Look out, here comes the Fourth Industrial Revolution

Despite a long and difficult pull out of recession, there are more people at work now than ever before in our history

China sneezes, Port Talbot catches a cold. One of the reasons why Tata Steel is cutting its workforce by more than 1,000, with 750 people losing their jobs at Port Talbot, is the surge in cheap imports of steel from China. And one of the reasons why China is flooding the world with cheap steel is that it is facing a slump in demand at home. So while there are other factors at work, including the high cost of energy in Britain, both of these big stories of the week – the domestic story of our steel industry and the international one of slower growth in China – are directly linked.

More than this, they are examples of the huge structural changes taking place in the world economy, in particular the shift from manufacturing to services. It is a path that we have come a long way down, and there is a debate as to whether we have come too far: is our manufacturing sector too small? But China is moving along that path too, as it is retreating from an economy based on heavy industry and infrastructural investment. Already services account for half of its GDP and in recent months it has been the booming service sector that has been rescuing the economy, helping offset the fall in manufacturing output.  

The debate as to the appropriate size of manufacturing in a modern economy will rumble on. For all the talk of industrial decline and the need to rebalance our economy, it is interesting that Port Talbot will still have more that 3,000 people making steel even after these cutbacks. But that is way down from the 18,000 in the 1960s, when the Abbey Works there was the largest integrated steel mill in Europe. 

So what does happen next? We cannot know what the jobs of tomorrow will be, but we can reasonably assume that there will be jobs. Despite a long and difficult pull out of recession, there are more people at work now than ever before in our history. The questions about the future structure of our economy, indeed that of any country in the developed world, are about the types of job that are being created, fitting skills to those jobs, trying to increase productivity so that the jobs can pay better, and so on.

It is a huge subject and perhaps one of the best ways to get one’s head around what might happen is to look at the vision sketched in what has been dubbed the Fourth Industrial Revolution. You will hear a lot more about this in the next few days for this is one of the headline subjects at the World Economic Forum’s Davos symposium, which starts today.

The original Industrial Revolution, the one that changed everything, was of course the one driven by steam: the railways, steamships, coal and iron, and so on. The second was driven by electricity, mass manufacturing, cars, aircraft, the telephone and consumer durables. The third is the one we are living through now, with our lives transformed by IT, electronics, the internet, Google and apps. My view is that this has still a long way to run, for we are only beginning to learn how to apply the technology we already have to improve the efficiency and performance of service industries. 

But on top of this comes revolution number four. Some people argue that this is really a continuation of number three and in a sense it is, but the way it is described in a new book by Klaus Schwab, founder of the WEF, The Fourth Industrial Revolution, does pick out some of the ideas behind it. One is that machines will not just “talk” to each other, but fix each other. Another is that genetic engineering will enable us, so-to-speak, to fix ourselves. Another is that 3-D printing will clear the way to make complex bespoke products at an affordable price. Whether this is a new revolution or a continuation of an existing one, it is certainly proving greatly disruptive. Witness the way Uber, Facebook and Airbnb are transforming their respective industries.

“The changes are so profound that, from the perspective of human history, there has never been a time of greater promise or potential peril,” he claims.

Well, maybe. It is scary stuff if you are trying to run a business, because you don’t know whether there will be an Uber round the corner that will savage your model: will legal or financial services be “ubered”? 

There are also some troubling social implications, for a number of reasons. One is that there seems to be a hollowing out of the medium-skill jobs that many of us do. Another is that as the life of companies shortens, job instability will increase even further. Still another is that some people are excluded as consumers because they don’t know how to use the information that has become available.

But you have to ask whether these changes are really likely to be more disruptive than the changes that earlier generations had to cope with. For example, people in South Wales had to give up largely agrarian lifestyles and learn how to work in a steel factory. That created jobs for men, albeit tough ones, but not for women. People in China have had to cope with not just their Industrial Revolution and on a much shorter timescale than anything in the West, but a social one, where all the values they were taught in schools until 40 years ago have been turned utterly upside down.

What I suggest we can be sure about is that a combination of general skills, especially mathematics, plus a sense of resilience and adaptability, will be the best way to prosper in an uncertain world.

Governments can help a bit by trying to buffer economic shifts, as well as doing their own jobs more efficiently. But their key role is surely education, and there the UK is only in the middle of the pack by developed world standards. As for the Fourth Industrial Revolution, the thing we should cling to surely is that the previous three, in their different ways, all improved the wellbeing of the majority of the people who lived through them.

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