World Development, Vol. 13, No. 3, pp. 441-463, 1985. I1305-750X/8553.110 + 0.

{RI
Printed in Great Britain. © 1985 Pergamon Press Ltd.

Microelectronics, Long Waves

and World Structural Change:
New Perspectives for Developing Countries

C A R L O T A PEREZ*
Science Policv Research Unit,
University of Sussex, Brighton, UK

Summary. - - This article assesses thc way in which emerging new tcclmologics could cnhance
dcvclopmcnt prospects. To do this, it first prcscnts a hmg-term view of the relationship bctwccn
the techno-economic sphere and the socio-institutional framework, defining the present period as
one of transition and structural change. It then outlines the main characteristics of the
technological revolution based on microclcctronics. It finally argues that these characteristics will
offer a completely new range of oppt+rtunities Ior reshaping development stratcgics.

1, I N T R O D U C T I O N institutional f r a m e w o r k , on the national and

A t p r e s e n t , the prospects for developing coun-
tries seem b l e a k e r than ever. As general stagna-
tion continues, with short-lived spurts of growth
in the industrialized world, export o p p o r t u n i t i e s
for the T h i r d W o r l d are significantly reduced.
This, c o m b i n e d with the rising cost of imports
and a reduction in i n v e s t m e n t flows, is putting
u n b e a r a b l e pressures on weak d e b t - r i d d e n eco-
nomies. At the sltme time, the electronics revolu-
tion seems to have w i d e n e d the technological gap
to u n b r e a c h a b l e proportions.
This article will present an alternative view. It
will argue that the world is experiencing it
structural crisis, during which, in spite of the
obvious difficulties, t h e r e would be greater - -
r a t h e r than lesser - - scope for a m a j o r positive
change in d e v e l o p m e n t prospects.
T h e a r g u m e n t is based on a s o m e w h a t
S c h u m p e t e r i a n ~ i n t e r p r e t a t i o n of the so-called
K o n d r a t i e v long waves.: T h e e x p l a n a t i o n prop-
osed here for the recurrence of cycles of a b o u t 51)
years' d u r a t i o n in e c o n o m i c growth, attributes a
central role to the diffusion of successive
technological revolutions, r e p r e s e n t i n g a q u a n -
tum ,jump in potential productivity for all or most
of the e c o n o m y . T h e reason for the long wave
p a t t e r n would be that, to yield its full growth
potential, each of these "techno-economic para-
digms" - - as we shall call t h e m - - requires a
fundamental restructuring of the socio-
internatiomtl levels. T h e resulting social lind
institutional t r u n s f o r m a t i o n s then d e t e r m i n e the
general s h a p e of e c o n o m i c d e v e l o p m e n t , or the
"mode of growth" of the next long wave. A
K o n d r a t i e v wave is thus defined here its tire rise
and fall of a m o d e of growth and each crisis its the
painful transition from o n e m o d e of growth to
the next.
T h e present period is seen its o n e such transi-
tion. T h e m o d e of growth that led to the b o o m of
the 1950s and 1960s has run its course. T h e world
must now make the transition f r o m a set o f social
and institutional a r r a n g e m e n t s , shaped by the
characteristics - - and fostering the full deploy-
m e n t - - of a constellation of mass p r o d u c t i o n
technologies based on low-cost oil, to a n o t h e r
capable of fruitful and a p p r o p r i a t e interaction
with a new system of flexible technologies, b a s e d
on low-cost electronics.
This m e a n s that e x t r a p o l a t i o n s from the past
or from the t u r b u l e n t present are misleading. If
and w h e n a new upswing is u n l e a s h e d in the
world e c o n o m y , it is likely to be f r a m e d by a set
of national and i n t e r n a t i o n a l institutions, which
will differ as m u c h from those of the 1950s and
1960s as these differed from the prevailing
conditions in the "Belle Epoque" at the turn of the
century. It also m e a n s that the present is precise-
*Former Director of Technological Development at the
Ministry of Industry of Venczucla.

441
442 W()RI.I) I)[~V[-A_()I)M FN I
l\ the l)Cliod t)I crcatiOll o t t h o s e hlluru condi-
tiOllS and tll',tl :.ill social ;tctors, induding the
d¢,,clolfing c o u n t r i e s , can nnd s h o u l d tltkc ~113
u c t i \ c Imrt it+ thut conw4cx a n d oh,.iousI,.
cord]ict r i d d e n triul-itnd-crrot p~occ,;s.
-to u n d e r t a k e this task successfully h o w e v e r , it
is csscntiul it) identify the n e w runoe of t h e
possible. T h e t.tccpcr the undcrntul~ding o t the
i-,t)tcntialitics lind limit;itions of the n o \ \ "tcchno-
CCOI/OlllJC txn-udigtn," the g r e a t e r the sCOlW h u
shnl'6ng it i m u g i n u t i \ c l x und cIlccti'+cI,, thrt)u~h
mllO\'itti\'c itct+on Jl+ the socinl ~md Mlstittltitul',tl
SpIlcrc,,.
Section 2 ot this txlpcr \',ill intrt)ducc the
ct)nL'L'pt OJ "Icchno-¢coI1OllliC I'~;IrildiglllS" illILI
l)lt..'st._'I1t~I11 OLI[IilIC t)| the l()llg \\it\t" itr~tIIl1¢llt.~
This theoretical l:rilI11u'W(~rk Jx :t II'._'+,_'¢ssltt~+' plClC-
quisitc for undcrstunding the rclc,,ano._ +oI: the
discus,,itms that lotto\\. Sccti.on 3 undertakes the
itnuI,,gs of the dcIinin~ features of tile prcscntI\
difIusing tnicrt~clcctronics I~uradigm. touching
Ul+~on s o m e o t the q u e s t i o n s it raises l:or dcvclol~-
tncnt striltcgics+ Section 4 is a brief CXl)hsrltti(m
into lhc c h u l l c n g c s a n d opI'~orttnlitics l u t i n g the
t+JCvdt)pmg c o u n t r i e s in the p r e s e n t trltn',ition.
A s i, \ \ h o l e , the urticlc ix i n t e n d e d its to(+d h+r
t h o u g h t . T h e r c u d c r +'ill find no stutistics:
r e f e r e n c e s \\ill I',c spltrsc, t h o u g h hundt-cds could
hc gi\cn: cxun+plcs \++ill hc l'qn,.idcd o n l \ w h e n
the', sccm indiH~cnsublc t(+ illustrate an it.lea
rattier than to prove it. This is fully intentional.
T h e p a p e r is c o n c e i v e d m a i n l y as a c o n t r i b u t i o n
for o p e n i n g llCX~r txlths in dc,,clolm+cnt t h i n k i n g .
A s the a t g u m c n t e \ ' o l \ c s , it will hccon+c in-
ctc;tsingl+,, clcilr thin \ \ c u r c n+akinu it case tor
d c t i n i n g the p r e s e n t p e r i o d as ;t time for ill
l:ormcd spcctthltion a n d b o l d CXl~crinlcnlution.
2. r l ! C I I N ( ) I . ( ) ( I Y A N I ) I . ( ) N ( ; WAx,,.r|{s
('onvcntional Vvisdoill tends to ~,cc tcChilolog,,
~is ~l tmtttcr for scientists und engineers, and its
evolution us u series of indixi<.hutl inventions
resulting in ,,+,nnlint]ous cun+uhttixc udvun,..:c:
furthermore, most people find it cltsicr to think
of technologies in the plural, in view of tI+cir
t r e m e n d o u s variety. Y e t . since t e c h n o l o g y is t h e
'ho\,,' a n d tile "\\hilt + o f p r o d u c t i o n , it is in+ fuct
\'or,+' m u c h ;t social a n d e c o n o m i c mattcl-. filL'
p r o c e s s o f t e c h n o l o g i c a l a d v a n c e it+ tCFnlS o f
kno,,\lcdgc itnd i n \ c n l i o n s is :t rchlli~,elv
ittlto11o111OUS t}IOCCSS, hut itlllO\iilioil -i.e.
upplicatiot+ a n d diffusion of specific t c c h n i g u c s in
the prodtlcti,.c s p h e r e - - is ,+or,, mucl+ d e t e r -
m i n e d I+,,' social c o n d i t i o n s und e c o n o m i c profit
decisions. T h u s t e c h n i c a l chum, c curt bc uccclcr+
idcd or held Suck by sociul und cconOllliC
|:lL.t ors. 4
l.xcn tj~u" itli[t)n()Ill\ ol (hu rcsL'~tldh ju,,;,.'cs,, in
rc]iflixc. :nld e c o n o m i c cFitCri~l m c i l n P l i c i t l \
+,)I1J~, r
plCSClll ill the tninds oI scJc'ntists a n d engineer,,.
T h e ~+bjcct has ul,.,vit\s hccn to turn I+,;t>,c mct~tl',
i n t o ~(:,1<.1 :ttl,..I not tile rc\crn u . So. :tllht;ugh :l
~lCitt l'qoportit,n ,.)l: h i n d sciuncc ix cnt.logunoun]\
~ u i d c d . itpldic,ttions a n d dc',clol+mCl+t clh+rt,,.
while still k ¢ c p i n ~ il ccrt'aJi3 itlllOtillI O[;+lLltt'ql(ml\ .
~tt+ tnuch tllorc diFcctl,, u n g a g u d in the h+tcll-dlt\
of +',Ul+pl,+ push" itild +dcin~nld p u l r v, ith the tinct-,,
()1 milO\ati,.Ul:., ill th,.' CCOilOlIHC H ~ h c r u .
lhc lCltdh1¢~s to ;tl+~stub (11 dc'tlllttld n,+_'v~
tcchnt)log', '.ill+itsgrcilth undcl ,.liIIcrcrHc,.c,no-
mid ct3nditi,.)I+S, c\u.'ii ill th,.' ,,ainu firm: iuld tilt'
sorl:-;ol technical solutions '-,flitch[ill tilt_"CL'(llltl+
llliC sphcIC C~IIl ch',IIl~C ill 1311ttIIC ',IcF,ctvAhl ~ tm it
\ : t r i c I \ or h i l c r n a l lind cxtcrn~d factor,, Mlcctin~
l+WOducti\'Jt~,, ru-tditilhility iUld m',irkct~,. Ill lucent
ctccudcs, imlch s()cill[ hcicnL',+: rCSC~iI-Ch hItn |o
u'tlst._'<.l oil tile IIH{I+IIL' Ol this tCL'hllo-cc,.ul,.+nliu
h+tcr;lction. ()n it ~¢llcr~d Ic\c[. i n n o \ : t t h m n hIL\u
buell clltssiIic'.Il',ythch imp:let on producti\ itS,.:~s
to \vhcthcr thu\ m-c nlninlv hthor sn',in~ ot c'iq-,it~tl
s;t\inS ` l,v their rchlti\c inq+~ortilncc, distin-
~uislfin~ ra,+Iicnl frum incJctncntM hlnt)\itthm,,-
told bx thus oI+jccl, either prtwc>,', oi i+rodt.l,..'t."
()thor clfc,rt'-, hlt\c f,ncuscd oIl tile i+~ttt,..'rn()1
L'\ OItlti()ll t)l t+"dch [+itI-tiL'tll~tr il311o\ ittiOll lu',ldinL' t(+
tile n()thm of tcchrtt)h)gicifl ttllicctt+rics." Tiff',
c o n c e p t ix u~,cd to d c s c r i b c the pilth frtun birth to
n+~ilturit\'_ (+I cmy Ixtrticular technology+, from the
~cnct-ull,; it\\ k\\;ird first i n t l o d u c t i o n . IoIlowcd b,+
the idcntilJclttJon o i OI3C h o t t l u n c c k aftc] ailothct
brhlging forth c'tmq+Icn3cntnr~, it+tlO\ ilt i+.)iis.
tjlro+lgh sUcccssl\¢ jnclclllcnt.:tl mlrq,.)\cmunt,,.
l e a d i n g t,,) the fin',tl <',t~,timiz',tthm :nl,.I r c l l t t i \ c
MillldatdJzalJt>II t++ tilt_' l)loccss o r pl+t+t.hlct, illtcl
\ \ h i c h h n t h c r efforts l+uin~ d i n m d s h i n ~ r e t u r n s , n,
l)lottcd 'd~iiil+St tiI11¢, the Iv\el o t p]OdllCtJ\H\
~tchic\'cd I+\ il l+unticuhtr tcchnt)It)gicul plOCc,,s. ~t,,
it is suhicctcd it) StIL'CCSSi\L" Hllpl()\¢lllc'IltS
thr,nugh additional Jn\cslmcnt. \\,nuld thus l+,r,.:s
cnt the .S" shupu or nlltn\ I+iolt~ic:tl pr,.)wtI3
l)roccsscs.
This MoWiflg hod,, c)f IHcFalurc hiLs llILIdc it
incrca>;ingIy clear that tuchnicaI ch,lngc dt)t:s not
occur ut un c\un rh,,'thn~,but neither is it m c F u h
a l+imdom i+l+occs:-,, l:I.ti+thcr still, thu analysis ol
the p+:tttcrns of prol',Ugution ot nc'+v tccht+ologic,,
ucross tile ¢co1+o111~, tun,..Is to L'()nth-tn Schunll)L't+
cl+'s v i e w a b o u t thc hunchil+~ ()l inllox+;ttioiIs ,ll3d
their ,.liflusionillb a n d w a g o n tilshioll.It I11txI',¢¢13
found, tt+r uxampIc, that dutin~ ccrtitJt3periods.
plOCdSs iI+I10\iltJOllS [CIld it) ¢;,UtMlq'~ r)roduct
inl+o\citions in m o s t industl'JL':..,r II T h i s ,,ug~csts
that Jl+llOViitJOllS ill Cq/lJl'UllCllt goo(ln ()CCLII il3
clusters.
110re \vc utc i n t e r e s t e d in the rcl~ttit)tlnhi F,
J'~Ct\~CCII thesis' \\it\c:-, ol tcchtliCltl cl31itl~c LIII~.I
 LONG WAVES AND WORLD S T R U C f U R A L ('ftANGE
long cycles in economic growth. In this cotltext.
Christopher Frecnlan i2 has introduced the notion
of "new technological systelllS,' to describe clust-
crs of mtcrrehitcd product and proccss, tcchnical
and organizational renovations, affecting many
branches of tile economy. Takmg the accent
away from lhe first introduction of stogie innma-
lions and focusin,, on their rate of diffusion as
itllerconnected systems of technical change.
l:reeman points to patterns of structural change
m the ect)nOlllV which, through their widespread
sochd eonsequellCeS, could uilderiie the Koildfa-
tier long waves.
ttcre we would like to fuse Ilk' concepts of
tcchnological Ira ectories and technological sys-
tems and take them one step ftlrlher. We suggest
that these llotions arc applicable to tile analysis
¢/t' tile whole body of technology durin,g rclativcl\
long periods. We propose that it is possible to
identify each successive Kondratiev \~,a~e with
the deploynlent tff a specific, all-pcr~,asive.
technological rcvohition. In other words, that
behind the apparently infinite ~ai-ietv el tech-
nologies of each Iollg-wa\e upswing, there is a
distinct set of accepted +conlnlon-SCllSe" princi-
ples, which define a broad technological tra ec-
tory to,aards a general +best practicc" lronticr.
These prhlciples are applied in file gcnernlion of
innowltions ;uld in the organization of production
m one firm after another, in one branch after
allother, within alld across countries. As this
process of plol)agation evoh'es, there is a pro-
hnlged period of economic growth, based on
relatively high profits and increasing productiv-
it)'. But, gradually, as the range of applications is
illore or less lullv covered and w h e n , t h r o u g h
successive incremental improvements, tile best
practice frontier is actually approached, the
forces underlying thai wa,,e of prosperily dwin-
dle. As this occurs, limits to growth arc ellCOUn-
tcrcd by more and more seclors of the ecollomv.
profits dcclease, and productJ\ity growth slows
down.
Yct, v+ell before the downswhlg is visiblc as {i
general p h e n o m e n o n , dhllinishing returns arc
experienced by some of the IllOsl dvnalnJc firms
i.lnd s e c t o r s , a l l l O n g thetn, there e n s u e s {i COlll-
plcx trial-and-error process spurred by the profit
motive. It results in wavcs of mergers ,:uld
acquisitions, various forms of speculation, efforts
io "stretch" the teehnologies by containing htbor
costs or relocating+ But it also involxes a pcrsist-
cnt search in the pool of the technologically
feasible for what would potentially bc economic-
ally profitable. 'Fhis intensified feedback intcrac-
tion betwcen the technological and economic
spheres, e~cntuallv leads --- through discovery
and rediscovery - - to thc gradual emergence and
443
subsequent rapid devclopmcnt of new tcchnical
elcments. As these prove capable of ovcreolning
thc specific bottlenecks encountered withm tile
mature technologies, imitation and further
innovation along those lines, gradually converge
in synergistic fashion to define a general model to
follow. Each ncw modcl is based on a diffcrcnt
set of "eonunon-scnse' prmciplcs, indicating a
higher best practicc frontier, dcslillcd once again
to transfornl lilt." whole techtlo-cconollliC s\stenl.
The dmvnswhlg of each long w a \ e scls in as tile
process of ;.iballdOlllllent of the e x h a u s t e d illodcl
and the initial propagation of thc next.
(a) A t e c h n o - e c o n o m i c paradi,c{m ax a ~'l +~I
ill I't'.sl#1lCll[ th'cisio'L+
Technological decisions arc taken in a specilic
socio-cconomic context and ill turn influcnce that
context. ECOllOlllic flleorv would have t.s believe
that managers take into account the relative
prices not just of labor and capital, in general.
but of each possible combination of diffcrent
types of labor, of different types of CCluJpnlenl
and of different sorts of inputs, for a range of
possible products, But, how does this work in
practice?
We suggest that the behavior of the relative
cost structure of all inputs to production follows
more or Icss predictable trcnds for relatively long
periods. This predictability bccomes the hasis for
the construction of an 'ideal type' of produclixc
organization, which defines the COlltottrs el tile
most efficicnt and "least cost" combinations for a
~iven period. It thus serves as a general "rule-of-
thumb" guide for inveslnlcnt and technological
decisions. That gcncral guiding model is thc
"tcchno-cconomic paradigm.' As it generalizes, it
introduces a strong bias in both technical and
orgatlizational int3ovation. EVelltUatlv, tile range
of choice in technique is itsclf contained within a
relatively narrow spectrum, as the supply of
capital equipment mcreasingly embodies the new
prmciples. Furthcrtnore, for cach type of pro-
duct, expected productivity levels, optimal scales
and rchltive prices become gradually established,
together with thc forms of compctition ill cach
market.
