One of the prominent analyses of the near future was made in 2016 after the 46th International Economic Forum in Davos. When we just recount the topics highlighted that time – blockchain technology, circular economy, etc. – we recognize that they’re still on the desk for the Gulf countries.
Most of all, five years ago participants discussed prices for oil, Iran, and the war in Ukraine (don’t you recognize the same difficult issues still going on in 2021?), although the nominal title topic of the forum was “The Fourth Industrial Revolution”. The founder of the forum, a Swiss economist and one of the main theoreticians of the Industry 4.0 phenomenon, Klaus Schwab, spoke more and more actively than others about its premises and challenges.
He has authored and co-authored several books, including “The Fourth Industrial Revolution” (2016), “Shaping the Fourth Industrial Revolution” (2018, with Nicholas Davis), “COVID-19: The Great Reset” (2020, with Thierry Malleret), and “Stakeholder Capitalism” (to appear in 2021, with Peter Vanham).
Let’s summarize the most interesting statements and predictions that are still of current interest in the post-pandemic world.
The fourth industrial revolution
We live in the era of the third industrial (or digital) revolution, which began in the second half of the XX century and is characterized by the spread of information and communication technologies.
The first industrial revolution began in the second half of the 18th century when it became possible to switch from manual labor to machine labor with the help of water and steam. The second was characterized by the development of mass conveyor production associated with the development of electricity. The era of the ongoing third industrial revolution began with the creation of digital computers and the subsequent evolution of information technology. Today, it’s gradually transforming into the fourth industrial revolution, which is characterized by the fusion of technologies and the blurring of the lines between the physical, digital, and biological spheres. This is how Klaus Schwab describes it.
For the first time, the concept of the fourth industrial revolution, or “Industry 4.0”, was formulated at the Hanover Fair in 2011, defining it as the introduction of “cyber-physical systems” into factory processes. It’s assumed that these systems will integrate into one network, communicate with each other in real-time, self-adjust, and learn new behaviors. Such networks will be able to establish production with fewer errors, interact with manufactured goods and, if necessary, adapt to new consumer needs. For example, a product in the manufacturing process will be able to identify the equipment that is capable of producing it. And all this stuff works in a completely autonomous mode without human intervention.
Thus, if the automation of production, which began in the middle of the 20th century, had a narrow specialization, in which control systems were developed for each sphere and enterprise separately and were not scaled, then the development of global industrial networks will underlie the new technological revolution.
Germany was the first on the path of Industry 4.0, which, within the framework of the developed “high-tech strategy”, began to invest in new Internet infrastructure and the creation of global standards for 40 billion euros a year. Similar programs are being implemented in other developed countries – China, South Korea, and the United States, where the Industrial Internet non-profit consortium was created in 2014, among the founders of which are General Electric, AT&T, IBM and Intel.
According to a survey of 800 leaders of technology companies, conducted specifically for the Davos forum, the key drivers of change will be cloud technologies, the development of methods for collecting and analyzing Big Data, crowdsourcing, sharing economics and biotechnology. Among other forecasts of experts, “smart” clothes connected to the Internet, self-driving cars and medicine based on 3D printing are in the lead. In addition, 45% of respondents believe that artificial intelligence may be present on the boards of directors of large companies in 2025.
Klaus Schwab also spoke about this at the forum in his speech: “The possibilities of billions of people connected with each other by mobile devices with enormous power and memory, providing access to all the knowledge of mankind, are truly endless. And these opportunities will multiply many times due to more and more breakthroughs in the fields of artificial intelligence, robotics, the Internet of things, autonomous transport, nanotechnology, materials science and quantum computers. Artificial intelligence is already here in the form of autonomous machines, drones, virtual assistants, translation programs. “
It should be understood that the breakdown of the technological paradigm brings not only new perspectives, but also new social challenges associated primarily with the transformation of the labor market.
The most serious cuts are expected among office and administrative employees. On the other hand, many of the demanded and highly paid professions today did not exist fifteen years ago, the rate of change in the labor market is only growing every year, and the decline in employment will be partially offset by its two millionth growth in engineering, finance and computer specialties.
