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Informationalism and the network society 15So, how did the network society come about? At its source there was theaccidental coincidence, in the 1970s, of three independent processes, whoseinteraction constituted a new technological paradigm, informationalism, and anew social structure, the network society, which are inseparably intertwined.These three processes were: the crisis and restructuring of industrialism and itstwo associated modes of production, capitalism and statism; the freedomoriented,cultural social movements of the late 1960s and early 1970s; and therevolution in information and communication technologies, as describedabove. Given the analytical purpose of this chapter, I will not enter into thedetail of the analysis of these three complex historical processes, but take theliberty of referring the reader to my earlier writings (Castells, 1980, 2000b, c,2001, 2004; Castells and Kiselyova, 2003). Yet, I will summarize the essenceof the analysis as it relates to understanding the formation of the network society.First, the industrial model of development hit the buffers of its limits toincrease productivity growth as the organizations, values, and policies of theindustrial society could not manage the transition to knowledge-based productivitygrowth by using the potential unleashed by information and communicationtechnologies. However, a crisis in the mode of development istranslated specifically into a crisis in the model of accumulation that is dominantin each time and space. In the case of capitalism, this meant the callinginto question of the Keynesian model that had characterized the period of highproductivity increase and steady economic growth after World War II. Thatmodel was based on the ability to increase both profits and social redistributionthrough government guidance and funding, largely in a controlled,domestic policy environment. Productivity growth and market expansion werebased on a social contract that ensured social stability, improved living conditions,and mass consumption of mass-produced goods and services. Decliningproductivity resulted in declining surplus, thus in declining profits, and decliningprivate investment. The model was sustained by increasing public spendingand private indebtedness. Public borrowing and increased money supplyled to rampant inflation. Under conditions of fiscal stress and inflationarypressures, the sudden rise in oil prices of 1973–5 by OPEC and its associatedmultinational corporations both increased inflation and provided the opportunityto declare a crisis, and the ensuing search for corrective policies. Theworldwide crisis of the 1970s prompted a debate, in the United States as in therest of the world, on the future of capitalism. Corporations responded by sheddinglabor, putting pressure on wages, benefits, and job security, globalizingproduction and markets, stepping up research and development, investing intechnology, and finding more flexible, efficient forms of management.But the decisive shift to a different model of accumulation came fromgovernments, albeit in harmony with corporations. It can be related to the twin