This essay is the last in a four-part series on the theme, “The Third Industrial Revolution.” An introduction by Arianna Huffington is available here. Part one is available here. Part two is here. Part three is here. Stay tuned for responses from leading global figures and technologists.
Addressing climate change and healing the biosphere
The upcoming COP 21 United Nations climate conference, scheduled to take place in Paris in December, revolves around a series of benchmarks: an increase in energy efficiency, a reduction of CO2 and other global warming gases and an increase in renewable energies. However, without an economic vision and development plan for transitioning participating nations into a post-carbon era, governments are reluctant to commit their countries to these benchmarks in a period where GDP is slowing, productivity is waning and unemployment remains high. They are far more likely to perceive the benchmarks as punishments that will only serve to further constrict their economies. The nations of the world would be far more likely to make commitments to the U.N. climate conference benchmarks if they were pegged to a new economic paradigm that can increase productivity, create new economic opportunities and put people back to work, ensuring a more vibrant and sustainable society, while transitioning their economies out of carbon-based energies and technologies and into renewable energies. That vision is already taking hold in Germany and other countries.
In a fully digitalized economy, extreme productivity, triggered by the optimization of aggregate efficiency in the managing, powering and moving of economic activity, decreases the amount of information, energy, material resources, labor and logistics necessary to produce, store, distribute, consume and recycle economic goods and services toward near zero marginal cost. The partial shift from ownership to access in a growing “Sharing Economy” also means more people are sharing fewer items — the birth of the circular economy — significantly reducing the number of new products sold, which results in fewer resources being used up and less global warming gases being emitted into the Earth’s atmosphere. In other words, the headlong push to a near zero marginal cost society and the sharing of nearly free green energy and redistributed goods and services in the Sharing Economy is the most ecologically efficient economy achievable. The drive to near zero marginal cost is the ultimate benchmark for establishing a sustainable future for the human race on Earth. And the Third Industrial Revolution paradigm will transform the U.N. climate conference benchmarks from perceived punitive measures to goalposts on the journey to a more prosperous and sustainable post-carbon economic era.
A new smart infrastructure, made up of an interactive “Communications Internet,” “Renewable Energy Internet” and “Transportation Internet” is beginning to spread nodally, like Wi-Fi, from region to region, crossing continents and connecting society in a vast global neural network. Connecting every thing with every being — the Internet of Things — is a transformational event in human history, allowing our species to empathize and socialize as a single extended human family for the first time in history. A younger generation is studying in global classrooms via Skype; socializing with cohorts around the world on Facebook; gossiping with hundreds of millions of peers on Twitter; sharing homes, clothes and just about everything else online in the Communications Internet; generating and sharing green electricity across continents over the Energy Internet; sharing cars, bikes and public transport on the evolving Transportation and Logistics Internet; and, in the process, shifting the human journey from an unswerving allegiance to unlimited and unrestrained material growth to a species commitment to sustainable economic development. This transformation is being accompanied by a change in the human psyche — the leap to biosphere consciousness and the Collaborative Age.
The biosphere is the integrated living and life-supporting system comprising the peripheral envelope of the planet together with its surrounding atmosphere. The biosphere extends only about 40 miles up from the ocean floor, inhabited by the most primitive life forms, to the stratosphere. Within this narrow realm, Earth’s biological and geochemical processes are continually interacting in a complex choreography that determines the evolutionary path of life on the planet.
We are beginning to realize that the Earth’s biosphere functions more like a self-regulating organism and that human activity that undermines the biochemical balance of the planet can lead to the catastrophic destabilization of the entire system. The spewing of massive amounts of carbon dioxide, methane and nitrous oxide into the atmosphere over the course of the First and Second Industrial Revolutions has done just that. The rising temperature from industrial emissions of global warming gases has now dramatically altered the Earth’s hydrological cycle, throwing ecosystems into rapid decline and ushering in the sixth extinction event in the past 450 million years, with untold consequences for both human civilization and the future health of the planet.
