by Klaus Schwab
And while North America and the EU, which includes some of the most innovative economies, lead the way, other parts of the world are rapidly catching up. Estimates of China’s innovation performance, for example, have increased to 49% of the EU level in 2015 (up from 35% in 2006) as the country shifts its economic model to focus on innovation and services.43 Even considering that China’s progress springs from a relatively low level, the country is continually entering higher value-added segments of global production and employing its significant economies of scale to compete better globally.44
Overall, this shows that policy choices will ultimately determine whether a specific country or region can capitalize fully on the opportunities afforded by the technology revolution.
Regions and cities as hubs of innovation
I am particularly concerned about the effect that automation will have on some countries and regions, particularly those in fast-growing markets and developing countries, where it could abruptly erode the comparative advantage they enjoy in producing labour-intensive goods and services. Such a scenario could devastate the economies of some countries and regions that are currently thriving.
It is clear that neither countries nor regions can flourish if their cities (innovation ecosystems) are not being continually nourished. Cities have been the engines of economic growth, prosperity and social progress throughout history, and will be essential to the future competitiveness of nations and regions. Today, more than half of the world’s population lives in urban areas, ranging from mid-size cities to megacities, and the number of city dwellers worldwide keeps rising. Many factors that affect the competitiveness of countries and regions – from innovation and education to infrastructure and public administration – are under the purview of cities.
The speed and breadth by which cities absorb and deploy technology, supported by agile policy frameworks, will determine their ability to compete in attracting talent. Possessing a superfast broadband, putting into place digital technologies in transportation, energy consumption, waste recycling and so on help make a city more efficient and liveable, and therefore more attractive than others.
It is therefore critical that cities and countries around the world focus on ensuring access to and use of the information and communication technologies on which much of the fourth industrial revolution depends. Unfortunately, as the World Economic Forum’s Global Information Technology Report 2015 points out, ICT infrastructures are neither as prevalent nor diffusing as fast as many people believe. “Half of the world’s population does not have mobile phones and 450 million people still live out of reach of a mobile signal. Some 90% of the population of low-income countries and over 60% globally are not online yet. Finally, most mobile phones are of an older generation.”45
Governments must therefore focus on bridging the digital divide in countries at all stages of development to ensure that cities and countries have the basic infrastructure required to create the economic opportunities and shared prosperity that is possible through new models of collaboration, efficiency and entrepreneurship.
The Forum’s work on Data-Driven Development highlights that it is not just access to digital infrastructure that matters for grasping these opportunities. Also critical is addressing the “data deficit” in many countries, particularly in the global South, thanks to constraints on how data can be created, collected, transmitted and used. Closing the four “gaps” which contribute to this deficit – its existence, access, governance and usability – gives countries, regions and cities many additional abilities that can enhance their development, such as tracking the outbreak of infectious diseases, responding better to natural disasters, enhancing access to public and financial services for the poor, and understanding migration patterns of vulnerable populations.46
Countries, regions and cities can do more than simply change the regulatory environment. They can actively invest in becoming launch pads for digital transformation, so as to attract and encourage entrepreneurs and investors in innovative startups while also ensuring that established businesses orient themselves to the opportunities of the fourth industrial revolution. As young, dynamic firms and established enterprises connect with one another and to citizens and universities, cities become both sites of experimentation and powerful hubs for turning new ideas into real value for the local and global economies.
According to the innovation charity Nesta in the UK, the five cities that are globally best placed in terms of having the most effective policy environment to foster innovation are: New York, London, Helsinki, Barcelona and Amsterdam.47 Nesta’s study shows that these cities particularly succeed in finding creative ways to effect change outside of the formal policy arena, being open by default, and acting more like entrepreneurs (than bureaucrats). All three criteria give rise to the best-in-class examples we currently see globally, and which are equally applicable to cities in emerging markets and the developing world. Medellin, Colombia, was honored with a City of the Year award in 2013, recognising its innovative approaches to mobility and environmental sustainability, beating the other finalists New York and Tel Aviv.48
In October 2015, the World Economic Forum’s Global Agenda Council on the Future of Cities released a report highlighting instances of cities around the world pursuing innovative solutions to a variety of problems (see Box D: Urban Innovations).49 This work indicates that the fourth industrial revolution is unique, driven as it is by a global network of smart (network-driven) cities, countries and regional clusters, which understand and leverage the opportunities of this revolution – top down and bottom up – acting from a holistic and integrated perspective.
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Box D: Urban Innovations
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Digitally reprogrammable space: Buildings will be able to instantly shift purpose to serve as a theatre, gymnasium, social centre, nightclub or whatever, thus minimizing the overall urban footprint. This would allow cities to get more from less.