The process can bc s e e n as analogt+us tt) the
appearance of a new genetic pool, which contains
the bhtcprint for a great variety of organistns
(products and processes) and their forms of
mtcrrelation. It diffuses lhrough hybridization.
cross-breeding, cvohition and new entrailts. Its
increasingly obvious advantages inevitably dcs-
tree it to transform most and substitute illallV of
444 WORLD DEVELOPMEN'[
the old 'species' and create a new "eco-system/
The focusing device or main organizing prin-
ciple of this selective mechanism would be a
particuhlr input or set of inputs, capablc of
strongly influencing the behavior of the rehltivc
cost structure. Such an input, which we shall call
the +key factor,' is capable of playing a steering
role because it fulfills the folhlwmg conditions:
( 1) clearly perceived low - - and descending - -
relative cost,
(2) apparently unlimited supply (for :.ill practi-
cal purposes),
(3) obvious potential for all-pervasive infhl-
cncc m the productive sphe.-e, and
(4) a generally recognized capacity, based on
a set of interwoven technical alld or~alliZ~t-
tional innovations, to reduce the costs and
change tile quality of capital equipment, labor
and products.
This conjunction of characteristics holds today
for microclectnmics. For this reason, it is m-
cre:.lshllzlv steerine, both eueineerine and nlanaoe -
rial comnloll sense towards its intensive use and
gradually shaping the new 'best practice" frontier
for old and new industries. It held uillil recently
for oil, together with petrochemicals and other
energy-intensive materials, which underlay tilt_"
now exhausted mass production paradigul of the
post-war upswing. In the previous long waxe, at
the turn of the century, the role of 'key factor"
was played by low-cost steel, shaping the growth
of tile hcavv mechanical, electrical and chemical
cugineermg industries. The Victorian boom in
tile mid-19th century (the +railway agc') had
low-cost coal :.lnd steaul-powered trallsportatiOll
at its core. And, it could be argued that in the
hldustrial Revohition the role of 'key factor' fell
upou lOW cost machine-tending aud c o t t o n -
growing hibor.
Of course, none of these inputs are really, +new"
in a technical sense. Each had a previous history
of development within the previous paradigm
and even further into the past. The truly new
aspect in each case is the drastic reduction in
rehitive cost, which is generally associated with a
technical or org:.nlizational breakthroug[1, i; And,
these breakthroughs arc more likely to o c c u r - -
or to be fully noticed, exploited and widely
applied - - when the set of technologies based on
the prevailing key factor has exhausted its
potential for further increasing productivity.
But, a full-fledged techno-economic paradigm
grows in complexity and coherence, going far
beyond technical change alld affecting almost
every aspect of the productive system. The full
constellation - - once crystallized - - inw)lves:
( 1) New concepts of efficiency for the organiz-
ation of production :+it the plant level.
(2) A new nlodel for the 111~.Ul~JgClllell{alld
organization of the firm.
(3) A distinctly lower labor input per unit of
output, with a different skill profile of
emphLvment. ~a
(4) A strong bias in technolo,,ical~ innovation,
fiivoring key f:.tctor use.
(5) A new pattern of investment, faw~rmg key
filctor related sectors, propelling and prop-
elled bv iiwestment in a new infrastructural
netwol+k.
(6) A consequent bias m the composition of
production, with faster rates of growth m key
factor related products.
(7) A redefinition of optimal scales leading to
a redistribution of production between large
and small firms.
(8) A new pattern in tile geographic location
of investment, based on the shift m compara-
tive advantages (:411d disadvantages!).
(9) A restructuring of mtcrbranch rela-
tionships, where those I~ranches that produce
or intensively use the key factor, become the
new engines of growth and getlcratu a new
range ol+ "induced' activities, which generally
proliferate in bandwagon fashion, once the
upswing begins.
To ,2ivc a rouoh illustration of these various
elcmetlts, let us look at the flOW cxhauMed
lcchno-economic paradigm. It came together m
tile 1920s and 1931)s and underlay the present
mode of growth cstablisllcd after ~/ot-ld War 11.
It was based on low-cost oil and energy-intensive
materials, especially petroehcnficals. Tile model
for efficient prodtlcti'~e organization at the pi:.lllt
level was thc continuous flow process or
asscmblv-]inc for thc mass prc~duction of identi-
cal products. The ideal type of firm was thc
"corporation," run bv ;i separate, professional,
managerial and administrative hierarchy, it in-
chided in-house R& D and operated in oligopolis-
tic markets. Growth was led by giant oil, chemi-
cals, a u t o n l o b i l e illld o l h c r i1111ss pl-oducel-S o f
durable goods for the defense or consumer
markets. The growth and interplay of these core
branches, induced the proliferation of the service
sector (from gasoline st:.ttJolls alld superm:lrkets
to the advertising industry and the diversified
financial sectorL as well as tile growth of the
construction industry. It dcnlandcd increasing
amounts of middle range specialization in both
blue- and white-collar skills. It benefited from
econonlies of agglomeration :.ind required ~tll
ever-expanding highway network, together with
oil and electricity distribution systems for energy-
intensive production, transportation and life-
styles.
Today, with cheap nncroelectronics ',,~ideb,
 LONG WAVES AND WORLD STRU('TURAL ('ttANGE
awiilable (together with tile consequent low-cost
tit" iufornlation handling), a new lechno-
econolllic paradigm is coming together and
diffusing, li is no longer "conlnlon sense' to
continue along the now expensive! path of energy
and materials intensity. The "ideal" productive
organization, which has been evolving smce the
early seventies, brings together lllana~elllelll,
production and marketing into one single into-
graled system (a process we might call "svstema-
lion'), for turning out a flexible output of
preferably information-illtensive, rapidly chang-
ing, products and serviccs. (}rowth would pre-
sumably hc led by tile electronics and informa-
tion sectors, propelling and propelled by, an
aliienconlpassing tclec'ommuuications hlfra-
structure, which would briug dOWll it) negligible
levcls tile cost of access |])r produccrs and
consunlcrs alike. Thc skill profile tends to changc
from mainly middle range to increasingly high
and low range qualifications, and from ilarrow
spccializatiorl to broader and multipurpose basic
skills for information handlmg. Divcrsitv, and
flexibility at all levels substitute unifornlitv and
repetitiveness as "Ct)llllllOll-sensc" best practice.
But why the crisis? Why can the productive
svstenl not make a SllloOth transition fronl one
paradigm to tile othcr?
(b) Long wave recessions as the matt!l~'statiott ~1
a 'mismal(h' hetwee#t the socio-i#tstitttliottal
l)atnework arid the lechtlo-eco#lottlic sl~here
The transition to i.i new techno-econonlic
regilne cannot proceed smoothly, not only be-
cause it hnplies massive transfornlation iuld nluch
destruction of existing phlnt, but mainly because
the prewiiling pattern of social behavior and the
existing institutional structure were shaped
around the requirements and possibilities created
by the previous paradigm. That is why, as the
potential of the old paradigm is exhausted,
previously successful reguhiting or stinmhitmg
policies do not work. in turn, the rehltivc inertia
of tile socio-institutional framework becomes an
msurmountable obstacle for the full dcploymeut
of the new paradignl. Worse still, the very
diffusion of the new technologies, as far as
conditions allow, is itself an aggravating factor
because the new investment pattern disrupts the
social fabric and creates unexpected cross-
currents and counter-trends in aii markets.
Under these conditions, long wave recessious
and depressions can be seen as the syndrome of a
serious "mismatch' between tile socio-
institutional framework and tile new dynamics m
tile techno-economic sphere. The crisis is the
445
emergency signal calling for a redefinition of tile
general mode of growth.
At the micro level, when numerical control or
computer technology is introduced in a firm
previously working with electromcchanical tech-
nology, it is not possible to reap all the potential
productivity increase without transforming tile
whole organization both at the phmt and thc
office levels, including extensive retraining and
rcdefinition of tile forms of interaction. In a
similar nlannor, when the full constelhltion of a
new techno-econonlic paradignl tends to take
t)vcr the bulk of production w i t h e a societv, il
will not yield its full growth potential until tile
soeio-iustitutional franlework is transforuled It)
adapt to its requirenlents.
This would indicate that OUl+ "ccosvslcm' al/a-
Iogy has a fundanlcntal linlitation. While in
nature, it is the external environment that forces
the adaptation of the living species: in econonlic
developnlcnt, it would be tile environment tilat is
reshaped to suit the potential of the new genetie
pool. Yet it must be enlphasized that, in spite of
appearances, we are not makmg an argument for
mere technological determinism. File variety of
suitable environments is quite hu-ge, and what-
ever specific form is arrived at, from the wide
range of viable options, will m turn deternline tile
preferred ways in which the hltent techno-
econonlic poteutial develops through strong
'feedback" selective action and gradual nlutual
adjustment.
St), when the downswing of a long wave
occurs, tile new teehno-eeononfic paradigm to
which restitutions must rcspoud is ah-eadv diffus-
ing. Ironically, it is precisely wtlell the seeds el
change arc being sown around peak prosperity
that institutions beconle lilt)re attached to prac-
tices that seem to have achieved the rest)It of
uurelenting growth. This is why it is particularly
difficult to bring about the required profound
transfornlatious. Much more st) in view of the
fact that this inertia is also upheld hy powerful
vested interests.
tlistorically, when the required structural
transfl)rfnations have fmallv, been brought about.
creating the framework for a new mode el
growth and unleashing the upswing, they have
generally affected the following, among many
other, aspects of society:
(1) The specific fornls of operation and
rcguhition of tile wirious markets (product,
hibor, capital, money) on the ilalional and
internatkmal levels.
(2) The organization of the bankiug and credit
systems.
(3) The relative proportions and character of
public and private responsibility in genera-
44n \.V()RI I) I ) l ! \ I{I+()I'MI(N I
riot1, d i ' q t i l + u t h i n itllcl rccli,qritlutit+n tfl in
CtlmU. a', ~ u l l :th the tt+irc,,l+t+]ltlhl~ <,tidal
arlLin~¢lllClltg.
(4! l h m hUlll5 o1 t)i7:Uli/itli<u/ ol ~<~.t+ikml-+ ailcl
lll~iior intcrcnt 7i-t+tll~X. 1llTcthcu \',Jlh 1he IL'~al
li:illlUV, tu+k ~ i t h i n ~ h i t h 1he\ ot~Clalf.
(5) T h u t~lt/~, ihion o [ c'duc:.ilion :li/tl l l : l i i l i n 7 in
iih q u a l i t ) . ~+ltuYtc and the t ) p c t+l in'qiluti~u~x
in ,_'harot_' o t il.
Ih) TIle c o n t t i t i o n h uildcl ~lfic'la hl\cillJOil,, ~il¢
g t n t r t l t ¢ c l , l~roicc'tud alld Irliclftl.
(7) Tliu i i l t o l n a t i o i l a l tlivi,,ion o f l ~ i o t l u c t i o n a,,
~cll a <, Ih¢ tilC:ltl,~ for i-c~td',ilitl~ hllcu-ct+Ulllr\
ti:tclm :il+ct i n x c n t n l c n t .
(~) T h u i t l t o i n : i t i o n a l iclali'~¢ ptY¢,ci I+cihtncc
~tild thL' arf:uigcnlcnt~, l o t in~ihlt~ihlin 7 h.
lt+ tllilCa~,h thu I+lt_'\it+ti~, tll+',\'~iti,£. :i ch:iilTL' ;l'~
]+roh+uiltt :lilt[ tttli+lcc'ctlciltL'd ~1+ tll:t'~'~J~.L ' M',llu
hitcl\cntion in the c'ct'~llOlll\. :lh/iI~ KL'\llChiail
princil~lc~, \~.:l', IlC.'t.'L'~>~,~II'\ Io lt+:,lci" thu lull
tlcl'tloynlcnl o f tl/c oi]-Ilasctl Ill;i~'., t ~ i o t h i c i i o n
i~'<iratliTlll. ,.\ c o m p l e x net o l tt¢inatlcl ill;lll~i~c_'-
illu'ilt lll¢chani,qllS ',vii,, c,,tal~li<,hcd, l l o i l l the li1,.)~,I
d i r c c l . ~,tlch as C¢iltRil c'lllih~)] o l the tllotlc.'\
SUl'q-,i 5, iiiid tlj the I¢,,c] o f ~ovcrnlllL'll[ N~unclinL>.
It+ the iIIOic indirL'cl such its the c \ j ~ i n c l h l 7 ,,\ htu'lil
t',l Ct+li:',tlillUr crctlil {llltl lhu pul'flic I~ro\'i',itu/ ol
natJt)n,tl ~>tatistics l o t nl:n-l-,ctin7 :lnd t)l~+tluclit~i~
t~l:iiltlill~. Tl',tclm tlnJOll'-, b¢C:illlm hl,,lJttitiotl~ili/md.
the ,~,,olkin 7 \',cck ClllC] \,,~)tkin 7 )c:lf \%Cl+C ,~llt+it-
un¢ct :illtl uil¢i111~]o)iilUill '<illtl i c l i t ¢ l l l t n l belie'Ill,,
~,',LUC 7cncualiiccl. T l l h ~ l ~ inact¢ p~,~',ilqc h \ lhc
illl.'OlllC lax ~,\htcu11. ~%llic_ll ~tl~,o ,qikttiinu'tl the
+l~ublic >,ui\icc" :ilitl '~twL'I111i/t_'111 Xl~cmlin ~"
nl¢chani~m~, It+i i t d i , q l i l ~ u l i t ~ n ~q i n c o m e . ( )n lhc
inlL'iil~tiJt~il:tl luvcl, tllcnC il:itioilal Hi i~111~ClllC..111<~
\~,ClC c'OIl11"~1C111¢II1Ccth \ the J. IN o l g l t l l i / a L i o l l , the
I<.'adin,..t Iolc ~+1 lhc I lnitutl .~t~liC~,. I h c l h m
\Vo,ntl~.. the I M I ' . the ( I A T ' I . lhu I'li<+\i'~Jt+il:il lq.uthci siill. :is l~n :is h+llt+'~,iil7 :l l+atlic'ul;n
N|ili~ll:tll ]q~til iilltl It/¢ iilCim:i'~iil~h u¢cml0icitu'tl
dcmi<,c o i c o l o n i a l cretin-c,,. ,.%11 IhL'~C tlc~chG~-
illctlt', crc:ilctl :ill :lttL'tlti:ltL" h",itllL'V~ o r k h u ~iowlh
b:lsud ON lli:tk'-, i ~ i o d u c f i o n . :t,, v, cll ',i,, the illU:ill~
h u I c ~ u l a t i n 7 :lnd h+htci-in 7 t11¢ l l u i d t x p u n h i o n ol
i]11crtl:iLJt)li~tl Hl\L'hliliClit :illtl 1ratio.'. t"
(C) 171~' Cf,Vl'~llll('lifJ#l f)/ ~/ /H'lr //lf;dU +J/.q,r+Jw//# ,.~
[]i(' ()II[('()IIIU ,,t ,lll iIllCIl3l'l't" ]I#'(~('C~k f)[ ~<)ri.I
( ~ll[)O#l[~lli¢)ll, CICtIIiI'ilV d#H/ CtIIII]~I'¢)#tlI~C
( ' l c a r l x . such ~iclcl\' i~tll~ill~ ch.;iliOC '-, tit> lit)l
occur it]l lit otlcc. T h e y OlllL'iTu 7 i ; i t h i : i i l ) .
con\cr~iti7 JiltO :i nl,,+lC ,,Ir It,,,, ct+htrcult
|f.tilliC\,*. Ol k. N t ) i Lit+ the,, COl/it Llbotlt ¢:isil\. l ' h c \
i c q u h u :ill t'ilt)lllltltl~ ',llllOillll t~[ in%¢llli\cnc,,'~
allcl L'Xl~t.U-hllctil;llion :in ~ c l l :i', conll)ronli,,c.
.,\lid. ~,incc :111\ I ) a r l i c u l i i r ,,c't ol ilII:II/.2.'Ul11L'Illh tlalCt,~.
l~t\ 01~, ~,OIIIC ~lt'~tiil~ |'~l lilt' tJut~Ti111C111~ O[ O|IIcI%. il~
u~,l~lblJ:'-,Jlll/UIl[ ¢Jou', 11o| {ICglll ~,\itholll N(tCJ~II ~llltl
Hl|Clll~tlit)ll~l] lgOllJ'lOIl[~l|iOll..~o, the CItll",tli.lC|J~H1
t+l ~t m.'w muth_' o l ~rm,,th is pucctt h \ Ihc I t \ e l o f
LIndcr~,landin~, the ~ c i ~ h l t>t hlcrfi~t mid the
tq31~onitioll Ifl tilt)sO v~l/o fuaf I! IoI run] nr
illl:lpjtlccl rC',lh(+li~. The ti111C it IHku"n it+ CIC:IIL" tIlL
IIUv, IIullluv, o r k :llltl II1~.~ '.,l'~ccilic h+rll~ t~l the
(i]11111;llc I~IAICollIC depend on tllu Ichltix c '.,liqtl~lh
tfl 111¢ \':iliOliS M+cJ:iI lolCC~, ;.tntl o n their c:t1+~tci1\
It+ dc\'ch+l+ ~tt+ct i m l + l c m c n t \i~thh_' itii/t+\:lli\c
ic~poilnm~. N t l l t l i l i 7+ ol ct)tll~c', c:ttl ~tl~ir:llilu'c'
<-,i.icc'¢'~'~ llt+l lh:il c't~ll'<tt~,~,_' t~i dL't:lxl:ltiii 7 \V~il t;ill
bc cl\'tlidCd.
I ) u r i n 7 the last ' q i u c t u r a l cli,~i,, in lhc t<J~it'.,.
lhc I'UC~t_'llt T h i r d \ V t u l t l v,m, i/tq :i111,,+1i7 the
t)]:I\L'I~, kh),q COUlltlit.',, \~.Ulm tiiltiCF c t q o n m t Iulc:
allot lho'.,L' l h a l \>'.C.'I'L' Ilt+t \vmrm IllarTilia] l~<tllici
l'~:lilt~ itl the w o i l d cc'tl[lOll+l\. ~ i t h m> i n t c l -
n',llional h~'qitution~ in v, hich tt+ m ; i k c 1heir \t~icc
hc_uirtl. Fhih t i m e . il~, :i ic,.ull tll the l~r¢\ i<lu,, ii/ott¢
,.ll 7io\'~l]l. l h o r c :11¢ r¢~ll po~'ql~ilitiL'-~ t+l i n l h l c l / c
in.+,, the Ct+ti1:'-,L' t)t re\tilth h+r l i l t fleX! tLJ+',V, ill~
~t+ll/L' o [ the lgj~tl115 h+r thi'~ rcl:ilc tt+ 1he \vt+rlcl
i+olilic<ll '~t.'c.'llC. btll other', nlClll lit+ill the N+¢cilic
Iil~llkc[ CXly<in:~ion lCtltlirL'lllL'lli', t+| film nov, luc.'tl
tlc+lt+TiL'~.
