c t s a s i d e , i s t h e r e anything on t h e h o r i z o n

-

i n t h e a r e a of innovations

-

t h a t may make a marked impzct on economic a c t i v i t y o r s i g n i f i c a n t l y reshape t h e way of l i f e ? Nothing l e s s than t h e d i v i n e

i n s p i r a t i o n of a prophet is r e q u i r e d t o answer questions o f t h i s kind, and I can off'er no more than personal guesses.

GUESSIIiG THZ FUTURE

Let u s f i r s t have t h e 'microprocessor r e v o l u t i o n ' out o f t h e way. There a r e many who b e l i e v e t h a t t h i s g r e a t innovation w i l l be t h e redeemer o f t h e s i c k l y world economy, f o l l o w i n g i n s i g n i f i c a n c e t h e motors of e a r l i e r

upswings. The importance of m i c r o - e l e c t r o n i c s can be s e e n i n many a r e a s a l r e a d y . The microprocessor i s l i k e a chameleon: it t a k e s on t h e c h a r a c t e r of whatever program h a s been f e d i n t o it. It can d i r e c t a guided m i s s i l e , o p e r a t e a f u e l i n j e c t o r o r a c o f f e e d i s p e n s e r , o r c o n t r o l an i n d u s t r i a l p r o c e s s . I t can be used almost anywhere, i n m e t a l machining and i n medical d i a g n o s i s . It i s c o n c e i v a b l e t h a t it c o u l d b e a c a n d i d a t e t o l e a d a

t e c h n o l o g i c a l upheaval, g i v i n g t h e n e c e s s a r y push f o r a swing o u t o f Mensch's t e c h n o l c g i c a l stale21late

-

i f we r e a l l y a r e i n t h i s p o s i t i o n .

I t i s n o t b e l i t t l i n g t h e s i g n i f i c a n c e o f t h e n i c r o p r o c e s s o r when I

e x p r e s s t h e view t h a t I c o n s i d e r it t o b e t h e n e c e s s a r y i n s t r u m e n t f o r a c h i e v i n g a r e a l l y marked change 'out I expect t h i s change i t s e l f t o come elsewhere.

My c a n d i d a t e s f o r t h i s change a r e t h e following a r e a s , i n t h i s o r d e r : energy

food

environment

s o c i a l i n s t i t u t i o n s .

Some may miss i n t h i s s h o r t l i s t t h o s e n a t u r a l r e s o u r c e s t h a t are n e i t h e r food nor energy; t h e i r o n i s s i o n i s i n t e n t i o n a l . I b e l i e v e t h a t w i t h i n t h e f o r e s e e a b l e f u t u r e none o f t h e s e w i l l be i n fundamentally s c a r c e s u p p l y , b u t i f , c o n t r a r y t o my e x p e c t a t i o n , s h o r t a g e s do o c c u r , mankind w i l l f i n d a way t o l i v e without t h e s c a r c e m a t e r i a l o r f i n d out how t o r e p l a c e it. S c i e n t i f i c and t e c h n o l o g i c a l advance w i l l p r o v i d e t h e answer i n t h e c a s e of such an

emergency

-

^{a s} it s o o f t e n h a s i n t h e p a s t . ( 8 )

The above f o u r a r e a s r e p r e s e n t v a r i o u s f a c t o r s of p r o d u c t i o n ( o r ' r e s o u r c e s

'

⁾

,

of which t h r e e a r e l i k e l y t o b e i n a t i g h t o r disturbed p o s i t i o n and one i n uncomfortable abundance. Energy may become s c z c e ; food s u p p l i e s i n a d e q u a t e and l a n d f o r expanding food p r o d a c t i o n d i f f i c u l t t o f i n d ; and t h e environment may b e d i s t u r b e d by p o l l u t i o n of v a r i o u s k i n d s . The f o u r t h a r e a , s o c i a l i n s t i t u t i o n s , concerns t h e f a c t o r i n p l e n t i f u l oversupply: p e o p l e .

ENERGY

With only a v e r y s l i g h t s t r e t c h of t h e imagination it c a n be s a i d t h a t t h e motors o f e a r l i e r Koridratiev upswings, a s i d e n t i f i e d by Schumpeterian a n a l y s i s , were c l o s e l y connected w i t h energy developments. The f i r s t upswing had w a t e r power and t h e beginning of t h e c o a l e r a . The second was c l e a r l y b a s e d on c o a l ; t h e t h i r e on c o a l , e l e c t r i c i t y and t h e e a r l y development of o i l .

