The Five Great Technology Surges

Cycle three Depression and Revolts
The Third Great Technology Cycle – Depression and Revolutions

The Third Innovation Cycle: Electricity, Heavy Engineering, and Steel

The Seismic Shifts of Industrial Power: The Third Great Surge

The Shifting Titans of Industry (1870-1914)

By 1870, a mere quartet of nations—England, France, Germany, and the United States—dominated the industrial landscape, commanding an astonishing 80% of global manufacturing output. The explosive growth was tangible: steel production skyrocketed twenty-fold among these industrial behemoths between 1870 and 1890. This era of unprecedented prosperity, stretching from the 1870s until the thunderclap of World War I, earned its romantic moniker “Belle Époque”—the Beautiful Era.

Economic historians have zeroed in on two fascinating phenomena: Britain’s gradual industrial dethroning and the meteoric rise of American and German manufacturing might. This marked a revolutionary departure from historical patterns. While all other “Great Surges” before and after featured a single dominant technological leader, the Third Surge witnessed this unique triumvirate of power. Perhaps we should rename it “The Transitional Surge”—the bridge between industrial eras.

Anatomy of Economic Collapse

Massive economic depressions invariably mark the epicenter of these Great Technology Surge Cycles. When global depression strikes, you can pinpoint precisely where humanity stands in these tectonic economic shifts. While the structural patterns of Great Surges remain consistent, how and when they unfold create unique historical fingerprints.

The Third Surge proved particularly unusual because its worldwide depressions crashed onto different shores at different times. Freshly crowned as industrial co-leader alongside Britain, America exemplifies this temporal complexity. The Panic of 1873 triggered what Americans called “the Great Depression” (1873-1879). Yet an even more devastating collapse in 1893 would steal that ominous title—until the catastrophic 1930s crisis permanently claimed it. Historians rebranded the earlier period as “the Long Depression,” a financial nightmare that haunted the industrial powers from 1873 through the 1890s, striking each nation in its own time.

The Staggering Scale of Collapse

Was the Long Depression truly catastrophic? Consider these sobering statistics from the U.S. National Bureau of Economic Research: unemployment soared to 20%, while 800 banks collapsed between 1893 and 1897—a figure unmatched until the Great Depression of 1929. By mid-1894, 156 railroad companies worth $2.5 billion (equivalent to $92 billion in 2024), representing 30,000 miles of track, were bankrupt.

Even more remarkable was the economic whiplash that followed. Charles Hoffmann’s Columbia University research documented economic peaks in July 1890, January 1893, December 1895, and June 1899, interspersed with devastating troughs in May 1891, June 1894, and June 1897. Imagine the psychological impact—a triple-bottomed depression delivering three financial body blows in just eight years!

Technology in Transition

The Third Surge stood at a fascinating technological crossroads. As one historian noted, “the new energy sources in electrical and chemical energy, or those associated with the new energy sources about to compete with steam, do not as yet seem quite imposing enough to dominate the movement of the world economy.” Industrial technologies began steering broader economic currents for the first time, yet vast segments of society still depended on traditional agriculture.

The Anatomy of a Crisis

Despite its uniqueness, the Third Surge followed familiar crisis patterns. It began with the Baring Banking crisis—a cautionary tale of financial hubris. The Baring Bank had gambled recklessly on South American railroads, part of the 1890s investment frenzy that doubled Argentina’s rail network within five years. When Baring faced bankruptcy, its tentacles reached so deeply into global finance that the world’s wealthiest individuals formed an emergency consortium to prevent financial contagion. William Lidderdale, Bank of England governor, assembled London’s central banks and the Rothschilds to guarantee Baring’s debts. Nathan Rothschild grimly observed that without intervention, London’s entire private banking system—and with it, the global economy—would have collapsed.

Americans had fueled this bubble too, pouring approximately $250 million into Argentina between 1892 and 1897. The reckoning was brutal: on May 5, 1893, the Dow Jones plummeted 24% in a single day—the worst intraday crash in U.S. history until the Great Depression would erase 89% of the Dow’s value between 1929 and 1932.

The Political Aftershocks

Economic earthquakes invariably trigger political tsunamis. The 1890s saw populism surge, with William Jennings Bryan championing literal biblical interpretation and opposing Darwinian theory, echoing populist movements that followed the 2008-2009 Great Recession. The Great Depression similarly fueled right-wing fascism, eventually plunging humanity into history’s most devastating war.

The housing market also followed a pattern we would witness in later surges. In the mid-1890s, building activity bottomed out and remained depressed in many American cities until 1905. This delayed response occurs as speculators, burned by collapsing core technologies, desperately seek new asset classes for significant returns. Carlota Perez’s “Technological Revolutions and Financial Capital” brilliantly documents this recurring dynamic.

The Unique Nationalist Crucible

The Third Surge’s distinctive feature was its convergence with intense nationalism. As Germany and Italy pushed toward unification, the Austrian Empire—one of history’s largest—created a power vacuum through its decline. The simultaneous diminishment of these two imperial giants likely catalyzed World War I, though historians still debate its primary causes.

This transitional surge, with its nationalistic fervor and absence of a single dominant innovative power, culminated in history’s first industrialized war, claiming 20 million lives. The vengeful armistice terms subsequently ignited World War II after the Fourth Technology Cycle collapsed, resulting in an additional 85 million deaths. Significant Surges resemble tectonic plates—when they collide, the human cost is catastrophic.

Surprisingly little research exists on the Long Depression or the Panic of 1893. Clément Juglar, a French economist who wrote about these events in 1893, is better remembered for identifying 7-11-year business cycles (later called “Juglar cycles”). Joseph Schumpeter incorporated some of these theories in his 1939 work on business cycles, but after the Keynesian revolution, these cyclical economic theories largely vanished from mainstream economics. It is high time we brought back technology cycles to mainstream economics.

The fourth technology cycle: ICE & Oil

Wikipedia: The French Revolution