I [tlt\t_'\'Cf. the Qc.'llClal cliruclion tH c'll;ill~c.'
iUcluhcd It) :tcc'OllllilOtJHlc' ki I'ktltic'ul:iF tc, lltlt~-
h+Tical t~<+tL.nli:il i,~ lilt+it- ;ill~i]o~Otl>, It+ cio<,'qil 7 HI1
ocu:ln l k l n It+ hflhwvin 7 ;i r',iilrt+;~d li~ll.'k. I1 i,, ;l
,,title ~l);icc ' for i l i l l O \ a t i o l l ill <~ociill tuT~ini/atit~li
:lnt[ ii~lliOll~il alld JiltcUllalitul~il in,,titul.ion',. l h c
piopu,~cd xt+hlliOll~, i_'~111 \~if',, q u h c ~ictci\ ~ii/d
~C_'l-\ d i l l c l c n t p t d i h t a l ll:ill/¢\\Olk,., c~tll :lc'lli<_'\c
lli~h
liltc", t+l ~tt+\tth. I h : i l t h e \ ciill J>u' ~i-,
d i f f c i t n l :t<~ la~<i'~tn :iiItl k¢~.llUhi:ltl tlu+llltlL'lClc\.
~,',:i'~ t i c : h i \ nccil in Ihc.' ],i'-,I K o n c h : t t i c \ 1rt~tiuh.
tc'cllnt+lt+Tic:i] inotlc'l h i f 7itn,',t]l. the i+ic,~unl
socialist >,\~,tClli C~tll bL' st.'roll ~lh Ltllothuu o l llic
:iitct+n;ili~,c<~ 1hal I+io~.ud \ial+lc. \Vc \ \ o u l t l '.-.tl~
L"q l h a l . a l l h t i u ~ h w i t l l ,~t)lll¢\~.hlit d i l l c l C n l nllllli
Ichl:ilit+l/'~, lJltinc' COtll/lliC,~ h n \ c ant+ c.Ulct+ulllL.lCd
Iimit~ It+ 71-oWl]l :incl i',LC¢ lhc ]lcu'tl 1<+ ll~itl'-hlllll
111C soL'it+ inslitutitm',il lr:nllcv, t u k . t'hil lhi'~ i', nt>t
111c l~l:lc'c to clihcll~.'~ Ill,it iXhtlL'.
"Fhc inq~ortani itlL':t It+ I~c~ll in illilltl i'~ lhlil \'~ h~ll
Illit~l~un~ ill 1ILL' trnn,,ition i~miioct hm, c'lltUtllt+tl'-,
I~c:iiJi17 o]1 l i l t i/HttllC t+l 1he liCXl til~hv, in,~. ( )lltc'
:ill ilclcciu~tl¢ lllotlm tfl 71t+\',lll i'~ u,qahli~,hcd. I1
Illtllcl>,. roTtli:ilc~ :itld CiL'IClnlinu,~ thL' t~tmluiru'tl
\'~i\~ in \~,hich the ILL'\\ h.'chnoh)~ictll [~OlCllti~tl i',
c x p h f i t c d . [/,._'c';il+i:-;c :.1 Cluanttinl jUnll~ ill t ) r t l t h i c l i \ -
itv implic~ :i tltiailttliil jumt~ ill w e a l t h crclilJi17
c:liuicit),, it ctqitain,., tllllt)tl~ the t~t><~,,ilq<., tllll-
mO111¢'-., wklc,fl~roild illl]'ql/tClllclll~, m lit in 7 iqqii-
 LON(i WAVES AND WORI,D STRUCI'URAI+ ('ItAN(iE
IZach transition, thcn. by itnplying a radical
restructuring, reopens the question of the de~cl-
optllellt pcrspcctivcs of the \ariotlS cottntrics, ;.ts
well as that of the better or worse distribution of
tile benefits of future growth, among social
groul-)S, regions and countrics.
Thus, in spite of tile crisis and bccatlSC of the
crisis, it is e s s e n t i a l to opCtl IlCW splices lor
dcvclopmcnt thinking in terms of the future. Yet,
from what has been argttcd, social institutional
atld cCOtlOllliC planning hmoxatitms arc tnt)rc
liken to be viable if based on a dccp understand-
ing of both the demands and tile potential, both
tile scope and the limitations of the new techno-
economic paradigm. And this understanding is
possible because, on the one hand, lhc paradigm
has ahcadv diffused to a sufficicnl dcgrec for
rccogniti(m ;Hid, Otl the other, we now l)Osscss
better ant|lyrical tools and more historical cxpcri+
etlce.
In this COlltext, a basic task woukt be tt) detect
the main features of tile new pattern of tcchno-
economic behavior based on tile potential of the
new tcchuolo,w distinettishine what arc mcrch'
surxival tactics of those tied to the old par:tdignl
from the more coherent initiatives pointing to-
wards the futurc. It is upon lhcse new trends lhat
the al-)propriatc institutional configuration lllttsl
bc constructcd in this transit|tin period.
In tile following section, we aucmpt the
anah'sis of the main features of the new paradigm
which is gradually becoming more and more
visible and more and more coherent, its organiza-
tional renovations within firms join the technical
c l u s t e r g r o w i n g ;trottnd n f i c r o c l e c l r t m i c s . ++'
3. Tt ItZ C1 t A R A ( ' T E R I S T I C S ()F TI IK
T E C t t N O - E C O N ( ) M I C P A R A D I G M BASF, D
()N M 1(71>,OE Lt~ICTRON I('S
In considering the specific features of the
tcchno-econonfic paradigm which is taking shape
aroulld microclectronics, wc sh;,i]] try to make as
clcar a contrast as possible with thosc which have
characterized the mass-production, oil-based p:.t-
radigm. For the sake of brevity, tile analysis will
be limited to sonic Of the essential features, albeit
with a substantial amount of oversimplification.
The first part will allalvzc how the trend
towards 'information intensity" would tend to
modify inpttt mix and investment patterns in
ternls of relative cost advantages. The second
part will focus on the trend towards 'flexibility" in
plant, in product mix and in product change over
time. The third and last part of this section, will
explore tire new trends in firm organization: o n
the one hand, the concept of "systcmation," and
447
on tile other tile potential for decentralization. In
the course of the discussion, attcnlJoll will bc
given to some of the isstics raised for devclop-
mcnt strategies, ahvavs in a tentatJvc spirit to
stimulate thinking and cxperimentation.
('d) h(lbrmalion i.teusi(v i'.s cm'#gy aml materials
i#tleHsitv
The overriding feature of tile new paradigm,
and the Ol]e that is likely to haxc the most
profound consequences, is the trend towards
information intensity rather than energy and
materials intensity in production. This stems
directly from the very visiblc change in the
general relative cost structure towards ever
cheaper information handling potential through
microelcctronics and digital telecommunications.
It should bc clear that this is a rclati'~e cost
argument. It does not in]ply that encrov or raw
materials prices arc expected ttt take un upwaM
course ill absolute terms, bttt that the decrcashlg
cost and growing potential of microclectronics
results in an increasing relative gap in the future.
In product cnginccring, there would hc a
tendency to redesign existing goods to m:tkc
them smaller, less cnergy-consttmiug, with less
tnoving parts, more electronics and more soft-
ware. This has ahcadv been the case for :l v:u-ictv
of products such as watches and clocks, calcttla-
tors, cash registers, sewing machitlcs and COlll-
puters themselves, but the possibilities arc far
from being fully exploited, hi addition, man\
needs that are today full:|lied with dttrablc goods,
due to the characteristics of the previous para-
digm, might tend to be met with information-
intensive services instead.
Ill plant engineering, not only would energy-
saving techniques based on electronics be applied
as a matter of good process design, but also
materials saving techniques. ] h e possibilities
generated by both computer-aided design and
computer-controlled nmnufacturing greatly in-
crease precision and allow production to narrow-
er tolerances. Furthermore, tighter inventory
controls and on-line quality control would allow a
reduction m waste and rejects. Both these trends,
together with the reduction in size and parts
already mentioned, would tend to reduce even
further tile amount of materials required per unit
o f product or, as Smith |-)tits it, wottld i~rcatly
increase the 'productivity of rcsourccs'.
New products and services: The most promis-
ing treud in shccr growth tern> is tile flourishing
of innowttions and entreprcueurial activity
stemnlJllg directly from [t)w cost electronics alld
data proccssing. This would be analogous to the
448 W()RIA) I)EV[:A+( )I'MENI"
flurry of c o n s u m e r d u r a b l e s of thu l'~i-uscntl)
v¢;um]g p a r a d i g m , whiuh b e g u n to g u t h c r mcmaun-
tun1 in the 192(1s v,'ith a t t t o m o h i l u s , radios ~ltlt]
r c f l i g c r a t o r s , uuquirud full forcu t h r o u g h thu
195(1s, itnd p e a k e d ill the I:ltu 196fls w i t h such
t~l-odtt¢ts its ulcuiriu ¢~ln Ol)UilUrS liild ult_'clri¢
¢iirving knivus. In thai u~tsc, it was :l tltlCSlitlll o l
i d e n t i f y i n g I]oinc activities that r c q u i r u d tht-" list'
o [ t'ilci-g)' aild designing it t+lrt)dtiul to fulfill ti/Ulll
illlcl ol)¢n it nuW m l i r k ¢ l , hi t]1¢ l~rust.'nl ulist_', it
w o u l d I~c ~i tlUCStiOil of dctc¢ting honlu (it. and
t+'sl-~ccially, t+~rodu¢¢ r aulivitius ih~il tt'Clttit-u
i n f o r l l l l i t i o n h a n d l i n g or d u ¢ i s i o n - i l l l i k i n g lind
designing tin ¢lct_'trtlili¢ t+Jrodticl lit it SOIIvvaiU
txickmgc or setting Ul+) tin i n f o r n l a t i o n inlunsixu
serviuu It) OpUll ;_i I1¢W IllltlkCt. Tilt_" hlll+~ort',int
t h i n g ill ilOtC is thul thcsu nc~v t+l+odtlcts tit
sur\'iccs itru in fitct ruhtti'+cl 3 siml+lu al>l+lic:ttions
o f ah-ulidv xvuli-kno\vn prinuit+lus so ihltl thuru
\~,ottld bu no d o u b t its to tuchniua[ fuusil+ilih.
~tlUUUSS ~ o t t l d dct-)cnd (as it did with uttllStlli/Ui
dttrablu~;t on till u d c q t u l l c t+)crcuf)tit+n of m[irkut
~t¢¢¢l+tatluu iilitl tilt" d i n l i n i s h i n g costs of inl)ttts.
f)ld +rod new A'i+mt.~: This gcnt'rlil itd~,~illtltgu o [
inftlrnl;ttitm intun~,itv is u l u u r i \ r u \ ¢ i i i u d in thu
l~t¢( ihal. ~it r~i+cscnt, in lllu mitl~,t of rL'¢U~+,SiOil ~ii/ct
MlOllg i n f l a t i o n ; u \ i)iussurcs, ihu firms IllOkl
uhl~ulv rulatud to t-hu I+~roductJon or intcn,,iv¢ tlSU
of i11iL'rou]uctrotliUy, ;llU S]l<l~,~,hlg gUllUlct]lx,' high
grov+th i-iflt'~, iitlct thuir t'~rt)dtlt_'th art_" thu only. OilU~,
duul¢asing in t+u-i¢¢, uvun in al~>,oltitu 1¢1-111~,!/\~ in
i+~ruviou>, l+l~u-adigln shift'+, tlli~, a(_lvmltugu, vuhJch
liall:++;hilu:.4 into tllltiy, tl;.iilv high I~loiit iulu~ foi
SOII1U, s¢luut~ thu firtn~ thlit, h \ g r o w t h or
d i vu r s if ic ut ion. \~iil I+~uuonlc thu largu~.t ~lilcl 111o:-,I
chllliilliC of lhc nuxl Ul+>swiilg. ('tm:+,UCluuntl\,
strait o f the nu~v f i t m s in thu~>c sou\tills might itlin
thu i~iilk:-+ \if ihu giants. But, al~,tl. ,,tlnlu i l l ihu old
giant,, in thu illilttlru indu~+tt-ius ~ilU a l r u a d \
~d)o,,ving w i t h Ill\it+(. ' tit lu'e, sttuut_'srdttl rcsultr,
iii1 illui-ultsillg tt_'lldunc\. 11ot jtt~,t to t i a l l s l o r i ) l
their l'~rt~dut:Is and I~roucs'+t-'~. hut ab, o to di~ ¢t~,il~
into lhu llUW zti]tl nlOlU d v i l a n l i c , iillorn~itJoil-
intensive iiicli~; of lhu llCW p~Lradigm: n~icro-
elcutroniu cl)n11+~Oilents, cquit+)mcnt for the "flu-
l o r v o f thu ltlltti+u ' tit l h ¢ +tfffiuu o l lhu ftlttirc:"
tllita pi-tiuu~,:~iilg, lJlllilluiltl, luuhnologJual itncl
o t h u r l)r~)dtit_'ur scrviuus: lulcut+milltitlJuiilit)lls.
sutullitcs, fihur tlt)tius and o t h u r ;ist~uutx o1 ctat~l
ir:insn~issitm; ~il~tl oh'+.hluslv, thu "stat+v¢~il~;" m i l i t -
Hi'V +~Ut-'ttll'. IX
Im/~.ct +.,n r+.,t++'ntateri+d proUuccr',: T h u truncls
wu h:tvu b¢cn discussing nluM hu ~>C¢tl dx, tl~lnHu-
~tllv+ Thu rcdtLutit)n in ihc c1+1¢1-~)' und i~iw
maturial~, ¢onlulll of i n d i v i d u a l t'u-t)duuis, and the
i~ossihly fiistur grt)~,~,.th tit scrviuus, is <i t~ovuurfttl
ft)icu in ruvci-~,illg thu I:ou]+th Koildr:ttJmv trund'~
that tht+u~itunud t(i rc~+;ult ill lltittli:l] it_"+.;(ltlrug
dcl+,lutitm. It ,.lots nt~t. h o w u v c r . IllUHII thut
l+roduuurs of thusu l+,u~ic i n p u t s ",'+.ill lauu u \ u r -
dwindlirig m a r k e t s . T h u initial ruductiom, uru
likely to I,c the most drastic: hut oncu a higher
l+roducti,,it ,, of t c s o u r c u s hcctmlCS the tlor111, the
shuur uxDin',itm of I+rt)duution. ur<pcciall 3 ~ l l u n
tit I~ithui +, if - the Ul+Sv+ing GUtS tinclul\~at.
~ould ; t l l o ~ a IU+-,tiillt+li~)n o f i{tv., ill~ih_'ii~lJ,,
lllai-kul gl-t/,,vtll, ~.itll t+roh~thl) lov, ur, but cuii;ihl-
h not ncg<itivt_', uht~tiuit\ in rt_'lution to tlutpttt. I~'
Thtt~>. thu nu\~ tuuhnohlgius b~i>,ud on ltl+~ ut>>.t
uluulrtmi¢~ uottld lu:icl 1(~ ~L nux'~ plitlt-'in in
intur-Iu-<uluh rulatiotl~;llit+', itllcl in tilt_' c\l/hili<in t+t
tllU gutlur~ll I)rodttut mix. N ot tullv v,t)ulcl lllt~'q
l+roduction tuuhnt)logiu+ tiilclui7tl Jnlt-~o rl'<int
ch~tllgU'~, httt ~tl'~t/ lilt' gtlticl,-, t h e \ t+u-oduuu wtittld
I+ucomm inforinlitioi~ int¢nsi~u, rFh¢ ~,~llilU vutittltt
t)Ct.'tll in illl~ly,l exit, ling >,t_'i~it_'u inclu,,triux. \~hilu
thuiu \vould bu incrua',in 7 g t t l ~ t l / in <,ur\ ict-", o l ci
totall~ nuv, uh~traclur, t l n d u r thusu uhuum-
5tilllUUS. n~tliOll~il ~ii~tt w o r l d grtl~,+ I+)rtltltlcl ~ttlcl
tlitdu uliil hL' cxpuctud Ill c(intaill ;.111 hluru~l~hlg
i+rtT~oi+titm ~ll infornlutitu+ ~ind surviuu tml~ttud
•+iihiu addud.
( i ) ,'Vclr M,w.'~.Ibr det'CD~lUtlC' c+~untric~
A l t h o u g h thb, b, o n h o n e of the f¢;mH-u~ ol the
i/\'v., t)~tlZidiglll, it cHi1 u h c u d \ ~,¢1-~u as u guJdt-' l,.+l
rethinking ecrtuin ',lspcct~. of ttc,.ch~lmaunt
,,trutugic+,. In so far a', trund~, in thc clc,+c[opud
wt+rld ill\cut the \'arit+us dcvch>ping cotlnlriu.,.
significunt ch:tngu~, u:m hu expected in f¢+rcign
h1%rustllauzlt Ix\\turns a n d it+ thu coral+\++ilion ~+t
w u r l d tnldu. T h u first b e c a u s e thuru is :t fun-
din-ncntill rush\lUlling t+l ctmlp:.u-;.ttixu :.ldt. :mtagcs
:it tile ~HlllC tilllU LI', tllClU is Jill iillUltlLtl rt."qrtlCltLt-
ing o l t r a n s n a t i o n a l C()l-[it)l~ltitil1~,. l ' h u '.uc~mcl.
l,ucau+u thu l~istur riltc of grt>\vth ol i111,.+rlllZition-
intcn~ivu scrviuus in inturn<ition~tl ti',tdu v,t+uld
~d+tuct the u \ o l u t i o n o t c x p t u t m~ttkut~ h~i u;iv,
muturial~ ~ttl,+l u t h u r T h i r d W o r l d go~,.l~. ;is v+ull
:is thu compositium o f inq+o]t:,.
