Challenges of the 4th Industrial Revolution

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The unfinished Philippine Development Plan 2017-2022 has an underdeveloped Chapter Two, titled “An Overview of Prospects and Other Developments that Could Affect the Philippines’ Socioeconomic and Institutional Development”.

Are our economic planners now taking a closer look at what is happening in the real world, and are prepared to abandon the old and simplistic export-or-perish and open-up-or-shrink economic-development formulas?

Yes, the country needs to do serious stock-taking by rigorously assessing global and national developments. The protectionist America First policy initiatives of the Trump administration and the Brexit phenomenon that has shaken Europe to the core should clearly be on top of the National Economic and Development Authority list, for both these developments have serious implications on the Philippine trade and industrial policies and the situation of the country’s overseas Filipino workers. The must-assess list should also include two more trade-related issues: the failure of the World Trade Organization’s Doha Development Agenda (DDA) to take off after one and a half decades of fruitless global trade talks; and the sudden collapse of the much-ballyhooed Trans-Pacific Partnership (TPP) agreement. Economic technocrats of the past administrations pinned so much hope in the DDA and the TPP as possible platforms for Philippine trade and economic expansion.

However, one major development that both those in the government and civil society should not ignore are the changes in the market and the workplace that are continuously
being churned out by what the superelite in the Davos annual summit call as the “Fourth Industrial Revolution”.
Why Fourth?

According to economic historians, there are three epochal Industrial Revolutions. The first happened in the 18th and 19th centuries, when the factory system powered by the steam engine and new machines replaced the cottage or home-based production of textiles and various goods in Europe and, subsequently, in America and elsewhere. The revolution was amply celebrated in the 1776 book of Adam Smith, The Wealth of Nations, which described the explosive growth of production under the extended division of labor in a capitalist factory system. The book also advanced the thesis that nations prosper because of the “invisible hand” that unleashes the animal spirits among “free” capitalists as they build factories and trade goods everywhere. The new wealth, however, was appropriated by a few who ignored the rights of the “proletariat” to eight-hour work, unionism and better conditions of work. These rights took two centuries of working-class struggle before they came to be recognized in many countries.

The Second Industrial Revolution is dated to have taken place in the late 19th century up to the early decades of the 20th century. This period saw advances in steel making, railway construction, gas exploration and refining, telegraph communication, chemical formulation, electrification and development of the bicycle and automotive. This period also witnessed the transformation of the factory system into mass-production system involving giant conveyor belts, thousands of workers and the application of the ideas of Frederick
Taylor on “scientific management” (alternatively known as the one-best-way approach in business operation).
The Third Industrial Revolution is largely based on the Information Communication Technology (ICT) Revolution. The ICT Revolution supposedly began in the 1950s with the development of digital systems and rapid advances in computing power, which have enabled new ways of generating, processing and sharing information. The ICT Revolution intensified in the last three to four decades with the digitization of the analog system of communication; launching of communication satellites; development of the personal computer and microprocessors; emergence and commercialization of cellular communication; the spread of the Internet; and the endless discovery on the endless uses of ICT in various phases of commerce and aspects of life. These decades, also happened to be decades, too, of the dominance of “free trade” thinking, alias “Washington Consensus”, in national and global trade-policy formulation.

Today the Fourth Industrial Revolution builds on the advances under the ICT. This is described as the fusion of “cyber-physical systems” providing entirely new capabilities for people and machines. One author asserts the Fourth Industrial Revolution “represents entirely new ways in which technology becomes embedded within societies and even our human bodies”, as exemplified by the emergence of new “technology breakthroughs”, such as robotics, artificial intelligence, nanotechnology, biotechnology, Internet of Things, 3D printing and autonomous vehicles. The breakthroughs include a host of mind-boggling innovations and discoveries, for example, human organs, such as liver, are now being duplicated through the magic of 3D printing and the use of new materials, while Google, the search engine firm, has successfully piloted the production of the “autonomous car” sans any driver, which is now being sold in the market.

With the huge flow of productivity-enhancing technical innovations and technologies it is able to generate, the Fourth Industrial Revolution clearly provides humanity a historic opportunity to liberate all Earth’s inhabitants from hunger, ignorance and disease. This, unfortunately, is not happening. The revelation by Oxfam International that eight men have wealth equivalent to the collective wealth of 3.6 billion people or half of humanity captures the extent of inequality in the world. Instead of easing, inequality is deepening between and among countries, between and among social classes. In the Philippines the bottom one-fourth of the population has remained stuck in the quagmire of poverty since the 1990s, despite the government’s commitment to halve poverty under the old UN Millenium Development Goals for 2000-2015.

The bigger challenge, however, is: Will the Philippines be able to post sustainable growth and create more and better jobs as the Fourth Industrial Revolution continues to churn out new technological products and processes? It is a given that the arrival of any new technological product in the workplace has a “disruptive” impact on existing jobs, which often leads to some form of technology-triggered unemployment. In the past, such unemployment is eventually offset by the growth of new investments and jobs in related industries, such as farm mechanization spurring the growth of agri-processing industry. This time, the problem, per study by Martin Ford, author of The Rise of the Robots (2015), job displacement in some industries can be massive and job losses cannot easily be offset. Which is the reason Ford is pushing for a “basic income guarantee” for all citizens regardless of whether they have jobs or not. This is like making the existing Conditional Cash Transfer (CCT) initiated first by the Arroyo administration universal. These two topics—CCT and basic income guarantee—deserve a separate discussion.

Meantime, the threat of massive job displacement under the ongoing Fourth Industrial Revolution is real, and should be treated seriously by the Philippines. For example, the two biggest industries at home—electronics assembly and call center/BPO services—are vulnerable, jobs-wise, to the advances in automation. On the other hand, the demand for OFW services in various countries may also weaken (apart from the recent impact of the rising tide of anti-immigrant attitudes in developed countries) due to the rise of robots and DIY (do-it-yourself) technological breakthroughs. The hopes of some economists that more jobs can be created if the Philippines focus on certain value chain phases of the multinational GPNs are now being dashed by the efforts of developed countries to bring back low-cost manufacturing in their home turfs.

In short, the world of work under globalization is changing radically under the Fourth Industrial Revolution. Is it not time for the Philippines to reassess, indeed, its overall position globally and at home? Should it not draw up a more balanced program of regional and global integration simultaneous with the scaling up of its domestic agricultural and industrial capacities?

-Written by Rene E. Ofreneo in BusinessMirror.  See original article link here.

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