The World Economic Forum at Davos provides a reliable barometer of conventional wisdom amongst the globalised elite, so it’s interesting this year that, amidst all the sage thoughts on refugee crises, collapsing commodity prices and world stock market gyrations, there’s concern about the economic potential and possible dislocations from the fourth industrial revolution we are currently, it seems widely agreed, at the cusp of. This is believed to arise from the coupling of the digital and material worlds, through robotics, the “Internet of Things”, 3-d printing, and so on, together with the development of artificial intelligence to the point where it can replace the skill and judgement of highly educated and trained workers.
A report from the FT’s Izabella Kaminska of one session – Davos: Historians dream of fourth industrial revolutions – captures the flavour nicely. I’m struck by her summary of the views of the historian Niall Ferguson – “The fourth industrial revolution, Harvard’s Niall Ferguson notes, is distinctive because of its exponential rather than linear pace, not only changing what and how we do things but also potentially who we are.”
This succinctly summarises conventional wisdom, but almost every word of this statement is questionable or wrong.
Why do we talk of a fourth industrial revolution?
I do think it is helpful to admit that there was more than one industrial revolution. For example, I think it is useful to stress the importance of the the revolution in the second half of the 19th century (sometimes called the second industrial revolution). This brought the development of the chemical industry, electrical technology, cars and aeroplanes, all of which were supported by social innovations like technical training, research universities and industrial R&D. This phase of development is distinct from the developments in the late 18th century, of factories, especially for the spinning and weaving of textiles (the so-called first industrial revolution). This distinctiveness is neglected in many British accounts of history, perhaps because Britain didn’t unquestionably lead this “second industrial revolution”, with Germany and the USA setting the pace in many areas.
But there were other industrial revolutions (see for example this discussion and alternative periodisation from Anton Howes – “How many industrial revolutions”). I’ve discussed here the importance of an earlier revolution, starting in England in the mid-17th century, of process industries like glass making, pottery, lime making, and metallurgy, fueled by the ready availability of coal. And, expanding the definition of technology, one could talk of an earlier technological revolution from the mid-15th century, with the new financial technologies of banking and accountancy driving an expansion of trade and capital investment.
So much for history, where discussions of how many industrial revolutions may be inconclusive, but are at least interesting prompts for us to go back to the evidence and argue about it. But for the present and future, announcing the onset of a new industrial revolution doesn’t constitute analysis, it can only be marketing. And indeed, we’ve seen such “new industrial revolutions” announced before – with nanotechnology, then synthetic biology, to give just two examples. Marketing is useful for those with something to sell, but is not necessarily a good basis for policy-making.
If we were to accept that we were seeing a new industrial revolution, though, what is the basis for Ferguson’s assertion that the current revolution is exponential, while previous ones were linear? In fact, the earlier revolutions were exponential too. One needs to remember that exponential growth is not something magical, it occurs any time a process has a constant fractional growth rate. John Lienhard demonstrates (in The Rate of Technological Improvement before and after the 1830s) exponential growth in a number of early technologies – steam engine efficiencies between about 1750 and 1850, accuracy of mechanical clocks between 1400 and 1900, and refrigeration from 1860 to 1940, to give three examples.
The economic outcomes of these technological revolutions were exponential too – they resulted in periods of roughly exponential economic growth. Exponential economic growth is, of course, the natural consequence of a constant positive percentage growth rate – compounding. Niall Ferguson presumably once knew this, given that he used to be a historian of finance of some repute.
So what’s exponential about the current revolution? The most important exponential in recent economic history has been Moore’s law – the constant (and very high) rate of fractional improvement in computer power which resulted from the continual miniaturisation of the components of microelectronic circuits. Transistors are still getting smaller, and computers are still getting faster, but it’s important to realise that the exponential phase of Moore’s law has now come to an end, as exponential growth in the physical world always does.
Meanwhile economic growth in the developed countries, in the countries at the technology frontier, has conspicuously stopped being exponential. Growth rates are slowing, as the productivity growth that arises from technological innovation, and which is the fundamental driving force behind economic growth, has declined across the world in the last decade.
At this point, optimists about technology begin to question whether economic measures, like GDP, can capture all the benefits that current digital technology brings. In effect, the hard-nosed capitalists of the tech industry morph into dopey hippies to argue that really, money isn’t everything. What about the value consumers gain from being able, at no marginal cost, to do free searches through all the world’s information, or to call up music and entertainment on demand?
In this, of course, they are right – GDP doesn’t measure everything that matters. But why should we think this is any different to the great innovations of the past, which themselves brought huge benefits not measured in money? This argument is forcefully made by the FT’s chief economist, Martin Wolf, in a recent article: “Same as it ever was: why the Techno-optimists are wrong”.
Technology has always brought about benefits that weren’t fully captured in GDP. Think of the non-monetary value of there not being a 4-5% chance of mothers dying through childbirth, as there was in Britain before around 1930, and weigh that up against the free entertainment possibilities of the web.
As for the new technologies being different because they change, not just what we do, but who we are, all that this illustrates is the bleeding of transhumanist rhetoric into the mainstream that I criticise in my ebook Against Transhumanism: the delusion of technological transcendence. It’s a wish that some people have, that technologies will allow them to transcend the limitations of their human nature (and most notably, the limitation of mortality). What is yet to be proven that the new technologies are any more capable of fulfilling that (admitttedly powerful) wish, than the previous ones.
Yet I remain optimistic about the potential of technology. The technological developments that underly this “fourth industrial revolution” excitement are real, though they are sometimes not as new as is being portrayed, and their effect on the broader economy so far remains disappointing. I don’t entirely accept the pessimistic case made by Tyler Cowen and others that slow technological progress is inevitable because we’ve already taken the “low hanging fruit”. The problem is that fast progress in some areas (the combination of mobile communication with large databases that constitutes the core of the so-called “tech sector”, especially) obscures, but doesn’t counteract, the glacially slow progress we are making in other areas – including areas that matter to us a great deal, like the development of sustainable, scalable energy technologies.
There is no fourth industrial revolution. Technological progress continues, in some areas it moves fast, in other areas it moves much more slowly, despite our society’s most pressing needs. Which technologies move fast, and which we neglect and allow to stagnate, are the results of the political and social choices we make, often tacitly. We might make better choices if our discussions of technology weren’t conducted entirely in terms of tired clichés.