0.7 21st century technology, digital displacement, and the role of  (Page 4/17)

Some of the implications of the second wave of digitization for income inequality in rich nations and for both income distribution and income growth in developing countries are not pleasant to contemplate.

However, options exist to help moderate the ill effects of these trends if we bring to bear the lessons of the previous chapter: the importance of human capital formation. Technological innovation will cause many present jobs to vanish, while others will be fundamentally changed. Human labor will still be essential, but only to the extent that human capital formation keeps pace with technological innovation. For the future, both in rich and poor nations this will require not merely improvements in the quality of education for the young, but the need for lifelong programs for continuing human capital formation, to enhance human skills throughout the life of both workers and managers.

Technological innovation and foreign trade

According to the archeological record, the history of international trade extend back at least 4,500 years, when linen, wool and hemp were shipped from the Indus River Valley (in what is now Pakistan) to cities in what is now Eastern Iran.

Trade expanded slowly during the Bronze Age, when Phoenicia brought tin from Wales. It flourished during Roman rule from about 200 BC to 500 AD, and then slowed down for the Middle Ages. After that it grew in kicks and starts, until about 1820 through 1914. Trade entered a flourishing new era after 1970, when emerging nations began to reap sizeable benefits from globalization (see Chapter 3).

But that may be all about to change, if the potential of digital manufacturing (or additive manufacturing) is realized, particularly as the prices of equipment and software used in the industry continues to decline.

We may speak of not one, but four industrial revolutions. We have noted in earlier chapters that the first Industrial Revolution began in about 1810 in Britain and then spread to the U.S. and the rest of Europe. The second Industrial Revolution arrived with the invention and adoption of the assembly line in manufacturing. The third was spurred by the first wave of the Digital Revolution, beginning in about 1980. There are those who believe that a new wave, relying increasingly upon additive manufacturing, will usher in a fourth Industrial Revolution before 2025.

Additive manufacturing is a process that utilizes 3D printers to build up objects from small particles. The first printers used either ink or powder. Today printers can print metal parts and even human tissue, building them by depositing materials layer by layer. Up until about 2010, the technology was used mostly to build prototypes and early production runs for small, complex components. Martin Neil Baily and Barry P. Bosworth (2014, Winter). “US Manufacturing: Understanding Its Past and Its Potential Future,” Journal of Economic Perspectives , 28(1): 20.

Why is it called additive? Manufacturing we have known it before is subtractive . For example: making an aircraft part today requires expensive, lightweight titanium. Before one took solid titanium billets and machined them into parts. This results in about 90% of the material being subtracted, or cut away. This is called swarf, and is no longer of any use in making an aircraft, and much of it is waste.