The l a s t upswing ( t h e postwar golden age t o 1973) was based oil o i l and g a s , w i t h t h e b i r t h p a n g s of n u c l e a r energy.

The energy s i t u a t i o n does not r e q u i r e any g r e a t a n a l y s i s h e r e . It w i l l s u f f i c e t o say t h a t t h e p r e s e n t key, t h e o i l s i t u a t i o n , h a s a l r e a d y become t i g h t . The p r i c e of o i l a t t h e producers i s now some

15

times t h a t of i t s

1972 l e v e l i n money terms, and i n c r e a s e d over t h i s p e r i o d something l i k e

s i x o r seven-fold i n r e a l terms. The w o r l d ' s main source o f o i l i n i n t e r n a t i o n a l t r a d e i s t h e Middle d a s t , whose producers, a l l i e d t o e x p o r t e r s i n o t h e r a r e a s , a r e a s s o c i a t e d w i t h i n OPEC; t h e y a r e

-

a t p r e s e n t

-

i n a p o s i t i o n t o keep t h e market t i g h t and s e t t h e p r i c e .

The t i g h t supply p o s i t i o n and ever-increasing p r i c e have, however, a number of i m p l i c a t i o n s . On t h e n e g a t i v e s i d e (which at p r e s e n t

-

b u t ,

h o p e f u l l y , probably only t e m p o r a r i l y

-

f a r outweighs any b e n e f i t s t h a t might cone from t h e p o s i t i v e s i d e as d e t a i l e d below) are t h e w e l l knowrl i n f l u e n c e s f u e l l i n g i n f l a t i o n , reducing domestic output and r e a l income of t h e o i l

consumers, and r e s u l t i n g i n a n imbalance i n t h e i n t e r n a t i o n a l f i n a n c i a l p o s i t i o n t o an e x t e n t t h a t from t i m e t o t i m e it may seem unmanageable. These a r e a l l immediate e f f e c t s . There i s a l s o a p o s i t i v e s i d e t o t h e p r e s e n t c o n s t e l l a t i o n

-

b u t w i t h e f f e c t s which can only work i n t h e u n c e r t a i n f u t u r e (and some would

?

no doubt add: i f a t a l l ) . S c a r c i t y and t h e high p r i c e a r e a g r e a t s-$mulus

t

t o R & D e f f o r t s i n t h r e e d i r e c t i o n s ; t h e s e a r e : conserving energy, t h a t is r a i s i n g t h e e f f i c i e n c y of usage; s e a r c h i n g f o r new s o u r c e s of conventional f u e l s ; end seeking sources of new t y p e s o f energy.

Mankind w i l l be p r e s s e d t o p r o g r e s s and it i s my b e l i e f t h a t s o l u t i o n s

w i l l be found; indezd, t h e r e J r e a l r e a ? ~ . s i g n s point in^ i n al: thrcte d i r e c t i o . 1 ~ . Let me s t a r t w i t h t h e f i r s t : c o n s e r v a t i o n .

There a r e many s t u d i e s r e l a t e d t o t h e e s t i m a t i o n of t h e p r i c e

e l a s t i c i t y of energy use. They d i f f e r i n t h e i r e s t i m a t e s b u t a g r e e , w i t h o u t e x c e p t i o n , on one p o i n t : t h a t w h i l s t t h e short-term p r i c e e l a s t i c i t y may b e low, t h e long-term r e a c t i o n of demand and usage t o p r i c e changes i s high.

The long-term may be longer t h a n we would l i k e t o s e e ; i n t h e p r e s e n t

c o n d i t i o n s of very slow growth and reduced investment a c t i v i t y it may indeed b e v e r y l o n g .

