Setho ka Gaon

Today, every economy in the world shares a common concern; the GDP is falling, and while most argue it is due to the Pandemic, the Economists have something else to say. It is because productivity is declining all over the world for the past 20 years resulting in high unemployment, everywhere. They tell us that we can look forward to slow productivity growth for the next 20 years. The economists have believed that there are only two factors responsible for enhancing productivity; efficient Capital and Labour. But Robert Solow said that these two factors only account for about 14% of the productivity. The rest 86% comes from the Aggregate Efficiency – the ratio of potential to useful work. The maths says, at the end of two industrial revolutions, in the 19th and 20th century, half the human race has become well off whereas the other half has become worse off than their ancestors. 

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The British took us through the first Industrial Revolution in the 19th century which was a communication revolution. They invented Steam Powered Printing, putting an end to the manual printing presses. It allowed us to produce mass cheap print quickly. They also laid out a Telegraph System across the British aisle. These two new technologies then converged with a completely new source of energy in Britain called coal. They harvested the coal and invented the Steam Engine which was then put out on rails as Locomotives. The Second Industrial Revolution took place in America, in the 20th century there was centralized Electricity and Telephone. All of a sudden, people could communicate at vast distances as fast as the speed of light. Later came Radio and Television and when these new communication technologies converged in the United States with a completely new energy source - cheap Texas crude oil.  

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It changed the way we manage, power, and move economic life. It took the whole world through the 20th century and it peaked in July 2008, when Crude Oil hit a record price of $147 on the world markets, leading to the shutting down of the whole world economy. This economic earthquake led to the collapse of the Financial Markets later as an aftershock and the world economy is still dealing with it. The entire Industrial Revolution that we have gone through is dependent on the Carbon deposits of a previous period in history and fossil fuels. The fertilizers and pesticides, construction materials, pharma products, clothing, power, and transport, all are made out of Fossil Fuels. So, when the price of oil goes up to $95 a barrel, all the other prices go up. When the prices reach about $115, the purchasing power slows. The global economy is expected to be in a state of unrest for the next 50 years.

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So, how do we expect the world economy to grow when the businesses are plugged into a platform,

an infrastructure of centralized telecommunication, fossil fuel nuclear power, internal combustion road,

rail, water, and air transport and that infrastructure peaked in its productivity in the world, years ago?

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The pattern that we observe in these two Industrial Revolutions is the coming up of two new technologies, converged with an energy source, giving rise to new infrastructure for mankind. The Third Industrial Revolution which is expected to take place in Germany will be a new convergence of communication, energy, and transportation. Germany, in terms of Per Capita Income, is the most robust market economy in the world. 32% of all the electric power in Germany comes from renewable energy. The fixed costs of these renewable energies will be very cheap in the next 20 years. The marginal cost of producing renewable energy in Germany today is zero. As Rifkin said, “The communication internet is converging with a nascent, digitalized, renewable energy internet and both those internets are converging with a fledging automated driverless road, rail and water transport internet to create three internets: Communication Internet, Renewable Energy Internet and Automated transportation logistic Internet to manage, power and move economic life. These three internets ride on top of a platform called the Internet of Things”.

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As this new system comes in, it would lead to direct engagement at very low costs. This is the Revolution. This new platform is very radical because it is designed to be distributed and not centralized. According to economic theory, the market is in equilibrium where price equals marginal cost. The third Industrial Revolution would be a digital revolution that would be so powerful in its potential productivity, it could reduce the marginal cost for some goods and services to nearly zero and there would no longer be a profit margin. With 3 billion people on the internet producing their music, videos, news blogs, and sharing it at near-zero marginal cost with millions of people online, have disrupted the entire industries.