Innovation: the springboard for 25 years of expansion

Innovation: the springboard for 25 years of expansion

166 Conferences/Reports to the further detriment of the Third world. The Sahelian region, for example, could well be faced in the year 2000 with the...

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to the further detriment of the Third world. The Sahelian region, for example, could well be faced in the year 2000 with the prospect of 60% of its imports accounted for by oil, taking up 20% of gross domestic product. Already many of the developing countries were unable to afford increasing imports of oil in spite of the continued necessity to do so for purposes of economic development. The result has been the increased use of scarce indigenous resources, especially wood. Demand for the latter was in many cases giving rise to deforestation with increasing desertification. And new demands for wood from the urban areas meant that the mass of the people, who lived in rural areas, had even less to meet their essential needs, particularly for cooking. For these countries the problem is not a problem of change of lifestyle but of life.

A cost-effectiveness


On the renewable energy sources, the overriding impression was of the tremendous diversity in programmes and the extent to which their economics depend on place and circumstance. Thus, not only is it inappropriate to ask the general question whether, say, solar energy is economic; but even in one place there is no single cost at which it suddenly becomes so.

There will typically be a small part of the market that can afford to pay a premium price, with a steadily larger market developing as the cost is brought down. This implies that marketing studies should form an important part of any R and D programme to develop economic systems in the renewable energy sources-yet virtually none of the papers seemed to contain such studies. Certainly none of the presentations mentioned marketing studies. The problem of carbon dioxide refused to be ignored, though no new facts were available. At the outset of the conference we were told that, because of the dearth of new work, the subject was not be to discussed. Yet it kept cropping up again and again. It is clear that the possibility of climatic effects as atmospheric carbon dioxide increases is a serious one. We cannot yet know whether climatic changes will occur, but we cannot ignore the possibility. If research now in hand substantiates the effect to the point that the world must do something about it, the elimination of carbon dioxide by treatment of the post-burning exhaust gas would, it was claimed, double the cost of coalbased electricity. But then costs would also double if electricity were to be produced by nuclear fast reactors, someone argued. Stalemate again. F. 3. P. Clarke UKAEA Harwell

REPORTS Innovation:

the springboard

There probably exists today a ‘super innovation’ that will help fuel economic expansion for the rest of the century. In a recent article,1 George Ray of the National Institute of Economic and Social Research bases this conclusion on an analysis of the long-waves in

for 25 years of expansion economic activity (the Kondratiev cycle), 2 in conjunction with the work of Schumpeter and Mensch. Schumpeter argued that the upturns in economic growth (1790-1813, 1844-1874, 1895-1914/16) were largely due to the dissemination of steam


April 1980




Period Trough



Peak years

Number of years: trough to trough peak to peak trough to peak peak to trough

1795 1845 1905 1955

1790 1a44 1895

1770 1825 1885 1935 60, 55, 30, 25,

Kondratiev’s cyclesa

1814 1874 1916

60, 60, 40, 20,

50 50 30 20

54, 51 60,42 24, 30, 21 30,21

Nofe: a Kondratiev used 25 series, of which ten concerned the French economy, eight the British, four the USA, one (coal) the German, and two (pig-iron and coal production) the world economy. Source: Ray, op tit, Table 1.

power, railways, and the motor car and electricity;3 Mensch mapped the clustering of innovations over 200 years (1770, 1825, 1885, and 1935) and suggested the need for ‘a new push of basic innovations’ to lift the postwar world economy.4 Ray compares the two cycles (Table 1) ,5 and discusses the innovations behind the growth of steam power and railways, where the UK was a major innovator. In contrast, by the second half of the 19th century, the UK was lagging behind its competitors in innovation. Entrenched positions in the iron, chemicals, gas, and coal industry slowed the introduction of the Solvay process for making alkali, steelmaking, electricity, and the motor ship. Ray concludes that the economic impact depends on the diffusion of the basic innovation, and the speed of that diffusion. Thus, innovation is crucial to the Kondratiev cycle, although the identification of these major innovations is difficult. One may use Table 1 to speculate on the next upswing. Kondratiev cycles last about 25 years from trough to peak; if we take the mid 1970s as the trough, the next peak should be around 2000-and thus the remainder


