Abstract
The Fourth Industrial Revolution has already begun. It will lead to maximum consideration of consumers’ preferences. The purpose of the chapter is to describe the characteristics of the Fourth Industrial Revolution, make a forecast for the contents of the Fifth Industrial Revolution, and emphasize the fundamental role of Industry 4.0 in economic development of Russia. The conclusions are based on analysis of the trends of the indicators of the technological progress and specific efforts for development of the direction of Industry 4.0.
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1 Introduction
Over the recent centuries, the world has changed a lot, with three industrial revolutions following each other. The first revolution took place in the early 19th century and was related to mass transition from usage of manual labor and muscle force in industry to energy of steam engine. A hundred years later, the second revolution marked the start of mass production due to appearance of conveyor. A large role belonged to development of Taylorism, or scientific organization of labor. 1970s-1980s passed under new vectors of scientific and technological progress—the Third Industrial Revolution. Modern industrial complexes with machines with numeric control and robotized production made modern factories uninhabited. As a result, mass products became cheaper, so it was better to buy a new product that to repair the old one. Thirty years later the world is getting ready for the new industrial revolution—Industry 4.0.
The concept “Industry 4.0” was formulated in 2011 by the President of the World Economic Forum in Davos, Klaus Schwab. Its essence consists in quick convergence of cyberphysical systems and factory processes, as a result of which a possibility of production of individual product with necessary functions and options appears—at that, its cost is almost similar to the cost of a mass product (Schwab 2016). At present, the leader of development of Industry 4.0 is Germany, where a place similar to the Silicon Valley is created—Intelligent Technical Systems Ost Westfalen Lippe (Dumitrescu 2012). Similar programs have been started in the Netherlands, France, the UK, Italy, Belgium, etc. Since 2012, a non-profit “Coalition of leaders of clever production” has been working in the USA—it unites business, universities, and government structures.
Industry 4.0 is based on mass distribution and implementation of a lot of new technologies (Table 1), which will lead to global and deep changes in all spheres of society’s life (The World Economic Forum, “Deep transformation—technological breakthrough moments and social influence”, Research report, International Expert Council of the World Economic Forum on the issues of future program provision and society, November 2015).
According to the data of PwC (Report 2016), manufacturers of industrial products from various countries of the world plan to invest into development of Industry 4.0 $907 billion per year until 2020. The World Bank and General Electric estimate that Industry 4.0 may bring $30 trillion for the global economy.
The global services market, which corresponds to the requirements of Industry 4.0, is estimated at $773 billion, but Russia’s share in it is only 0.28%. The key barriers for Russia’s transition to Industry 4.0 include low level of digitization and insufficient expenditures of companies for innovations. For example, the share of expenditures for R&D in the budgets of the world leaders on car industry is by six times higher than with Russian companies, and in the telecommunication sphere this gaps is tenfold.
The main stimulus for development of the Russian technologies within Industry 4.0 is the program “Digital economy of the Russian Federation”, which defines priorities of national policy and is a basis for creation of the normative base and favorable investment environment. Within the program, it is planned to spend RUB 16 billion for supporting Russian software developers in 2018–2020, of which half accounts for investments from the companies. Regarding the Internet, there’s an issue of registration of the Russian standard NarrowBandFidelity (NB-FI). Standardization of protocols of data transfer will allow solving the issue of compatibility of digital systems.
Construction of technological parks contributes into development of Russian technologies. According to the Association of clusters and technological parks, Russia has 125 technological parks in 44 subjects of the RF. Most of them are located in the central part of Russia, with maximum concentration in Moscow. As a rule, the sphere of specialization of technological park is somehow connected to the region’s industrial potential, ensuring maximum synergetic effect. In the structure of Russian technological parks, the most popular specialization in the sphere of information technologies, which corresponds to the general direction of the trend of Russia’s development.
Thus, it is expected that Industry 4.0 will have the fundamental influence on the global and Russian economies and will influence all large macro-variables: GDP, investments, consumption, employment, trade, inflation, etc. What will this new economic reality look like? In order to answer this question, let us view historical trends of the main macro-economic indicators.
2 Information and Methods
Several years before the 2008 crisis, growth of the global GDP constituted 4.4% per year in real value (according to the World Bank). After the economic decline, a lot of people expected the economy to return to the previous model of quick growth. However, this did not happen. The global economy slowed down at 2.5% growth rate per year in 2012–2016. There are a lot of explanations of this slowdown of growth: from irrational usage of capital and excessive debt to demographic shift, etc. One of the main factors was “stagnation” of labor efficiency.
Let’s take the USA (Fig. 1), where labor efficiency in 1987–1993 grew by 2.8%; in 2000–2007—by 2.6%, and in 2007–2015—by 1.3%. Such decline was caused by reduction of the level of aggregate efficiency of production factors—the indicator that is associated to increase of effectiveness as a result of technological progress. According to the Bureau of Labor Statistics of the USA, growth of aggregate efficiency of production factors for 2007–2014 constituted 0.5%, which is a large reduction as compared to annual growth of 1.4% for 1995–2007.
The thing is that official statistics cannot record real increase of efficiency for consumers by means of technical progress, as growth of value is not reflected in the number of transactions or EBITDA. For example, aggregators of taxi or food delivery are free for consumer, but provide convenience and save time and resources.
Goods and services of Industry 4.0 have higher functionality and quality, but have zero threshold expenditures. Due to digital globalization, the Fourth Industrial Revolution will enable certain people and society to obtain access to required products in all countries of the world. This will lead to increase of demand and economic growth. Also, Industry 4.0 will rise our capability to cope with external negative effects—e.g., ecological problems.