,'\Iruadv. thu tr;msmi~it+n ml,.l <+.ale ~+l pro-
cussed itihumzttiot+i itsulf is rcucl]ing u o n s i d u r a h l u
plt+l~t',rtit)llS hl inturilittioli~ll lll;ukuts. In l+UCcnt
\'U:ll+S. tl-~idu hl pLltUlltS Htld +klloW-how" :lilt] o t h e r
tuuht+iologiu:tl itflt+rm:ttit+n h~t+ l-,uun grt+wing
l:tstcl- t h a n c t m u n o d i t v trudt-'. ThL' incru+tsingl)+
tr:ulst1+ition+il uh:u:tctur t+t I'~anking ',tnd tit+:mciztl
sur\iuus Ii:ts I,ccn f u r t h e r CXl+;.tndcd I+,v. COmlmt,._'l
tcchnt~log?, a n d digit~tl tr:tnsmissiori. ('t)llStllt~tllCV
firms h o t h in t r a d i t i o n u l utlginucritlg zuld in thu
IICV',' "~\"SIUI11S" Ullgitlcurillg ~llCH~, HIC UOllliilg It+
thu foru. ~oltwzu+t-• ~,ui"+io-'~,. ~tandard, ~+t-'nli-
CLl:+-,t,(1111iilld UtlS[O111, HIC 5c~ |t)l lHpid ~ltlx,~+tJl. +t+
A n d tcluut+mnauniuation~> it>,ull+ which i~ tllu m u m
11112~1n5 cif "tl~tl1~jlOlt~tti(H1 o | 111o~| t)f tht.., LiJ'~o\'t-'
<.¢UlVifg5 ~tlld 111~I11v 111111t.'. gould ~lt)x.~, Ht ~t 1111.1ch
 LONG WAVES AND WORLD STRUCTURAL CHANGE
faster rate than the established means of physical
transport.
These trends certainly require innovative re-
sponses. It is now essential to examine closely the
service side of the balance of payments but, more
than that, the concepts of "industrialization' and
"import substitution" as well as 'export promo-
tion" have to bc redefined. All are now profound-
ly transformed to include the elusive "software
and information" areas which, in the form of
technolo,,ical~ policy, would have to be
institutionally addressed and placed at the core,
not at the side, of development thinking.
Depending upon how far advanced the country
is ahmg the previous path of industrialization,
strategic decisions are in order regarding the
telecommunications network, the electronics in-
dustry, the service sector, in its new much wider
sense, and in particula, the means to develop and
protect local technical and consultancy capabili-
ties. The latter will be crucial, not only to make a
direct contribution, but also to help aw~id a flood
of misdirected technological services leading to a
drain on econonlic resources.
The greatest challenge, however, lies in
identifying the new opportunities. A more long-
term view could bring forth new typcs of advan-
tages. For raw materials producers, for instance,
the fitct that in the long run tl~erc would be a
clear advantage in transportation costs for 'tele-
transmitted" services or for small-sized goods
with high information wdue added, might lead to
a rather unexpected development: it could
generate a comparative advantage for local
production of energy or materials intensive goods
in resource-rich countries. That many OPEC
countries have been investing heavily in such
energy-intensive industries as alummium, steel
and petrochemicals could be interpreted as early
manifestations of such a trend. The question is
whether, in the case of certain products, further
vertical integration will prove to be the most
cost-effective arrangement to awfid the increas-
ing share of multiple transportation costs in the
final price. 2t
(b) Flexible vs mass productiott
After information intensity, "flexibility" is
probably the most important key-word within the
new paradigm. It challenges the old best practice
concept of mass production in three central
aspects. High-volume output of identical pro-
ducts is no longer the main route to high
productivity, which can now be achieved for a
diversified set of low-volume products. The
'minimum change' strategy in product develop-
449
ment might no longer be necessary for cost-
effectiveness, as rapid technical change becomes
much less costly and less risky. Market growth on
the basis of "homogenous" demand is no longer
essential, as the new technologies permit high
profitability in catering to segmented markets
and provide ample space for adapting production
systems and output to specific local conditions
and needs. Let us briefly discuss each of thesc
features.
(i) Economies of SCol~e or of specialization t~tsed
on ]lexibilio' vs ecommlies olscale based on
homogeneity
As regards the new potential for diversity m
production, the new paradigm affects the
accepted concepts of optimal scale of plant and
market. When production, as well as productiv-
ity, depended on the repetitive nlovcnlents of
motors and workers and every change of model
or tooling was dowtl-time, optimal production
costs were closely related to achieving high-
volume production of identical units. With elec-
tronic controls and the relatively low cost of
progratnming rapid changes in production sche-
dules, such limitations disappear to a great
extent.
It is, of course, still possible to apply the new
technologies for inass production of certain
components or products at a scale that could be a
multiple of the previously established optimal
size. l towever, the most significant change, rich
in eventual combinations, is a quantum jump in
potential productivity for small- and medium-
batch production. It could be said that, with the
new technologies, plant scale becomes relatively
independent of market size. Thus, the question
of "barriers to entry' is redefined for most
industries.
Flexible manufacturing technologies allow
plant size to relate to a changing mix of a range of
products submitted to similar transformation
processes. On the one hand, one very large plant
can produce for several relatively small markets,
applying what is now being referred to as
"economies of scope'.-'-" On the other hand, since
individual pieces of equipment can be provided
with "intelligence," they can display similar
flexibility in performance. This opens a range of
new opportunities for relatively small plants
serving one or a set of small local markets or
specific market "niches." These can achieve high
productivity levels with "economies of specializa-
tion," not necessarily dependent on large scale. >
This potential for flexibility and adaptability
has varying impact across industries and across
activities within each industry. In general, the
quantum jump in productivity allowed by micro-
450 WORLD I ) E V E L ( ) I ' M E N I
electronics SCClllS [O be greatest precisely in those
industries or activities that were least amenable
to mass production techniques under the prc-
~iotls paradigm. T h e r e f o r e , the activities most
easily transformed are the most decision-
intensive, such as office work, product design.
stock control, quality control and others that
were peripheral to tl~e production process proper
and, in the past, often constituted cost and time
bottlenecks.
t:.qually, it is in tile industries tqlcvioll:,,ix,
ctlaractc'rizcd by high ralcs of product C'Ilallgc.
high craft intensity and Sll"laiI or nlcdium produc-
tion runs. that tile impact is greatest. This has
a h c a d v b e e n the case iri prinling, which might in
the future ,,o throu,,h a f u r t h e r revolution.
bc\'cmd ink and paper, using an array, of nov,
computer-related m e a n s ol rccordin~ and
disscnlinatiilg i n f o r m a t i o n . ~4 Mechanical
c n g m c c r m g (and t h c r c f o l c a sul~slaniial portion
of the capital goods industryt, while continuing
to bc n]ulli-proccss, n l u l l i - p r o d u c l , is bcmg
tr:tnsforlll,,.'d by conlputt_'r-:iidL'd design and
mantlfacturhl~ i ( ' / \ D - ( ' A M ). flexible illalltlllic-
luring systems (I:MS) aild c o i l l p u l c r - i n l c g r a i c d
lllililtlfac[urillg { ( ' I M ) into a conlintlOtl', flox~
industry. > T o a certain degree, the potential
c'xisis for a sin]liar l r a n s f o r m a l i o i l in such arc:is :is
clothing and f u r n i t u l c . > 1-hcsc Hi't_' SCCIOIS in
which there has l r a d i t i o n a l l v bccn :i grcal nun]-
bcr o l small firlns. This might cllangc in the
future as large" firms introduce c o i n p u t c i i z c d
flcxiblc s'vslcms alld tend to cover grc.:llt_'r por-
tions of ii diversified illarkct. The smaller firnts
could bc successful on the basis of Iocational
advantages or in skillfully sclcctc'd inal kct ilichcs.
la;\ COlllr~ls[. assembly, ci hi,,h-producii\ itv alt_'a
in Mass p r o d u c t i o n techniques, migill become the
bottleneck of flexible p r o d u c t i o n facilities.
Robots arc' clcarlv advaill:tgcotis for ullra-high
precision tasks such as clcctroi]ic chip I:uodtlt_-
tion: for the assembly of certain electronics
products whore quality is central and for hazard-
otis or unplc.:lSaill activities such a', splaying or
welding. T h e i r economics :ire VelV doubtful
and controversial as regards nledium or small-
batch assembly, involving frequent changes m
product r:ulge or ill product design. The fiici is
th'll, whcrc'as it is very easy l\>r ~i COil]purer lo
control ihc ctiltiilg of the mosl ct)ntplcx ol shapes
in a ~cl-v small fraction of ihc lime lakc'n by a
highly sl<illcd opt.'rator, it is much illOl-t_' difficult
for it and it rctiuirc's illucll n]orc sophisticated
ctttiiplllCnl :iiltt software Io perform the
app.:u-cntl_v simple task of correctly picking up a
p a i l and inscrling it in thc right place. For this
icHst)n, in achieving t_'cononlicS o l ~,copc. lhc IICXA
UO\V-COSt flcxibilit\' availabk, for clcsign al]d the
o t h e r t r a n s f o r m a t i o n processes could stumble
against the high cost of batch asscmbl~ robotics.
Solutions arc b c m g sougllt in radical redesign
of parts and products to m a k e them more
anlcnablc to robot manipulation (in some cases
cvcn to the point of bypassing assembly
altogether). Anofllcr route, w h M ] has alrcad,~
been put it] practice, is s u b c o n t r a c t h l g the assem-
bly tasks vlith spccializcd local firms. Both trctld~,
,,,,ill p r o b a b l y ttcvelol+, ctcpcnding on specific
conditions. ()vcrCOlllillE thc b o t t l e n e c k , thou<,h
depends on wh,_'thcr the cost of robots and
sensors as well as of lhch- ,~)pCl~ll.iOlt. ,._':111 bc
suhstantiaLlv reduced. This miehi hin,,c on hox~
quickly radical breakthroughs arc made in a r t i t i -
cial intelligence." for Imp, cost p r o g r a m m i n g and
r c p r o g r a n m m l g , as ~cll as on the c,xpclicncc
gained hi f l i t diffusioil of robotics in Ct_'riiLil/
inanipulation lasks where lhcv_ ~ilt_' bound 1o
generalize, such as those involvine, high hazards,
high skills, high precision or activitics thai could
simply iiol bc do]to by hull]an~,, such tis dccp sea
mining or \Xolk in outer space'.
In Ilk" proccs~ industries, stic'll as chemicals.
paper, c l c c t r i c i t \ , ntcl;tllurgy, lood prllccs~,h/7,
ctc.. ihc nl<iin hnlxiCt might bc in pianl design.
t:or conlh/uous flow i~lOCCSsCS. ~hich Ii<lcl ap-
plied clt_'ctronic conlrols vcr', carl,, t)ll. ilk'ix_.
inighi b c a ¢crl:.lhl dc'grc'c o l rc';c'r,,al o l lhc trciltl
lowartts fixed outpul giai]l plallD, al,, :l i]/t_':ill> loi
inutimizing unit costs. The llC\ ~, potential flu cosl
reduction b\ illt.':lllS tll precise conirol o l q t i a n l i l }
alld Clualil } o l inptllS, lhi-ougllptils alltl Oulpuls ;i,,
well :is of process paral]lClc'rs might Ic:ld to
smaller :illcl/or illorc flexible design of planl, t~ iilt
glCalCr actaptabilit}. Io inarkct and it]put \ a i m -
liolls, pc, rhaps illcluding closed-hump, no-~,,a,,lc'
,,\ M t_'lllS. ""
( )ll lhc o t h c l hdltd, s,,ilnt_< IJ~l[cI/ [llOt_t_?s'-,c:,.
COll]lllo,1 in lhc p h a r m a c e u t i c a l and |otu.t indus-
tries, might b¢ l r a n s f o r m c d htlo continuous, lhw,.
x~hilc achie\ing ccontmlics of scope. Such nc\~
c'lcnlcnls as flexible auton]atic fccdin 7. c lcctltmic
process COlllrols, sclf-clcanm 7 svMcnls alltl ~ltnlo
n]alic nlca,,uring and packaging. Hi-c' bcin 7 in-
c o r p o r a l c d ilt picccmc<il" lashion, bul lhc', could
It_'nd 1o COllie !ogclhcr :is li [tll:il svslt_.lll_ alld
bccoi]/c' tilt? llOllll for 11/~111\ groups o l i~lt~ducl~,.
In scr%icc illCit, for hHori]l:liion inlcnsixc
activities. 111c flcxibilitx potential, rcTaldii17 I~,~tll
size and c:lpacity to adapl product mix to
changing inarkc'( r~allci-ns, see'ms parlimularl}
gl-Cal. In the case of soflv~arc and inlOllllaliOil
sc'i-x,.it_'c,s,however, it will lake a long time I~c'lt>rc
ttk' rtllCS of the g:llllC :ilC laid down both cm the
suppl) :.llld on the dcnl:illd side. since thc~ ;ire in
Ilk' process of Clt.,alill 7 IlC\% Illilrkc'ls. t~ho',c ~,izc"
iS tillklloWll a n d o f t e n depends, oil lhc r;ilc o I
 LONG WAVES AND WORLD STRUCTURAL CHANGE
diffusion of other equipment or of infrastructure
networks. Even the activity classes themselves
await definitions in practice, before optima[
product mix or scales are established. This
trial-and-error process of boundary definition
seems typical of the new industries in each
paradigm shift: the "model" Ford phmt in the
1930s was vertically integrated even to include
glass-making.
As regards the more traditional service activi-
ties, though, the change towards 'economies of
scope" for the giants and 'economies of
specialization' for the smaller firms seems to be
under way. An article in the bTnam'ial Times 2<>
described the "fundamental restructuring' of
financial services, identifying 'three basic roles
for successful participants:" ( 1) broad-based com-
petitors, which would be the merged and reorga-
nized giants with state-of-the-art information
systems and very broad market coverage, pro-
duct innowltion, brand franchises and image
advertising: (2) low-cost producers, which would
be smaller firms with an emphasis On minimum
cost in "simple product lines targeted at the
pricc-sensitive, commodity segment of the mar-
ket;' and (3) speciality firms, also small, but
geared at specific, highly demanding, semi-
custom market niches.
This example of reorganization is a particularly
clear illustration of what could tend Io be the
pattern of distribution of markets by firm sizes in
many industries as they restructure. The largest
firms would tend to widen their market coverage
across a wide range of technologically dynamic
products. This would leave spaces for small or
medium firms, both in the more routine mass
production areas of the market and in the
exploitation of skillfully segmented, specialized
market triches.
Outside industry and information intensive
services, all other productive activities, from
mining and agriculture> to distribution and most
areas of the service sector are being more or less
radically transformed by information technology
in the direction of computer-controlled, input-
adaptable, market-adaptable flexible systems.
Beyond traditional industry divisions a para-
digm shift, as it sweeps across the productive
sphere, not only transforms existing industries
and creates new ones; it can also change estab-
lished industry boundaries. The present shift may
blur the distinction between nranufacturing and
services and, within each industry, it can modify
the traditional patterns of horizontal or vertical
integration. This aspect of the transition makes it
difficult to assess what is really happening, when
analyzing industry using the established
classification system.
451
For developing countries, the changes brought
about by the new flexible technologies mean, as
they do for developed countries, that, on the
whole, the bulk of existing phmt is obsolete by
international standards. Every single sector
needs to be re-examined afresh to assess its
prospects hi national and international markets
under the new conditions. The reasons that led
firms or countries to concenmtte resources in
some industries, as opposed to others, might no
longer be valid. Certain export-oriented sectors
may face new difficulties: in others, previously
adequate protection policies could prove incap-
able of stemming import competition.
Both national planning and individual project
evaluation, by national or international agencies,
would have to recognize a totally new set of
conditions governing the choice of technique and
scalc. Assessing adequacy or competitiveness on
tile basis of past or even present average costs,
without bearing m mind the dvnamics of techni-
cal change, could be highly misleading and bring
disastrous results. This would apply to any sector
or pro cot, for the changes tend to afl:ect file
whole spectrtnn. It is particularly crucial, how-
ever, m the case of the capital goods industry
which, apart from its obvious impact in determin-
ing the productivity of the user industries, is in
the midst of a profound transformation v~orld-
wide m both products and processes.
(ii) Rapid technical clmn<~,e vs 'minimum change"
strategy
The new flexibility potential stretches beyond
changes in optimal scale and wmablc output mix.
It expands the capacity Io nlakc successive
changes in products, both in appearance and in
technical performancc without great loss in effi-
ciency.
The coupling of computcr-aided design with
computer-aided manufacturing (('AI)-CAM), ~i
together with on-going developments in
computer-aided software, can reduce the relative
cost of innovation and the time span of learning
curves. This feature opens the way for rapid
product change in time: and, although its irnpact
could vary widely depending on the industry, it is
likely to have a profound impact on business
behavior. It could reshape the forms of competi-
tion and hence of oligopolistic practices in many
areas; it may change the distribution of produc-
tion between large and small firms, and it is
likely to give a key role to the in-house research
and development departments.
Change in the.lorms qlcomlu'tition: F r o m past
experience, i! could be said that it is generally m
the interest of highly concentrated oligopolies to
administer technical change, by pacing the
452 WOI~LI) I)EVIZL()PM [~N'I
rhythm of innovation~ to take bust adv~tlltaUc" of
uauh produut cv+lo in _\,ioidh+g optimun~ ovurall
profitability. We w o u l d ar~tlt_" tim) Miuh Li 'mini-
muln uhant,c'+ Ml+~.ltUl~v<+\va+ mctucd apprt+priutc
tilldCr thc prcviou~ t+aradium, bw<ud on ii1~1~
produution of identical units, within which pro-
duct +llai17c i m p l i e d hiuh uosts in dudiuatctl
cquit~>munt ;.uld toolJi+lg. ~.t~<wull as hiuh risks.
I lowuvct-, ~is film relatively low cost of l l c x i b i l i t \
alid d\'llalllJS111 Uildt_'r the nu\+ +ondititu]s is
rt_'alizcd, thu ~<trti771c l o r markut sllarc could, in
c¢rtahl industrJus, hicruasit171 ), tsiku the lornl tfl
fast Jill+ovation and inlitaiJt/n. l'hi~ i~ ali+uadv
hapl)cnin 7 in th¢ ~+llt_'as of ~,olt\\al-+ alld ulcc-
tronJl.'s flroduuts \~,hei+¢ l+iotuction ba~,ud +`+il
patcntJll7 SC¢lllS uxttonlc]\+ dilfiuult it) ul+hold.