Humanity is quickly becoming aware that the biosphere is the indivisible overarching community to which we all belong and whose well-being is indispensable to assuring our own well-being as well as our survival. This dawning awareness comes with a new sense of responsibility — living our individual and collective lives in our homes, businesses and communities in ways that advance the health of the larger biosphere. Children all over the world are learning about their “ecological footprint.” They are coming to understand that everything we human beings do — and for that matter every other creature — leaves an ecological footprint that affects the well-being of some other human being or creature in some other part of the Earth’s biosphere. They are connecting the dots and realizing that every creature is embedded in myriad symbiotic and synergistic relationships in ecosystems across the biosphere and that the proper functioning of the whole system depends on the sustainable relationships of each of the parts. A younger generation is learning that the biosphere is our planetary community, whose health and well-being determines our own.
Their newfound openness is tearing down the walls that have long divided people by gender, class, race, ethnicity and sexual orientation. Empathic sensitivity is expanding laterally as quickly as global networks are connecting everyone together. Hundreds of millions of human beings — I suspect even several billion — are beginning to experience “the other” as “one’s self,” as empathy becomes the ultimate litmus test of a truly democratic society. Millions of individuals, especially young people, are also beginning to extend their empathic drive to include our fellow creatures, from the penguins and polar bears adrift on the poles to the other endangered species inhabiting the few remaining pristine, wild ecosystems. The young are just beginning to glimpse the opportunity of forging an empathic civilization tucked inside a biosphere community. At this stage, much of the anticipation is more hope than expectation. Still, there is an unmistakable feeling of possibility in the air.
Spurring new business opportunities in the emerging digital economy
The European Union is potentially the largest internal market in the world, with 500 million consumers, and hundreds of millions of additional consumers in its associated partnership regions that stretch into the Mediterranean and North Africa. The build-out of an Internet of Things platform for a Third Industrial Revolution, connecting Europe and its partnership regions in a single integrated economic space, will allow business enterprises and prosumers to produce and distribute information, renewable energy, 3-D-printed products and a wide range of other products and services at low marginal cost in the conventional marketplace, or at near zero marginal cost in the Sharing Economy, with vast economic benefits for society.
Erecting the Internet of Things infrastructure for a digital Third Industrial Revolution economy will require a significant investment of public and private funds, just as was the case in the First and Second Industrial Revolutions. European investment on infrastructure-related projects totaled $741 billion in 2012, much of it to shore up a general purpose technology platform that is outmoded and whose productivity potential has long since been reached. If just 25 percent of these funds were redirected and earmarked in every region of the European Union to assemble an Internet of Things infrastructure, the “Digital Union” could be phased-in between now and 2040.
The EU communication network will have to be upgraded with the inclusion of universal broadband and free Wi-Fi. The energy infrastructure will need to be transformed from fossil fuel and nuclear power to renewable energies. Millions of buildings will need to be retrofitted and equipped with renewable energy-harvesting installations and converted into micro power plants. Hydrogen and other storage technologies will have to be built into every layer of the infrastructure to secure intermittent renewable energy. The electricity grid of the European Union will have to be transformed into a smart digital Energy Internet to accommodate the flow of energy produced by millions of green micro power plants. The transportation and logistics sector will have to be digitalized and transformed into an automated GPS-guided driverless network running on smart roads and rail systems. The introduction of electric and fuel cell transportation will require millions of charging stations. Smart roads, equipped with millions of sensors that feed real-time information on traffic flows and the movement of freight, will also have to be installed.
The establishment of the Third Industrial Revolution Internet of Things infrastructure will necessitate the active engagement of virtually every commercial sector, spur commercial innovations, promote small and medium-sized enterprises and employ millions of workers over the next 40 years. The power and electricity transmission companies, the telecommunication industry, the construction industry, the information and communication technology sector, the electronics industry, transportation and logistics, the manufacturing sector, the life-sciences industry and retail trade will all need to be brought into the process. Many of today’s leading companies, as well as new commercial players, will help establish and manage the Internet of Things platform, allowing millions of others — small, medium and large businesses, nonprofit enterprises and prosumers — to produce and use renewable energy, transportation and logistics and a panoply of other goods and services at low marginal cost in the exchange economy or at near zero marginal cost in the Sharing Economy.
