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IAS Exam : Fourth Industrial Revolution: Impact and Implication

Apr 18, 2016 15:18 IST

    Relevance of the Topic:

    GS Paper III - Effects of Liberalization on the Economy, Changes in Industrial Policy and their effect on Industrial Growth.

    GS Paper II - Government Policies and Interventions for Development in Various Sector and issues arising out of their design and Implementation.

    India’s relation with World.

    Practice Question for Students:

    1.    What do you mean by Fourth Industrial Revolution? Examine its importance for India.
    2.    “Technology being a two edged sword and can be used for building weapons of destruction or advancing human life”. Analyze this statement in the backdrop of Fourth Industrial Revolution.

    Introduction:

    World Economic Forum which was established in 1971 and is a frontal platform for discussion on the global topic ranging from Political to Business to Society to shape global, regional and Industry agendas. The buzz of this year’s annual meet was around ‘Fourth Industrial Revolution’. Fourth Industrial Revolution is defined as “Technological revolution that will fundamentally alter the way we live, work and relate to one another”.

    The First Industrial Revolution began in 18th century in Britain with the mechanisation of the industries mainly Textiles, birth of the modern factory and harnessing of steam power. The Second revolution began in 20th century, almost a century after the first which started with the creation of the moving assembly line that ushered in mass production. Factories now were producing countless numbers of identical products cheaply and quickly.

    The Third Industrial Revolution, began in 1970s, was digital and information technology (IT) to processes of production. Additive manufacturing so-called ‘3D printing’ and Mass customisation are its key concepts, and its applications, yet to be imagined fully, are quite mind-boggling.
    The Idea of fourth industrial revolution is being conceptualised as an upgrade and advancement on the third revolution and is marked by a fusion of technologies straddling the physical, digital and biological worlds.

    In a published paper on The Fourth Industrial Revolution: what it is, how to respond, has three things about the ongoing transformation and advancement mark it out as a new phase rather than a prolongation of the current revolution Scope, Velocity and Systems impact. The speed of change is quite unprecedented, it is disrupting almost everything in every industry in every country, and it heralds “the transformation of entire systems of production, management, and governance”.

    The possibilities and of billions of people connected by mobile devices, with unprecedented processing power, storage capacity, and access to knowledge, are unlimited. And these possibilities will be multiplied by emerging technology breakthroughs in fields such as artificial intelligence, robotics, the Internet of Things, autonomous vehicles, 3-D printing, nanotechnology, biotechnology, materials science, energy storage, and quantum computing.

    artificial intelligence

    Already, artificial intelligence (AI) is all around us and making the human life quite easier which is ranging  from self-driving cars and drones to virtual assistants and software that translate or invest. Impressive progress has been made in Artificial Intelligence in recent years, driven by exponential increases in computing power and by the availability of vast amounts of data, from software used to discover new drugs to algorithms used to predict our cultural interests. Digital fabrication technologies, meanwhile, are interacting with the biological world on a daily basis. Engineers, designers, and architects are combining computational design, additive manufacturing, materials engineering, and synthetic biology to pioneer a symbiosis between microorganisms, our bodies, the products we consume, and even the buildings we inhabit.

    Challenges and Opportunities

    Fourth Industrial Revolution has the potential to raise global income levels and improve the quality of life for populations around the world like previously occurred revolution. Consumers have been able to gain the most in particular to date to afford and access the digital world, new technology has made it possible, where the new products and services have increased the pleasure and efficiency of our personal lives. Booking a flight, ordering a cab, buying a product, making a payment, watching a film, listening to music, or playing a game any of these and almost all the technical things can now be done remotely.

    In the coming days, technological innovation will also lead to a supply-side miracle, with long-term gains in efficiency and productivity. Transportation and communication costs will drop, logistics and global supply chains will become more efficient and effective, and the cost of trade will be demolished, all of which will open new economic markets and spear economic growth.

    At the same time the Fourth revolution has the potential to disrupt labor markets and could yield greater inequality. In all the economy, automation substitutes for labor and the net displacement of workers by machines might widen the gap between returns to labor and returns to capital. On the contrary, it is also possible that the displacement of workers by technology will, in aggregate, result in a net increase in safe and rewarding jobs.

    At this point we can’t say which scenario is likely to emerge, and history suggests that the outcome of it is likely to be combination of the two. However, it seems that in the future more than capital, talent will represent the critical factor of production. This situation will give rise to a job market increasingly segregated into low-pay for low-skill and high-pay for high-skill segments, which could lead to an increase in social tensions and social fabric may destabilize.

    In addition to being a key economic concern, inequality represents the greatest societal concern associated with the Fourth Industrial Revolution. The largest beneficiaries of innovation tend to be the providers of intellectual and physical capital—the innovators, shareholders, and investors—which explains the rising gap in wealth between those dependent on capital versus labor. Technology is therefore one of the main reasons why incomes have stagnated, or even decreased, for a majority of the population in high-income countries: the demand for highly skilled workers has increased while the demand for workers with less education and lower skills has decreased. The result is a job market with a strong demand at the high and low ends, but a hollowing out of the middle.

    This helps explain why so many workers are disillusioned and fearful that their own real incomes and those of their children will continue to stagnate. It also helps explain why middle classes around the world are increasingly experiencing a pervasive sense of dissatisfaction and unfairness. A winner-takes-all economy that offers only limited access to the middle class is a recipe for democratic malaise and dereliction.
    Discontent can also be fueled by the pervasiveness of digital technologies and the dynamics of information sharing typified by social media. More than 30 percent of the global population now uses social media platforms to connect, learn, and share information. In an ideal world, these interactions would provide an opportunity for cross-cultural understanding and cohesion. However, they can also create and propagate unrealistic expectations as to what constitutes success for an individual or a group, as well as offer opportunities for extreme ideas and ideologies to spread.