“Waternet”: The internet of pipes, this will employ sensors in the water system to monitor flows and thus manage the entire cycle, providing sustainable water for human and ecological needs.
Adopting a tree through social networks: Studies show that increasing a city’s green area by 10% could compensate for the temperature increase caused by climate change: vegetation helps to block shortwave radiation while also evaporating water, cooling the ambient air and creating more comfortable microclimates. Tree canopies and root systems can also reduce storm water flows and balance nutrient loads.
Next-generation mobility: With advances in sensors, optics and embedded processors, improved safety for pedestrians and non-motorized transportation will lead to greater adoption of public transport, reduced congestion and pollution, better health and commutes that are quicker, more predictable and less expensive.
Co-generation, co-heating and co-cooling: Co-generation mechanical systems already capture and use the excess heat, significantly improving energy efficiency. Trigeneration systems use the heat either to warm buildings or to cool them through absorption refrigerator technology – for example, cooling office complexes that house large numbers of computers.
Mobility-on-demand: Digitization is making vehicular traffic more efficient by allowing real-time information and an unprecedented monitoring of urban mobility infrastructure. This opens up new potential for leveraging unused vehicle capacity through dynamic optimization algorithms.
Intelligent street poles: Next-generation LED street lights can act as a platform for a host of sensing technologies that collect data on weather, pollution, seismic activity, the movement of traffic and people, and noise and air pollution. By linking these intelligent street poles in a network, it is possible to sense what is going on across a city in real time and provide innovative solutions in areas such as public safety or identifying where there are free parking spaces.
Source: “Top Ten Urban Innovations”, Global Agenda Council on the Future of Cities, World Economic Forum, October 201
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3.3.3 International Security
The fourth industrial revolution will have a profound impact on the nature of state relationships and international security. I devote particular attention to this issue in this section as I feel that of all the important transformations linked to the fourth industrial revolution, security is a topic not sufficiently discussed in the public domain and in sectors outside governments and the defence industry.
The critical danger is that a hyperconnected world of rising inequality may lead to increasing fragmentation, segregation and social unrest, which in turn creates the conditions for violent extremism. The fourth industrial revolution will change the character of security threats while also influencing shifts of power, which are occurring both geographically, and from state to non-state actors. Faced with the rise of armed non-state actors within what is already an increasing complex geo-political landscape, the prospect of establishing a common platform for collaboration around key international security challenges becomes a critical, if more demanding challenge.
Connectivity, fragmentation and social unrest
We live in a hyper-connected world, where information, ideas and people are travelling faster than ever before. We also live in a world of rising inequality, a phenomenon that will be exacerbated by the massive changes in the labour market that I described earlier. Widening social exclusion, the challenge of finding reliable sources of meaning in the modern world, and disenchantment with established elites and structures, perceived or real, have motivated extremist movements and enabled them to recruit for a violent struggle against existing systems (See Box E: Mobility and the Fourth Industrial Revolution).
Hyper-connectivity does not naturally come together with greater tolerance or -adaptability, as seen in the reactions to the tragic human displacements that reached a historic high in 2015. However, the same hyper-connectivity also contains the potential to reach common ground based on greater acceptance and understanding of differences, which could help bring communities together rather than driving them apart. If we do not continue moving in this direction, however, the alternative is that it leads to increasing fragmentation.
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Box E: Mobility and the Fourth Industrial Revolution
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The movement of people around the world is both a significant phenomenon and a huge driver of wealth. How will the fourth industrial revolution impact human mobility? It may be too soon to tell, but extrapolating from current trends indicates that mobility will play an ever more important role in society and economics in the future than today:
– Realizing life aspirations: Corresponding to a rise in awareness of events and opportunities in other countries thanks to rising connectivity, mobility is increasingly seen as a life choice to be exercised at some point, especially by young people. While individual motivations vary enormously, the search for work, the desire to study, the need for protection, the desire to reunite family, and so on, there is a greater readiness to look for solutions over the horizon.
– Redefining individual identities: Individuals used to identify their lives most closely with a place, an ethnic group, a particular culture or even a language. The advent of online engagement and increased exposure to ideas from other cultures mean that identities are now more fungible than previously. People are now much more comfortable with carrying and managing multiple identities.
– Redefining family identity: Thanks to the combination of historical migration patterns and low-cost connectivity, family structures are being redefined. No longer bound by space, they often stretch across the world, with constant family dialogue, reinforced by digital means. Increasingly, the traditional family unit is being replaced by the trans-national family network.
