The Third Industrial Revolution: How Lateral Power is Transforming Energy, the Economy, and the World

The Third Industrial Revolution: How Lateral Power is Transforming Energy, the Economy, and the World

Toward A New Economic Paradigm. Excerpted from Jeremy Rifkin's The Third Industrial Revolution: How Lateral Power is Transforming Energy, the Economy, and the World, Palgrave Macmillan 2011.

Our industrial civilization is at a crossroads. Oil and the other fossil fuel energies that make up the industrial way of life are sunsetting, and the technologies made from and propelled by these energies are antiquated. The entire industrial infrastructure built off of fossil fuels is aging and in disrepair. The result is that unemployment is rising to dangerous levels all over the world. Governments, businesses and consumers are awash in debt and living standards are plummeting everywhere. A record one billion human beings--nearly one seventh of the human race--face hunger and starvation.

Worse, climate change from fossil fuel-based industrial activity looms on the horizon. Our scientists warn that we face a potentially cataclysmic change in the temperature and chemistry of the planet, which threatens to destabilize ecosystems around the world. Scientists worry that we may be on the brink of a mass extinction of plant and animal life by the end of the century, imperiling our own species' ability to survive. It is becoming increasingly clear that we need a new economic narrative that can take us into a more equitable and sustainable future.

By the 1980's the evidence was mounting that the fossil fuel-driven industrial revolution was peaking and that human-induced climate change was forcing a planetary crisis of untold proportions. For the past 30 years I have been searching for a new paradigm that could usher in a post-carbon era. In my explorations, I came to realize that the great economic revolutions in history occur when new communication technologies converge with new energy systems. New energy regimes make possible the creation of more interdependent economic activity and expanded commercial exchange as well as facilitate more dense and inclusive social relationships. The accompanying communication revolutions become the means to organize and manage the new temporal and spatial dynamics that arise from new energy systems.

In the 19th century, steam-powered print technology became the communication medium to manage the coal-fired rail infrastructure and the incipient national markets of the First Industrial Revolution. In the 20th century, electronic communications--the telephone and later, radio and television--became the communication medium to manage and market the oil-powered auto age and the mass consumer culture of the Second Industrial Revolution.

In the mid-1990s, it dawned on me that a new convergence of communication and energy was in the offing. Internet technology and renewable energies were about to merge to create a powerful new infrastructure for a Third Industrial Revolution (TIR) that would change the world.

In the coming era, hundreds of millions of people will produce their own green energy in their homes, offices, and factories and share it with each other in an "energy Internet," just like we now create and share information online. The democratization of energy will bring with it a fundamental reordering of human relationships, impacting the very way we conduct business, govern society, educate our children, and engage in civic life.

I introduced the Third Industrial Revolution vision at the Wharton School's Advanced Management Program (AMP), at the University of Pennsylvania, where I have been a senior lecturer for the past sixteen years on new trends in science, technology, the economy, and society. The five-week program exposes CEOs and business executives from around the world to the emerging issues and challenges they will face in the 21st century. The idea soon found its way into corporate suites and became part of the political lexicon among heads of state in the European Union.

By the year 2000, the European Union was aggressively pursuing policies to significantly reduce its carbon footprint and transition into a sustainable economic era. Europeans were readying targets and benchmarks, resetting research and development priorities, and putting into place codes, regulations, and standards for a new economic journey. By contrast, America was preoccupied with the newest gizmos and "killer apps" coming out of Silicon Valley, and homeowners were flush with excitement over a bullish real estate market pumped up by subprime mortgages.

Few Americans were interested in sobering peak oil forecasts, dire climate change warnings, and the growing signs that beneath the surface, our economy was not well. There was an air of contentment, even complacency, across the country, confirming once again the belief that our good fortune demonstrated our superiority over other nations.

Feeling a little like an outsider in my own country, I chose to ignore Horace Greeley's sage advice to every malcontent in 1850 to "Go West, young man, go West," and decided to travel in the opposite direction, across the ocean to old Europe, where new ideas about the future prospects of the human race were being seriously entertained.

I know at this point, many of my American readers are rolling their eyes and saying, "Give me a break! Europe is falling apart and living in the past. The whole place is one big museum. It may be a nice destination for a holiday but is no longer a serious contender on the world scene."

I'm not naïve to Europe's many problems, failings, and contradictions. But pejorative slurs could just as easily be leveled at the United States and other governments for their many limitations.

