The third industrial revolution

The world economy will face shocks and depressions, punctuated by ever-shorter and weaker recoveries, as long as it relies on outdated fossil fuels, says Jeremy Rifkin, author of “The Third Industrial Revolution.”“There will be cycles of growth, collapse, growth, collapse, every three years or so,” he said in an interview in Berlin, where he was scheduled to speak on a panel about sustainable growth introduced by Chancellor Angela Merkel.We are on the cusp of a major upheaval as the world switches to renewable energies and our power-distribution networks undergo a transition similar to that experienced by communications systems with the advent of the Internet, he said.Until the “third industrial revolution” is in full swing, debt crises such as those plaguing the euro area will recur, Rifkin said.“The real crisis has been missed,” he said. “It occurred in July 2008, when oil hit $147 a barrel. The whole economic system shut down. That was the earthquake. The collapse of the financial market 60 days later was the aftershock.”Rifkin’s book is peppered with chats about hydrogen with then-European Commission President Romano Prodi and dinners with Merkel. Clients of his Foundation on Economic Trends include Citigroup Inc. (C), Ford Motor Co. (F), the European Commission and the U.S. Department of Interior.Rifkin, who is 66, began a career as an activist in the peace movement of the 1960s. He lectures at the Wharton School’s Executive Education Program and has devised a master plan for Rome’s transition to a post-carbon economy.All industrial revolutions occur, he argues, when technological advances in communications and energy converge. The first industrial revolution combined literacy and printing with steam power and rail. The second brought us the telephone, the internal combustion engine and oil.That era is dying, he said, and it’s not just the economy that is reeling from the carbon age, but the climate and biosphere too.“We are at the beginning of a mass shift in the chemistry of the planet,” he said. “Our species has never experienced anything like this and we’re not grasping it at all.”He doesn’t rule out the end of civilization as we know it, unless we get our act together.That, he said, means shifting to renewable energy; transforming our homes into mini power-plants; using hydrogen to store intermittent energies such as solar and wind energy; developing a “smart grid” so that small-scale power producers can sell back excess electricity; and switching to electric plug-in vehicles. The key is to advance all five elements simultaneously.Germany and Europe are leading the way, yet they are still in the early stages, he said. Rifkin’s vision resonates in Germany, which has announced plans for an “energy transition” after deciding to quit nuclear power.“The good thing about the chancellor is that she’s a physicist, she understands all the science,” he said.The U.S., on the other hand, is falling behind, Rifkin argues. President Barack Obama, who wanted a green economy, spent too much on stand-alone projects that don’t link up to create a new infrastructure, he said.“He’s lost billions,” he said. “The reason is that we have a huge, powerful energy industry that can finance the elections, and they didn’t want to touch this.”Power companies around the world are reluctant to give up their role as energy providers, Rifkin said. Yet utilities whose executives realize their future is to manage grids and access will survive, he said, in much the same way International Business Machines Corp. (IBM) made the switch from manufacturing PCs to managing information systems.He views it as a generational question.“When I give talks to executive boards, I can see the 40- year-olds are nodding their heads,” he said. “The 60-year-olds are shaking their heads. There’s a battle going on.”New sources of energy will lead to an economy where power, in both senses, is lateral rather than vertical, he predicted.“It’s as fundamental as the shift from medieval guilds to a market economy,” he said. “It has enormous opportunities for a world in the doldrums of despair.”So how are we going to pay for all this in an era of mass debt? Rifkin said we have no choice.He doesn’t pretend it’s easy.“The second part of this century is either going to be real hell on this planet, or we’re going to turn it around,” he said. “I think it’s a pretty uphill climb.”“The Third Industrial Revolution: How Lateral Power Is Transforming Energy, the Economy and the World” will be published in the U.S. on Sept. 27 by Palgrave Macmillan.