Selling goods in highly-competitive open digital platforms-aggregators and reduction of production costs by means of implementing new technologies should lead to gradual reduction of prices. Figure 2 shows that in real value prices for durable goods (cars, household equipment, furniture) reduced by three times. Non-durable goods (food, clothes, household chemicals, office supplies, etc.) remained at the same price level, as they depend on volatile prices for energy and resources. Prices for services grow quicker than inflation. Prices for goods reduce by 4% annually. This means that with preservation of the volumes of production at the same level, industrial countries will be losing 4% of GDP if they do not change the structure of national product formation.
Reduction of prices for goods and increase of revenues led to increase of consumption (Fig. 3). Demand for durable goods grew by ten times for fifty years. Accessibility of goods and services for each person in the world, which is offered by Industry 4.0, will preserve growth of this indicator.
Another important fact is transition of the centers of profit from industrial companies to digital ones. Implementation of new technologies becomes the main articles of expenditures of largest companies. New spheres of Industry 4.0 occupy a large share in formation of GDP of developed countries. Thus, in 2016 the share of digital companies that offer services in the sphere of implementation of new technologies in the American GDP constituted 14%. This indicator will continue growing.
3 Results
Industry 4.0 will preserve the trend of reduction of prices for industrial goods. As a result, marginality of productions will reduce, and centers of profit will move to IT corporations that implement technologies. If the country does not have its own suppliers of technologies, the companies will have to use foreign suppliers. If Russia remains above this technological rivalry and does not take seriously the challenges of the Fourth Industrial Revolution, Russia’s GDP will be reducing by 4% per year (according to the rate of prices’ reduction). At that, there’s a risk to remain at the periphery of new digital markets and become dependent on import of foreign technologies, without which—in the conditions of Industry 4.0—industry will die. As is observed today, well-known companies experience large pressure from new innovational companies from other spheres and countries. The same is true for the countries that do not recognize the necessity for building their own innovational eco-systems in the corresponding way.
4 Discussion
The Fourth Industrial Revolution has already started—but what form will the Fifth Revolution have? The current trends show that prices for goods will continue reducing, and share of digital companies and IT corporations in GDP will continue increasing, as they will become the main centers of cost formation. According to the authors, the next industrial revolution will be related to emergence and distribution of more perfect computation means, which will process large volumes of information instantaneously.
The existing computers have a whole range of drawbacks, the main of which are expensive components and large consumption of electric energy. The concepts of “machines” of future without these disadvantages have already appeared. Thus, for example, bio-engineers have started work on an interesting product—“living” supercomputer, which will obtain energy from adenosine triphosphate, as all normal organisms, and information transfer will be conducted by proteins instead of electrons.
As a result, artificial intelligence will be able to process dig data of not only one company or corporations but the whole spheres. This will lead to global unification of the sphere of production into one interconnected structure. The notion “competition” will disappear—as an ineffective relic of the past. The driver of new economy will become not free market but optimization and “individualization”. Advertising will disappear—it will be replaced by automatic recommendation systems that will adapt to the needs and preferences of each person. Larger reduction of expenditures will allow selling products for the lowest process. In a certain sense, new reality will look like communism, which will be “built” by technological progress.
5 Conclusions
We’re looking at the origin of the Fourth Industrial Revolution, but it is possible to see its effects in all spheres of society’s life—especially, in economy. It is possible to note the following main directions of changes.
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Self-optimization and self-adaptation of cyber-physical systems” the means of self-optimization and self-adaptation, endogenous adaptation of the system’s goals to changing external influences, which conforms to the tasks of activities and ensures effective correction of the system’s behavior. Reliability of such cyber-physical systems will grows substantially, as they will be more reliable against temporary errors.
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Man-machine symbiosis: growing complexity of intellectual systems set high requirements to natural and intuitively understandable man-machine interfaces. Flexible setting for developer ensures consecutive and well-structured interaction, which supports convenience of usage of technical systems.
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Intellectual networks (artificial intelligence): intellectual technical networks consist of a lot of closely connected and complex systems which connection leads to global changes in production. Global optimality of production system becomes a result of connection of local decentralized sub-systems.
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Energy efficiency: cyber-physical systems allow determining and using reserves of economy of electric, heat, and other energy from the stage of design to exploitation, changing the structure of costs along the whole chain of formation of product’s cost.
The list of directions of future changes is much larger. It is necessary to expect fundamental changes in all spheres of society’s life as a result of mass implementation of new technologies, which consists the basis of “Industry 4.0”.
References
Dumitrescu, R., Jürgenhake, C., & Gausemeier, J. (2012). Intelligent Technical Systems OstWestfalenLippe/1st Joint International Symposium on System-Integrated Intelligence 2012: New Challenges for Product and Production Engineering, Hanover,—p. 24–27. Access: https://pdfs.semanticscholar.org/6d50/2ac162b7c70c3a07da0bf0c79f3291a79a11.pdf.
Schwab K (2016) The Fourth Industrial Revolution/K. Schwab—“Eksmo”—(TopBusinessAwards) —138 p.
The global overview of implementing the concept “Industry 4.0” for 2016—What does “Industry 4.0” means. Access: https://www.pwc.ru/ru/technology/assets/global_industry-2016_rus.pdf.
The World Economic Forum. (2015, November). Deep change—technological breakthrough moments and social influence. Research report, International expert council of the World economic forum on the issues of future software provision and society.
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Feshina, S.S., Konovalova, O.V., Sinyavsky, N.G. (2019). Industry 4.0—Transition to New Economic Reality. In: Popkova, E., Ragulina, Y., Bogoviz, A. (eds) Industry 4.0: Industrial Revolution of the 21st Century. Studies in Systems, Decision and Control, vol 169. Springer, Cham. https://doi.org/10.1007/978-3-319-94310-7_11
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