The t h r e e p o i n t s t h a t have t o b e borne i n mind a r e t h e s e . ' F i r s t , a p e r t from t h e r e l a t i v e l y easy measures t h a t can be t a k e n i n t h e framework o f

b e t t e r householding

-

t h a t i s , improved o r g a n i s a t ion and more c a r e f u l c o n t r o l o f energy use

-

any more important change t h a t would y i e l d h i g h e r energy e f f i c i e n c y r e q u i r e s new investment. That t a k e s t i m e , e s p e c i a l l y i n a p e r i o d o f high i n f l a t i o n and slow growth, s i n c e t h e r e a r e many o t h e r o b j e c t i v e s

c a l l i n g f o r i n v e s t m e ~ t and energy p r o j e c t s compete with o t h e r s f o r t h e l i m i t e d c a p i t a l a v a i l a b l e . Secondly, and t h i s i s more important, a p a r t from t h e

once-and-for-all e f f e c t of t h e dramatic r i s e i n o i l p r i c e s i n 1973/74, u n t i l r e c e n t l y t h e f i n a n c i a l i n c e n t i v e t o i n v e s t i n energy saving has n o t been t o o g r e a t . Whilst t h e macroeconomic burden on o u r economies h a s i n c r e a s e d

s u b s t a n t i a l l y w i t h t h e manifold r i s e i n OPEC p r i c e s , t h e c o s t t o t h e f i n a l consumer h a s r i s e n much l e s s . Up t o t h e c l o s i n g months o f 1979 t h i s rise i n r e a l t e r n s was i n many c a s e s no more t h a n 30-40 p e r c e n t i n +.he v a r i o u s c o u n t r i e s , and i n t h e c a s e of motor s p i r i t even l e s s . We cannot expect t o o much r e a c t i o n t o slich a r e l a t i v e l y minor r e a l p r i c e change, remembering t h a t energy c o s t s s t i l l do n o t account f o r a v e r y l a r g e s h a r e i n t o t a l p r o d u c t i o n c o s t s ( a p a r t from some very heavy u s e r s ) . I n t h i s r e s p e c t I expect a

s i g n i f i c a n t change es from about now, when t h e second p r i c e e x p l o s i o n i s l i k e l y t o reach t h e c o n s m e r . T h i r d l y , it i s .questionable t o what e x t e n t e l a s t i c i t y e s t i m a t e s , which a r e i n v a r i a b l y based on h i s t o r i c a l e x p e r i e n c e going back t o t h e p e r i o d of cheap energy s u p p l i e s , a r e r e l e v a n t t o t h e f u t u r e o f a g r e a t l y changed energy s i t u a t i o n . T h i s i s one o f t h e r e a s o n s I a m avoiding t h e u s e of any q u a n t i f i e d e s t i m a t e s . Apart from t h e p r i c e , t h e r e c o g n i t i x ~ of p o s s i b l e ? c a r c i t i e s z a y z l s o work i n t h e same d i r e c t i o n

-

t h a t i s , t o devote much more a t t e n t i o n and a l l o c a t e more r e s o u r c e s t o energy conservation.

The second e f f e c t o f t h e p r e s e n t s i t u a t i o n i s t h e s e a r c h f o r new s o u r c e s of conventional f u e l s . Here we have p l e n t y o f evidence p r a c t i c a l l y a l l o v e r t h e world, b u t l e t me r e s t r i c t myself t o t h e North Sea. The second wave of o i l p r i c e r i s e s i n 1979 has a l r e a d y induced o p e r a t o r s t o s t a r t b u i l d i n g t h e equipment f o r t h e e x p l o i t a t i o n of s m a l l e r o i l f i e l d s discovered e a r l i e r t h a t would not have been touched a t a lower p r i c e l e v e l . E x p l o r a t i o n h a s a l s o r e c e i v e d a f i l l i p from t h e p r i c e b i k e and only r e c e n t l y , i n May 1980, b o t h S h e l l and BP announced independently t h e f i n d i n g o f major new g a s f i e l d s i n t h e North Sea. Given t h e f a c t t h a t s o far o n l y a p a r t o f t h a t maritime a r e a has been explored, it i s ^i10t w i s h f u l t h i n k i n g t o b e l i e v e t h a t even more w i l l b e forthcoming; and t h e s i t u a t i o n i s probably s i m i l a r i n o t h e r areas t o o .

F i n a l l y , t h e s e a r c h f o r new s o u r c e s of energy i s a l s o seen i n a d i f f e r e n t l i g h t now. I n t h e s c i e n t i f i c s e n s e , t h e s e s o u r c e s a r e not new.

