Who will lead in the 4th Industrial Revolution?

2023 marked the 10th anniversary of the Hannover Fair 2013, in which the idea of the Fourth Industrial Revolution first appeared as a major theme describing our age. While students of economics and history understand the significance of the First Industrial Revolution of England in human history, few delve into how the subsequent industrial revolutions affected history. With the US-China rivalry becoming a hot issue affecting the Philippines, looking at how the Industrial Revolution will decide the outcome of the competition is relevant.

Benefits of industrial revolution

The most important attribute of an industrial revolution to a country is the innovative power brought. Innovation power is the ability to invent, adopt and adapt new technologies. Using new technologies effectively raises productivity and output. The ensuing economic prosperity enables it to solve the domestic problems that inevitably come with disruptions while enhancing a nation’s soft and hard power overseas.

The rising of new industries will take the economic gravity away from the old industries and often cause many of them to decline. Moreover, the increase in productivity of old industries does not benefit all players alike; the early movers benefit from technology adoption and often squeeze out others. Labor reskilling is particularly a thorny issue facing a country in this era of disruptive change. Many workers must reskill to meet the new economic environment skill requirement, and the outcome for many is uncertain. The social tension can run high. The task of material wealth and working skill redistribution is a critical test of the governance ability of a country.

The new high tech weapons increase a nation’s military might and deter its enemies; the ability to sell goods cheaper and better makes it an attractive economic partner to other countries; research and technologies in the frontier promote the country’s appeal to foreign talents to come to learn and project its civilization as superior. There is a long tradition of countries using innovation power to project power overseas, and the industrial revolution based on technological advances makes the leadership self perpetuating.

The passing of innovation leadership from one country to another in an industrial revolution involves new industries and technologies reshuffling state to state dynamics. For example, the power transition in the Second Industrial Revolution, electricity and internal combustion engines allowed the US and Germany to leapfrog the UK. Similarly, in the Third Industrial Revolution, digital technology kept the US pivot and fended off the European and Japanese challenge to its economic leadership.

US‐China great power rivalry

President Biden described the situation today as a “decisive decade,” and President Xi likewise used the terms “unparallel complexity” and “major changes unseen in a century” to describe the challenges facing them. The mutual destruction scenario in a nuclear war is today’s effective deterrent against a direct war of giants with second strike capabilities. The outcome of great power rivalry will be decided by who can innovate faster and better. Innovation is the foundation of military, economic and cultural power.

No one knows which country will prevail in this power transition. Although the US has been the leading innovation power since the end of WW2, the emergence of new technologies has rendered leadership less certain in an industrial revolution age with so many budding technologies.

A report titled “The Global Race for Future Power” by the Australia Strategic Policy Institute (ASPI), a think tank funded by the Australian, UK and US governments as well as defense and tech industries, recently analyzed 44 critical technology areas and put China ahead of the US in 37 out of 44 technologies. The US leads only in seven critical technologies.

The report attributed the unprecedented China innovation buildup to the steadfast implementation of the country’s long term science and technology development planning, supported by the world’s largest pool of science and technology researchers. The outcome of the great power rivalry is murky at this stage.

The uncertainty behind the great power rivalry poses a regional foreign policy dilemma to the region. The call of Indonesia, the 2023 Asean rotating chairman, for the wrap up of “The Code of Conduct” negotiation reflects the member states’ hesitancy to get embroiled in the rivalry.

What are the Industrial Revolutions

The Industrial Revolution refers to a period of time in which science, technology and innovation put the process of socioeconomic and cultural transformations into high gear. Earlier scholars focused the study on an ex-post basis and characterized the period after it happened. For example, the First Industrial Revolution was popularized by noted historian Arnold Toynbee in the 20th century, more than a century after it happened. The Second and Third Industrial Revolutions were also characterized after they happened.

In contrast, the Fourth Industrial Revolution was put on the table when it was still nascent in 2013. That allows governments to peek into the future and adopt measures to use the innovations to serve the population better and mitigate any adverse social changes that invariably come with new technologies. After the 2013 proclamation of the age of the Fourth Industrial Revolution, almost all governments announced policies for its coming.

Four industrial revolutions

Scientific discoveries, technological improvements and innovations are continuous every day. The timeline described is somewhat arbitrary, but helps clarify the ideas.

First Industrial Revolution. From 1750-1850 in England, it turned the leading European countries from agricultural to industrial. Urbanization started, factories replaced artisan workshops as the place of production, and labor specialization raised productivity. Steam engines, textiles, steel, coal and railway are the products defining the era.

Second Industrial Revolution.

Occuring 1870-1914 before WW1, saw the US and Germany taking pivotal positions. Urbanization, corporations replaced family and private partnerships in the organization, and pushed mass production and governments worldwide to adopt social amelioration policies to address the inequalities of society. This is the age of technological revolution with many new industries emerging. Notable inventions of the era are electricity, the internal combustion engine, numerous chemical manufacturing processes and mass production.

Third Industrial Revolution. Also known as the Digital Revolution, it started with the first commercial microprocessor, Intel 4004, in 1969 until the early 21st century when people defined the Fourth Industrial Revolution to serve as its continuum. The emergence of gig workers and the economy’s shift into service are features of the era. Nothing described the evolution of the period better than computers; it moved from mainframe to minicomputer, then to microcomputer, laptop and tablet. In addition, the internet and mobile phones became popular in this period, forming indispensable parts of many people’s lives. The US stands out in this period; it dominated the Third Industrial Revolution digital age. Its success not only enabled it to push back the economic challenge of the European and Japanese industries in the 1970s and 80s but also provided it with economic clout as the sole global hegemon following the disintegration of the USSR in 1991.

Fourth Industrial Revolution. The period is characterized as an era of cyber physical integration. It will be characterized as an age of integrating computation, networking and artificial intelligence in virtual cyberspace into the physical process. Enabling physical processes with sensing and human intelligence accorded by AI is a higher form of automation based on a prescribed routine that cannot adjust to sudden changes in the working environment.

Dr. Henry Chan is an internationally recognized development economist based in Singapore. He is also a senior visiting research fellow at the Cambodia Institute for Cooperation and Peace and adjunct research fellow at the Integrated Development Studies Institute (IDSI). His primary research interest includes global economic development, Asean-China relations and the Fourth Industrial Revolution.