Chancellor Angela Merkel hinted recently that her government is willing to consider spending to stimulate growth in the German and E.U. economy.
The chancellor said she was particularly interested in investment in the “digital sphere” and the transition of the energy sector into a renewable energy mix. Her remarks are timely, as the economic discussion in European capitals is quickly turning to the new theme of erecting a green high-tech “Digital Europe” to integrate a European Union single market and put the continent and its partnership regions on a long term course toward a sustainable low-carbon economy.
The digitalization of the European space involves much more than providing seamless broadband, more reliable Wi-Fi and a flow of Big Data. The digitalization of economic life is ushering a new economic system onto the world stage. The digital economy is beginning to revolutionize the global economy, disrupting the workings of virtually every industry, and bringing with it unprecedented new economy opportunities and business models.
To grasp the enormity of the economic change taking place, we need to understand the technological forces that have given rise to new economic systems throughout history. Every great economic paradigm requires three elements, each of which interacts with the other to enable the system to operate as a whole: a communication medium, a power source, and a transportation mechanism. Together, these three operating systems make up what economists call a general purpose technology platform.
Now, the communication Internet is converging with a digitalized renewable energy Internet and a digitalized logistics and transportation Internet, creating a super Internet of Things platform for a Third Industrial Revolution.
Millions of people are already transferring bits and pieces of their economic life from capitalist markets to the global Collaborative Commons.
By 2030, it is estimated there will be more than 100 trillion sensors connecting the human and natural environment in a global distributed intelligent network. Connecting everything and everyone via the Internet of Things offers enormous economic benefits. It also raises risks and challenges, not the least of which is protecting personal privacy, ensuring data security, and guaranteeing network neutrality.
The bulk of the energy we use to heat our homes and run our appliances, power our businesses, drive our vehicles, and operate every party of the global economy will be generated at near zero marginal cost and be nearly free in the coming decades. That’s already the case for several million early adopters who have transformed their homes and businesses into micro-power plants to harvest renewable energy on-site. After the fixed costs for the installation of solar and wind are paid back—often as little as two to eight years—the marginal cost of the harvested energy is nearly free.
The Internet of Things will enable prosumers to monitor their electricity usage in their buildings, optimize their energy efficiency, and share surplus green electricity with others on the energy Internet.
By 2020, prosumers will be able to share their 3D printed products with others on the Collaborative Commons by transporting them in driverless electric and fuel cell vehicles, powered by near zero marginal cost renewable energy, on an automated logistics and transportation Internet. It portends a great shift in the flow of economic power from the few to the multitudes and the democratization of economic life.
In the digital economy, social capital is as vital as finance capital, access is as important as ownership, sustainability supersedes consumerism, cooperation is as crucial as competition, and “exchange value” in the capitalist market place is increasingly supplemented by “shareable value” on the Collaborative Commons.
Millions of people are already transferring bits and pieces of their economic life from capitalist markets to the global Collaborative Commons. Prosumers are not only producing and sharing their own information, entertainment, green energy, 3D-printed goods, and enrolling in massive open online courses on the Collaborative Commons at near zero marginal cost. They are also sharing cars, homes, and even clothes with one another via social media sites, rentals, redistribution clubs, and cooperatives, at low or near zero marginal cost.
In a near zero marginal cost digital economy, extreme productivity decreases the amount of information, energy, material resources, labor and logistics costs, necessary to produce, distribute, and recycle economic goods and services, once fixed costs are absorbed. The shift from ownership to access also means more people are sharing fewer items, significantly reducing the number of new products sold, resulting in fewer resources being used up and less global warming gases being emitted into the earth’s atmosphere.
In other words, the headlong push to a near zero marginal cost society and the sharing of nearly free green energy and an array of redistributed goods and services on the Collaborative Commons is the most ecologically efficient economy achievable. The drive to near zero marginal cost is the ultimate benchmark for establishing a sustainable future for the human race on earth.
The European Union is potentially the largest internal market in the world, with 500 million consumers, and an additional 500 million consumers in its associated partnership regions. The build-out of an Internet of Things will allow a billion people to produce and share information, renewable energy, 3D printed products, and a wide range of services in a hybrid digital economy—part capitalist market and part Collaborative Commons—at low or near zero marginal cost.
The drive to near zero marginal cost is the ultimate benchmark for establishing a sustainable future for the human race on earth.
Erecting an infrastructure for this will require a significant investment of public and private funds. The European Union currently invests €740 billion ($94 billion) each year in infrastructure-related projects, much of it to shore up a Second Industrial Revolution, general purpose technology platform that is outmoded, and whose productivity potential has long since been reached. If just 25 percent of these funds were redirected and earmarked in every region of the European Union to assemble an Internet of Things infrastructure, the Digital Union could be phased in between now and 2040.
The EU communication network will have to be upgraded with the inclusion of universal broadband and free Wi-Fi. The energy infrastructure will need to be transformed from fossil fuel and nuclear power to renewable energies. Millions of buildings will need to be retrofitted and equipped with renewable energy harvesting installations, and converted into micro power plants. Hydrogen and other storage technologies will have to be built into every layer of the infrastructure to secure intermittent renewable energy.
The electricity grid of the European Union will have to be transformed into a smart digital energy Internet to accommodate the flow of energy produced by millions of green micro power pants. The logistics and transport sector will have to be digitalized and transformed into an automated GPS-guided driverless network running on smart roads and rail systems. The introduction of electric and fuel cell transport will require millions of electric refueling outlets, connected to the energy Internet. Smart roads, equipped with millions of sensors, feeding real-time information on traffic flows and the movement of freight will have to be installed.
This will all necessitate the active engagement of virtually every commercial sector. Millions of semi-skilled, skilled, professional, and knowledge workers will need to be employed across every region of Europe to construct and service the three Internets that make up the digital platform of a Third Industrial Revolution economy.
The scale up of this infrastructure will generate new business opportunities in both the market economy and on the Collaborative Commons, dramatically increase productivity, and create an ecologically oriented post-carbon society. The employment of millions of workers will also stimulate purchasing power and generate new business opportunities and additional employment to serve increased consumer demand.
We are on the cusp of a promising new economic era, with far reaching benefits for humankind. What’s required now is an E.U. commitment to phase in the Internet of Things platform to facilitate the transition to a digitalized zero marginal cost society, if we are to create a more just, humane and ecologically sustainable society. Germany can help lead the way into the new economic era.
Jeremy Rifkin is the author of “The Zero Marginal Cost Society: The Internet of Things, the Collaborative Commons, and the Eclipse of Capitalism”. To contact the author: email@example.com.