And before we Americans become too puffed up about our own importance, we should take note that the European Union, not the United States or China, is the biggest economy in the world. The gross domestic product (GDP) of its twenty-seven member states exceeds the GDP of our fifty states. While the European Union doesn't field much of a global military presence, it is a formidable force on the international stage. More to the point, the European Union is virtually alone among the governments of the world in asking the big questions about our future viability as a species on Earth.

So I went east. For the past ten years, I have spent more than 40 percent of my time in the European Union, sometimes commuting weekly back and forth across the Atlantic, working with governments, the business community, and civil society organizations to advance the Third Industrial Revolution.

In 2006, I began working with the leadership of the European Parliament in drafting a Third Industrial Revolution economic development plan. Then, in May 2007, the European Parliament issued a formal written declaration endorsing the Third Industrial Revolution as the long-term economic vision and road map for the European Union. The Third Industrial Revolution is now being implemented by the various agencies within the European Commission as well as in the member states.

A year later, in October 2008, just weeks after the global economic collapse, my office hurriedly assembled a meeting in Washington, D.C., of eighty CEOs and senior executives from the world's leading companies in renewable energy, construction, architecture, real estate, IT, power and utilities, and transport and logistics to discuss how we might turn the crisis into an opportunity.

Business leaders and trade associations attending the gathering agreed that they could no longer go it alone and committed to creating a Third Industrial Revolution network that could work with governments, local businesses, and civil society organizations toward the goal of transitioning the global economy into a distributed post-carbon era. The economic development group--which includes Philips, Schneider Electric, IBM, Cisco Systems, Acciona, CH2M Hill, Arup, Adrian Smith + Gordon Gill Architecture, and Q-Cells, among others--is the largest of its kind in the world and is currently working with cities, regions, and national governments to develop master plans to transform their economies into Third Industrial Revolution infrastructures.

The Third Industrial Revolution vision is quickly spreading to countries in Asia, Africa, and the Americas. On May 24th, 2011, I presented the five pillar TIR economic plan in a keynote address at the fiftieth anniversary conference of the Organization for Economic Cooperation and Development (OECD) in Paris, attended by heads of state and ministers from the thirty-four participating member nations. The presentation accompanied the rollout of an OECD green growth economic plan which will serve as a template to begin preparing the nations of the world for a post carbon industrial future.

In designing the EU blueprint for the Third Industrial Revolution, I have been privileged to work with many of Europe's leading heads of state, including Chancellor Angela Merkel of Germany; Prime Minister Romano Prodi of Italy; Prime Minister José Luis Rodríguez Zapatero of Spain; Manuel Barroso, the president of the European Commission; and five of the presidents of the European Council.

Is there anything we Americans can learn from what's happening in Europe? I believe so. We need to begin by taking a careful look at what our European friends are saying and attempting to do. However falteringly, Europeans are at least coming to grips with the reality that the fossil fuel era is dying, and they are beginning to chart a course into a green future. Unfortunately, Americans, for the most part, continue to be in a state of denial, not wishing to acknowledge that the economic system that served us so well in the past is now on life support. Like Europe, we need to own up and pony up.

But what can we bring to the party? While Europe has come up with a compelling narrative, no one can tell a story better than America. Madison Avenue, Hollywood, and Silicon Valley excel at this. What has distinguished America is not so much our manufacturing acumen or military prowess, but our uncanny ability to envision the future with such vividness and clarity that people feel as if they've arrived even before they've left the station. If and when Americans truly "get" the new Third Industrial Revolution narrative, we have the unequalled ability to move quickly to make that dream a reality.

The Third Industrial Revolution is the last of the great Industrial Revolutions and will lay the foundational infrastructure for an emerging collaborative age. The forty year build-out of the TIR infrastructure will create hundreds of thousands of new businesses and hundreds of millions of new jobs. Its completion will signal the end of a two-hundred-year commercial saga characterized by industrious thinking, entrepreneurial markets, and mass labor workforces and the beginning of a new era marked by collaborative behavior, social networks and boutique professional and technical workforces. In the coming half century, the conventional, centralized business operations of the First and Second Industrial Revolutions will increasingly be subsumed by the distributed business practices of the Third Industrial Revolution; and the traditional, hierarchical organization of economic and political power will give way to lateral power organized nodally across society.

At first blush, the very notion of lateral power seems so contradictory to how we have experienced power relations through much of history. Power, after all, has traditionally been organized pyramidically from top to bottom. Today, however, the collaborative power unleashed by the coming together of Internet technology and renewable energies, fundamentally restructures human relationships, from top to bottom to side to side, with profound implications for the future of society.

