The fourth industrial revolution simultaneously poses the biggest opportunity and the largest threat to a prosperous future
In 1750 AD, India’s share of global industrial output was 25%; by 1900, this had declined to 2%. The reasons were the chaos triggered by the decline of the Mughal empire, colonization by Britain and the first industrial revolution. Like China, India missed out on the industrial revolution which saw the invention of the steam engine and powered looms and unleashed a productivity revolution. As a result, our handloom industry was decimated; India became deindustrialized and fell into abject poverty. China has re-industrialized with a vengeance, while India is still struggling to catch up.
This bit of history is more relevant than ever. The industrial revolution was a massive disruption. Countries that drove it or embraced it went from rags to riches, while those that missed out went from riches to rags. Today, we are in the midst of the fourth industrial revolution that promises to be profoundly more disruptive. The question is whether India is positioning itself to ride this tidal wave or whether once again we will be swept away by it.
The world is at the beginning of a revolution where there are huge advances in genomics, artificial intelligence, materials and manufacturing technologies. Machines are closing in on human ability with astonishing speed. Robots are replacing humans not just on factory floors but in homes too. Reusable rockets promise to make space travel and colonies on Mars and the moon a reality. Possibly in our own lifetime, we will reach a point called “singularity" where machines become as smart as humans and then keep getting smarter. We will soon be able to edit genes to create favourable traits and new life forms. Science fiction is becoming reality.
As with previous industrial revolutions, new technologies will create new jobs and simultaneously destroy many old ones. The rise of machines, from robots to smart software, threatens to impact not just low-skilled factory workers, but everyone including software engineers, stock traders and taxi drivers.
Even chief executive officers are not exempt; a recent McKinsey study estimates that half the tasks done by CXOs can be automated. While in the long run, it is possible that more jobs will be created than are destroyed; in the medium term, the opposite will be true.
An Oxford study estimates that 47% of the jobs in the US, 69% of the jobs in India and 77% of the jobs in China will not exist in 25 years. This is not conjecture. China’s factories are adding robots faster than they are hiring people. India’s information technology sector is already witnessing jobless growth and total employment may have peaked.
The really vital question is this. While lots of people will lose their jobs all over the world, where will the new jobs be? Today, much of the world’s fundamental research and innovation is happening in the US. Disruption is being driven very disproportionately by American companies such as Google, Amazon, Tesla, Illumina or First Solar. The chances are quite high therefore that the bulk of the new jobs will be created in the US. This is important. In the first industrial revolution, Britain and Europe were able to export the job losses created by machinery to colonies such as India. Productivity growth and trade eventually resulted in enormous job and wealth creation in Europe even as it resulted in famine and devastation in India, China and Africa.
Let us assume that all the new developments will create five new high-end jobs and destroy 10. Current trends would suggest two of these will be in the US, two in China and perhaps one in Europe. If this is true, do countries like India once again become colonies? Not of countries perhaps but of companies such as Google, Pfizer or Monsanto? Do we simply become markets for innovations developed elsewhere? Will the vast majority of our people then live on subsistence-wage service jobs? Is India doomed to remain a low-middle-income country?
India is already facing a severe jobs crisis. The consequences of the fourth industrial revolution are truly frightening unless, of course, we learn to ride this wave. But what exactly does that take? People often wistfully wonder whether India will have its own Microsoft or Google. This is exactly like wondering when we will win an Olympic gold medal. If we win a gold medal, it will be because of a freak event—a person of extraordinary ability and tenacity—not because of the system.
What allowed Apple, Microsoft and Google to emerge is fundamental scientific research at world-class corporate labs such as Xerox PARC or Bell Labs and universities such as Stanford and Massachusetts Institute of Technology. The US government has played a vital role in underwriting high-risk, long-term research projects through institutions such as Defense Advanced Research Projects Agency and National Science Foundation; virtually all the technology in the iPhone was funded this way. Sensible immigration policies attracted the brightest minds from India, China, Russia and Hungary to these labs. Finally, a vibrant entrepreneurial ecosystem allowed the commercialization of research.
The contrast could not be more stark. There is almost no understanding or discourse on these matters in India; our policymakers, scientists and business leaders are firmly stuck in the old paradigm. Not one Indian university is ranked in the global top 300. It is hard to think of a single Indian company that is at the leading edge of any of the disciplines that matter to the future. To do cutting-edge work in most scientific and engineering disciplines, our finest minds have either to join the research and development centre of a multinational company or leave the country. Government funding for science-based technology research has been minuscule. It is no wonder that all our entrepreneurial activity is restricted to me-too businesses rather that game-changing ideas.
The fourth industrial revolution simultaneously poses the biggest opportunity and the largest threat to a prosperous future. India cannot afford to squander this moment. What we need urgently is a national mission like the Apollo space programme. Is the prime minister listening?
“There is a tide in the affairs of men, Which taken at the flood, leads on to fortune. Omitted, all the voyage of their life is bound in shallows and in miseries. On such a full sea are we now afloat. And we must take the current when it serves, or lose our ventures". —Shakespeare in Julius Caesar
Ravi Venkatesan is the chairman of Bank of Baroda. The views expressed here are personal.