The best essay I’ve read for a while is certainly The Economist’s Leader on “The Third Industrial Revolution”, a timely and fascinating take on the digitisation of manufacturing, and the implications that will have on the geography of jobs. While the first industrial revolution brought us mechanisation in the eighteenth and nineteenth centuries, the second industrial revolution of the twentieth century brought mass production (think Henry Ford’s quip ‘Any colour as long as it’s black’), the third industrial revolution of the twenty-first century will bring us mass customisation. We’ve been moving in this direction for a while (high-end fashion is one example), but, The Economist argues, the converging of several technologies, including clever software, novel materials, more dexterous robots, new processes (such as 3D printing) and web services, now allows the consumer to also be her own producer.
Gone are the need for cheap Chinese (or Vietnamese, Bangladeshi or Malawian) imports. Need a new pair of shoes? Why not just order a pair of Reebok’s printed by a local shoe-maker to your exact specification (size, material, colour)? Inviting guests over for the evening? Why not print them personalised cutlery on your home 3D printer, which will soon be as ubiquitous in our homes as the fridge? To be profitable, large manufacturers will have to shift from producing products to producing services; the example of Rolls-Royce that no longer sells jet engines but rather the hours that each engine is actually thrusting an aeroplane through the sky is pertinent. Of course, not everything can be printed (see The Economists’ April fools-joke about printing pets). But there is no denying that the most recent technological revolution will (again) be creatively destructive, benefiting most at the cost of some.
The consumer should be the biggest benefactor. (Ask any wearer of size 15 shoes.) But large manufacturers of standardised, cheap products will struggle. Governments, too, will find it hard. As The Economist notes, “their instinct is to protect industries and companies that already exist, not the upstarts that would destroy them. They shower old factories with subsidies and bully bosses who want to move production abroad. They spend billions backing the new technologies which they, in their wisdom, think will prevail. And they cling to a romantic belief that manufacturing is superior to services, let alone finance”. The internet is perhaps the best way to see this process of creative destruction with little to no government involvement: Instagram, after just a year with a dozen employees, was worth $1 billion to Facebook. No bureaucrat could have foreseen this a year ago.
South African minister of Trade and Industry, Rob Davies, at the recent Africa Dialogue conference called for African governments to promote policies that encourage industrialisation. His argument is that all the rich nations have industrialised by promoting large, manufacturing industries, and that African countries should follow that blueprint. Unfortunately, Minister Davies still lives in the twentieth century; he needs to realise that the most recent technological revolution won’t allow African countries to replace Factory China. In fact, Factory China is disappearing faster than you can say “African renaissance”. Services are the future. South Africa already has a unique comparative advantage in three important service industries: travel, communications and finance. Others, such as insurance, construction and business services may follow. In the next decade, these are the industries where thousands of (well-paying) jobs will be created, not in mass production, regardless of whatever government support is provided.
The problem is that governments don’t know how to support or encourage these services industries. It’s easy to give subsidies, or tax rebates, or build infrastructure, that cater to the manufacturing industry. It’s also easy to win votes when politicians can state that they’ve protected 50,000 jobs in the clothing industry (but at what cost?!). But to support the services industries requires far tougher policies; reduced red tape (across national boundaries), free and fast web access, in short, make it easier for entrepreneurs to start and grow a business. Entrepreneurs also require something else: education. It’s this last hurdle that is South Africa’s Achilles Heel: the most essential way to improve a country’s industrial capacity – be it in manufacturing, but especially in services – is to ensure that kids get a quality education, that they learn to think critically, do math, and have access to tertiary education (either at universities but more importantly at vocational colleges). It’s a cliché that we should prepare students for jobs that don’t yet exist, but it’s also frighteningly true. Some of my best-paid friends are writing web applications for tablets and smart phones on the African continent, neither of which existed a decade ago when we studied together. Minister Davies’ best sangoma bones could not have foreseen this.
Those fortunate enough to gain a quality education could lead Africa’s industrial revolution (and benefit from the large consumer gains it has to offer).Those left behind will have to resort to manual labour, labour that’s increasingly outsourced not to cheap China, but to rapidly improving robots in the rich world.