I t i s t h e e n g i n e e r i n g t h a t c a u s e s problems and t h e d i f f i c u l t i e s of producing u s a b l e energy from t h e s e s o u r c e s i n l a r g e , commercial q u a n t i t i e s . Whichever of t h e new s o u r c e s we t a k e

-

s o l a r , biomass, sugarcane-based g a s o h o l , o i l s h a l e s , t a r s a n d s , e t c . - none o f them w i l l supply energy cheaply. But w h i l s t s o f a r t h e d i f f e r e n c e between t h e c o s t o f t h e novel t y p e of energy and t h a t o f conventional o i l h a s been very l a r g e , w i t h t h e p r i c e - r a i s i n g r a c e t h a t can be w i t n e s s e d among OPEC producers t h e p r i c e o f o i l i s coming n e a r e r and n e a r e r t o t h e h i g h e r l e v e l of t h e new f u e l s , h e l p i n g t h e l a t t e r t o r e a c h economic v i a b i l i t y w i t h i n t h e f o r e s e e a b l e f u t u r e .

EARLIER ENERGY EXPERIENCE

There a r e , however, sone o t h e r important p o i n t s t o b e remembered. Let m e go back i n h i s t o r y i n o r d e r t o survey b r i e f l y what happened i n t h e p a s t on t h e energy f r o n t , t a k i n g j u s t two examples. I w i l l d e a l w i t h t h e f i r s t o n l y b r i e f l y s i n c e it has been d e s c r i b e d i n some d e t a i l elsewhere

( 5 ) -

what form d i d t h o s e developments t a k e t h a t h e l p e d t o overcone e a r l i e r , s i m i l a r l y

s e r i o u s energy s h o r t a g e s ? The p r e s e n t one i s not t h e f i r s t i n mankind's h i s t o r y . England was f a c i n g s e r i o u s f u e l s c a r c i t y i n t h e e a r l y 1 8 t h c e n t u r y , having b u r n t up h e r formerly ample f o r e s t s ; a number o f major t e c h n o l o g i c a l breakthroughs and t h e f o l l o w i n g s t e p w i s e innovatory developments helped t o overcome t h e problem by c o n v e r t i n g h e r economy t o t h e u s e o f t h e newcomer a t t h a t t i m e : c o a l , of which t h e r e was p l e n t y .

My second example r e q u i r e s a l i t t l e more e l a b o r a t i o n . It concerns t h e United S t a t e s , t h e c o u n t r y where (among t h e n o r e advanced economies) fuelwood remained t h e energy b a s e f o r t h e l o n g e s t t i n e . As l a t e as 1870, about t h r e e q u a r t e r s o f a l l t h e energy used i n t h e US came f r o n fuelwood. By t h e n , t h e t r a n s i t i o n t o c o a l was a l r e a d y underway and towards t h e end o f t h e l a s t

c e n t h it b e c m e t h e dominant s o u r c e . The important p o i n t i n t h i s t r a n s i t i o n was t h e change from a s e v e r e l y l i m i t e d f u e l r e s o u r c e t o a n o t h e r , a v a i l a b l e i n a p p a r e n t l y e n d l e s s q u a n t i t i e s . Abundance paved t h e way f o r t h e unimpeded growth o f i r o n and s t e e l p r o d u c t i o n which, i n t u r n , made it p o s s i b l e t o b u i l d a r a i l r o a d network covering t h e whole enormous c o n t i n e n t and t o produce t h e machinery r e q u i r e d f o r t h e r a p i d l y expanding manufacturing i n d u s t r i e s . The w r i t i n g s o f Rosenberg

( 6 )

and S c h u r r ( 7 ) d e s c r i b e how,once t h e f u e l c o n s t r a i n t was broken, one developnent l e d t o a n o t h e r i n t h e v a r i o u s branches of i n d u s t r y and s e r v i c e s (and a l s o i n a g r i c u l t u r e ) i n a dynamic sequence.

