The First Industrial Revolution used water and steam power to mechanize production. The Second used electric power to create mass production. The Third used electronics and information technology to automate production. Now a Fourth Industrial Revolution is building on the Third. It is characterized by a fusion of technologies that is blurring the lines between the physical, digital, and biological spheres.
The Fourth Industrial Revolution has the potential to raise global income levels and improve the quality of life for populations around the world.
To date, those who have gained the most from it have been consumers able to afford and access the digital world. Technology has made possible new products and services that increase the efficiency and pleasure of our personal lives. 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.
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.
In the future, 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 effective, and the cost of trade will diminish, all of which will open new markets and drive economic growth.