Saying goodbye to Adam Smith at the dawn of the Third Industrial Revolution (Jeremy Rifkin)

Jeremy Rifkin / The Guardian Sustainable Business / November 2011

Rifkin argues we are on the cusp of a third industrial revolution where citizens will produce and share their own energy using new communication technologies via what he calls the “energy internet”.

He says in the future it will be hundreds of millions of people who store renewable energy (in hydrogen form) and then distribute it online for it to be used in things like transport. This revolution will take us away from fossil fuels that are driving dangerous climate change. It will also create millions of new jobs.

He argues previous industrial revolutions have happened when new energy sources have been combined with new communications technologies. The first industrial revolution in the 19th century was based on a “print-literate workforce” (using print technology and educated in schools) who harnessed coal and steam power. The second industrial revolution in the 20th century combined the telephone, radio and TV with oil (and other fossil fuels), cars and mass consumer culture.

Rifkin predicts the third industrial revolution will have major implications for how societies are organised, how we do business and will distribute power laterally instead of hierarchically.

He goes on to say the very basis of conventional economic theory and notions of capital are being questioned. He uses the example of economist Adam Smith who used the ideas of physicist Isaac Newton to explain how economies functioned. Rifkin argues these perspectives fail to understand that “real economic activity is all about the irreversibility of events—how energy and material resources are harnessed, transformed, utilized, used up, and discarded”.

He proposes the economy should be viewed from a thermodynamic perspective because this would give us a true picture of the consequences of economic activity. This would allow us to see that our current economic model “is borrowing against nature’s energy and material reserves. If that borrowing draws down nature’s bounty faster than the biosphere can recycle the waste and replenish the stock, the accumulation of entropic debt will eventually collapse whatever economic regime is harnessing the resources.”

He has this to say about gross domestic product (GDP): “We think of GDP as a measure of the wealth that a country generates each year. But from a thermodynamic point of view, it is more a measure of the temporary energy value embedded in the goods and services produced at the expense of the diminution of the available energy reserves and an accumulation of entropic waste.”