L a t e r on, t h e US was i n t h e f o r e f r o n t of developing a l a r g e - s c a l e e l e c t r i c i t y g e n e r a t i o n and supply i n d u s t r y ; t h i s removed t h e l i m i t a t i o n s imposed on f a c t o r y processes by t h e e a r l i e r mechanical energy system t h a t used s h a f t s and b e l t i n g t o t r a n s m i t power from t h e in-house prime mover, and l e d t o l a r g e p r o d u c t i v i t y i n c r e a s e s . The o i l p e r i o d , a p a r t from g e n e r a l l y i n c r e a s i n g m o b i l i t y , l e d t o enormous i n c r e a s e s i n crop y i e l d s with t h e h e l p o f t r a c t o r s and energy-based a r t i f i c i a l f e r t i l i z e r s , a g a i n removing f u r t h e r c o n s t r a i n t s : t h o s e of t h e a v a i l a b i l i t y of n a t u r a l

f e r t i l i z e r s and animal drawing p a r e r . Geographic c o n s t r a i n t s were a l s o removed: t h e r a i l w a y s overcame t h e l i m i t s formerly imposed on i n d u s t r i a l l o c a t i o n s by waterways r e q u i r e d f o r t r a n s p o r t a t i o n and w a t z r wheels f o r power. I n l a t e r y e a r s , l i q u i d f u e l s and t h e e a s e o f t r a n s p o r t a t i o n by

t r u c k s and c a r s made t h e l i m i t a t i o n s imposed by r a i l w a y s and c o a l disappear.

And f i n a l l y , a i r c o n d i t i o n i n g and a i r t r a n s p o r t removed o t h e r l i m i t a t i o n s , t h o s e o f c l i m a t e and d i s t a n c e s .

Of c o u r s e , an e n d l e s s number o f a d a p t a t i o n s w i t h i n t h e economic system were needed along t h i s long road t o changed c o n d i t i o n s b u t t e c h n o l o g i c a l

advance s u p p l i e d t h e answers t o t h e emerging problems. These fhdamental changes were a l l - p e r v a s i v e ; t h e y were caused by t h e t r a n s i t i o n from t h e r e l a t i v e s c a r c i t y o f one form of energy t o t h e abundance of a n o t h e r , t h e n t h e emergence o f y e t newer f u e l s ; it was a long h a u l from s h o r t a g e t o abundance and d i v e r s i f i c a t i o n . There i s reason t o b e l i e v e t h a t on t h e d i f f e r e n t way t h a t l i e s ahead s i m i l a r developnents w i l l occur a c r o s s t h e board. This Fay i s more d i f f i c u l t because it goes from r e l a t i v e abundance t o a t i g h t e r s i t u a t i o n . Yhe i n s t i n c t f o r s u r v i v a l , t h e 'animal s p i r i t ' , is s t r o n g however, and s i n c e t h e energy s i t u a t i o n w i l l l e a v e i t s mark on

p r a c t i c a l l y every a s p e c t o f present-day l i f e , it i s not t o o naive o r t o o o p t i m i s t i c t o expect a s i m i l a r cascading o f t e c h n o l o g i c a l changes t o b r i n g answers t o many f u t u r e problems. We nay have some vague i d e a s a s t o what t h e s e changes might b e but we cannot know e x a c t l y . Nor d i d t h e Americans of 1870.

T h i s i s why I b e l i e v e t h a t major developments w i l l emerge i n t h e a r e a o f energy and w i l l r a d i a t e and cascade from t h e r e . I f we t h i n k o f t h e v e r y l a r g e c a p i t a l r e q u i r e d f o r a s i n g l e n u c l e a r power s t a t i o n o r one new coalmine, not t o mention t h e m i l l i a r d s i n v e s t e d i n t h e North Sea, and i f we a l s o remember t h a t new forms and s o u r c e s o f energy w i l l probably r e q u i r e r e l a t i v e l y even l a r g e r p a r t i c i p a t i o n from many i n d u s t r i e s and s e r v i c e s - t h e n it must become c l e a r t h a t t h e impact o f t h e s e developments w i l l a l s o b e fundamental and very g r e a t .

FOOD

I w i l l only dwell b r i e f l y on t h e o t h e r t h r e e a r e a s i n which - i n my persorial viek

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major developments can be expected.

A l l t h r e e a r e i n some way - t o a g r e a t e r o r l e s s e r degree

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connected w i t h energy, It does not r e q u i r e t o o much j u s t i f i c a t i o n t o s t a t e t h a t food production w i l l have t o be i n c r e a s e d considerably i n o r d e r t o f e e d t h e r i s i n g population o f t h e world and t o secure i t s b e t t e r n u t r i t i o n . C l e a r l y t h i s is t h e d i f f i c u l t t a s k of a g r i c u l t u r e . The c o n s i d e r a b l e d i r e c t and i n d i r e c t requirements o f a g r i c u l t u r e ( i n c l u d i n g f e r t i l i s e r s and many o t h e r i n p u t s i n t o a g r i c u l t u r a l production) provide t h e l i n k t o energy s u p p l i e s . It seems c e r t a i n t h a t t h e s e requirements a r e going t o i n c r s a s e i n f u t u r e , i n view of t h e r i s i n g a g r i c u l t u r a l production.

