The new industrial revolution goes unnoticed / SurprizingFacts

Looking back a century ago, you can see how the world was changing rapidly. Half a century back, half a century here and now the first industrial revolution has flown by! And then the second. But for the contemporaries everything happened slowly, several generations were replaced and it was not easy to assess the turning point. Perhaps in a few decades someone will adequately point out the next industrial revolution that took place in the 20th or the 21st century.

In general, attempts to guess the set of technologies that will lead to the fourth industrial revolution abound. At different times, they relied on nanotechnology, 3D printers, renewable energy, Internet of things. Something gave the result, something not very, something will probably give in the future. But to guess the specific future magic technology is not so important, because the industrial revolution, in my opinion, is already going on.

How does the industrial revolution look like, on the example of the first, the most beloved and classical? You can see through the eyes of an engineer and describe it through the development of steam engines and looms, but if you try to look through the eyes of the economist in search of a "forest for the trees", then primarily this mass reduction in the price and distribution of goods affecting a significant part of society. Both old and new industries. For example, in the homeland of the industrial revolution, in Britain, the main driver was the textile industry, the leader in terms of employment and value added. Thanks to the mechanization of cotton processing, the production of textiles went up and prices fell. Against the backdrop of wandering centuries, this happened instantly (revolution!), But in practice it dragged on for decades. On an example of a cotton fabric:


The prices for a cotton fabric annually decreased on 4% and, as a result, products became much more accessible to the population. Similar events occurred in other industries. From now on, the worker could provide goods several times more people than before.

In search of traces of the revolution

As I have already shown in one of the previous articles, the introduction of industrial innovation continues to take decades, at least two centuries ago, at least now – electric vehicles, renewable energy, and so on. Therefore, to look for traces of industrial revolution follows on a similar time scale. Secondly, in order not to wallow in the "trees", again I will leave my reflections on specific innovations overboard and look for traces of a hypothetical revolution. Unfortunately, long statistical lines for decades are available only for the USA, so the examples will be based on their statistics:


Two very obvious trends are visible: while the prices for services Growing faster than inflation, prices of durable goods fell by three times. Machines, household appliances, electronics, furniture, technical equipment, etc. – all this is getting cheaper, something is even faster, something is slower. Short-term goods (food, clothing, fuel, household chemicals, office supplies, etc.) almost did not change in price, because they are highly dependent on volatile prices for energy and raw materials. In the domestic economy, the effects discussed because of crises are noticeable worse, but in general this trend is true for the whole world.

However, the schedule does not disclose the whole situation. The prices for goods are not only declining, the process is accelerating and since 2000 the goods have become cheaper by 2-6% annually. The crisis of 2008-2009 slowed development due to a decline in investment in labor productivity, but now again prices are down 4% per year, as in the first industrial revolution:

A linear trend is marked by a linear trend

Strictly speaking, this reduction in prices does not necessarily mean something revolutionary in production, because it can be due to other factors. In order to reduce the prices related to the topic under discussion, there should be a significant increase in labor productivity after it, as we have explained above, and statistics confirm this more:


Of incomes of the population all over the world, modern people literally bathe in cheap goods in comparison with the previous generation. But why does life still seem very complicated and expensive?

The growth of labor productivity leads to oblivion of the industry

An interesting and not obvious for everyone is that the growth of labor productivity in an industry reduces the share of this industry in the economy and in the life of the individual in particular. When the industry becomes highly efficient, the need for millions of workers is lost. People go to work in less and less vital spheres, to which society's attention is shifted. Two such transitions occurred: from food production to the production of goods (industrialization) and from goods to services (postindustrialization).

Before the industrial revolution, the whole being of man revolves around food and the main mass of society were peasants, providing themselves and society with daily bread. A small part of the society worked to provide the peasants with the goods they needed. But when agriculture became effective, such a huge number of peasants turned out to be unnecessary. The prices for food fell, the availability and variety of the diet increased and the problem of nutrition faded into the background. The liberated workers' hands went into the industry, where they created all new products, making life more comfortable. This new layer of the economy has become much more than agriculture, but initially it was ineffective and could not attract attention.

A similar process has been occurring since the second half of the twentieth century: the industry is becoming more and more effective, the number of employees there is constantly falling, Goods are becoming cheaper and they are beginning to play an increasingly less important role in people's lives. A full house of technology and gadgets is available to almost anyone and this is no longer a status of success. In parallel to this process the developing sphere of services draws in itself a mass of people that are simply not needed in industry. The service sector creates a previously inaccessible level of comfort to a resident of the industrial world, it is much less efficient than industry, so its goods are labor-consuming and expensive. But at the same time they are also new objects of desires and status. The described can be clearly seen on this graph:


The food needs are met by a thin yellow stripe of "peasants", in addition the USA is the world's largest exporter of agricultural products. With the industry a little more difficult, but with the adjustment for imports and labor productivity, we can say that the needs for goods are satisfied with the local labor force by 80%, almost entirely. In the past decade, labor productivity in industry has been growing and so high that even in China, most of the employment and value added falls on the services sector, and industry has receded into the background.

Commodity "communism"

] It is also interesting to add the factor of income growth, although it lies already outside the plane of the industrial revolution. Salaries are rising, prices are declining and, with a correction to the real disposable income, the situation has improved already by 10 times:


In a sense, the situation tends to "communism" and soon, thanks to Scientific and technical progress and economic growth, the goods will be almost free of charge =)

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