April 1980

of this century will see an economic upswing. Mensch’s innovation peaks had a cycle of 50-60 years-which gives the next innovation peak around 1985, although this means the interval between the two peaks would be shorter than before (about 20 years, rather than 40) .6 Ray then speculates on what the next super innovation may bemicroelectronics, nuclear power, perhaps some advance in agriculture (leading to global development), or biochemistry. Finally he questions whether the UK’s continued economic decline is inevitable. There is a chance that, if the economy were quick to diffuse the next major innovation, the economy could be rejuvenated. Ray cites the examples of other countries that have made such recoveries : France, Holland, Austria, and the USA (after the depression of 1976-1978). There remains, of course, the problem of backing the right horse: with the benefit of hindsight it may be possible to assess the fundamental importance of some major innovations, but it is difficult to classify any relatively new development in this super-class without the historical perspective. After all, Watt’s aim was simply a better engine . . . 7



References 1. George Ray, “Innovation in the long cycle”, Lloyds Bank Review, January 1980, 135, pages 14-28. 2. N. D. Kondratiev, “The long waves in economic life”, reprinted in Lloyds Bank Review, July 1978, 129. 3. J. A. Schumpeter, Business Cycles: A Theoretical, Historical and Statistical Analysis of the Capitalist Process (New York and London, McGraw-Hill, 1939).

Mensch, Stalemate in Technolopv 4. G. (Cambridge, MA, Ballinger, 1979). “Business 5. See also Jay W. Forrester, structure, economic cycles, and national policies”, Futures, June 1976, 8 (3), pages 95-214; Christopher Freeman, “The determinants of innovation”, Futures, June 1979,ll (3), pages 206-215. 6. The lags between Mensch’s innovation peaks and Kondratiev’s were 44, 49, 41, and 32 years. 7. G. Ray, ofi tit, page 21.

Words shuffle slowlv/ on to US screens Why has the USA uncharacteristically lagged behind Europe, and even Canada, in the introduction of teletext and videotex? An Institute for the Future (IFF) workshop, held at Pajaro Dunes, California in June 1979, provides at least some of the answers.1 Teletext is the name generally applied to a one-way textual data transmission system (eg Ceefax, run by the BBC in the UK).2 The user has a terminal, often but not always with a keyboard ; and a display, usually a television set but sometimes a computer. This equipment allows access to, and selection from, a limited amount of text and graphics, the whole of which is being continuously transmitted. The system uses ‘spare’ capacity in a broadcast television signal, or even a spare television channel (in the case of cable transmission). The means of transmission therefore has a limited capacity, and because all the data base is always available to all users, that data base is necessarily small. Videotex (alias viewdata) is the generic term given to systems such as the UK’s Prestel. (Confusingly perhaps, for outsiders to the field, Prestel was formerly known as Viewdata; note the initial capital letter.) The hardware employed is similar to that described for teletext, with an important addition-a two-~~~ylink, usually a

telephone connection between a peripheral television set and a central computer. Some observers dismiss teletext as a mere frill tacked on to television. Videotex however, opens up a range of possibilities. Through the two-way link, the user may: l

l l

gain access to and interact with various data bases in the system’s central computer and any data bases in other linked computers, use any programs available in the central computer, or interact with other users.

The UK progress of Prestel is being keenly watched in the USA, even though there are great regulatory and cultural differences between the two countries. At the IFF workshop it was felt that, despite these differences, the current low level of US investment in videotex would receive a boost if Prestel were to be an obvious success in the UK. Of the many doubts and pitfalls discussed at the workshop, three main factors go much of the way towards explaining previous US reluctance to enter a ‘new era of communications’. First, capital investment is necessary to provide transmission equipment, computers, and reception terminals for a mass audience. As the IFF report states :


April 1999