Semi-skilled, skilled, professional and knowledge workers will need to be employed across every region of the world to construct and service the three Internets that make up the digital platform of a Third Industrial Revolution economy. Transforming the world’s energy regime from fossil fuels and nuclear power to renewable energies is extremely labor intensive and will require millions of workers and spawn thousands of new businesses. Retrofitting and converting hundreds of millions of existing buildings into green micro power plants and erecting millions of new micro power buildings will likewise require tens of millions of workers and open up new entrepreneurial opportunities for energy-saving companies, smart-construction companies and green-appliance producers. Installing hydrogen and other storage technologies across the entire economic infrastructure to manage the flow of green electricity will generate comparable mass employment and new businesses as well. The reconfiguration of the European electricity grid into an Energy Internet will generate millions of installation jobs and give birth to thousands of clean Web app start-up companies. And finally, rebooting the transport sector from the internal combustion engine to electric and fuel-cell vehicles will necessitate the makeover of the continent’s road system and fueling infrastructure. Installing millions of charging stations along roads and in every parking space is labor-intensive employment that will require a sizable workforce.
The massive build-out of the IoT infrastructure for a Third Industrial Revolution in every locality and region of the world is going to spur an extended surge of salaried labor that will run for 40 years or more, spanning two generations. However, in the long run, the phase-in of a smart industrial plan like “Digital Europe” will ultimately lead to a highly automated capitalist market economy by midcentury, operated by small professional and supervisory workforces using advanced analytics, algorithms and artificial intelligence. The maturing of this smart infrastructure will lead to a migration of employment from an increasingly automated capitalist market to the growing social economy. While fewer human beings will be required to produce goods and services in the market economy, machine surrogates will play a smaller role in the nonprofit social economy for the evident reason that deep social engagement and the amassing of social capital is an inherently human enterprise. The social economy is a vast realm that includes education, charities, health care, child and senior care, stewardship of the environment, cultural activity and the arts, sports and entertainment — all of which require human-to-human engagement.
In dollar terms, the world of nonprofits is a powerful force. Nonprofit revenues grew at a robust rate of 41 percent — after adjusting for inflation — from 2000 to 2010, more than doubling the growth of gross domestic product, which increased by 16.4 percent during the same period. In 2010, the nonprofit sector in the United States accounted for 5.5 percent of GDP.
The nonprofit sphere is already the fastest-growing employment sector in many of the advanced industrial economies of the world. Aside from the millions of volunteers who freely give of their time, millions of others are actively employed. In the 22 countries surveyed by the Johns Hopkins University Center for Civil Society Studies some years ago, 19 million full-time workers are currently employed in the nonprofit sector. In some countries, employment in the nonprofit arena makes up more than 10 percent of the workforce. In the Netherlands, nonprofits account for 12.6 percent of paid employment. In Ireland it’s 11.5 percent. In Belgium, 10.5 percent of the workforce is in the nonprofit sector. In the United States, nonprofit employment accounts for 7.8 percent of the workforce. These percentages will likely rise steadily in the coming decades as employment switches from a highly automated market economy to a highly labor-intensive social economy.
Despite the dramatic growth curve in employment in the social economy, many economists look at it askance, with the rejoinder that the nonprofit sector is not an independent economic force but rather largely dependent on government procurement contracts and private philanthropy. One could say the same about the enormous government procurements, subsidies and incentives meted out to the private sector. But this aside, the Johns Hopkins study of 22 countries revealed that contrary to the view of many economists, nearly 50 percent of the aggregate revenue of the nonprofit sector already comes from fees for services, while government support accounts for only 40 percent of the revenues and private philanthropy for only 11 percent. I expect that by the middle of this century, if not sooner, a majority of the employed around the world will be in the nonprofit sector, busily engaged in advancing the social economy and purchasing at least some of their goods and services in a highly automated capitalist marketplace.
John Maynard Keynes’s futurist essay, “Economic Possibilities for Our Grandchildren,” which was written more than 80 years ago for his grandchildren, envisioned a world where machines have freed up human beings from toil in the marketplace to engage in deep cultural play in the social economy in the pursuit of more lofty and transcendent goals. It might prove to be his most accurate economic forecast.