The decline in the total share of human labor against the background of the comprehensive introduction of automation will have a serious impact on developing countries, where the lack of disruptive technologies has so far been compensated for by inexpensive labor. Large-scale production will return to Europe and the United States, depriving developing countries of an important industrial resource.
In addition to massive job losses, advances in technology can widen the gap between capital and labor incomes and, as a result, increase inequality, including gender, among workers. Those who provide intellectual and physical capital, that is, developers, shareholders and investors, will benefit from the change. And the demand for workers with a low level of education and lower qualifications, on the contrary, will decrease.
States need to start rebuilding their education and training systems now, modernizing infrastructure to create new jobs, and developing new progressive tax legislation.
Philip Jennings, Secretary General of the International Federation of Trade Unions UNI Global Union, said about this: “Let’s take a look at the scale of the problem we face. We already have 200 million unemployed. Half of the world’s workers live on just a couple of dollars a day and work in the informal sector. If we add to this the incipient digital revolution, then, looking at these statistics, panic grips.”
A similar forecast was made by Joe Biden, who expressed the opinion that the new digital revolution could completely destroy the middle class in the United States and developed countries. He spoke five years ago a lot about the pessimistic scenario that the development of technology can lead to: “Automation may mean better-paying jobs for the manager of a self-driving trucking company, but for tens of thousands of drivers it means a loss of place and livelihood. Our challenge is to tune these coming changes in favor of society, to make sure that there are more winners than losers. Earlier, in other epochs, in moments of tectonic changes, we managed to do it, but today, on the crest of a new revolution, it will be even harder to do it.”
To avoid this, Biden said, states must now begin to rebuild their education and training systems, modernize infrastructure to create new jobs, and develop new progressive tax legislation to prevent wealth concentration.
As part of the discussion of the fourth industrial revolution, the forum participants paid much attention to cryptocurrencies and Blockchain technologies. The director of the International Monetary Fund Christine Lagarde urged regulators to develop a flexible approach to cryptocurrencies, instead of banning them.
The role of business
New technologies are changing supply and demand. The end consumer of goods is increasingly influencing the work of companies in
Forcing them to adapt to his needs in all categories – from design and sales to delivery methods. In his article for Foreign Affairs, Klaus Schwab identifies four main effects that the fourth industrial revolution can have on business: increased customer expectations, improved product quality, collaborative innovation, and new forms of organization. Companies with a unique platform that brings together many people will have the advantage, rather than any underlying asset. For example, Uber does not have its own taxi fleet, Facebook does not produce its own content, and the world’s largest online store, Alibaba, does not have its own products.
Role of the state
As consumers will be able to more actively influence the work of large companies, so citizens will be able to participate more actively in political life with the help of new technologies. But besides this, the fourth industrial revolution will exacerbate the problems of state and international security, completely changing the very nature of military confrontations. According to Klaus Schwab, future conflicts will be hybrid in nature and combine direct action on the battlefield with non-state phenomena and elements:
“The line between war and peace, soldier and civilian, and even violence and non-violence (think of cyber terrorism) is frighteningly blurred. With the development of military technology, the emergence of biological and autonomous weapons, non-state associations of people will reach the same level of lethality as states. This vulnerability will cause an explosion of fear among the population. At the same time, technological breakthroughs will potentially reduce the danger of hostilities by creating protective systems or increasing the accuracy of weapons.”
Environment and circular economy
The linear production patterns we inherited from previous revolutions today exhibit many serious flaws, one of which is growing environmental problems; and the new industrial revolution is designed to correct the accumulated negative factors. One of the tools for solving the problem of pollution and ensuring a stable ecological future is a circular economy, which implies a continuous circulation of technical and biological materials in production and the preservation of valuable natural resources. In his article, prepared within the framework of the forum, Chris Dedicot, senior vice president of Cisco, draws attention to the opportunities that technological progress provides for the widespread adoption of a circular economy:
“The proliferation of the Internet of Things opens up opportunities for circular innovation. The declining cost of sensor technology and the proliferation of networks make it possible to connect every component entering the manufacturing process. The data collected through such connections make it possible to find out the place of origin of the product, the method of production, and the amount of energy used to produce it. This data is at the heart of the circular economy. The information obtained on their basis gives enterprises, cities, and entire countries the opportunity to more effectively restore, create and relocate these resources. “