The Economist recently published a new special report on manufacturing and innovation: “A third industrial revolution” (see also introductory video below).
The report looks at the dramatic changes occurring in manufacturing, including new materials, advanced production processes, additive manufacturing and other changes:
The consequences of all these changes, this report will argue, amount to a third industrial revolution. The first began in Britain in the late 18th century with the mechanisation of the textile industry. In the following decades the use of machines to make things, instead of crafting them by hand, spread around the world. The second industrial revolution began in America in the early 20th century with the assembly line, which ushered in the era of mass production.
As manufacturing goes digital, a third great change is now gathering pace. It will allow things to be made economically in much smaller numbers, more flexibly and with a much lower input of labour, thanks to new materials, completely new processes such as 3D printing, easy-to-use robots and new collaborative manufacturing services available online. The wheel is almost coming full circle, turning away from mass manufacturing and towards much more individualised production.
This blog has looked at a number of the same trends (most recently just last week) and made similar arguments over the years. But I would also argue that much more is going on than just a third industrial revolution. The changes we are seeing will add up to more than just the next phase of the industrial age. It is the beginning of a new information age.
The Economist report hints at this. As the above quote notes, the first and second industrial revolution were based on the rise of mechanization and driven by economies of scale. This new trend breaks away from economies of scale and from increased use of machines. Rather, this new economic wave is based on the increased use of information to drive customized production. It is almost a return, as the report notes, to the pre-industrial craft production using post-industrial techniques.
The consequence of this shift is far greater than just a return of manufacturing activity to the currently rich countries such as the United States. Take as an example what happened with the rise of the railroad. The marrying of the steam engine to a carriage on iron rails brought about far reaching changes in many difference areas. The railroads spurred on development of a number of other industries, most notably the steel industry. They changed opened up vast new markets and changed the retail and wholesale industries. They even gave rise to new management practices and the shift from ownership capitalism to managerial capitalism. I would also argue that this shift in business practices moved the government from the political “spoils” system to a professional civil service. Likewise, the shift in the production system and the increased “informationization” of the economy will have far reaching implications for many parts of our society.
So, enjoy this insightful piece, but don’t let the title limit your thinking. The report does a good job of talking about the changes in manufacturing. But there is so much more going on than just a third industrial revolution.