~)/~l~orluniUev lTJr small anU medium 17#I#~#l~:
1his uapauit_\ for quick tccluliual uhanTc miTht
havu uonscqucnucs in thu Ion#-run distribution +`+1
production bchvucn Im-~u and small ~)r mudiuln
l:irms, bc'eau~,¢ it is ruhitud to tile qticMitm t)l
"bai+i+icr+ to untrv +. \Vhc'rca', tl+m ¢luutlonic uom-
l+tHlunt+ +tutor i'+ ailuady bc'uomJn 7 +tmcc'ntrstlud
and thu h.'vel of in\'uMilluni at the pruscilt sla~c, o l
developnieni has reauhud prohihitive pro-
p o r t i o n : < , - wide areas of product aptlliuation~
tilltt 5o[lwai-u arc ClUitU l;ii + i:l-oil:l ruac'hh~ 7 )hal
situation. It ¢~ln bt." al+~tlcd indued that. ~[th the
I)OWLU+ful uapuhilitius ~ind low ~lnd dt.'uru'<i~Jn~ uoM
ol • bolJ/ conlpont_'llt~ ~ilid tJt_wuJt)tl111¢llt s\'Mci11s
(i.u. cquil+tmci+lt \\itll whiuh tt) tic'dun micro-
pl-occ,>~or ba'<ud appliu;.ition~<), thcru will. lol ~l
t+clativulv [on 7 lime, bc ainplu ~l~aCu for t1¢\~
<+illall lilln~ with new product~. A l l d the ?,~1111¢c'all
hu said aboi.ii inilt)v~itit)n in ~clviuc~. il+i+`~im st) il
tuluconlnmnication~ ch~ buut~mu a l l - p c r \ n s i \ c and
uoM-duurua~Jn 7. Whuthcr thc~u firms buutm~u
nlurt_" rick-take)?>, to hu taken ovur b) lhL" 7iant~, ii
~uucu~>sltil. or who)her thL'v will i)l+`~lJfcratu in
bandwa~ol+i fashion nnd buconlc typic'aL o1: the
i+luxt upswing, cannot bm torc'suun. Yut, thu
sc,c'/)l+ltt uoul+st_+, ~\,hiuh w o u l d ~ti;+ii-Liiltc,t_, conth]ucd
market uxpansioi~ for the uolnl+~onutHs, the uqtiip-
lllUnl, the <+\_u-vices ~lild lht_" tulecomnmniccitJtUl++
t>rothiuud bv the ~JalllS. +4UCtllS much i11ol+u
pl-onlisitl~ for overall ~ i o w l h .
77w role q/ #I('L~~)~~#ICill ~#~l ~/('li(J]+J]~##l~J#tl U¢7~arl-
#m'#~L~: In the l~l+u\ ious paratliunl, tllu c×istunuu of
~111 in-house R & D clcpartm¢nt \\as ~i 'hc'~>t pruc+
tiuu+ icaturc indiN~unsablc in n l o M 1;.ii-7¢ ct)ll~orsi-
lion~+ lis role, how0vcr, and )he tiuhinus<+ of its
rchition~hil~ with illailaUUlllunt, ill~irkcthl 7 or thu
t~rodtlciion t)rouc~s, varied widely_ a¢l-oss bran+
I.'l+lc'~, ch_'pcndin 7 on how suiunce-basud ihc pro+
duuts \yore. A l r e a d y thouuh, avid l+~l-I+i++il+>Suvun
nloro ill thu i:ulur¢, tllu R & I ) dmt~artillmnt, or
dc'i~)artillcilts, aru buUOlllJil~ ~i u o r u i]l{lllSl~c'111cnl
tool in ilium hiruc lh+nl~. FtlrihcrillorL'. dvilailliu
R & I ) miuht iilUl-Ua~inul) bu thu kuv t+`~ tllu
cxistt~llUC and ~+tilVi'+al of ?>mall a n d nlc'diuin
fir)n+, uspuuially in the cluctl+t)lliU+ aild illfol-illsi -
tioi] +uutoi-~.
In duv¢lopin7 uouniric+, mo<+t +`~1thu l<t&l) i~
tlotlc' in illOl+C ill- lUSh+ cicsidt_'lttic institulu', ~llltl
(puttin 7 a+idu ih+ quu~>tioi] of thu Iouai rclu\ancu
o[ ~,()ltlO o[ the l+iol+lums tauklL'cl) ~l't_'ai d i f f i c u l t \
i~ ¢llCtitliltt_'t+l+'cl m li-}iil~ t+`l lrailslc,r the i-c+ult~ for
apt+liuatit)n in ihu l+roducti\L • ~phcrc. \\"ith lhc
llc\v paiadJui11, ttk't-+ \\oulcl hu 7i-t_'atci+ ilt_'c_'tl loi
ii+!-housc R & I ) ulft)ris, diructh' linked t+`+prt~duu-
lion, and lt)r explicit tuuhnolouical str~iit.'Uit_'h t+ll
thu part t)l +Iminauun~cnt, cH+udull$ - thou,<.z,hnt~i
\)Ill\' it1 export t)rielltCd ,,¢ctor~,.
(iii) IL~er-dq/Um'd ~Ywem~ r~ /m~Um+er-Ue/incU
pfodtlcl.~
The cunjunution ut tl,.+'xil~l,._" F~roduuthm u~tp',tbi-
litics a n d ~ r c u t u r mtt>rnmtit+n mtun,dtv of e q u i p -
m e n t a n d l+u-oducts go\let',tics am+thor t r e n d ',,,ith
f a r - r c a c h m u c o n s c q u u n c u + : the di',crsit~ t>l :if+
pliuutions uvuilablc it+ the usur.
l h c typiual p r o d u c t s of thu l~rcvious Konch~t-
tit_',.: ,act-u concui\ccl to l~crJtunl a singlu task t+t
set t:,[ tasks that \~,crc n l o t c o r Its:., s t r i c t l \ d u l i n c d
b \ the 111~intltHcttllCr. l+roducts based Oil ll'liCl-O-
electronic>, arc, at least potcntiall~,, multi-
l+Url+t~su. Not o n l \ aru J n d i \ i d u a l picots of
uquipmunt htcruusiri~ly \ursatilu, but they. can bu
linked to~cthur into di\ursc utm+bin',tti~+n,,,
dupundhl~ on usur nuu&,+ This hu~> bucomc
c o m n l o n m olficu UCluipmcnt. v, hcru the m;trkut
offers st t-all~U tll b~isic COlf' l+t-ochlct~, and st ISll/~t+'
+`)i +`)t+tional l+Ct-il+hural c'lcnlunt•. ;\s thu llCt.'¢5~41r\
d r i \ u tt)t~,~il-tts standardization aild COml+atibJlit ~,
aclt+allCU~, in both hardware ~tilct ~tflt\~;LiU. the
j_'ilCl~lh/sillOll o[ lhc lrutltt l+`)%\at+cts Inodul',lril\
on the supply ~<Jdo for lllaltti[auturJn~ uquil+uncnl
i,~ also likoly to advaneu. Pinal swtc'rn~+ Jn tl~+ arc"
thu~,, potunliull_v, tl~C'l- ctcfincd, S.il!tt U~ili ~l+`)\t,' in
+omplo×ity al ~i rhvthlli si]~o ctut+cndunt +`)il thu
u$ci +.
Yhi+ OlUanic t},pc tll ,,\Mcin ~l-O\\th ClUHt+`_'s
!+,cop\_" 1ol+ adaptability in t+rocc++ clcsi#n t+n thu
tlart of l+lroduccrs. It uSiil liluan, for clmvclopii]#
uountriu+, thai ufloi-ts lit inaluhin 7 touhnicul
cht)iuc to +puuifi+ local condition+ tmvu a hcttur
cilancc of StlC'Ct_'ss. Moruovur. this :iclal~tability
also applies to the pr+`)duuts mad\_' with those
tcchniqtics, l.Jlldt_'r the ill;)is>> produutJ+`m ['~slrsi-
digm, the drive towards uiiifornlitv in collSUlnl+-
\ion patterns unuompasscd the privih+'~cd min+`)r-
itic~ of sill dcvuh/ping COtliltric~,. The qtic~,,ti+`+nof
adaptin 7 cithui + capital or Ct)IISI+IIIICI ~OOtI~, It)
div<.'r+itv in ulhllalt_" or cttltulc \va~, i]+`)t +,)11 ihu
;i~t_'ilda, ~1~>long sis t+roduuti\it) , iilltl t+rofitabilit)
dcpundcd Inninl\ t)l/ 7rt)\\'h]7 illSi~,~, nlarkt_'t<~ for
 LONG WAVES AND WORLD STRUCI'URAL ()|tANGE
identical products. The new technologies open
the path - - though nothing can guarantee it will
be trodden - - for adapting to diversity m
conditions.
Taking advantage of this new potential is no
easy matter. It requires overcoming decades of
imitationt it implies a willingness to recognize
local needs and building confidence in the real
possibility of addressing thenr successfully. And,
this applies both to the public and to the private
sectors. The general point is that once the mass
production constraint is eliminated as the only
means of high productivity achievement, divers-
it 3 in demand can become a source of investment
opportunities. [t can even create naturally pro-
tected markets and regional export advantages.
Yet, fulfilling this potential rcquires vast
amounts of individual, social and institutional
creativity, based on adeqnate information and
education, appropriate stimulating policies and,
hopefully, a genuine interest in the welfare of thc
national population.
(c) Neu'conCel~ts,lbr oceanizational q[l/ciency
When speaking about information intensity
{lilt[ flexibility, we seemed to assunle that engine-
ors and managers would immediately respond to
the new dynamics in the relative cost structure
and to the potential offered by the new tcchnok~-
gies. The process, of course, is neither simple nor
automatic. Yet the changes in the optimal
organization of the firm are even more difficult as
they require overcoming deeply rooted behavior
patterns, in fact, the diffusion of a new
technological style is also a conflict ridden
process of creation through trial and error of a
new organizational model as regards the manage-
mcnt of the firm. This process is cxtremcly
uneven and tellds to spread through "sink or
swim' imitation under competitive prcssnres. It is
profoundly linked to the characteristics of the
new technologies, especially to the features that
contribute to the quantum j u m p in productivity
in relation to previous practices, i l e r e wc shall
discttss some of the elements already visible in
the process of diffusion of the new organizational
model.
Obviously, there is never one and only one
form of organization of the firm at any one
period. There are differences stemming from
type of branch, national conditions, and partict.-
larly size and scope of firm. Yet, certain gcneral
principles can be widely accepted as constituting
"best practice" guidelines and will, therefore, tend
to shape the organizational goals of most firms
(and in the longer run even of most institutions).
453
It is in the sphere of these general principles that
the following discussion will be placed.
Nevertheless, it should be kept m mind thai
the innovative process in this area is taking place
now, and there is still much ground for creativity.
Ford's first assembly line, which became the
prototype for plant-level efficiency in the mass
production paradignr, was established at tile
beginning of this century, t lowevcr, Sloan's
professional nranagenlent model, ~¢ which be-
came the 'ideal typc" of corporate organization,
was actually developed m General Motors sornc
fifteen years later. Furthcrmorc, it was only
during World War I1 that organic links between
industry, science and government wcrc estab-
lished as a feature of the Keynesian mode of
growth.
(i) T/re internal organization ol the JTrm:
systemation vs atttomation
Tile Fourth Kondratiev model of organization
implied a sharp separation of plant managenaent
from eeononlic irranagement and, within each, a
clear differentiation of activities to identify all
forms of repetitiveness for st, bsequent autonla-
tion. It was mainly an analytical model. It
demanded foct, sing attention on parts or ele-
ments of processes: it led to detailed defmititm of
tasks, posts, departments, sections, responsibili-
ties and to complcx hierarchies. The new pa.-a-
digm is intrinsically synthetic. It focuses on links
and systems of interrelations for holistic techno-
economic coordination.
Although many applications of electronic
equipment are generally referred to as 'automa-
tion,' we suggest the use of the term "svstema-
tion' to describe the new trend towards merging
all activities - - managerial and productive, white
and blue collar, design and marketing, economic
and technical - - into one single interactive
system. +~ This term has the advantage of de-
emphasiziug mere 'hardware,' and emphasizing
the systemic, feedback nature of the organiza-
tional "software.' We believe this is an essential
distinguishing feature between the new and the
old model of firm organization.
In fact, many unsuccessful attempts at
introducing electronic equipment may stem from
thinking they are mere pieces of hardware, which
can be incorporated into the previous plant or
office with some retraining, for "business as usual
but hopefully better.' In reality, reaping the fruits
of the new technology requires a profound
transformation in the internal organization of the
firm and in its interconnections with markets and
suppliers.
In a sense, it couM be said that information
technology does for the firm what the assembly
454 WORI.I) DEVEI.()PMENI
liric did for tile phult. l'lle firrrl, as a wholc,
bccotnes a c o n t i n u o u s flow system of activitics.
inlk/rmation, ewthtations and decisions. But thct-e
is a crucial difference: w h e r e a s the assembly lmc
was based on the c o n s t a n t repetitiot+ of the same
s e q u e n c e of m o v e m e n t s , irfformation technology
is based till it system of f e e d b a c k loops for the
optmfization of the most di~ ersc and chatlging
activities.
W e have aheaclv seen that, in plant t',rganiz-
ation, the new tcchnology md only changes thc
core t r a n s f o r m a t i o n processes, but also the crst
while peripheral tasks such ~ls dcsign, stock
control+ quality control, nlaintenance+ etc. Thus,
the potential exists for the conlplctu fusion el all
production activities into one single, flexil+le,
ot+timized svste111_ frOill the illpUl It+ the Otllpul
end. /\ simihn integration can occur in the ufficc
through conipulerization and conm]unicalitms
systems both internal and exlern.:ll.
Yet, although such trends in plant ~tll¢.t office
could alleadv be considered cilt)l-lllOtl:-+, trails-
f o r m a t i o n s , they arc not the crucial l+:tt+t of the
story. It is the possibility of n]erging both into :i
single system that constitutes ttlu trul'+ radical
ch;.in<,e at the or~.:ulizatJonal It'+el. Tliis steins
fronl the potential provided by the equipnient
itself+ which, :.it the s.:imc tinle as it controls the
physical volunles .:illd qualities of iilputs,
throughpuls and outputs, can vh_'ld both the
t e c h n i c a l dalai a n d the economic inft)rmation for
eollStallt IllOIlJtoliilg of ICCIII10-CCOilOillIcpelollll-
.:II1CL',
This does not mean+ oi course, that all i:irm
activities x~otild be physically till it unified space.
Mueh to the COiltrary, lelemoinmunicatioi~s Otit+~a-
bilities actually increase the degrees of lrccdonl
concmrnin 7 location (includii+lg even that of indi
viduat people), hi fael, they +nigh+ loud to a much
wider geographical dispersion, .:is urbail iigg]Oill-
erations lose their capacity to I~rovide external
econoinies. Nor does it hnply that lllcv v+ould
constJttlte a '>ingle unil. If the old corporate
struclure illanagcd llltilli-plant, illulti-couiltrv op-
+.'rations, the new teehnoh~gical infrastruelur¢
would allow tile efficient i11.:illligC'lllellt of world-
wide, giant, conllflc'x and r:lpidly c.'tllulTing
eonglotllerate structtirl.,s. (And +his is indeed the
direction in which transnaiional corl+~oratJoi/s
have been lllOViIlg since the late 196(Is).
(ii) Relationship between production and
mark~,l,~': dytlamic "on-line' monilorin+ I'Ll"
periodic plannin,~
But systcmation goes bc,~ond the internal
org.:ulJZ.:ltion of the firm iilld allows the cst<lhlish-
mcnt of rthttivclv low-oust lcc<.lhack loops with
the market, for ucquiring infl~miation m real
time. This inturconnection ~h'es full meaning to
the potential for flexibility in output pre,+iousl~,
discussed. T h e quickest way to convey the idea is
p r o b a b l y t h r o u g h an example, l,et tts then look ~lt
a CaSe In the highly volatile area of fashion.
B e n n e t o n , an Italian family firm described as
o n e of the lllOst successful c l o t h m g coml+anics in
t++urol+~C, is organized in a flexible network el
l+roduction and distribution. At the nmrkct end it
has 2500 national and it+tcrnational outlets,
furnished with Sl+cciatty designed electronic cash
registers that transmit on-llnc tell dat'a about
whicll articles are being sold. their sizes itncl
color. This information is c:cntrldlv rccei,+ud and
processed for decision-reek+nee at the dcsi,,ne and
production end. There. the output mix tIcxibilitv
of the main im~duction faciliticsis comi+Icmcntcd
by a network of 200 small firms in a sc>rt t+l
+putting out' system that pro'~idcs additiomtl
ftexibility rcgarcling : o l u m e . . : t l t h o u g h possiblt, at
the expense of thcsc redirect workers. ,.\llegtdl 5
thc response tithe to mat-kct changc,~ i', reduced
to lfl da,~s.
This potential for reliable f e e d b a c k loops with
the m a r k e t could have a p r o f o u n d irnpact on
Ill~tll~+|g~+lllt.'I1t prL|ctict_'s. It c~tii tl+~ti1sft)rt11 pl+/+ctu¢ -
thin phummg trom a periodic hit-or-miss activit\
couph_'d with l+lexiblc production fac'ilitius. Prc-
viousl'+, prt~duction p h m n m g relied on the IImv e l
orders, tempered by past cxpuricnct+', intuitit+n
and thc ',tvailabilitvof ruttional statistics inclicu-
turs; but this mtrt+duces an inc~.ilablc time lag
resulting in wide inventory fluctuatitms. With
clectlonic eclUil+~llltntand s\StClllatJOll,gi\'cn tilt_'
approi+~riatc software, cvcrv aspect el thc busi-
ness can be monitored in dctail and in real timc.
Not only can thc possible (model-smmlatcd) or
actual elfuels of ~411v decision be knov+'n m u c h
lastcl th.:m bolero, but also fine tuning and
decision c h a n g i n g arc much nlorc rapidl} pcl-
f,ormcd. Short-term prtffit maximizing or pro,fit
flow optimizing tht-ough adjustments in costs.
prices and volumes, a'+ well as vet,, tighl in,sun-
tory controls and ,dvmmfic F,roductic,n schedul-
ing. can n o w be inIk+rmation-bascd. ~''
It is. el course, proI:,.:tblcthat the htrgcr firms
will he the ones to ach:,i+~ttllc s'+stemati,4n model
more full,,..Ncverthclcss, the general c',illCCpls
also aPi+lY to smaller firnts.~+ In particul;tr+ the
on-line m a r k e t informatitm systems COlfld cliffttse
cluitc wMclv, as both produccr~, and distributor>,
adopt c o m p u t e r i z e d c q u i p n l c n t and tclccom-
llllllliC~ttii'tllSbCCC, IllC truly all-pcr,+asi\c and low-
cost,
 IA)NG WAVES AND WORLD STRU('TURAI.. CttANGE
(iii) A new management style: it{lbrmation-based
vs intuition-based skills
These developments also tend to change the
required management skills. Much of the experi-
ence of successful Inanagers involved having the
type of mtuition that would lead to the right
decisions in the filce of scant information. That
might be why the first reaction of tr:,tditional
managers to the masses of data that could now be
available is a certain sense of intoxication. In the
future, coordination and information man:,igc-
ment skills are likely to become essential for daily
operations. Creative, intuitive skills might be
increasingly required for human rehations and for
the more strategic questions, such as investment
or technological decisions as well :,is for the
design of the information systems themselves.
