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The Fourth Industrial Revolution and Economy Case Study

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Updated: Jul 5th, 2021

Current Economic Problems and the 4th Industrial Revolution

The 4th Industrial Revolution is the digital revolution that builds upon the third and is characterized by the assimilation of technologies that distort the barriers between digital, physical, and biological spheres of human life. The wide scope, the impact of emerging systems, and the velocity at which changes occur are the most distinct characteristics of the 4th Industrial Revolution. The speed at which discoveries and breakthroughs are happening is unprecedented, and the influence is so large that it affects almost every existing industry. It is possible that the Revolution raises global income levels and improves the overall quality of life in countries around the world, thus resolving many challenges that the global society faces today.

Despite the opportunities, current economic problems show the challenges that the 4th Industrial Revolution faces. For example, the unequal distribution of power and monetary resources that is prevalent in the world economy today may get even worse since the Revolution can disrupt labor markets and substitute human labor for automation. Also, the rising gap in wealth distribution may get even more significant because the largest innovation beneficiaries are shareholders, inventors, and investors. With the growing coverage of technologies, the high-income social layers that invest in innovation will get even richer, leaving the rest behind. Other changes and challenges include the disconnect between real life and the technology-led ways of human communication: the use of social media may create unrealistic expectations and open doors for extreme ideas.

Implications of the 4th Industrial Revolution

The implications of the 4th Industrial Revolutions for the free economy are vast. The most unique and unprecedented risk of the Revolution is associated with the shifting role of information and its protection. This occurs because of the expanding access to information and its dissemination to maintain progress, with parties in both private and governmental sectors trying to use it for malicious purposes. The use of information and new technologies will directly impact employment because the development of automation has skyrocketed, leaving more and more workers who do manual tasks without jobs. For fiscal policies, the implications of the Revolution will be complex because changes in digitalization and robotics that disrupt jobs can influence tax revenues.

Therefore, if more human-based occupations are replaced with machines and computers, governments’ abilities to tax the income of labor will inevitably decrease. For the economy in general, lower taxes will mean lower revenues, which in turn will have adverse effects on the society. For central banks that make up a large sector in free economies, technological disruption will mean an increase in consumer prices associated with the increased digitalization of retail sales. The increase in consumer sales can be explained by the need for upholding price stability linked to the trends of the high quality of goods.

Measuring Performance

In the economic environment of the technosphere, estimating performance through GDP is becoming less and less effective. GDP is defined as an economic indicator of success through showing a size of an economy, which is driven by consumption while failing to measure the wellbeing of consumers. Therefore, alternative measurements of progress should be introduced as the social and economic environment is shifting dramatically. An example of this can be the Genuine Progress Indicator (GPI) that takes into account a variety of aspects ranging from sustainability to human development. GPI has emerged only recently to include several factors that show how well a society is progressing. It includes such indicators as water, air, and noise pollution, the costs of transportation, accidents associated with industrial production and traveling, criminal activity, rates of climate changes, the depletion of land and ozone layers, gambling problems, and many others.

Human Development Index (HDI) and Happy Planet Index (HPI) are other alternatives to GDP because they measure achievements of countries on the basis of human development and take into consideration aspects that have a direct impact on the well-being of a population. While HDI measures performance through using life expectancy, literacy and education, and purchasing power parity, HPI is made up from three indicators such as the ecological footprint, longevity, and the subjective feeling of well-being.

Complementing AI

It has already been accepted that Artificial Intelligence (AI) will transform the way industries ranging from energy to health care perform. A large problem arises when humans try to compete with AI, which leads to disruption in operations. Therefore, it has been advised to supplement human performance with AI and vice versa to create an environment of teamwork to complete the most challenging tasks. It is expected that the combination of AI and human efforts creates a ripple effect: the availability of bots and AI improves the performance of people who work with them, and, as a result, humans influence other players in improving their levels of performance.

Collaboration with AI for enhancing performance can be done through the continuous education of human resources on the use of technologies, which will inevitably lead to the redefinition of the way humans work. Setting attainable performance goals for AI and humans to reach cooperatively will help organizations see the areas that need to be improved as well as think about the creation of new responsibilities that the collaborative work between humans and machines has yielded. It is also important to mention that there are areas that cannot be replaced by machines, which means that the optimization of human effort is needed to ensure that AI supplements people-based operations instead of limiting its success.

Who Benefits from the 4th Industrial Revolution

Despite the potential benefits of the 4th Industrial Revolution for the global society, there is still a risk that the positive implications will reach only a selected demographic of people that live in a specific area. Since the Revolution is said to make rich people richer because of their direct involvement with technologies, it is likely that developed economies will benefit the most. This will inevitably lead to the growing inequality between developed and developing countries, not to mention the adverse impact on emerging economies that depend on manual labor that can be replaced by automation.

Researchers are now concerned about the fact that the polarization in the labor force will lead to income inequality and larger financial gains for economies that are already on the top of the list in terms of wealth, skills, capabilities, and income. Low-skilled workers that dominate the labor market of developing and emerging economies run the risk of being replaced by technologies within the next twenty years while skilled, knowledgeable, and adaptable personnel will experience huge financial returns. Overall, there is a high need for addressing the inequality issue that can get worse with the development of the 4th Industrial Revolution because the global business environment will change to suit only the skilled, rich, and powerful.

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"The Fourth Industrial Revolution and Economy." IvyPanda, 5 July 2021, ivypanda.com/essays/the-fourth-industrial-revolution-and-economy/.

1. IvyPanda. "The Fourth Industrial Revolution and Economy." July 5, 2021. https://ivypanda.com/essays/the-fourth-industrial-revolution-and-economy/.


IvyPanda. "The Fourth Industrial Revolution and Economy." July 5, 2021. https://ivypanda.com/essays/the-fourth-industrial-revolution-and-economy/.


IvyPanda. 2021. "The Fourth Industrial Revolution and Economy." July 5, 2021. https://ivypanda.com/essays/the-fourth-industrial-revolution-and-economy/.


IvyPanda. (2021) 'The Fourth Industrial Revolution and Economy'. 5 July.

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