The Fourth Industrial Revolution: What Are We Preparing For?

South Korea is a country swept up in the boom surrounding the Fourth Industrial Revolution. Discussions on how to respond to the Fourth Industrial Revolution are flooding the country, and bookstores have dedicated sections for books on the subject. Interest at the pan-government level is also high, to the point that the Presidential Committee on the Fourth Industrial Revolution was launched. Just as the term “low birthrate” was for a time inserted into government budget proposals like a cure-all, it is now easy to find government budget items aimed at preparing for the Fourth Industrial Revolution.

The term “Fourth Industrial Revolution,” which is hard to hear even in Silicon Valley, the very symbol of innovation, has truly become a huge hit in Korea. That is why the joke that the biggest beneficiary of the Fourth Industrial Revolution is Klaus Schwab, who coined the term at the Davos Forum, does not sound like a joke alone. So how far has South Korea gone in its almost excessive focus on the Fourth Industrial Revolution, and what exactly are we preparing for?

In his 1884 book Lectures on the Industrial Revolution in England in the 18th Century, Toynbee defined the Industrial Revolution as “not a violent event, but a gradual and continuous process of technological innovation that had been accumulating beforehand.” An industrial revolution is not completed by one astonishing invention alone. In fact, it was France, not Britain, that first developed the loom that helped bring about the Industrial Revolution.

Jacques de Vaucanson developed a loom 26 years earlier than Britain did, but it ultimately failed to be commercialized because of threats from the French silk guilds that dominated the market. Britain, by contrast, established the institutional foundations of a free market and free enterprise after the Glorious Revolution of 1688, with property rights protected and competition and profit-seeking allowed, thereby creating the conditions for entrepreneurship to take root.

What, then, is the reality in Korea? Of the world’s top 100 startups, 57 have business models that in Korea could not even be launched because of various regulations. Despite having advanced medical standards and the advantages of being an IT powerhouse, telemedicine—common enough in other countries—has remained stuck in a “pilot project” phase for 10 years. Korean companies are competing to invest in ride-sharing firms in other countries, such as Grab, yet in Korea the ride-sharing business model still has not escaped the bounds of illegality.

The Fourth Industrial Revolution is shaking up existing business models. In the past, companies built large-scale factory facilities in places such as Southeast Asia to lower production costs. Now the model is changing: using AI to predict consumer demand and establishing automated factories of appropriate scale near the market. Through smart factories and similar technologies, countries are addressing declining productivity through innovation in manufacturing. The emergence of various forms of the sharing economy extending beyond cars and offices, along with biotechnology racing forward without any clear end in sight, presents both a crisis and an opportunity for us.

As the saying goes, defending is harder than starting. Although Britain was the birthplace of the Industrial Revolution, its automobile industry did not in fact develop. The Red Flag Act, enacted in 1865, required a rider carrying a red flag to walk in front of an automobile to alert people to its approach. Though justified in the name of protecting citizens from automobiles, it was in fact a law designed to protect coachmen from the horse-and-carriage era. The law, swayed by interest groups, blocked the birth of a new industry.

The Fourth Industrial Revolution inevitably involves “creative destruction,” increasing the possibility that existing industries may collapse in an instant. Overall social welfare may rise, but certain occupations protected by law and institutions will inevitably suffer harm. In the end, our future depends on how our society overcomes the resistance of these interest groups and how we foster the entrepreneurial spirit that sees opportunities in new industries with a perspective different from others.

Younghoon Kim / Director, Economic Knowledge Network

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Original title: 4차산업혁명, 우리는 무엇을 준비하고 있나

Author: Young-hoon Kim

Date: 2018-10-17

Source: https://www.cfe.org/bbs/bbsDetail.php?cid=column&pn=16&idx=11154