As a matter of f:,ict, since firm growth might
often depend on tnarket scope :,lild technologic:,ll
dvnamism, it could prove very ineffective for top
nlan:,tgenlent to ignore or delegate the tectmical
questions. Both strategic :,lnd short-term deci-
sions :.ire likely to involve :,l tightly woven
techno-cconomic p:,tck:,ige. Thus, the new condi-
tions imply a subst:,intial tr:,nlsform:,ltion in tile
required ill:,tnagcnlenl skills, right throngh It> the
topmost levels.
(iv) ,4 new system qf control: decentralized
networks i's hierarchical bureaucracies
Thus flu, tile an:,llvsis of the new org:,uliz:,ltion:,il
modcl, might have led tile reader to bclic~e that
:,ill forces within the new technology f:,ivored
gi:,lnt firms and centr:,ilized control. Nevertheless,
there :.ire vcrv essential conlplcmentary ch:,lrac-
teristics that grc:,tlly widen the sp:,lce for local
:,tutotlomy and decentralization.
To begin with, the typical pyranaidal organiz-
ation is r:,idically questioncd. Until rcccntlv, the
more complex the organiz:,ltion the greater the
prolifer:,ltion of interincdi:,lte control levels. The
v:,trious la~,ers of 'middle" i11:,inagenleilt served as
;.i sort of rela\ s\,'steill collectmg and processing
inforimition from below, taking nlinor decisions
or s u g g e s t i n g major o n e s to top nl:,inaggnleilt ()r
top government officials and then transmittmg
tile fin:,tl decisions downwards. "Fod:,l\'. provided
the :,ldcqu:,lte software, those rel:,ly and proces-
sing tasks c:,ln bc done by computers, and the
present fui>etion of middle ill:,ul:,lgers made
redund:,tnt.
This, in itself, already fhattens the control
system bringing decisions and :,lOtions eh>ser
together. But. if tills ~vere to le:,ld it> hyper-
ec'ntraliz:,ition of decision-nl:,lking, the main
flexibility potential of the new svstcin would be
hopelessly lost. The core fe:,lture of low cost
microprocessors is the capacity for providing
455
"distributed intelligencc,' which, in organi-
zational terms, means distributed decision-
making. An illustration from a hardware system,
might clarify the inlplications. Let us look, for
example, at tile cvohition of traffic control
systems.
In electromechanical times, traffic light relay
mechanisms were individually hand-set to change
at prescribed interv:,lls :,iccording to control plans
drawri up ;it tile central office, on the basis of
sample "counts" taken by hand or instrument. By
the end of the first stagc of computcrizcd tr:,tffic
control, :,ill the information w:,is being fed into :,l
giant computer with very complex :,rod expensive
software, providcd with a giant display of the
city's traffic control systcm, where the hyper-
centralized decisions were made. Tod:,iv, ilffmitc-
Iv nlorc flcxiblc svstenls h:.ive been dcvelopcd
with microprocessor intelligence :.it each traffic
light, hlfornl:,ilion on tr:,lffic flows :,it each
mtersection is collected on-Iiric, on the spot, so
e:,ich set of lights c:,in re:,ict to demand. Further
inlerct)mnlunic:.ltions links :.ire p r o v i d e d anlt>ng
intersections in :,in area or :,llong :,l nlain route for
collective coordm:,ltion, and even v, ider systems
of information sharing between are:,is can be
established for further interactive optimization.
In this new context, the central control unit
acquires a monitoring :,tilcl coorctiilatmg role in
ch:,lrge of designing :,lilct evahialing the distri-
buted intelligence network. This type of svslein,
:,ip:,irt frt>m being m f i n i l c l v less costly :,tile[ anion-
able lo ilw)dular installation, is far lllore effeetive
and reliable than tile tot:,illv centr:,llized one. ~'~
Be:,lring in mind the obvious limits io tile
anah)gy, it serves to nlake the organization:.il
point qnite cle:,niv. A centr:,tlizcd decision-
nlaking system wouid h:,ivc to be :,tble to simuhate
every single possible ct>illbin:,lti~,)n of events with
every single possible cotnbination of elenlcnts,
and this is mdeed :,l cni/lbersoille :,iild nc:,n-ly
hnpossible t:,tsk. If organizations :.ire to be diver-
sifted :,lilcl flexible, to take full adv:,nltaoc of the
ne~ tx)teniial, they w,ill probably tend to be
b:,tsc'cl on flexible, intcractixe, rcl:,ltively
autonomous units, lmked in :,ldaptive on-line
systems of coordin:,ltion under dvnanfic strategic
ill:,nl:,tgenlent.
But, the analoov can be t:,lkcn fnrther. Because
"intelligence" can be provided for single pieces of
equipment, centr:,il coordination is not indispens-
:,lble for efficiency m every case, :,rod m:,lny local
:,rod niche markets, for products t>r services, can
be covered by independent small firms or
cooperative networks. And, going still flnther,
greater worker participation, already ex-
perimented with more w i d e n in Jap:,ln but :,ilso in
sotne Western firms, conld give better results in
456 W()RI.D I)F.VEIX)PMENI
b o t h h u m a n and productivity terms. All the more
so. because of the need for t e a m w o r k , multi-t;,sk
posts and multi-purpose skills. This aspect, much
to our regret, can not be discussed herr.
Thus, in o r g a n i z a t i o n a l terms, the new para-
digm c o m b i n e s trends towards ceullralization aud
d c c c n t r a l i z a t i o n , towards more control and i++oic
autonomy, st+ thc x;u'ictv of c o m b i n a t i o n s is
likely to lye quite wide. not only ill thc present
transitioual period, but prol+ably into the future
upswing.
Moreovcl, this applies nol only to firms. The
new, oiganizational model, ;is in prcvious Kon-
dratic',s, overflows into ;ill sorts of other social
activities frt5nl the educational s\'siein to the
functioning of goverillllCllt. +|~tlrcaucracv' m
Wcbcr's tinle was ;111 inuovation that led to the
division of labor iu the control sphere, increasing
tile efficiency, of organizations during the Third
Kondratiev. In thc Fourth, it was taken to its
ulnlost limits and has i+o+~ bcc,<u/lc ;l CUlllbcrsollle
aild costly bt~tliencck. Yet, both those who cry
against governnlcllt bureatlCr;lcies and those who
defend them seem to hc trapped in the same
nlenta] block: confusing the form of lhc' orgnniz-
ation with its purpose. The same social goals
coukt no\v bc achieved with a diffcreut aiId more
efficient orgal+ization; alld. rather than reduce
the nun+bcr (5| people at x~ork, the obicct could
often be to eXDalld alld enrich the goals.
(v) l)eccnlraliealio#z. a key/('Hlltl'C.lOf Ueve/otmlg
COll#ll#i(',,;
It would seem that an e m p h a s i s on taking
a d v a n t a g e of the decentralizing potential of the
new paradigm could open fruitful paths for the
T h i r d World. 1"o begin with, the p l a n n i n g system
itself might w a r r a n t radical rethinking. ( ' c n l r a l
c o o r d i n a t i o n of regional, local or scctorial uuits
with a high degree of a u t o n o n l v , especially
economic, could prove morc effective than either
truc centralizcd control or so-called "indicativc
plarming.' It should also be r c m c m b c r c d that a
model of orgauization is mainly ;t set of princi-
ples. It can, therel\~re, he applied xsith the "least
hardware" solution. T h c r c is indeed a d a n g e r of
massive o v c r i n v e s t m e n t and w r o n g technological
choice. So, original solutions to real local needs,
taking rote account local conditions and limita-
tions, are possible, v*
But these solutions should bc sought now,
before technical choice b e c o m e s morc rigid. If
groups of d e v e l o p i n g c o u n t r i e s are able to set and
put into practice s t a n d a r d s more a p p r o p r i a t e to
their specific conditions and a more a d e q u a t e
m o d e of growth, it is not unlikcly that these could
b e c o m e powerful indicators for d e v e l o p e d
country prodt, ccrs socking export o p p o r t u n i t i e s
in the Third WorM.
It seems that the first Iocotnotixc was designed
with horse-like legs, but, il it had bccn ctmccivcd
in a ~rorld without horses, it might n e v e r have
gone t h r o u g h that "hybrid' stagc. It is truc that
technology' is not socially neutral, but pcrhul~S its
scope is greater than the limits imposed by those
who have l+lolded it.
To take just one current cx;unplc: the t)pical
p a t t e r n for clcclt-icity g e n e r a t i o n and distributiou
wus established, in thc Third Kondrutic~. as a
centralized ilCtV¢ol+k bascd on the use ',)f Im~ cost
steel for large engit+ccring e q u i p m e n t . It ~r~IS
f u r t h e r pushed hi this direction bx mass-
p r o d u c t i o n concepts and the availabilit,~' of low-
cost till, ~ h i c h closcd-olf file route of most othct
possible sources. Today, this same centralizing
model sees llUCIear pc,v-,er as the t5tll', real
altcrl+ati;e. [-ixistint, infrastructure m a k e s it ditli
cult to conceive a truly dixcrsified semi-
d e c e n t r a l i z e d system. |'~vcn m the introducti¢m e l
solar technology, e x p e r i m e n t a l stations have
ct,velcd acres of lalld with solar collectors for
central r e d i s t r i b u t h m . This r a t h e r awkveat+d form
of application has b c c n used in spite e l the
x~klcsprcad a g r e c n l c n t thai it is more n;tttir;tl for
a techllology that collects an nll-per\;tsi\c st+urcc
of chore\+>, to install lhc ,~cneratiu~• e q u i p m e n t at
the points of use.
Individual+ n;ttional or region;tI initi,fli~es.
invol~mg ntm-mnt;ttivc b e h a v i o r m these t}pcs of
issues, could d e v e l o p and gear the new potential
towards more a p p r o p r i a t e solutitms for T h h d
WorM conditions. ~'
In the following scot+tin, wc shall cxph>rc the
more gcncr;,l perspcctivcs in thc context of the
changes in the internutional fratnework that can
occur in long wave transitions.
4. C t t A I . I . E N ( I E S A N D P E R S P E C - I ' I V E S
F O R D E V E I . O P I N C ; ( ' O U N T R I E S IN Tt II-
PRESFNT LONG WAVE TRANSITI()N
If our long wave hypotheses arc correct, the
uppermost idea that should guide de,/elopmcnt
strategy today is that p l a n n i n g must address the
p r o b l e m s and o p p o r t u n i t i e s of t o m o r r o w ;uld 11+.5[
those of ycsterday. As we suggcstect ;it the
beginning, this is a timc for speculution and
renovation. A l t h o u g h the future is built upon the
past, in transition periods mere cxtrapolatiou
from the past is useless and even counter-
productive.
Obviously. the p r o b l e m of arriving ut success-
ful responses m dcvclopiug countries is
t r e m e n d o u s l y COlllplcx. It requires not olll.v ;u+
 LONG WAVES AND WORLD STRUCTURAL CItANGE
understanding of the new techuo-econonlic para-
digm. but also foreseeing the possible responses
of the core industrialized countries, to prefigure
the general climate of the future international
framework: and, this has to be done in most cases
in the face of scant fimlncial resources alld
tremendous hmnan hardship. Nevertheless, an
adequate response is more likely with higher
information and understandhlg. As we have
seen, certain features of the new paradignl and of
this specific transition could be used to advantage
m opening new avenues for developnlent.
(a) A new Slmce.lbr del'elolmWnt thinking
From what has been argued, the first point to
keep in mind is that the transfornlation in the
relative cost structure changes both comparative
adviultaoese, and comparative disadvantages. For
each country, this implies a fundamental rethink-
ing of its relative advantage position within the
new tcchno-ccononlic paradigm to identify the
new possibilities. This should not be misunder-
stood as going back on the discussion of static
and dynamic comparative advantages, nor :,is a
negation of the role of tile state in creating or
enhancing such advantages or using protective
nleasures to o v e r c o m e disadvantages. It merely
nleans that the w o r M of the past is dvin,, and,
with it, tire opportunities it opened or closed,
Only a reassessmcnt of real possibilities can lead
to adequate and innovative development pol-
icies.
This basic rethinking involves the question of
specific resource endowment, location, sizc,
cultural or environlnental fiictors and previous
areas of relative development. [towever, it also
involves a rcassessment of the technology gap.
Sincc the new overarching technology is now at
its relatively early stages, it is possible to attempt
a direct entry without going through tile
technological stages it leaves behind. As Luc
Soete 41 has pointed out in his analysis of tile inter-
national diffllsion of technology, each crisis in a
long wave restilts in a restructuring of the relative
positions of countries. This is partly because the
new technologies itllow "leapfrogging" for some of
the countries that do not carry the inertia of the
previous industrial structure. In the particular
area of microclectronics applications and soft-
ware, Morris Teubal a2 has noted that technical
knowledge of the type acquired in universities is
the essential initial skill required. This is m
contrast to the need for productive experience in
traditional mechanical engineering or investment
experience needed for success in the process
industries. (Of course, tills situation is t e m p o f
457
ary: as the new areas develop and standardize
their practices, experience will once again bc-
colne necessary for success).
These general comments apart, the route to
ttevelopnlent does not hinge on whether coun-
tries can or cannot enter the microelectronics or
inRmnation race. Even industrialized countries
might be wrong in believing that, with enough
govertuncnt funds to support tile growth of
information technology, they can unleash the
recovery. We have already seen that tile process
of diffusion of the new technology, without
changes in the socio-institutional framework,
actually aggravates the crisis. The real question
for developed countries is how to manage the
transition. This does inw~lve an effort to reorient
economic activity by enhancing the conditions
that stimulate a successful restructuring but also
to avoid a collapse: and. this requires both
temporary renovations to deal with the maior ills
brou,,ht~ about bv thc transition - - especially
unemployment - - as well as more pcrlllancnt
ones to shape the future.
For dcvelopmg countries, it is a question of
taking advantage of the transitional phase to leap
forward. This also requires socio-inslitutional
transformations. I lowevcr, since this is not the
place to address the wider social issties, the
discussion will be limited to an overview of the
new degrees of freedonr for achieving economic
growth. Although increasing wealth can be un-
evenly distributed, better distribution and
greater welfare arc more likely with increasing
wealth.
Because electronics and infornlation tech-
nology, and especially its flexible organizational
paradignl, catr transform anv activity, froth min-
ing and agrict.tture through health care and
education to biotechnology and satellites, the
real question is which activities to emphasize as
the core of a dcveloplnent policy. The how, as
was discussed in Section 3, seems to involve a
uluch more integrated systems approach, requir-
ing the development of design capacity for
process, products, gcneral organization and
marketing systems. Thus, there might bc higher
chances of success by focusing on one or very few
integrated complexes or flexible decentralized
clusters of activities, centered around local re-
sources or local conditions.
This approach could imply a revision of the
traditional concept of 'industrialization," substi-
tuting it with a much wider concept of integrated
development. A more adequate approach to
phmning would reevaluate :`ill wealth-creating
activities, from agriculture and mining to
inflmnation services, and :`ill the elements of each
process, from design through organization to
45~ W()RI I) 1)1~\ 1 1 ( ) I ' M I N I
nation~il and ~volld m l l r k c t i n ~ , l'hi~ II]C;i11~ thnt
T10 i~articuhtr scc'ttu ix intrin~+it_'~lllv "l+m'ltcr" for
tlc \¢l nt ~ n / cn t but lhat t_'tc'~ltiil~ iiclat~lj',¢ hHc-
~r~llctl ~vMt_'lllh iillct inlmFiic'li',u" Iink~ is bmllci- f i l l
[hc clc'+'cl(~l)i]+ici~t ¢>f iii1\ hOC'i()l.
Tr;tditionallv, u n d c t dc',cl,.)t'~cd uountriu~ h;t'.c
stlll'cictl l r o n l the insLifticicnt ~+izc tfl h+ccil tllilr
kl.'t~,, I~ick ~+1 (ill CXl+CUiCnccd iilicl skilled I~x+'+t)rk-
lorcc ~ttl+,l it hlltirtaTc o l tl'iallaTcr<4. { ltlclt_u the tlc\v
ctmctitit>n+, thus+ m i g h t i1o It)llOCr hc '~tlc'h attire
ob,q~lclcs.
,]~s v,c h a \ u sO'ell. \,<ilh gt)t)tt l+rocu's,~ ~illtt
oi+gailizatioilal design (arid p r o v i d e d the gt>iil is
well c h o s e n ) , it s h o u l d n o w bo t+ossihlc to ~ichicvc
high i+rc>ctucti~itv Ic~uis ~il the blr, i,+ i+l ~i '+mall
illill-kt_'l for o n e t+rt)chlct ~+1 ~i ct)nH+inniion o f
l h c n l . ' l h c s c Ol+t+orlunitics 'drt_' f t i r l h c r cilh;inccd
bv the nt.,~, t+olciltitil for c'iitciing il~ N+ccific h+clil
ncccl~ lind c o n d i t i o n s . ,~o. t t c t c l n l + i n g ctmtliiic,~
uoLlld no,+~, pl',iy ~i i11o1-c at_'tJ',c role in SCglllt_'lltc'tl
clc'tllillltl ~tliCt l+iochict ci-catitHl, for I(+c'iil illlii-kcts
cls well ~ts l o r i n t c r i l a t i t / n a i niche,+.
As lcgal+ds thu typic~il skill t+rtflilt_', thu llc,,t+
tt_'chnlllog'¢ call hc ~tpplicd w i t h :i ctillll+illlilii)ii o l
tcchnic;.il ;.illtl prt+ft_'ssioilal i+~crsonncl illltl ruhl-
tiv c h ' h+w-skillud+ ral+itll )' trliillCCl l;ihtit +. TIItI~
~+hil¢ thu ll~ort_' i n d u s t r i u l i z u d ct+uiltric~, tlltl>,l fac'c
the cl+lnllonTc o f rcc'_t,c'lin7 the b u l k o f tlic r c d u n d -
+iTlt +kills, d o v u l o p i n 7 c'OtllHrich c o u l d 1+~,' t+ii>,,<th~ii
p i c v i o u ~ bottlcl~¢ck \'+l/c_'i/cnicrin~ ilt_'w ku'ciOl+S t)l
t~rodticti<m+
z\s l<ir iis illall;.l~t_'i-~ ai-c cotlcCi+llCtt, the pistil+dell1
i+c'inaiilS, bu{ it nt>~ ha>4 ~i ulillcr¢iH c h a i i i c t u i +.