    The impact on business

    Across all industries, there is clear evidence that the technologies that underpin the Fourth Industrial Revolution are having a major impact on businesses.

    Many industries are seeing the evolution of new technologies that create entirely new ways of serving existing needs and significantly disrupt existing industry value chains on the supply side. With the growing transparency and consumer engagement, and whole new patterns of consumer behavior (increasingly built upon mobile networks and data) have forced the companies to adapt the way they Produce, design, market, and deliver products and services on the demand side are also occurring significantly.

    A key trend is the development of technology-enabled platforms that combine both demand and supply to disrupt existing industry structures, such as those we see within the “sharing” or “on demand” economy. These technology platforms, which are very easy to use by the smart phones, convene people, assets, and data thus creating entirely new ways of consuming goods and services in the process. These new platform businesses are rapidly multiplying into many new services, ranging from shopping to laundry, from massages to travel, from chores to parking.
    Overall there are four major effects that the Fourth Industrial Revolution has on business, on product enhancement, on customer expectations, on organizational forms, on collaborative innovation. Whether businesses or consumers, customers are increasingly at the epicenter of the economy, which is all about improving how customers are served. Physical products and services, moreover, can now be enhanced with digital capabilities that increase their value.

    New technologies make assets more durable and resilient, while data and analytics are transforming how they are maintained. A world of customer experiences, data-based services, and asset performance through analytics, meanwhile, requires new forms of collaboration, particularly given the speed at which innovation and disruption are taking place. And the emergence of global platforms and other new business models, finally, means that talent, culture, and organizational forms will have to be rethought.

    Overall, the inexorable shift from simple digitization (the Third Industrial Revolution) to innovation based on combinations of technologies (the Fourth Industrial Revolution) is forcing companies to reexamine the way they do business. The bottom line, however, is the same: business leaders and senior executives need to understand their changing environment, challenge the assumptions of their operating teams, and relentlessly and continuously innovate.

    The impact on government

    As the physical, digital, and biological worlds continue to converge, new technologies and platforms will increasingly enable citizens to engage with governments, voice their opinions, coordinate their efforts, and even circumvent the supervision of public authorities. Simultaneously, governments will gain new technological powers to increase their control over populations, based on pervasive surveillance systems and the ability to control digital infrastructure. On the whole, however, governments will increasingly face pressure to change their current approach to public engagement and policymaking, as their central role of conducting policy diminishes owing to new sources of competition and the redistribution and decentralization of power that new technologies make possible.

    Ultimately, the ability of government systems and public authorities to adapt will determine their survival. If they prove capable of embracing a world of disruptive change, subjecting their structures to the levels of transparency and efficiency that will enable them to maintain their competitive edge, they will endure. If they cannot evolve, they will face increasing trouble.

    This will be particularly true in the realm of regulation. Current systems of public policy and decision-making evolved alongside the Second Industrial Revolution, when decision-makers had time to study a specific issue and develop the necessary response or appropriate regulatory framework. The whole process was designed to be linear and mechanistic, following a strict “top down” approach.
    But such an approach is no longer feasible. Given the Fourth Industrial Revolution’s rapid pace of change and broad impacts, legislators and regulators are being challenged to an unprecedented degree and for the most part are proving unable to cope.

    How, then, can they preserve the interest of the consumers and the public at large while continuing to support innovation and technological development? By embracing agile governance, just as the private sector has increasingly adopted agile responses to software development and business operations more generally. This means regulators must continuously adapt to a new, fast-changing environment, reinventing themselves so they can truly understand what it is they are regulating. To do so, governments and regulatory agencies will need to collaborate closely with business and civil society.

    The Fourth Industrial Revolution will also profoundly impact the nature of national and international security, affecting both the probability and the nature of conflict. The history of warfare and international security is the history of technological innovation, and today is no exception. Modern conflicts involving states are increasingly “hybrid” in nature, combining traditional battlefield techniques with elements previously associated with nonstate actors. The distinction between war and peace, combatant and noncombatant, and even violence and nonviolence (think cyber warfare) is becoming uncomfortably blurry.

    As this process takes place and new technologies such as autonomous or biological weapons become easier to use, individuals and small groups will increasingly join states in being capable of causing mass harm. This new vulnerability will lead to new fears. But at the same time, advances in technology will create the potential to reduce the scale or impact of violence, through the development of new modes of protection, for example, or greater precision in targeting.

    Way Forward

    Humans have no control either on technology or over the disruption that comes with it is an exogenous force. All of us are responsible for shaping its evolution, in the decisions we make on a daily basis as consumers, citizens and investors. Hence, we must thus grasp this opportunity to shape the Fourth Industrial Revolution and direct it toward a future which reflects our common values and objectives.

    To make this happen, we must develop globally a comprehensive shared view of how technology is affecting our lives and reshaping our social, cultural, economic, and human environments. There has never been a time of greater promise, or one of greater potential peril. Today’s decision-makers, however, are too often trapped in traditional, linear thinking, or too absorbed by the multiple crises demanding their attention, to think strategically about the forces of disruption and innovation shaping our future.

    In the end, we need to shape a future that should works for us by putting people first and then empower them. In its most pessimistic, and dehumanized form, the Fourth Industrial Revolution may indeed have the potential to “robotize” humanity and thus it may deprive us of our heart and soul. But as a complement to the best parts of human nature empathy, creativity, stewardship, it can also lift humanity into a new collective moral consciousness based on a shared sense and value of destiny. It is incumbent on us all to make sure the latter prevails.

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