The business at hand will be to provide both retraining for the existing workforce and the appropriate skill development for students coming into the labor market to ease the transition into the new job categories and business opportunities that come with a massive build-out of an Internet of Things infrastructure around the world. At the same time, students will need to be educated for the new professional skills that come with the job opportunities opening up in the social economy. Although a herculean effort will be required, the human race has shown itself capable of similar efforts in the past — particularly in the rapid shift from an agricultural to an industrial way of life between 1890 and 1940.
In summary, the scale up of a smart digitalized Internet of Things infrastructure across the European Union, its partnership regions and the world will generate new business opportunities in both the market economy and the Sharing Economy, dramatically increase productivity, employ millions of people and create an ecologically oriented post-carbon society. The employment of millions of workers will also stimulate purchasing power and generate new business opportunities and additional employment to serve increased consumer demand. Infrastructure investment always creates a multiplier effect that reverberates across the economy as a whole.
The alternative — staying entrenched in the sunset of the Second Industrial Revolution, with fewer economic opportunities, slowing GDP, diminishing productivity, rising unemployment and an ever-more polluted environment — is unthinkable, and would set the world on a long-term course of economic contraction and decline in the quality of people’s lives.
A smart green Eurasian silk road economic belt
Lest skeptics think that the ushering-in of a smart green Third Industrial Revolution is problematic and unrealizable, take a look at China, which is already spearheading a similar economic paradigm shift in Asia. Premier Li Keqiang and the new leadership of China have embraced the Internet of Things platform (which many Chinese refer to as “Internet Plus”) and the Third Industrial Revolution economic vision. China’s Internet companies now rank among the global market leaders in the emerging smart digital era. Tencent, China’s social media giant, rivals Facebook while Alibaba, China’s massive e-commerce company, rivals Amazon, marking China’s commanding presence in the Third Industrial Revolution.
In Sept. 2013, Xinhua reported that Premier Li had read my book “The Third Industrial Revolution” with great interest and had instructed the National Development and Reform Commission and the Development Research Center of the State Council to read the book and follow up with a thorough study of the ideas and themes it puts forth. Subsequently, I traveled to China for an official visit for two weeks in Sept. 2013, where I met with Vice Premier Wang Yang and other key government officials to discuss the Chinese transition into a Third Industrial Revolution economy. Following my visit, the government of China announced an $82 billion four-year initial commitment to lay out a digital Energy Internet across China so that millions of Chinese people and thousands of Chinese businesses can produce their own green electricity and share surpluses with each other. Plans are also afoot to establish a pan-Asia Internet of Things platform that will stretch across the continent, allowing billions of people to produce and share information goods, renewable energy and transportation and logistics in a digitalized single market.
The European Union’s plan to establish an Internet of Things platform for a digital economy opens up the prospect of joint collaboration with China in the creation of a digitalized integrated economic space across the Eurasian landmass to foster the transition into a Third Industrial Revolution and a post-carbon green civilization. In recent months, President Xi Jinping and Premier Li of China have called for a new high-tech Eurasian Silk Road Economic Belt to connect the Eurasian land mass in a seamless integrated market from Shanghai to the Irish Sea. The build-out of a digitalized Internet of Things infrastructure across Eurasia could lead to a new age of deep collaboration, bringing much of the human family together for the first time in history.
We are on the cusp of a promising new economic era, with far-reaching benefits for humankind. What’s required now is a global commitment to phase-in the Internet of Things platform and facilitate the transition to a digitalized zero marginal cost society, if we are to avert catastrophic climate change and create a more prosperous, humane and ecologically sustainable society.
Jeremy Rifkin is the author of “The Zero Marginal Cost Society: The Internet of Things, the Collaborative Commons, and the Eclipse of Capitalism.” Rifkin is an advisor to the European Union and to heads of state around the world, and is the president of the Foundation on Economic Trends in Washington, D.C. For more information, please visit The Zero Marginal Cost Society.
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