A~iiil+i, l h c nccd l o r the <rid ~kills c'~ll/ hc lllOl+C <~1
h_'ss I ~ y - p u ~ c d and the n e w skills, ba~c'd tin a
cllt~uc'itv+ t~ clcsi,,n, ~ ;lild co(u-clinatc inft)rm~ltit)n-
i n l c n s i v ¢ sv~tmins, c'{iil I~c aCcluh+md and duvui-
~l)ccl. In t+his ;+lrt_'~l, tilt' itli+lov~llitm t~roc'c'~s J~
l a k i n 7 phicc n o w itll ow_u thin \v~>i-lcl, so t h e r e i~
l i k e l y t~+ I~c l h n c f l u cduc_'iititmnl '<tilct liJul+iind -
t_'rrt)r lm~llnill 7+ In thi~ c o i l t c x l , it miTht bc
w o r t h w h i l e t~l lc'iishc'ss l~ruscnt cffort~ in prolc,,-
niOilnl cctuclltit)n t>r t i a i t l i n 7 (iiichidJn~ lhosc to
bc ~lC'cluiruct nbrolid). Also. nint.c t11~tll\'
l~rcvioti+d_v t r l i i n c d cn~Jt]cul->, iirc.' o1i¢11 unclur-
tttilizcd in the l~aSsivc t)t~cr;llion ~>1 the old
tcchnolo<,ics ihu', (+'~ill hc ltli+ilc, d intn ~t ;"~ilti~ll~lt_'
~i~,sci if t h e y iiru" well dilCCtccl itnct ~i',cn il illt)rt_'
i+'rcaliVC l+oic.
(C) 7)'(IIL~IHIliOIIHIS tllld (llllOllf)/tlOll~ ddY~'/opIH('lll
It could bc ~lrgucd th~H the r ¢ i u t i v c h uutomm~-
ous induslri',dizutit+n t~l I hird W o r l d c~mntric~ i~
~ c n c r a l l S n~t in the iil1,...'i,.._'sL o | tran~natJonal
corl)ori||iOllh, FOF ~l 1oI1~ |i111c, lhcsc COliillric~
Jlil\C J~CL'II s'did TO hcil Si)LIIL'C oJ chc;AI~ I.LI\\
l+mttcrhtls ~tnd l~tl-..:,r,n'-, ',',.,.:I]~:., ~t l'~iolit~d+d,.:
nlut-kcl for mn~,:.,-l'~rndttc',._'d 4+..~ds. vith,.'r tinishcd
~,r ~ts~,¢mlflL'd in hw~d sul',sicliarics, l l,>v,.c,.vt, if
o u r it>n~ ,,,,'~l~t, IllildcI is ".,(]tillS.I, tllix nccd iI(]
h u l ~ u r hu tile u~lsu'.
It++ the first plllcu'. ~in L'ncr,~3. a n d nl~itLui;tt'~
SLI\rjllt~ tcchnt>h+gy lit+u:+ llOt hJll~L' llt+lt)n tilt+;
dt'ClCilsJll~ It+_'iatJVu"Cost i'd t)JJ ,,)r I~t\'+ tlliltu'lJltl'-, flH
inurum, ing productivit>, l+~r~flitnhility ~t]l~.l ~lt~+,+th
In the l,~trtic'uhn cusu c,l oil, thu tlilllht1~ititit]il]~ i11
th',_' fluid h a \ c uccuptud, nml sot+nutinlus Ic,~+lcrcd.
lull]+ COllllWl1++,iitcd I1~itJ(+llltli/~tlit)tl ~IIICl IItW,, 'Jut
i',c l'Uolit lrotn hcllin~ tcchn()lo~ic~t] ;tnd inarkut-
it1~ s,+_'l"+i~+u~, to t h e i r ur:-+tv,hilu sul+~idi~Hiu,,. ,\
sH11iJ~tr [+hclloFncilon ih (+Ccltrl-it1~ ill -,t)t1~,,.. t)l the
mct~tlhtr~icnl inclu,,trics, v, hcru t:tthcr thnn '-.utt-
ing u]'~ sul+sidiarics, tnnlhn',ttit+n~Hh ha~,c oltcti
ctltcrctl e i t h e r illitlt;rit'+ ~ll;ttu ~t~l+CUlllt_'llth OI
dcSJgll, conMrtlcliOll ~lllcltcchn~dc, g> set\ ice con-
tt,~icls with dc:chqfitlg ctmntric>,. These c',unt,,
coulct hc SCgll ~IS ~lll~il~OtiS tu the ItllXt,_'d hlcssinL,
t~t p~flilicnl indcl~Cndcncc ,+,,ith~ut c o + n o n l i c
[Itl|OlltH11\. YCt. it i ~, xl l tu t,,i g l l l cd to d u n \ ill;it
thuv Cl+,,+'illC [~ctt,,.'r t_'t'H/diiJt]l/:-, I(H HIClu'~lh~_'ct iltlttHI-
tl111V,
~t_'t_'Olld]~+. t h v r v i., l,+_':lStill t() I+,:tic\u III[H
{lktllhlliltJOllillS II1~t\ I10 ],,>l]~cr hc.',.:k the "lil/al
nssclnhh htlbsitlilirV' r[+tltc. This I+t~lcticu t u i u i n -
i t l h s c r \ c d Itlarkut CXl+~unsitm o b j c c t J \ c s :tml
Niter. ~lt the t+ctlk tfl the pr~+>,pcriiy plntsc. I+,ucmnu
n >,trctchinu ~,olutitm to thu limits on l+n+dttcti,~it ,,
gruv, th unclur the o l d l+~nndigm. I+,: r c d u c i n #
I~ti+,or c't~.t,. W h i l e thu no:', t c c h n o h ~ i c s ~uc :ti
their carl> st',t~cs, initi:H n+~ukct CXF~ansit+n ,.:~unc,~
l+roi+n l+uocluu't chni]~u ;tncl or)st r¢cluctitm:-+, arld
t h e r e ix 111tluh sCt+l+C | o r ct~nt r e d u c t i o n in l+rt+cch~
~iilcl org;H+i/ittJon',tl c'h~tIlgC ill the hi;tin p h m t n
Thu~,. a l t h o u g h the ,question ~+l i~+l+t~ti,<c,.l ilhhL'lll
I:,I+,+, ix not vet clc;n, the trcncl tt)w;trtl~ (+ll-sht>rc
111J~l'iltJtH1. m i g h t hv tv,cr+ ~tt least fl+,r +OtI+LCtin1¢.
t']V ,,_'olltr;ist, it ~_'~iil l',c a r g u e d that t m d u r the
nc~,, c,:>ndJth>ns, ~t ,++'u'l-t;titl ]c\,+.'l t:,t" ~ltitot+(iillOtih
dc'+'cl~q+mcnt ill tile T h i r d \V~+rld c'.)uld h,+_' ',ci~,
J1111+~t+rt~itH hH the nov,' tr~tilsilatit+il',tl>, its the,,
rcstrttctur,+:, l ligh It,c:fl in',ustnv+'nt Ic\uls ',+'+tqtld
~tctultll'v incrca>,c the '.,+orld m m k c t h>r the +.'~uv
[+:,rocltlClS t:,l the n e w l+;~u-~idigt+n:ch+,cti+tmic c:c,nll+t+-
Ilcntn, conH+utcrizcd tfllicc t)r I'Ht+dllctjtH1 cqUil+
II1¢1/1 illld 1c Ik.'COIllllltl I+ iC~lt jt)llh, lib ','-:L"] ] ~lh
¢11~illCC1i11~ ct;nslllt ~tllC\. i+liHll ctcni~tl ~tnd
c;(>n':.+trticti(m a n d all other hfforn].nti.~>n i n i c n s i v c
services, frut'n financial t,u, t c c h n o l o g i c u l .
.\ ccrhfin h i s t t u i c t l par:dlul can he dr~iv,'n ,+,+ill+
the T h i r d Ktm,.hiltic\ l+cllc l+]l,~+,.lUU" til+s\vill ~.
 I.ONG WAVES AND W()RLD STRUCI'URA[, ('tt/\N(i[-
Then, the giant firms concentrated in steel
(which we have suggested was the low cost 'key
factor" of the period), electrical equipment,
hcax, y chemicals, shipbuilding, engines and
machinery, great cngirheering works and, in
general, products destined for producers or
oovernlllcnts. At that time, the spread of electric-
ity led to a proliferation of small and medium
firms serving local consumer markets (much of
tile food processing, ready-made clothing and of
lhe early consunler durables induslries were born
ulldcr tht.'s,c conditionsL II was a wave of
small-scale industrializatioll with a vast
geographical I:.lnoe following the electrical nel-
work, as opposed to the previous inodcl of highl_~
COllCcnlratcd stidanl-powcrcd industrial coin-
plexes in railroad centres and ports. Yct, without
this wave of small industr_~ and COlllnlt.'rcc,
purcllasin 7 cquiplllcnt and cleclricitv and
iransfornling ihc agricultural world, the giants
would not have found the approprialc markel
grow, ih.
Bccatise this ilced for markcl expansion of lh¢
apt+ropriatc sort steins to have apl+eatcd at each
transition, wc WOtLld -o as far as to ai-~ue that it is
very unlikel\ that a new ups+~ing c,:lll bc utl-
Icashed without the devclopnient of at least a
considciablc group of Third World countries. To
ailing, lhc achievement of the quantuin juinp in
productivity promised by this new technology,
the present internal markets of the developed
tout/tries plus the fringe high ii3coine groups of
the Third \Vorld arc clearly insufficient.
t towevci-, achieving this is no sitnple nlattcr. In
vices of the pi-cst,'llt sllorlagc of iilvestillellt fuilds
~llld lhe ellorllltltlS levels of debt, illovc"~ It)
facililalc market cxpmlsion based on Third
World dcvelopnlent might require new transi-
tional or permanent institutional arrangements
for international income redistribution. Some of
these might take the fol-ill of agrCClllulltS on
better prices for raw nlalcrials (which is what
()PE(" achieved in a unilateral why), but others
nlight be oriented towards ~,onlt.' fern1 of rotor-
national Kexncsianisn3 as was stiggcslcd in lhc
Brandt I~,cpori.
Before all this is dismissed as tltO|lian, we
would like to invite the reader to imaeine hm~ it
might have sounded in thc carl,,, 193()s to say that,
to bring forth the nccessary market growth for
ccononlic revi\al, devcloped countries would
ha\e to raise thc wages of the majorit) of
nlal/tlf:.icttirhlg workers, organized m officially
recognized labor unions, to a level who,re they
could own a car and a hous¢ full of t_'lectrical
appliances; tl3~it govcrnnlclltS would have to
directly employ a significanl and growing proper-
lion of the pot3ulation, as well as to generalize
459
social security bcnefits, and lhat nluch of thc
labor shed by higher productivity manufacturing
and mechanized agriculture would be taken up
by a fast growing service sector, while the
working wcck would be reduced lo forty hours
for till. Further still, let us try to inlaginc" how the
world looked to those living in the "Belle Epo-
quc" prosperily, when alnlosl every industrialized
country had or aspired to a colonial empire. It
surely must have be'on very difficult to lolCSCC
thc generalization of political independence m
Africa and Asia. Neither of ihes¢ sciies e l
dcvcloplnonts occurrt.'d withoul conflicl, of
cotlrsc, but both botanic cciltral lt_'aturcs o[ the
OCllClal nlodc of growlh.
(d) 77u' ri,s/< <!I 'miv~in~, lll{' heal"
Of course, the so-called Third World does not
exist as such. It is a concept based on real, and
doubtless essential similarities, but it necessarily
overlooks significant differences between tetra-
tries. L}nitcd Nations literature already distin-
guishes the 'newl\ industrializing countries'
(Nl('s). a! the upper end, and lhc poorcsl "less
developed countries,' at the lower. Other groups
based on cultural or regional similarities or on
lC,,.:.,,~tlrcc cndov,,qllcnt arc also singled out for
various purposes. In the transition, ho~¢vei, the
recognition oi: the specific conditions of each
COUlltI-V or group of tout/tries is crucial, xi"t_'l,
whatever their origins, thcse conditions illtlsi
now bc sccn as starting points for the future,
rather than as static obslacles.
ttisiorically, long wave transitions have in-
\ o l v c d radical challgcs in the rules of the game.
And. in spite of the obvious weight of relative
power factors, the new rules arc created b,,_ all
tile players. Thus, m tile present transition,
developing countries, both individually alld
throuoh iiltcrnational oieanizalions, can and
should work constructiveh' towards undeistaild-
ill 7 the now conditions and m crcalin 7 tllu new
appropiialm socio-institutional framework, on
nalil./nl.il and world levels.
Just as ~overnnlclll instilutions in developed
countries can frtlillesslv apply old policies be-
cause of the incrlia created by past stict_'esscs,
developing COtllltl}. ~o\erllnlenls might mis <, the
opportunities opened by the transition ulldc'r the
weight of inertia resulting fronl past frustration.
E\cn the social and political groups, who did
benefit under recent conditions might fred lhcm-
solves on the losing end if they l-ely on tile
continuation of past practices.
In a sense, one couM visualize long ,,','a,~,c
transitions as a sort of th:,iwing Otlt t/f tile system,
460 W()RIJ) I)f~V[+~[.()I'M E N I
a l l o w i n g f l u i d i t y o f m o ' , c m c n t and ~i illtirc tit less
w i d u +tlcctruill o [ choice. ( ) n c c the til+l~,\ving gcl~+
uiidt_'rwa\', t h o u t , h industrit_'s. +ocial ~rotll->s and
countril.'s {ire' c a u g h t , as it w c r u , in :+i cc_ut:iin
~ r o w t h p a t h w i t h i n the OCill_'l-itlh c>+tahlishcd nc\v
illodt_" o f g r o w t h . T h e o l + p o r t u n i t i u s and d u v e l o p -
illCilt purspuctivcs tif each ~tlU Ihcn high <it
lii+nitcd, det+~onding oi+l thu r,_,hlti\o po~>ition>,
~ittaincd iit the ~,vsiurn. Lu;.ipl+rogging then l+u-
COiliC~> v e r y d i f f i c u l t i n d e e d until the svMCill
l#:+lt_+llt_'~ limits to 7io\>¢th ~.ig~lJil ~il thm n c x l ]+cak tit
t h e l<+ng ,,rave.
L+;~un it+ t h e t r a n + i t i o n , t h c t c a i ¢ t r c m c n d o u ~
r e s t r i c t i o n s , a n d t h e r e is a c e r t a i n limit tii jti~t
h t i w l~u- a n y l+~UticLihlr c t m n t r v Call ;iclVallCC. l+lut,
w h a t c \ c r t h e pt+'<,+ibilitics+ t h e cl+lanc¢~ a r c m u c h
h i g h e r o f t a k i n g u d v a n t a g c ol + t h e m t h r m i g h ~i
h o H a n d f u n d a n i c n t a l r u t h i n k i n g ill titc d c \ u l o p -
t11cnt p r o c e s s , t h a n if t h w a r t e d hv t h e ~+l+>,t;icl<_'s o f
the recent past.
(ir~.ultud, this i+ t + a r t i c u h u l ) dilficull for
dm,'clol'ling clmntrit_'~+ ~vhilc the i n d u ~ t i i a l i z c d
w o r l d persists ill t r y h l g t o I{)X,t.'l+Ct/lll¢ thu el-isis
w i t h the o l d practice?+. This. a~ wa~ the t_'asc in the
N()+rl!S
I. Scc Sclmml+,ctcl (193U).
2. Konch:lticv (1t;'35).
3. Sue ulso Pcruz (P;X3).
4. l:()r ~tl+ dilalvsis Ol the v;.iliOilS ~.a~ ill which
technological cllangu occurs in intur:tctitm with cc'onu-
mic :rod social fuctors, st_,+_,Rosunhcrg, If?S2).
5. I)nsi (19<<421.
(+. Sue tlccrtjc (1977), pp. I~+l 167.
7. l-'t+r a discussion ~>I the conccl+~t ol ntclical"
inntwations (:~s well us a different irltcrl+rct~ttionol lolL<_,
v,,avc pllcnonlcn;.i), scc Mcnsch ( 1979L For a cliscussitm
ol +'incrcmcntul" innovations as ~,x/cI]+.|~,;I good cmpiricul
example, scc ttolhmdcr (]965). For :1 ~+tllnnlar',, ol the
distinctions between incicmcntal, radical and
rcvolutionurv innovations, sou Freeman (19S4).
S. Sue J. J. Vun l)uijn (19<'41) and (19~3).
9. For ~1 discLlssion o l Ihc O)llC¢['~t o l "ll~lltllill
Ir;Jjc¢lorJc~" Jn tcchnicul JnnovatJt)n, see Nelson :rod
Winter (1977). For "tcchntflogical trajectories', sou
l)osi I ] 9 8 2 ) .
lfl. The proccss ol Jdctllilying und ovcrctiillmg h+:~l-
tlcnccks as a focusing dcvicc m steering tcchnulogic'al
:Id',Ir~IIli+'Choth within a tcchnc, log,, :rod across intcrrc-
kited htmilics ix discus~,cd hv Roscllhcrg (lU7h) csp.
t+lICviOtl~, clo'+t]ns~.ing, lid.is rcsttllcd in l i c i c c intcr-
nalioi+lal coml+lciitioi+l, w h i c h in tUrll hm+ led to ~l
stiffcnirig o f nationally+tic policius. %"or~u still.
~olnc s¢l_' sign>, o f a g r a d u a l g r o w t h in nlilitari>;tic
tc'l]ctc'i~t_'it_'s v a g u e l y r c i n i n i s c c n t o f w h a t hap-
l~cncd m the thirties. Y e t , this t i m u . a \~orld \t<iil
w o u l d s i m p l y hu the end.
/\S~Ulllhlg ihu g r t l \ i t y o l [hal dallgCr t~rcchlcic'~
the '~var r~ltltt.', it inight hc that. a~ the ~,;.llious
ailcullpl~ at rccovt_'rv rt_'sull in ~hol-I ~ptll-i~ tll
g i o w t i l and the underl)+.ing crisis contJnuu,+ or
C\t_'ll d c c l + c n s , 11101C crc;lli%c {illtI col/MrtlctJ\t.'
