Economists are now talking enthusiastically about the fourth industrial revolution. Invention of steam engine in the later part of 18th century brought about the first industrial revolution. The second revolution was occasioned by mass scale production thanks to electricity. Internet in the second half of 20th century was the doorway to the third revolution. Rapid developments involving Artificial Intelligence, Internet of Things, Big Data and cloud computing are the harbingers of the fourth industrial revolution.
In the recently held Davos conference, Klaus Schwab said, “There has never been a time of greater promise, or greater peril.” He was referring to the onset of the fourth revolution. Robert Shiller who is among the few economists who predicted the 2008 global gloom advised, “You cannot wait until a house burns down to buy fire insurance on it. We cannot wait until there are massive dislocations in our society to prepare for the fourth industrial revolution.”
What should we do so that we are ready for the impending revolution?
In order to extract maximum benefit from the fourth revolution, we need to create conditions of less inequality in terms of income and trust in society.
Oxfam says, “Across the world, the gap between the rich and poor is spiraling out of control. It’s hurting us all and standing in the way of ending poverty.” On 19 January, 2016 Oxfam published a report that bemoans the economic system that widens rather than narrowing the gulf between the rich and the poor. This report released just as the World Economic Forum was scheduled to meet at Davos appealed to global conscience with the warning that unless remedial steps are initiated forthwith, the richest 1% of humanity will own as much wealth as the remaining 99% by the end of 2016.
Approximately 11% of world population is too poor to consume their minimum dietary requirement. Even the most stone-hearted will squirm knowing that just 80 individuals are together as wealthy as 50% of global population (nearly 3.6 billion people) who are at the bottom of the wealth pyramid. IMF has gathered evidence to show that extreme inequality apart from being an ethical issue also lacerates the economic engine and slows down economic growth.
The extent to which different sections of society (broadly classified into elite and mass) trust various institutions is measured annually by what is referred to as “Edelman Trust Barometer”. The relevant data across the world are collected and conclusions drawn by a research group called ‘Edelman Berland’. Inequality in trust is measured by the difference between the trust of ‘informed group’ and the trust of ‘general population’ in four major institutions namely NGOs, Business, Media and Government. The difference in the latest survey (2016) is 12%, 10%, 10% and 9% respectively. These differences are more than the 2015 figures showing that the disparity in trust and confidence between the elite and lay sections of populations is widening just as the inequality in income / wealth also is growing. (‘Informed group’ is defined as college-educated, in top 25% of household income and reporting significant media consumption and engagement in business news.) The bottom-line is that the general population is less optimistic. Details are available in http://www.edelman.com/insights/intellectual-property/2016-edelman-trust-barometer/global-results/
To sum up, we are on the cusp of an exciting new revolution that has the potential to generate unprecedented prosperity. Inequalities in income and trust (mentioned as the ‘great peril’ by Klaus Schwab) may play the spoilsport. Therefore, sustained reduction in these inequalities will help us in moving faster towards a brighter future.
This appeared in the Industrial Economist Blog on 28 January.