This article explores the dynamics of industrial revolutions, focusing on two critical features – knowledge transfers between leading and lagging firms, and the shifting distribution of income between capital and labor.
This article examines the long-term cycles of technological innovation, financial crises, and economic growth over the past two centuries. It summarizes key research on the periodic surges of breakthrough innovations, their relationship to major financial downturns, and the resulting fluctuations in productivity and output.
The 2020-2021 pandemic struck just before the global economy could enter an era of robust growth and more equally distributed incomes, according to the attached article. While bringing suffering, the pandemic may accelerate strong growth if it pushes leaders and workers to transform behaviors. Small annual growth gains compound over decades into massive impacts on living standards. Recent leaders have framed this potential shift as the Fourth Industrial Revolution.
Robert Solow pioneered growth theory focused on capital investment and productivity. Joseph Schumpeter added the concept of creative destruction arising from the introduction of new technology. Paul Romer made technology endogenous, responding to perceived economic opportunities. Recent empirical analysis of patent data shows periodic surges in high-impact innovation over nearly two centuries. Major financial crises have frequently followed frenzied periods of overinvestment when business processes could not fully exploit the capabilities of newly emerging technologies.
