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The next industrial revolution. Manufacturing and society in the XXI century

    • Turin
    • 14 November 2014

          Serving as the opening premise for proceedings at this session of the Aspen Transatlantic Dialogue was the observation that productivity, not employment, will be the engine of the next industrial revolution, and that, despite the difficulties stemming from the prolonged crisis, the anti-decline camp has ample justification for envisioning a future in which manufacturing and industry will continue to play a central role. It was stressed, however, that they can only play such a role by undergoing transformation. Looking ahead to the coming years, it was posited that the three major economic blocs – Asia, Europe and the United States – will no longer and not only compete on the availability of cheap labor, but essentially on better quality human capital and on higher value-added. While growth in employment is still being witnessed in Asia, it was suggested that this will not last for much longer, and in the US and Europe it is productivity that is on the rise.

          The Dialogue participants foresaw the emerging scenario as one where unskilled workers would be replaced more and more by capital in the form of investment in machinery, with the factories of the future being almost certainly staffed with fewer but more highly-specialized employees, though entirely unmanned factories controlled robotically were seen as unlikely. It was nevertheless felt that much is still to be done, with estimates cited indicating that, in Europe alone, there are 900 thousand vacancies for highly-skilled workers, with fears that the situation will remain unchanged throughout 2015.

          It was noted that, in the United States in particular, there is growing acceptance for World Class Manufacturing, a new approach to manufacturing based on continuous improvement, with the idea being that incremental innovations renewed over time can make a difference. This has enabled gains in productivity and significant savings, with Fiat Chrysler Automobiles, for instance, reducing costs by $2.5 billion between 2010 and 2014.

          Digitization was also seen as playing a strategic role in the structural remodeling of the industrial system, with new technologies offering important opportunities both for SMEs, by introducing greater customization of products, as well as big firms, by completely transforming their business model and by forcing them to come to terms with the need to digitize processes and products. It was envisaged that, in the future, robotics and 3D printers will change the way factories are built and run, involving a likely move towards digital manufacture, with 3D printing being the most obvious but not the only embodiment of this. Indeed, the moment in which 3D-printing mode of production becomes a mass phenomenon will mark a radical revolution, and this will be so both for small and medium-sized enterprises and for big business.

          The participants also pointed to a stepping up of talks on the Transatlantic Trade and Investment Partnership (TTIP) in 2015 as a possible contributor to economic recovery in advanced countries. In the wake of the midterm elections, the United States may prove more determined to wrap up negotiations on certain chapters under discussion. In effect, the victory of the Republicans, who have always been in favor of free trade, could give a significant boost to the chances of striking an agreement. Viewed as indispensable to this end was a reduction in protectionist demands and proper calibration of shared legal standards, particularly given that fair and balanced regulation is crucial to increasing strategic trade.

          Turning to consider the European side of the equation, it was remarked that there was no shortage of issues to contend with. The approach of the various countries to the TTIP differs, and this variance in logic risks hindering the process. Not least is the problem of Germany, which has gone from initially being a great supporter of the initiative – with the personal backing of Angela Merkel – to partially reversing its position, due in part to dissenting voices in the German business world.

          Given that the situation could still go either way, the consensus was that 2015 presents an opportunity not to be missed. The transatlantic economy – manufacturing and industry in particular – could benefit greatly if certain strategic chapters still under discussion in the TTIP negotiations were settled to the satisfaction of all parties. The step-by-step approach seems in any case better-suited to reaching a more limited but well-put-together deal than a comprehensive global agreement on all issues, which definitely would not be signed during 2015. Since 2016 is the year of the US presidential elections, a comprehensive agreement on the TTIP is likely to be put on the backburner in wait for the new occupant of the White House and his or her strategic choices.

          By way of conclusion, it was emphasized that not only are industry and manufacturing far from defunct, but they seemed destined for a bright future, provided they can radically transform their mode of production and pursue the imperative of productivity. Moreover, reaching a sound if limited agreement on the TTIP in 2015 could provide a further reason for being optimistic of keeping the prognostications of the decline theorists at bay.

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