The Third Industrial Revolution - a response to the Economist

The Third Revolution by nature of its high mechanisation and non-labour intensity means an ever larger proportion of the general public will be excluded from the production process or remunerated to ever lesser extents.

Aaron Bastani
26 April 2012

Amid the atonal monotony of crisis that has increasingly sirened from the media during the last several years, it has been very rare to hear of ‘good news’ stories with regards to political economy, manufacturing or industry, particularly within the context of the OECD countries. Equally rare are stories that choose to take a longer term view, that zoom out of the immediate predicament in order to take a more macroscopic view of things. That ask ‘where next?’ for capitalism, jobs, growth.

This is unsurprising of course.

Crisis brings a certain density of life to human affairs and it is understandable that most commentators will remain focused on US unemployment statistics or foreclosure rates, Chinese defence spending or levels of economic contraction in most of the member states of the European Union. The insulin spike of crisis, default, movement is too much to bear for many commentators previously habituated to the stoical ataraxia of the world before the global financial crisis of 2008.

That is why the leader article in this week’s Economist ‘Manufacturing - The Third Industrial Revolution’ stands out. Here the reader is offered a vision of innovation in production extricated from contemporary debates about debt, deficits, unemployment and stagnating growth. The article itself peddles a conjoined techno-utopianism allied with a market-fundamentalism that is to be entirely anticipated from the Economist - the political wing of the KKF (Kevin Kelly Faction) and Wired magazine.

The article itself is clear that this ‘revolution’ will lead to the increased ‘irrelevance’ of the cost of labour in the final costs of production,

The revolution will affect not only how things are made, but where. Factories used to move to low-wage countries to curb labour costs. But labour costs are growing less and less important.

Furthermore it will be highly ‘disruptive’ in the Schumpeterian sense of ‘creative destruction’,

Like all revolutions, this one will be disruptive. Digital technology has already rocked the media and retailing industries, just as cotton mills crushed hand looms and the Model T put farriers out of work. Many people will look at the factories of the future and shudder. They will not be full of grimy machines manned by men in oily overalls. Many will be squeaky clean—and almost deserted. Some carmakers already produce twice as many vehicles per employee as they did only a decade or so ago. Most jobs will not be on the factory floor but in the offices nearby, which will be full of designers, engineers, IT specialists, logistics experts, marketing staff and other professionals. The manufacturing jobs of the future will require more skills. Many dull, repetitive tasks will become obsolete: you no longer need riveters when a product has no rivets.

None of this analysis seems to engage with the very real contradictions that such change will bring about. If the input of human labour is increasingly insignificant in the production of goods - something with which I entirely concur - and wages represent increasingly smaller amounts of capital allocated to production then who precisely is going to buy these products and with what wages? How will people subsist under capitalism without jobs?

Surely with ever increasing mechanisation and this ‘Third Industrial Revolution’ an ever larger proportion of the general public will be excluded from the production process or remunerated to ever lesser extents? Is this not the crisis of the labour-capital relation, where increasingly large numbers of people are rendered incapable of re-inserting themselves back into the production process? Where we have an increasingly smaller ‘aristocracy of labour’ of highly skilled workers while the rest join the lumpenproleteriat and who have no real role to play in production?

What the Economist seems to have missed out in its analysis was observed by Marx nearly a century and a half ago. This is unsurprising since it was after all he, and not Schumpeter, who first pointed out how ‘creative destruction’ worked in industrial society when observing in the British census of 1861 that the new industries of the 'Second Industrial Revolution' were in employment terms comparatively smaller than the antecedent ‘First Industrial Revolution'. Marx gave the examples of ‘gas works, telegraphy, photography, steam navigation and railways’ for the latter, all of which were highly mechanised and relatively automated processes.

Assessing these industries Marx claimed that they employed no more than 100,000 workers - this comparing to over one million in the industries of the First Industrial Revolution centred around metallurgy and textile manufacture whose workforces were by that point rapidly shrinking as a consequence of greater mechanisation. Subsequently Marx noted that the industries of the Second Industrial Revolution had not absorbed anything like as much labour as the First Industrial Revolution had expelled and Marx’s expectation of the secular trajectory in the decline in the demand for labour was born out by empirical evidence.

The same thing is about to happen, perhaps to a far greater extent, with the advance of what the Economist calls this ‘Third Revolution’. Huge numbers of workers will be expelled from work as the new norms of the distributed network and free-form fabrication massively accelerate the mechanisation of previously human labour. The Third Revolution by nature of its high mechanisation and non-labour intensity will not be able to ‘create’ anywhere near enough jobs to make up for that.

With typically ideological bravura the Economist concludes by saying,

As the revolution rages, governments should stick to the basics: better schools for a skilled workforce, clear rules and a level playing field for enterprises of all kinds. Leave the rest to the revolutionaries.

Without new mechanisms, state-centric or not, whereby social and economic surplus is equitably distributed within this new paradigm the ‘playing field’ itself may be simply torn apart. Ever greater numbers of people will be excluded from engaging in either the production or consumption of goods and both capital and labour will find a stalemate with neither being able to adequately re-insert themselves into the production process and achieve their objectives of well-remunerated employment in the case of labour or returns on capital deployed for capitalists.

Might we see a return to forms of petty commodity production and artisanal labour, where workers possess more than merely their own labour and in fact own the means of production? Given the nature of commercial disintermediation and distributed networks combined with the advent of 3D printing and modular, freeform fabrication the answer might well be yes. The Economist is being disingenuous however - the changes headed our way are inevitably a fundamental challenge to Coase’s theorem and the very basis of why firms are even necessary.

Modular, easily replicable, open source and peer-to-peer manufacture based around the morphology of the distributed network and solid freeform fabrication may destroy the existing manufacturing paradigm permitting the production of goods to be done at a local basis and undertaken with regards to the needs of a specific community. This kind of production is already evident with the Open Source Ecology project and could be extended to many other areas from car manufacture to furniture and clothing .

If the impact of Wikipedia, Linux and the online P2P economy has decimated the major informational industries of media, music and software production, we should understand that the crisis catalysed by technological changes in these sectors is only the beginning once the same norms are extended to offline production and the ‘Third Revolution’. The ruins of the software and music industries are merely the leading edge of a hurricane. It won’t be business as usual and when the Economist speaks of revolution it should be careful what it wishes for.


A full response as to why the ‘Third Revolution’ is not good for Capitalism can be found here.

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