There a r e , however, o t h e r a s p e c t s t o be considered as w e l l . Energy m a t e r i a l s supply t h e base t o make many of t h e s y n t h e t i c , man-made m a t e r i a l s

t h e w o r l d ' s i n d u s t r y needs. This base m a t e r i a l w i l l be i n s h o r t supply

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hence t h e r e w i l l be excess demand f o r t h e n a t u r a l v a r i e t i e s . To l i m i t myself t o t e x t i l e f i b r e s and rubber only: i f t h e p r e s e n t q u a n t i t i e s of

man-made f i b r e s and s y n t h e t i c rubber were t o be r e p l a c e d by n a t u r a l products, t h e a r e a no7 s e r v i n g t h e production of c o t t o n , wool and rubber ought t o be a t l e a s t doubled and p o s s i b l y t r e b l e d . Because of c l i m a t i c c o n d i t i o n s t h e p o s s i b i l i t i e s of c u l t i v a t i o n a r e l i m i t e d t o a l a r g e e x t e n t t o t h o s e c o u n t r i e s and geographic a r e a s where every square meter o f good s o i l i s b a d l y needed f o r t h e production of b a s i c foods. Thus

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a p a r t from some marginal l a n d s

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i n d u s t r i a l m a t e r i a l s nay be competing with food f o r t h e l i m i t e d a r e a of

land. Given t h e dual o b j e c t i v e , considerable developments w i l l be needed i n t h e t e c h n i c a l and t h e o r g a n i s a t i o n a l sense t o achieve both g o a l s .

ENVIRONMENT

b Q t h i r d p o i n t was t h e e n v i r o m e n t . This i s a vexed s u b j e c t nowadays, and i s f u r t h e r complicated by i t s a s s o c i a t i o n with energy. The production, t-ansformation and consumption of energy a r e a c t i v i t i e s which probably cause most of t h e p o l l u t i o n i n t h e environment. I n s o f a r as one can judge, some new sources and forms of energy may be r e l a t i v e l y less p o l l u t i n g (e.g. s o l a r ) b u t o t h e r s

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such a s s h a l e o i l

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may add markedly t o environmental problems i n t h e f u t u r e . For t h e p r e s e n t , we have been witnessing t h e emergence of p u b l i c opinion a g a i n s t t h e dangers t h a t n u c l e a r p a r e r s t a t i o n s may p r e s e n t t o t h e environment, r e s u l t i n g i n demonstration campaigns, which have l e d i n some cases t o very powerful i n t e r v e n t i o n .

Without going i n t o g r e a t d e t a i l , I am expecting s i g n i f i c a n t advances t o f i g h t t h e p o l l u t i o n of a i r and w a t e r , s i n c e otherwise t h e emergence o f unforeseeable dangers i s l i k e l y , o r a t l e a s t p o s s i b l e . However, t h e chances t h a t t h e s e developments w i l l become g e n e r a t o r s o f a d d i t i o n a l economic

a c t i v i t y a r e much l e s s t h a n i n t h e c a s e o f t h e two previous s e c t o r s , energy and food.

PEOPLE

My f o u r t h c a n d i d a t e , changes i n t h e s o c i a l f i e l d , d i r e c t l y concerns people. It i s mentioned not s o much a s a p o s s i b l e source of growth, r a t h e r as a n e c e s s i t y . Unemployment i s a g e n e r a l problem, i n d i c a t e d b o t h b y t h e high l e v e l of r e g i s t e r e d unemployed, a f i g u r e t h a t has r e f u s e d t o r e t u r n t o more normal l e v e l s e v e r s i n c e t h e g r e a t r e c e s s i o n o f 1975, and a l s o b y t h e r e c e n t low growth of p r o d u c t i v i t y p o i n t i n g t o o v e r m m i n g and ullemployment w i t h i n t h e f a c t o r y g a t e s . Energy s c a r c i t y w i l l h a r d l y h e l p ; i n a l l

p r o b a b i l i t y it w i l l make t h e s i t u a t i o n more d i f f i c u l t by r e t a r d i n g f u r t h e r economic growth.

