The fourth industrial revolution was the theme of this year at the annual World Economic Forum, the end of January jamboree at the picturesque Swiss ski resort of Davos. This gathering of the world&’s super rich and extremely powerful is dedicated to solving all problems on our planet. I thought that this was only the prerogative of Bengali addas, before Davos captured the attention of the world media. The theme this year comes directly from the title of a new book, The Fourth Industrial Revolution, written by Professor Klaus Schwab, founder and Executive Chairman of the World Economic Forum. In this book, he argues that we are at the threshold of a new revolution, where new technologies are combining physical, digital and biological systems, the “bio-nano” world as fancifully talked about in my academic circles, which are going to change the world around us.

The world saw its first industrial revolution with the advent of steam power towards the end of the century. The resulting disruption in the economic and social life of Europeans, where it all happened, was mind-boggling. The second revolution around electric power and internal combustion engine really took off at the end of the 19th century. With the discovery of superconductors and the resulting growth of computer technology, first with mainframe and then with personal computers, brought in the third “digital” revolution from the mid-seventies of the last century. Now we are hearing about the fourth industrial revolution that is right around the corner, propelled by innovations in driverless cars, smart robotics, lighter and tougher materials, manufacturing based on 3D printing and new medicines made possible by the fusion of nano-technology and genetic engineering.

Economists become exuberant when writing about Schumpeter&’s idea of ‘creative destruction.’  The first two industrial revolutions increased the welfare of the common people in the West dramatically, despite huge societal dislocations and short-term economic hardship. The first revolution released underused economic manpower from villages to run machines in towns driven by steam power. The second revolution, with assembly production, electric lamps and connectivity through the use of railways, telephone and telegraph provided abundant jobs with steadily increasing income for workers resulting in a large middle class. The  wealth of western countries grew at an unprecedented rate and the modern world took shape. This welfare then extended to the countries of East Asia, China being the latest and most impressive growth story of them all. With these records, it is no wonder that economists’ enthusiasm knew no bounds with the advent of the third ‘digital’ revolution. This time, however, there was a serious effect on industrial employment in the West, with factories going offshore to China. This effect was fortunately compensated by a huge increase in the ‘services sector’ employment, although incomes remained stagnant, and even occasionally fell behind inflation. I have seen the agony of common people with the constant threat of downsizing. The trade union movement became defensive and mostly ineffective. On the other hand, new technologies resulted in huge concentration of wealth with the already wealthy investors and the successful innovators. It also benefited well-educated scientists and engineers, and increasingly those in biological sciences.

This disturbing trend in concentration of wealth at the top and slow, but steady, erosion of the purchasing power of the vast middle class in the West as a result of the third ‘digital’ industrial revolution has been noticed by some left-leaning economists, including Nobel Prize winners Joseph Stiglitz and Paul Krugman. But the true believers in the mantra of ‘creative destruction’ brushed their critiques aside. As the fourth industrial revolution takes shape, there is a clear change in tone from some of those “true believers.” Thus Klaus Schwab, in his book mentioned above, is clearly worried about the unemployment problem becoming ubiquitous as this latest industrial revolution becomes more widespread. This unknown future, with attendant unemployment problem, was also the theme of a report by the Swiss investment bank UBS released just before the Davos meeting.

It predicts even more concentration of wealth at the extreme top and the threat of almost permanent unemployment, not only for the non/semi-skilled workers, but for skilled workers in offices and factories as well. To avoid any unforeseen social discontent, UBS is suggesting that western governments must already devise methods to channelize some of the wealth created by this fourth industrial revolution to those left behind by this process. This must be serious indeed if the reputed Foreign Affairs magazine devotes its most recent issue almost entirely to the topic of ‘inequality’.

The effect on the emerging world would be equally daunting. One direct consequence often mentioned is that the current model of transferring production offshore for cheap labour may become history very soon. If intelligent robots take over most of the human work in the factories of the future, there would be no need to send production overseas for cost differentials. In that case, it would be preferable to keep the production process close to the home base for better planning and intervention when required. The Chinese model of development that saw dramatic results in the last four decades is not going to work in other countries anymore. India is in for more paradoxes. We tried to jump from the phase of the first industrial revolution to the third ‘digital’ one and we were stuck in a limbo. Our Prime Minister recognized that and started ‘skill development’ and ‘made in India’ campaigns for our safe landing into the second industrial revolution phase. But our ego always gets the upper hand, despite warnings against its trappings by our wise men for millennia. So before finding a stable footing in this phase, we are dreaming of jumping to the phase of the fourth revolution with plans for ‘smart cities’ and ‘cashless payments’. I am afraid that we would soon be stuck in another limbo. Although we made strides in space technology and nuclear sciences, we have huge gaps in our technological capabilities on many fronts of the later phase of the second technological revolution. This is our main difference with the advanced countries. China, by contrast, has more or less caught up with the advanced countries as far as technologies emanating from the second technological revolution are concerned.

In his best-seller published last year, The Rise of the Robots, the Silicon Valley entrepreneur Martin Ford discussed in detail the future of automation and mass unemployment. Even earlier, Carl Benedikt and Michael A. Osborne of Oxford University found in a 2013 study “that the jobs held by roughly 47 per cent of the US workforce could be susceptible to automation within the next two decades.” The biggest scare for professional jobs comes from massive advance in the field of “big data.” Enormous data gathered these days in all fields of activities could be analysed automatically and useful information extracted from them without the need of human interface as research on “big data” matures.

Even though the advanced economies are sure to gain by bringing the production processes back home, some of their die-hard believers in the free market economy are asking governments to take measures to avoid adverse consequences of mass unemployment as the new economy arising out of the fourth industrial revolution takes shape. People without income would not be able to buy goods produced by the robots. Martin Ford suggested basic income for everyone to sustain the demand in the economy. To stop western companies to take their factories back home, Chinese workers are massively producing robots in China that would surely take away their own jobs. Are our free market economists listening? Are we taking steps to insulate us from the possible fall-out on the unemployment front? We need to act fast and act now.

The writer is former Dean and Emeritus Professor of Applied Mathematics,  University of Twente, The Netherlands.