February 23, 2016Doug Hadden
“Industry 4.0” or the “Fourth Industrial Revolution” was a major theme earlier this year at the World Economic Forum. What is the implication to public policy? The WEF Challenges site points out a few critical questions:
- The world needs greater equality to strengthen growth
- The world needs 470 million new jobs by 2030.
- The world needs to deliver healthy lives and health security for 9.7 billion people.
- The world needs to close its $1 trillion annual infrastructure investment gap.
Where does technology fit into the equation? For example, The WEF Future of Jobs Report predicts: “technological disruption is interacting with socio-economic, geopolitical and demographic factors to create a perfect storm in labour markets in the next five years.”
Professor Klaus Schwab, Founder and Executive Chairman of the World Economic Forum, in an interview “The Fourth Industrial Revolution will change all sectors. In fact, governments will be among the most impacted and challenged by the emerging revolution. These new technologies are shifting the balance of power among industries, state and non-state actors, and countries while also offering new opportunities to engage with citizens. Robotics, artificial intelligence and genetic engineering are raising new ethical and regulatory questions. Governments need to be aware of the changes that are occurring, but also be prepared to work together across all sectors to ensure that the fourth industrial revolution brings many opportunities and minimises its risks.”
In a long article, Cadie Thompson pointed out the 21 technology tipping points we will reach by 2030 including unlimited data storage, sensors connected to the Internet, wearables and 3D printing. The Industry 4.0 technology implications to governments – in particular, emerging economies, seem to revolve around:
- Digital Divide
- Health, Education and Employment
- Infrastructure and the Role of the Private Sector
- Environment Urbanization and Smart Cities
There is great concern about the increasing digital divide. Although many developing countries are benefiting from smart phone and feature phone networks, bandwidth is increasing in developed countries. The WEF Networked Readiness Index shows the digital divide between more and least developed countries. This could perpetuate an environment of information and technology asymmetry. Despite some good news, as Rosamond Hutt described in how Google is bringing the web to Sri Lanka using balloons, the lack of digital infrastructure could limit developing countries to “Industry 3.0” while developing countries focus on “Industry 4.0” without the need for lower priced labour. As The Economist pointed out: “Attracting investment in labour-intensive manufacturing has been a route to riches for many developing countries, including China. But having a surplus of cheap labour is becoming less of a lure to manufacturers. An investment in industrial robots can be repaid in less than two years.”
No wonder that Adriana Hamacher points that the underlying WEF theme was: getting anxious about automation.
Public policy implication: need to build up digital infrastructure, to enable an equitable distribution of Industry 4.0, in underserved areas to ensure growth and global stability
Health, Education and Employment
The Future of Jobs Report predicts: “technological disruption is interacting with socio-economic, geopolitical and demographic factors to create a perfect storm in labour markets in the next five years.” The report calls is a “skills disruption.” The elimination of many jobs because of automation and artificial intelligence – yet, the introduction of new jobs.
As Asmaa Abu Mezied pointed out: “There are different opportunities available that will shape the role which can be undertaken by higher education in the Fourth Industrial Revolution. Combining the strength of the traditional higher education with the increasing trend of MOOCs represents necessary steps to scale qulity education. On the other hand, “Global Identity” and “Education for You” embody aspects, if globally embraced, that would transform global higher education”
At the same time, there are age, gender and ethnic inequality in employment. As Guy Ryder pointed out: “the reality for far too many young women and men is that there simply aren’t enough decent jobs to go around.” And, Keith Breene observed: “It is not just the young who are vulnerable, though. Older workers in ageing economies are often failing to find viable livelihoods as industries evolve. Despite the high unemployment in many regions and across various age groups, skills mismatches and gaps in existing education systems are hindering the effective deployment of countries’ talent.”
Healthcare is tightly aligned with education and employment. Kaushik Basu suggested that addressing health issues will require “greater effort to spread education, build skills, and provide universal health care. Innovative thinking will be needed to achieve these goals. But we also need to think of new ways to bolster labor income.” Frida Garza observed that analytics can help because “data can be used to guide public health policy decisions in the areas that need it most.”
Public policy implication: the use of Industry 4.0 technology, digital infrastructure and “big data” for improved education and health to lead to sustainable employment.
Infrastructure and the Role of the Private Sector
Keith Breene analyzed that trillions of dollars of investment is needed for infrastructure to support effective global growth. It does not appear that governments can continuously fund infrastructure development, especially in an era of frugal spending. Mark Viso observed that “large-scale public-private partnerships …often look to the private sector to help solve problems from infrastructure to healthcare.” Caroline Kende-Robb pointed out that: “Venture capital funds are ready and waiting to invest across Africa. The next step is to bring together the public and private sectors to drive the deals as quickly as possible. In 2016, rapid technological changes have the potential to create new industries, reduce inequality and drive structural transformation.”
The increased use of the private sector for growth is not without risks. In an analysis Petter Matthews pointed out the “13 features that make construction particularly prone to corruption.” Public-Private Partnerships (PPPs) are difficult to effectively manage by governments. Most governments use a cash-basis of accounting so do not account for financial risks. PPPs are not presented on government books, considered “off-budget”, and tend to have less transparency. And, large companies are able to offer attractive deals to governments that restrict future competition.
Public policy implication: PPPs are a fundamental part of building the infrastructure for Industry 4.0, so governments need to embed risk management, transparency and accrual accounting.
Environment Urbanization and Smart Cities
Professor Klaus Schwab pointed out that Industry 4.0 could have significant positive environmental impact: “it is my fervent hope that the fourth industrial revolution will be the first industrial revolution that actively regenerates the environment rather than negatively impacting it. In fact, this is one of the great promises of new technologies – that more and better sensors combined with new ways of understanding, verifying and sharing data transparently could help companies, households and governments create a truly “zero waste” world that gives new space for species to proliferate.”
Urbanization is the opportunity and challenge. According to Robert Muggah: “the pace of this urban revolution is mesmerizing..China, India and Nigeria — will account for 40% of global growth over the next decade.” This could create fragile cities. Elie Chachoua observed that rapid urbanization means that “pressure will thus be felt mostly in cities, resulting in problems such as traffic congestion, increased energy use and heightened water stress.”
Smart Cities using smart energy and better use of water and waste enables, according to Ashima Sukhdev and James Pennington a circular economy “by which materials and products are kept at their highest possible value at all times… The digital circular city would not only save resources but would change the citizen’s experience for the better.” That why there will be “up to $175bn of cumulative investments expected by 2025 in the smart-city market,” according to Elie Chachoua .
Among the Top Ten Urban Innovations identified by the WEF was: water management, smart homes, smart energy, urban farming, mobility on demand, and adopt a tree.
Public policy implication: Given rising urbanization, cities have become the hotbed of innovation in sustainable innovation, so governments need to encourage innovation hubs and fund smart cities.
Inequality, security, and community are challenges that societies face with the Fourth Industrial Revolution, according to Nicholas Davis. Governments need to recognize that the rules have changed. Governments need agile forward-looking policies rather than traditional avenues of state control that will hamper growth and increase environmental damage to the planet.
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