Coupled w i t h t h i s i s t h e a l i e n a t i o n g e n e r a l l y experienced b y t h e worker from h i s work i n an assem3ly l i n e o r o t h e r o r g a n i s a t i o n a l form o f modern i n d u s t r y . Technological advance has helped t o reduce l a b o u r requirements o f production and o t h e r a c t i v i t i e s b u t it has not helped t o s o l v e t h e ensuing problems of t h e s o c i e t y and t h o s e of t h e i n d i v i d u a l . With o u r p r e s e n t

i n s t i t u t i o n s t h e l i k e l i h o o d i s o f r i s i n g d i f f i c u l t i e s i n keeping t h e i n c r e a s i n g number of people i n employment t h a t i s u s e f u l and a l s o s a t i s f i e s them. S o c i a l innovators have s o f a r been much l e s s p r a d u c t i v s and successful- t h a n s c i e n t i s t s and t e c h n o l o g i s t s .

It i s a b a s i c t r u t h t h a t man does n o t l i v e by bread alone. Whether o u r p r e s e n t s o c i a l set-up

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both t h e Western and E a s t e r n t y p e s

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w i l l b e a b l e t o provide 'bread' f o r t h e future p o p u l a t i o n now seems d o u b t f u l ; b u t it i s almost c e r t a i n t h a t t h e m a j o r i t y of mankind w i l l not f i n d non-bread, non-material s a t i s f a c t i o n , l e t alone happiness. This i s not t h e r i g h t p l a c e t o go any f u r t h e r i n t h i s m a t t e r , which i s i n any c a s e more i n t h e l i n e o f d i s c i p l i n e s o t h e r t h a n economics; whether we need a s h o r t e r working week, e a r l i e r r e t i r e m e n t , some c l e v e r r e o r g a n i s a t i o n o f i n d u s t r i a l and o t h e r t y p e s of work, t h e r e t u r n of t h e craftsman o r something e l s e t h a t cannot even be guessed a t

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^all t h i s would exceed t h e scope o f t h i s paper. But t h e need f o r some b a s i c s o c i a l change w i l l soon b e g e n e r a l l y f e l t .

COKCLUDING THOUGHTS

The n a t u r a l l y emerging question i s one t h a t asks t h i s : i f

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a s it appears - a 'next round' i s due t o begin soon, where i s it l i k e l y t o s t a r t ? A question obviously impossible t o answer; some s p e c u l a t i o n may, however, n o t be o u t of p l a c e .

Kindleberger ( 9 ) h a s put forward t h e e l e g a n t l y formulated view of t h e 'ageing economy'

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c o n t r a s t i n g t h e 'young c o u n t r i e s ' with t h e B r i t i s h c l i m a c t e r i c , a c o n d i t i o n which may be diagnosed a s a k i n d o f g e n e r a l a r t e r i o s c l e r o s i s a t t a c k i n g t h e whole system i n an advanced p e r i o d o f m a t u r i t y . This makes t h e ageing economy l o s e out ' i n a f i e l d f u l l o f

i n n o v a t i o n s ' . It i s an a t t r a c t i v e t h e o r y , one o f i t s a t t r a c t i o n s b e i n g t h a t ( a s t h e a u t h o r admits w i t h some h e s i t a t i o n ) although t h e p a s t is n o t e a s i l y d i s c a r d e d , 'bygones a r e bygones' and a new start could be made a t any time.

Economic h i s t o r y s u p p l i e s many examples o f t h e r e j u v e n a t i o n 3f economies which, a t v a r i o u s p o i n t s i n time, could l e g i t i m a t e l y have been considered ' a g e i n g ' . France h a s emerged dynamically from h e r l o n g inter-.war s t a g n a t i o n ; s o d i d Germany from war d e s t r u c t i o n ; Belgium and Holland have s u c c e s s f u l l y recovered f r o n t h e l o s s o f t h e i r c o l o n i a l empires, as d i d A u s t r i a a f t e r h e r l e s s ha2py experience i n t h e decades following t h e e x i t of t h e Habsburgs; and t h e United S t a t e s gave evidence o f t h e i r vigour b y t h e l i v e l y recovery i n 1976-78 from t h e deepest r e c e s s i o n s i n c e t h e war.