– Re-mapping labour markets: Worker mobility has the potential to transform domestic labour markets for better or for worse. On one hand, workers in the developing world constitute a pool of human resources -- at multiple skill levels that can satisfy unmet labour market needs in the developed world. Talent mobility is a driver of creativity, of industrial innovation and work efficiency. On the other hand, the injection of migrant labour into domestic markets, if not managed effectively, can produce wage distortions and social unrest in host nations, while depriving origin countries of valuable human capital.
The digital revolution created new opportunities for communication and “mobility” that complemented and enhanced physical mobility. It is likely that the fourth industrial revolution will have a similar effect, as the fusion of the physical, digital and biological worlds will further transcend time/space limitations in such a way as to encourage mobility. One of the challenges of the fourth industrial revolution will therefore be the governance of human mobility to ensure that its benefits are fully realized by aligning sovereign rights and obligations with individual rights and aspirations, reconciling national and human security and finding ways to maintain social harmony in the midst of increasing diversity.
Source: Global Agenda Council on Migration, World Economic Forum
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The changing nature of conflict
The fourth industrial revolution will affect the scale of conflict as well as its character. The distinctions between war and peace and who is a combatant and non-combatant are becoming uncomfortably blurred. Similarly, the battlefield is increasingly both local and global. Organizations such as Da’esh, or ISIS, operate principally in defined areas in the Middle East but they also recruit fighters from more than 100 countries, largely through social media, while related terrorist attacks can occur anywhere on the planet. Modern conflicts are increasingly hybrid in nature, combining traditional battlefield techniques with elements that were previously mostly associated with armed non-state actors. However, with technologies fusing in increasingly unpredictable ways and with state and armed non-state actors learning from each other, the potential magnitude of change is not yet widely appreciated.
As this process takes place and new, deadly technologies become easier to acquire and use, it is clear that the fourth industrial revolution offers individuals increasingly diverse ways to harm others on a grand scale. Realizing this leads to a greater sense of vulnerability.
It is not all bleak. Access to technology also brings with it the possibility of greater precision in warfare, cutting-edge protective wear for combat, the capacity to print essential spare parts or other components right on the battlefield, and so on.
Cyber warfare
Cyber warfare presents one of the most serious threats of our time. Cyberspace is becoming as much a theatre of engagement as land, sea and air was in the past. I can safely postulate that, while any future conflict between reasonably advanced actors may or may not play out in the physical world, it will most likely include a cyber-dimension simply because no modern opponent would resist the temptation to disrupt, confuse or destroy their enemy’s sensors, communications and decision-making capability.
This will not only lower the threshold of war but will also blur the distinction between war and peace, because any networks or connected devices, from military systems to civilian infrastructure such as energy sources, electricity grids, health or traffic controls, or water supplies, can be hacked and attacked. The concept of the adversary is also affected as a result. Contrary to the past, you may not be certain of who is attacking you – and even whether you have been attacked at all. Defence, military and national security strategists focused on a limited number of traditionally hostile states, now they must consider a near-infinite and indistinct universe of hackers, terrorists, activists, criminals, and other possible foes. Cyber warfare can take many different forms – from criminal acts and espionage to destructive attacks such as Stuxnet – that remain largely underestimated and misunderstood because they are so new and difficult to counter.
Since 2008, there have been many instances of cyber attacks directed at both specific countries and companies, yet discussions about this new era of warf
are are still in their infancy and the gap between those who understand the highly technical issues of cyber warfare and those who are developing cyber policy widens by the day. Whether a set of shared norms will evolve for cyber warfare, analogous to those developed for nuclear, biological and chemical weapons, remains an open question. We lack even a taxonomy to agree on what amounts to an attack and the appropriate response, with what and by whom. Part of the equation to manage this scenario is to define what data travels across borders. This is an indication of how far there is to go on effectively controlling cross-border cyber based transactions without inhibiting the positive outputs from a more interconnected world.
Autonomous warfare
Autonomous warfare, including the deployment of military robots and AI-powered automated weaponry, creates the prospect of “robo-war”, which will play a transformative role in future conflict.
The seabed and space are also likely to become increasingly militarized, as more and more actors – state and commercial – gain the ability to send up satellites and mobilize unmanned underwater vehicles capable of disrupting fibre-optic cables and satellite traffic. Criminal gangs are already using off-the-shelf quadrocopter drones to spy on and attack rivals. Autonomous weapons, capable of identifying targets and deciding to open fire without human intervention, will become increasingly feasible, challenging the laws of war.
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Box F: Emerging Technologies Transforming International Security
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Drones: They are essentially flying robots. The US currently leads but the technology is spreading widely and becoming more affordable.
Autonomous weapons: Combining drone technology with artificial intelligence, they have the potential to select and engage targets without human intervention, according to pre-defined criteria.