?+t/Itititul~ till ~l ~+icl~_'t luvcl ~ i l l hu >,otight. I.h~ctcr
tJlosc circtun>,tcincc~,, it i~ I i k c l \ to I+¢ctlmc
incroa~>ingly clear thai hi achio+c ~i sti~taincd
rmctlvcl+v, ii+dustrictlizcd coui/tliC~,, l t u t h u i r t+~n
<qiku, huvc ttl lind +ohititln~, to the dcht cl-isi~ :ind.
in [act. I+avc a ?,iakt_' in thu ctc~chq+mcnl of the
Third World.
T h e ClUC+tion rcilmin+ w h e t h e r the dc~cltll+iii 7
ctlUlltric>, arm plCt)aring tllClil+t_'l~.'cs 1o f;tc¢ the
c_'hallcngu ~liltl take I+t_',,t ~itl\~iilt~+lgt_" t)l thu m_'\~
opt+t/rtunilic?,. ' l h c r c ~ll+C+
'. tll ctitlrhc, iltl iUCil+¢h.
]>utt 2. I ' h c llotioll ot d i m i n i s h i n g rctttlllS It+ t e c h n i c a l
inll'Um, cnlcnt ig kilO'+VII ~IS Wulll+s l.av,, l'hu otigill~tl
'+,ourcc is: l)ic V+.,/kvw#'l',</i+i/i tl<r (;ct,,cnn'~trt lint/
Zu]~unfl (1 cipzig: l~J12).
11. . I . J . Van I)uijn (IUBI, lug3); ,+\l',crnuth~ :tnd
t itturhuck (lt;7~).
12. (L l : i c c m a n (19S2): und l:rccm~tn c{ +d. (IU~21.
( ' h a p t c r 4.
13. Sh:cl existed suh~crvicnt t~ iron. until lh¢ l~cs-
scmcr and Si,:nlcn~ Martin t'u-~ccs',us slashed it~ c~st l,.~
a tenth. ()il had hccn used htl limited purpose', until
the h+tcrmll c o m h u s t i t m cnghlc m u d c it central h+r ',ill
sorts of transportation. A n d this u++c, together with oil-
fueled g e n e r a t i o n of clcctrichy, h c c a m c c h e a p w h e n
hi,,~ cost ftcu tlowhlg oil. uM+~uchdl}, lrom the Mkldlu
[:a~,t CalllC Oll MrCmll. Eluc'tronic~, hc,.1'an wHh tuhc~.
thun tram, JMors told. lor ~i long tJn+t.' cluvul~q+ud within
- mid s u b m i t t e d It+ the 'h+gic' ol thu tll~r+,"+,
l+H'oducliOll, uncrg?, intensive p~ll'~idignl. It tinlv h c c m n c
Lln all l+>crvasivc key factor ',',hun it'+ (uiginal control
luncth)ns lu~,cd I11 :.+VliOrui+'tic ht~,hJon ++ith dula l+rX,ccs
sing. Sul+scClucntly, qurgc ",talc integration" rusultcd in
illCrcasJllg1~+' l'iowcrhll, i.."vcr-chcli1~li.,r lllicropl-+.)gc~+,st)ls
+n+d other electronic "chips. + Into the future, one couh.l
perhaps speculate that I+,iotcchnology might tollow an
analogous path as it grows and expands as an m
crcasingly Jnlporlallt industry, within thu
microclcctronics-lcd p a r a d i g m It m~y well make
M.ICCCShJ~,C lllnd~llllCllt~ll :111(I illCrCiltCiltLt! ~ldv~lllCCh (tlld
~radtmllv expand its H+hcrc t>l inllucncc hc,,ond
 LONG WAVES AND WORLD STRUCTURAL CHANGE
pharmaceutical and food production. It is already
affecting such apparently unrelated areas ;.is nlining lind
pollution conrail and experiments are under way for
the production of microeleetronic "No-chips." Yet much
ground might have to be covered before radical
cost-cutting breakthroughs with all-pervasive influence
are nradc.
14. This translates into new trends in the pattern of
income distribution and in the evolution of consumer
demand. For a brief discussion of these interactions.
sec Perez (1983). pp. 36(v-368.
15. For a similar approach to the relationship belwen
the socio-institutional structure and the underlying
technology, based on the concept of "Regulation.' its
well as a very conrprehensive analysis of what hc terms
"Fordist' modes of production and consumption, see
Aglietta (1979).
16. Although thc impact on employnrent is probably
the most ilnportant single issue in thc proccss of
paradigm change, it will not be discussed here. Due to
its complexity, it will be analyzed m a separate article.
The reader is invited to keep the issue in mind in the
course of the present discussion and to consult the
growing bibliography on the subject. See, Ior exanrple,
Rada (1981t): Lupton (19841, Freeman et al. (1984).
17. Smith (1983).
18. It should by now be clear that the general trend
towards information intensity is not to be misconstrued
as leading to a purely 'service economy." Much to the
contrary, tnost service applications of+electronics are
rendered by using manufactured equipment and the
main market for many of the new services is the
manufacturing industry.
19. Nevertheless, attention should also he paid to the
wave of change m materials themselves. The diffusion
of recycling techniques, fiber optics, ceramics and
sinrilar developments could substantially change the
prospects for specific materials and influence energy
consumption indirectly.
20. Scc Business Week (Fehruary 1984), pp. 54-71.
21. In the past, somewhat analogous conditions,
created a "natural" protective barrier for the growth of
local construction materials and civil engineering indus-
tries.
22. Bylinsky (1983), pp. 50-51.
23. In a sense, one could suggest that for certain types
of products or services the flexibility of electronic
equipment could eventually change the idea that
'custom made" is equivalent to "luxury." The possibility
of refined market segmentation in many areas together
with an increase in the "on-line" linkages between
markets and suppliers could gradually allow the 'craft"
potential of the new technologies to flourish. A n d this
can occur both under factory type conditions and its a
461
home craft. For an example discussing both types of
conditions in the cnse of weaving, see: "Micro-
electronics in textile production: A lanfilv firm and
cottage industry with A V L looms,' in Bhalla et al.
(1984).
24. Hills (1984).
25. Kaplinsky (1984): S. Jacohsson (1982)" Bessanl
(1984). See also other artidcs m this issue.
26. Hoffnmn and Rush (1984); and G u y (1984).
27. For further discussion on the issue of rohotics,
Ayres and Miller: and Jacohsson (1982).
28. For ;`Ill example about the limits to economies of
scale in the electrical industry and the trend towards
flexible sourcing m the United States, see Busine.vs
Week (1984b). pp. 68-71.
29. Allen et a/, (1984).
30. Information intensity and flexibility in agricullure
might be based not only on microelectronics, but also
on biotechnology. Increasing research efforts arc bcmg
made to develop natural pest-control systems and
soil-enriching bateria, which could in time expand the
agricultural frontier while reducing the need for
petrochemical pesticides and fertilizers.
31. For a thorough discussion of the implications of
C A D , sec Kaplinsky (1982).
32. Dosi (1984).
33. See Drucker (1972).
34. A detailed analysis of 'intra-sphere and rater-
sphere" autonlatiofl and the concept of 'svstemo-.
facture," can he found in Kaplinsky (1984). See also
article in this issue.
35. Buxton (1983).
36. The generalization of on-line market rmmitoring
implies the likelihood of dampening the short business
cycles due to inventory fluetuatkms. An analogy can be
made with the role played during the Fourth Kondra-
tiev upswing (late 1940s to late 1960s) by the elaborate
system of statistics established by natiomd govern-
ments. This constituted a significant step upwards in
the amount of information available li)r business
planning and contributed, together with other mea-
sures, to reduce the intensity of short cycles, when
compared with previous Kondratievs.
37. In Japan, no-inventory systems, called "just-in-
time' have been developed, which ;`ire less based on
up-to-date equipment than on new m a n a g e m e n t prac-
tices and greater worker involvement and participation.
See Sehonberger (1982).
38. I owe this example to Dr. R. Suarez, President of
 462 W()R[+[) I ) [ ~ V I : I ,( ) I ) M I~:NI
[iY'l ( ' . , \ , an c l c d r o n i c <, c'onlpan~, in ('alaC'a~,. ~'cllc
Ztic'l~i. v, hcrc o11¢ ~t1¢11 <.,',,',,lc'm ',',a <., developed.
3{). l'ctcl l)cmp~,c)<. I I l a l l a g i l l ~ tlii-cct(+r ol lilgci<,t>ll
f{n<.zincci~,, lilt lilm ic'~,l~t~il',il~l¢ Iol the in',t;lllaiitm o l
o\'ci b(l"{> tfl I l K IM% <,,,MCln,,. c,,limalc <, thal dosu to
7()"t, nl the Ix_'nclil <, 'die clchic\cd Irtllll organizalitmal
c'h:iil~c"., '~tilhl)tlt HtD, hHldv, HIc': '.,c'c' ]litlc'cc'l_lill~'., ill
FM,%-2 (19,h4).
I~I(t:I!RI!N( I~S
ikhci+n;ilh;,..1+ and .I. M. Illtcrback. +[>allcin', ol
incluslria[ illnov;ilion.' ['l'ctl#lol<JA, y /?cl#cH. NO. g<<'4
(.lunc .hlly 197<"4).
Aglictta. M...-1 [Tmorv ~l ('al>ilali~l R<'k'u/alif'H. Ih('
l".h, l-tpcriencc (l+ondon: NI.B. 1~170t.
,%lien. R . . . I . Blcckc and A. Mor7an. Pitlall', . I
con,,crging Iinancial services." lqmm<ial "l'ma'~ (1~
.hmuaL~ 19~4).
Aycrs, R.U. tlllC] %. M i l l c l , "Rohotic',. ( , ' \ M and
itlcluMrial i~rotltu.'ti'~it,,," ,X"(di+J#lal #>r<uluclh'i[v Re-
r/on'. Vo[. I, No. I (19<'42). pi ~. 452 46~.
tlt_'ssaili, J., '('ompctilion. technical chan~c and
Cillploynlcni in the U K loundrv+ induMrv+*. (Bri7h-
hill, [ I K : [:hi~htoi] I~olvicclmic ', llmo',(ilivc ](c~,c;uch
( h o u p . 19<<'44) (llliil]t.'~>).
Bhallii, A., D. .lainc~, and Y. ,%It',oil,, (cd',.i. in
tTh'ttdin<~t <~1,~,"cw +##1~17)'a<liH+mal 7]'(Im<,h(k,i(,+ ( Dub-
lin: I L O , T,<cooly lnlcrllational, l<,l~4).
lT+++i##('~.+ lt'cck. ',%oliWalC: tlw no++ chi',in7 Ioruu"
( [:C b f tl;li~)/ lgg4a).
1)~11.'1i]1("1<% l~i£'('/~. ' A r c utilities ohsolclc: ~i tlouhlcd
<-;,~Mcnl l'acc't~ radical chan~c" (21 I~lci',' 19,<44h).
t;tl:,:lOll. T.. "The mall v,.'ho I'ashiollcd ii clothin~
cnll'drt.'.' lqmm('ia/ 77racy (29 ()ctohcr It)S3)
Bylin~,ky, (i.. "'l'hc race to Ihc atltonlatic lachux.'
l o r m n e (21 Fcl'lltHlrv It)N~).
l)osi. (;.. "'l'cchilt)lo~ic;il I'lalcicliglilX alll.] Icchno]o~iC';l]
lra.icc'torics." Rc~car<'h Policy. \"ol. 11. No. /4 (.lunc
1982).
l)o~,i. (i., T('('hHi('al ('/la#l,t~c~ and I,ul.~t,-i.I
TIfHLtI(ffPHdl]0,1: 771<' 77/c,',,rv <md ,'1,1 ..ll;,l;li<'aH+m :,,
[11(" +~'('#ll[('o#ldll('[O#+ ]]IdItAII'V (l oildon: M a c m i l l a n ,
19~4).
l)ruckur, P., 771c ('o#l(('/)[ (~1 I11c ('+,#7>+,ral/<n/ (New
York: r'v|cnior. 197_).
PlC~_'llliln, C., 'Science, tc'chnoh)gy lille] tlll~.'llll3ioy-
lllClll," p;,tl)t.'fs in Sc'icilcl._', ']'cchnology lind Public
Policy. No. I ([.o[1don: Iillpcrial ('ollcg¢ o l l c c h -
ilOlogy and `%cicn¢c Poll O, Rc:-,carch IhlJl. 19~]).
Frct:nl;in, ('., "[)roincihctis tllll~ou[id', l+7¢lu#'dx, Vol. 1~.
No. 5 (()ctohcr 1984), pp. 494 507.
|:rc'l+'lllHll, ('., J. ( ' ] i l r k . ;llld I . ,~oc'lc'. ~;lldlll[~/oIIlldtl[
a n d 7'cch;lic<d hlm.'r,','fio,'l: ,t S t u d : ~Jl l.(.ul,~., H/avc~
ll#ld E('f,woltli(' l)('u('[op#tl('#l[ (l o[ido11: F'lilncc,, l)Jn -
tur. 19,~2).
Frocnlari, ('., J. ('lark, K. (;uy and l.. Soctc (cds.),
T('ctmolo,~>,ical 7)+c#1d.s' ~l#1d Em/)/ovm('nl, 4 ~ols.
(,.\ldcrshol: (;o'+,cr. 1984).
(}tl),, K. (ud.), T('c/Ino/o,~4ica/ ])i~'/~/Lv a n d /;n/d<Jvmcnt,
I <,l. /+ Ha~i(' ('(.,;r,'tml('r (;¢)¢.,<1,', (]'),o[w<'<lr" [7)<,d.
4(i. f:tu- ;t set o l casc ",tudi¢~, involving imaglnaH',c
al'q'flicatioiw o l liC\x lcchnt+logic~, t~> I'hiM \%o11d
c(mttititm~,. ~L'C" I~h;illa <'t <1/ (19g-l).
41. ~oclc (19,N/41; ',c'c al',t~ article in ihb, i<,<,uu.
4!. [ Ctlh;ll (ll)N2).
l)rmL and Tot>at<o: I~'wi/c~, ( Iolhm~) (,.\Mcr<,h,<~t:
(Mv,'cr. 19,<'44).
I lccrtic. A.. t-(<m<mli< +rod Tcclmi(al ('ha.k,r (l . n
don: W c M c n l c M and Nicol,,on. 1977).
Ilills. I'. led.). 7h,, l,)mur +d flw I'rimcJ H . ~ d
fl.omhm: Fianccs l'inlcl. 10<<'44).
I h f l f m a n . K.. and I I. Rm, h. J.li<r.Hr(mmi<~ ,mJ
(7olhm¢: 77u, l mp a (i <d Tc(tmi~al (han,-,c <m .
G'hd~al lmh~wrv ((;¢m_",a: Intcrnalional l.al~.ul
Office. 19,g4).
l lollandcr, ,%.. "/Tw 5'o.r('c~ ot I m r r a , r J l : / ] h i c m ) . I
Stu<lv +d Dul'<m+ R a y o n Plant.~ (('amhrid~c: M[ 1
Press, 1965).
.lacol~ssOlL ,%., +Trends and i,nlflicatiollS t>l ;lUtOlnaticul
in the cnbinccring s¢ctoi" (l+und, ,'-;v,'¢dcn: t(c,,carch
tMlicv lnsliltllC. 1992) ( m i m e . ) .
KapImsky. R.. ,,tutomamm 7h<' ] r c t m ( d . ~ umt kocm-
~v (l+omhm: [.ongnlan. 19,N4).
Kuplinsky. R.. ('ompumr-,tiJ,'d Ih'%,4H: I:h,cm,ni(~,
('<nnFaralil'c , Idrallld,qd.~ ~tHd I ) c r H . i . m ' n l ( [ ;N
II)(): l.omlon: Frances l'intcr. 19S2).
Kondralicv. N. I).. "The I,,)l/g ~r~l~'C~ in CCOllonlic: lilu.'
Rcvicu' +d /:<<nl<.n/c S'[aHwi('s. \%1, 17 (No',uml~<_r
IU35). t"P. 1()5, 115.
l.uplon. 1'. (cd.)+ I'ro<rcdmk,~ of tll(' h m ' r m u i . m d
('(m/i'r('n<(' <m t l u m a n t'Ta l<,r~ m Mamdi.'mrm,., (1 t%
and N o r l h Ihdland. I~)g4)
Mcnsc'h. F...~l'ld/dltltlld i#1 Tc<'Im<,hJ,~v /#m<)Vali<m,s ( )v<v-
c<,mc l)cl*rc~'.vion {New York: Fhdlingct. lb79).
Ncls+.m, R., told S. (7. Wintcl. "In '+.caruh ol a unchtl
thcurv o l illllO%;lliOll." ]{c.+('ar(']l l+<Jli(v, No. (+ (1q77)
Pcrcz. ('.. "`%tl'UCtural c'llatlgc aild assimilatiol~ ol nc~
technologies, in the t'l:CqlOlllJC' {llld social '-;~Mt_'IllN."
l')+Hfrc+, Vol. l:~. No. ~, (()clObCl lug3), pp. 357-/47b.
l'#'<Jci'('dill.7~ <~1 FJ#l'-2 (t/cdfoid: 1f:.'4 l>ulqicalion,,
10g4).
l{ada..I.. 17w Impact q! Jlicr+,Hrc#r.nic~, .t li,m,~m,,
AIq"ai.sal <d In/brm+uhm li'ctm<do.~,,v ((ium.",a: hi
lCllltiliOll;ll [.~il'~oUl + ( ) l l i c c , 10,<qll).
l~.o~,unbcig. N.. ['ePt~'l>C<'ln'c+ <J#l 7~'<'/+#l+d+J,+y ((';llll-
hridgc: (~amhridgc tlnivcrsitv lhuss, IUT()).
l,toscnlx.'rg, N.. Inside lhd Blac,~ I~.H.: l;,Hm+;h,+c,v <++,+</
[(c(,vl,~>;#li<'.'; (('ainhridgc: ('anlbridgc t Ill i', c'l ~,it',
l)lCSs. 19H2).
Schonhcrgcr. Jal.'a,'w:,c Ma:u(li,'cturmtt /'cchn/quc.~
N m c ttiddc;q L+.'SL',,':';r, i,'l 5'imt.'licio' (Ncv,: Yl~rk: Frcc
Piu~s. Macmillan, 1992)
`%chul'lll)Ctcr. .I. %.. .t 77m~JrcHra/, Itiw~.'i<'u/ and
,~mnwic.I .Ina/vw+ <£1 /he ('+q,HulA# /'rote++ (Nc~
York: McCha\~-llill. 193(;)
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