Economic Disruptions, Past, Present and Upcoming

An Economic Disruption refers to the action of preventing something, especially a system, process, or event, from continuing as usual   Throughout human history, there have been many periods when societies endured short periods of rapid social and economical transformations. Most economic disruptions have been regressive and destructive. But during the last 300 years, industrial and more recently, technological innovations have resulted in numerous periods of rapid advancements, some of which resulted in profound socioeconomic transitions, leading to massive changes in the way people lived and worked. However, recent data indicates the trend of generational gains in living standards has stopped and are now in decline. Many millennials are worse off than their parents – a first in American history | CNN Politics  

To understand why this decline is occurring, we need to study the past. 

Economic eras and their corresponding developments and transformations.

1.      The First Industrial Revolution (1733-1905) - transition from an agrarian and handicraft economy to one dominated by industry and machine manufacturing.

2.      The Second Industrial Revolution (1906-1958) – the emergence of the new sources of energy including electricity, gas, oil and later, nuclear to power industry and machine manufacturing as well as urbanization and new emerging transportation systems and related infrastructure.

3.      Digital, The Third Industrial Revolution (1959-2002) – the transition from mechanical and analog technologies to digital technologies, the emergence of the computer and electronics industry and later on, the World Wide Web which revolutionized connectivity and information technologies.

4.      Industry 4.0, The Fourth Industrial Revolution (2003-present) – the emergence of the Internet of Things, smart technologies/manufacturing, advanced analytics, machine learning, cloud technology and development of robotics, autonomous systems and artificial intelligence.

NOTE: Below synopsis is based on US economic data. 

The Economic Disruptions of the First and Second Industrial Revolution eras.

The economic disruptions related to the eras of the First and Second Industrial Revolution era spun off millions of direct and indirect jobs which were require to attain the gains in productivity etc. This led to gains in standards of living, resulting in an increasing size of the middle class, year after year. Understand there were numerous minor economic disruptions which were gradually increasing standards of living prior to and after the economic disruption of automobiles which occurred in the early 1900s.  In 1850, 10% of the American population were deemed middle class, 80% were working poor and about 10% were wealthy. By 1950, about 50% of Americans were middle class.  Understand for the purposes of definition herein, middle class pertains to the group with an income of 40 to 60 percent of the average national income. American middle class - Wikipedia

Automobiles.

In New York City in 1903, automobiles were widely regarded as a curiosity and horses vastly outnumbered them. For every automobile, there were hundreds of horses (left pic). 13 years later in 1913, there were hundreds of automobiles for every horse(right pic).

Questions submitted to Grok:

What was the size of the US labor force in 1929? How many direct jobs were there in the US automotive industry in 1929 and how many jobs were there related to manufacturing of automobiles in the US including parts and dealerships?

Answer:

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•  U.S. Labor Force in 1929: ~49 million.

•  Direct Jobs in Automotive Manufacturing in 1929: ~447,000.

•  Total Jobs Related to Automobile Manufacturing (Including Parts and Dealerships): ~1,678,500–1,902,000.

The automotive industry was a cornerstone of the U.S. economy in 1929, employing a significant portion of the workforce.

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Add millions more to the number of jobs noted above that were created as a result of increased consumer consumption (retail industry) and the corresponding required growth of distribution capacity (trucking industry) as well as governmental trucking and auto infrastructure development and construction (Roads, bridges etc.) 

Note that 1929 was a peak year of economic prosperity and late that year, the great stock market crash occurred. For many years afterwards, economic activity was depressed. But by the late 30s, an economic boom prompted by Federal construction projects and pre World War II industrial production resumed the growth trend. The post World War 2 years saw accelerated economic growth which led to a doubling of the median family income, creating a middle class that included nearly 60 percent of Americans by 1970. 

The Economic Disruptions of the Digital & Industry 4.0 eras.

One thing that effects all eras is the US financial regulatory system, which are supposed nurture sustainable economic growth. During the First and Second Industrial revolution eras and the early years of the The Digital Revolution era, apart from the few preceding years before the crash of 1929, the nurturing of sustainable prosperity was maintained. Government size was small at all levels and budgets, aside from the Great Depression and World War II years, were for the most part, balanced.

To the contrary, presently all levels of government run never ending increasing budget deficits. The size of government at all levels are bloated. The shrinking private sector is now service based, not manufacturing based, as it was during the First and Second Industrial Revolution eras.  

Historically, Manufacturing and Production, including farming are considered non-discretionary and are required by the masses, whereas service based employment is discretionary and predominantly leverage the wealth attained from manufacturing and production.

Globalism.

From the onset of the Digital Era, the Manufacturing and Production sector was an economic behemoth. During the early years of the Digital Era, corporations started outsourcing, nearshoring, and offshoring their manufacturing processes to lower-cost countries. From 1960 to 2010, the sector size shrunk from 25% to 12% of gross domestic production. US based manufacturing share of US GDP 1960 to 2010 - Google Search

Question: If the Manufacturing and Production sector is no longer the behemoth of the economy, how much longer can a growing Service sector leverage the wealth of Manufacturing and Production? The answer is, they are leveraging bloated stock and asset valuations from all sectors of the economy. 

Bloated stock and asset valuations primarily occurred because of stimulus rate and regulatory policies enacted by the The Federal Reserve Board, the Federal Deposit Insurance Corp., and the Securities and Exchange Commission.  From quantitative easing to bailouts of too big to fails, many of the most widely held stocks and asset valuations have been inflated beyond sensible metrics, primarily benefitting the wealthiest, all while inflating the price of everything, which primarily burdens the poor.

Automation & Robotics.  

The 1970s ushered in a wave of transformation in Manufacturing and Production sector, spurred by advancements in industrial robotics. Robots progressed from performing basic, repetitive tasks to tackling more intricate and precise operations. Subsequently, this transformation increased the rate of decline in sector employment already impacted by the outsourcing, nearshoring, and offshoring of jobs.

In summary, the difference between the economic disruptions of the First and Second Industrial Revolution eras and the current era are stark.  The disruptions of the First and Second Industrial Revolution eras created millions of jobs that were required to sustain and grow economies. The disruptions of the current era do not require millions of workers to sustain and grow economies. Furthermore, millions of people currently working in Service and Entertainment sector jobs, such as influencers, dog walkers, professional sports players etc. predominately own their existence to exorbitant leverage.

The Upcoming AI Everything era, the Last Economic Disruption.

From Autonomous Vehicles and Humanoid Robotics to Intelligent Research Tools and Autonomous Agents, AI is on track to revolutionize socioeconomic parameters and disrupt all industries and societies. Manufacturing and other blue collar Industries will employ significantly fewer laborers, machinists, mechanics, welders, drivers, etc., and the degree Industries of Litigation, Medicine, Science, Technology, Engineering, Education, and Mathematics will employ significantly fewer lawyers, doctors, researchers, scientists, technicians, engineers, professors, teachers, mathematicians and subordinates. The rate of this transition could be slower then expected, but regardless of the rate, eventually the far majority will not be employed.

A new system needs to be implemented, a 'Socialist Capitalist ' democracy?, where wealth can be re-distributed to the un-employed, all while providing purpose and esteem for all. A system where Wealth inequality is minimal, including that of the leaders and associates of government and corporations. The past has proven that both Socialist and Capitalist government systems overtime succumb to the greed of leaders and associates of the government. Regardless of what governing system comes to fruition, Humanity will be at a crossroad, the most significant one of all known human history.