I n d u s t r i a l i s a t i o n , and developments i n many s e c t o r s o u t s i d e i n d u s t r y , have reached a s t a g e t h a t i s h i g h l y developed as compared w i t h t h e p a s t i n t h e USSR and i n t h e a r e a t h a t h a s come t o b e c a l l e d E a s t e r n Europe. And some of t h e l e s s developed c o u l l t r i e s have a l r e a d y progressed r a p i d l y - enough t o b e c a l l e d 'newly i n d u s t r i a l i s e d ' ones.

One noteworthy experiment i n t h e sociology o f i n d u s t r i a l work h a s been undertaken i n one o f t h e s m a l l e r i n d u s t r i a l c o u n t r i e s , Sweden ( i n t h e Volvo works). A s u c c e s s f u l new s o l u t i o n f o r e a s i n g energy problems comes from B r a z i l ( i n t h e form o f t h e sugarcane-based 'gasohol' )

.

Thus, s i z e o r

p o s i t i o n on t h e development l a d d e r does not seem t o b e a n a b s o l u t e requirement f o r discovering and developing new avenues o f d e p a r t u r e .

The n a t u r a l and human endowments o f v a r i o u s c o u n t r i e s a r e d i f f e r e n t ; it remains t r u e

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t o some e x t e n t

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t o say t h a t w h i l s t t h e i r chances are about e q u a l , t h e y a r e more e q u a l f o r some t h a n f o r o t h e r s . The d i f f e r e n c e s ,

however, a r e r e l a t i v e l y much s m a l l e r t h a n t h e y used t o b e i n t h e p a s t . It i s not a 'handicap' r a c e p a r e x c e l l e n c e any more

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it seems t o b e f a i r l y open.

REFEHEKCES AIJC NOTES

( 1 ) Ray, G.F. ( 1980) Innovat i o n a s t h e s o u r c e of long term economic growth, Long Range P l a n n i n g , Vol. 13, A p r i l 1980.

( 2 ) Ray, G.F. (1980) I n n o v a t i o n i n t h e l o n g c y c l e , Lloyds Bauk Review, No 135,

J a n u a r y 1980.

( 3 ) Many r e f e r e n c e s were given i n ( 1 )

.

Some f u r t h e r and r e c e n t works : Rostow, W.W. and Kennedy, M. A simple model o f t h e K o n d r a t i e f ? c y c l e , Research i n Economic E i s t o r y , Vol.

4 ,

1979.

F o r r e s t e r , J . W . , Low, G.W. and Mass, N . J . Ce,pital formation and t h e l o n g wave i n a c t i v i t y , System Dynamics Group, Sloan School o f Management, MIT, Cambridge, Mass.

,

J u l y 1977.

F o r r e s t e r , J . W . Innovation and t h e economic l o n g wave, The McKinsex Q u a r t e r l x , Spring 1979.

S t o k e s , C . J . A long r a n g e view b a s e d on t h e Kondratieff c y c l e , Business Economics, J a n u a r y 1980.

( 4 ) Mensch, G . Das t e c h n o l o g i s c h e P a t t

,

F i s c h e r

,

F r a n k f u r t , 1977.

( 5 ) Ray, G.F. ( 1979) Energy economics

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a random walk i n h i s t o r y , Energy Economics, Vol. 1 , No 3, J u l y 1979.

( 6 ) Rosenberg, N . ( 1976) P e r s p e c t i v e s on technoloqy, Cambriege U n i v e r s i t y P r e s s , ( 7 ) S c h u r r , S . H . ( 1978) Energy, economic growth and human welfare-, EPRI J o u r n a l ,

Vol. 3, no

4 ,

May 1978. ( ~ l s o : Resources f o r t h e F u t u r e R e p r i n t 154).

( 8 ) Ray, G.F. (1980) The c o n t r i b u t i o n of s c i e n c e and technology t o t h e s u p p l y o f o f i n d u s t r i a l m a t e r i a l s , N a t i o n a l I n s t i t u t e Economic Review, No 9 2 , May 1980.

( 9 ) Kindleberger

,

C. P. ( 1978) The a g e i n g economy, W e l t w i r t s c h a f t l i c h e s A r c h i v ,

~ i e l - ~ U b i n g e n , Vol. 114, No 3.