The music companies didn't understand distributed power until millions of young people began sharing music online, and corporate revenues tumbled in less than a decade. Encyclopedia Britannica did not appreciate the distributed and collaborative power that made Wikipedia the leading reference source in the world. Nor did the newspapers take seriously the distributed power of the blogosphere; now many publications are either going out of business or transferring much of their activities online. The implications of people sharing distributed energy in an open commons are even more far-reaching.

Like every other communication and energy infrastructure in history, the various pillars of a Third Industrial Revolution must be laid down simultaneously or the foundation will not hold. That's because each pillar can only function in relationship to the others. The five pillars of the Third Industrial Revolution are (1) shifting to renewable energy; (2) transforming the building stock of every continent into micro-power plants to collect renewable energies on-site; (3) deploying hydrogen and other storage technologies in every building and throughout the infrastructure to store intermittent energies; (4) using Internet technology to transform the power grid of every continent into an energy-sharing intergrid that acts just like the Internet (when millions of buildings are generating a small amount of energy locally, on-site, they can sell surplus back to the grid and share electricity with their continental neighbors); and (5) transitioning the transport fleet to electric plug-in and fuel cell vehicles that can buy and sell electricity on a smart, continental, interactive power grid.

The critical need to integrate and harmonize these five pillars at every level and stage of development became clear to the European Union in the fall of 2010. A leaked European Commission document warned that the European Union would need to spend €1 trillion between 2010 and 2020 on updating its electricity grid to accommodate an influx of renewable energy. The internal document noted that "Europe is still lacking the infrastructure to enable renewables to develop and compete on an equal footing with traditional sources."

The European Union is expected to draw one-third of its electricity from green sources by 2020. This means that the power grid must be digitized and made intelligent to handle the intermittent renewable energies being fed to the grid from tens of thousands of local producers of energy.

Of course, it will also be essential to quickly develop and deploy hydrogen and other storage technologies across the European Union's infrastructure when the amount of intermittent renewable energy exceeds 15 percent of the electricity generation, or much of that electricity will be lost. Similarly, it is important to incentivize the construction and real estate sectors with low interest green loans and mortgages to encourage the conversion of millions of buildings in the European Union to mini power plants that can harness renewable energies on-site and send surpluses back to the smart grid. And unless these other considerations are met, the European Union won't be able to provide enough green electricity to power millions of electric plug-in and hydrogen fuel cell vehicles being readied for the market. If any of the five pillars fall behind the rest in their development, the others will be stymied and the infrastructure itself will be compromised.

The creation of a renewable energy regime, loaded by buildings, partially stored in the form of hydrogen, distributed via smart intergrids, and connected to plug-in, zero-emission transport, opens the door to a Third Industrial Revolution. The entire system is interactive, integrated, and seamless. When these five pillars come together, they make up an indivisible technological platform--an emergent system whose properties and functions are qualitatively different from the sum of its parts. In other words, the synergies between the pillars create a new economic paradigm that can transform the world.

To appreciate how disruptive the Third Industrial Revolution is to the existing way we organize economic life, consider the profound changes that have taken place in just the past twenty years with the introduction of the Internet revolution. The democratization of information and communication has altered the very nature of global commerce and social relations as significantly as the print revolution in the early modern era. Now, imagine the impact that the democratization of energy across all of society is likely to have when managed by Internet technology.

The Third Industrial Revolution build-out is particularly relevant for the poorer countries in the developing world. We need to keep in mind that 40% of the human race stills lives on two dollars a day or less, in dire poverty, and the vast majority have no electricity. Without access to electricity they remain "powerless," literally and figuratively. The single most important factor in raising hundreds of millions of people out of poverty is having reliable and affordable access to green electricity. All other economic development is impossible in its absence. The democratization of energy and universal access to electricity is the indispensible starting point for improving the lives of the poorest populations of the world. The extension of micro credit to generate micro power is already beginning to transform life across the developing nations, giving potentially millions of people hope of improving their economic situation.

There is no inevitability to the human sojourn. History is riddled with examples of great societies that collapsed, promising social experiments that withered, and visions of the future that never saw the light of day. This time, however, the situation is different. The stakes are higher. The possibility of utter extinction is not something the human race ever had to consider before the past half-century. The prospect of proliferation of weapons of mass destruction, coupled now with the looming climate crisis, has tipped the odds dangerously in favor of an endgame, not only for civilization as we know it, but for our very species.

The Third Industrial Revolution offers the hope that we can arrive at a sustainable post-carbon era by mid-century. We have the science, the technology, and the game plan to make it happen. Now it is a question of whether we will recognize the economic possibilities that lie ahead and muster the will to get there in time.