Jeremy Rifkin

Jeremy Rifkin, author and social activist with master plans, talks to The Global Journal about the Third Industrial Revolution, and how to bring it about.

How would you define yourself?

My dad asked me that until the day he died. I started as a social activist in the 1960s. From the first protests against the energy industry, with the Boston Oil Party, in 1973, I have been a social activist all my life. I write books that become catalysts to stimulate conversations and, hopefully, some movement around the raised issues. I have been teaching at the Wharton School for 17 years, currently for their executive education program. I was a student there in the 1960s. And I do political work; as you know, I have a business group of 120 companies, and we make master plans for the third industrial revolution. You have to put theory into practice.

How do you see the non-profit world?

There are really four sectors in society. There is the private sector, the public one, the so-called civil society, and the fourth sector would be the informal economy (from barter to criminal market). The third sector is actually the first sector because that is where we create our social narrative, where we create our social capital. We’re a story-telling species. We are very social creatures. We live by a narrative, so that is where we create the social bonds, the trust, the empathetic drive which allows us to set up markets, create commerce and build government structures. So without the civil society you cannot have anything else. Markets live off the social trust created by the culture of civil society. So culture is not secondary to the market - market and government are secondary institutions that exist as extensions of the culture. There is no example that I know of in history where people first created markets and then culture - or created governments and then culture, they are extensions.

Let’s talk about the Third Industrial Revolution Global CEO Business Roundtable, you’ve set up. What is it exactly?

There’s a very strong gathering of 120 companies in our third industrial revolution group. We have the major renewable energy companies and associations, which are our Pillar One (‘Renewable Energy’). Pillar Two (‘Buildings as Power Plants’), that’s the major construction associations, construction companies and real estate companies. Pillar Three (‘Deploying Hydrogen and other storage technologies’) includes the major hydrogen and storage industries. In Pillar Four (‘Using Internet technology to transform the power grid’) we have some of the largest IT companies: CISCO, IBM... Pillar Five (‘Transitioning the transport fleet to electric, plug in and fuel cell vehicles) is transport –Daimler, GM and others have joined– it’s a big group.

How do you ‘entertain’ them? How do you keep them in the net?

We’re making master plans; we’ve done four in about 15 months. We did San Antonio TX, our seventh largest US city, then the city of Rome. We’ve done Monaco for Prince Albert, and we just finished Utrecht in the Netherlands. We have a global policy team and a CEO roundtable. The policy team is made up of some of the top people in their field. Then our partners’ companies come in and make recommendations wherever our proposals interest them. When we reach the contractual stages, there is no guarantee that they will get a contract, but being in the division gives them a head start in being able to make bids.

So you’re like Sherpa for big projects?

We do it like in the movie business. We are the executive producers. Everybody has a day job; we can’t bring everybody together under one roof at one time. These are top people in companies and in the world, so it’s like a movie set. We come together, consider the master plan, organize ‘scenes’ combining industry, trade associations, city, region and country, and then we shoot our ‘movie’. We have a specific combination of the 120 players able to embed. Master plans are beautiful pieces; for example, the Rome plan is a creation of 180 pages, it’s really impressive, a masterwork. As you know, the Third Industrial Revolution is the formal plan of the European Union. I was privileged to develop the plan, which was endorsed by the European Parliament in 2007. As it works its way to the Commission, I was with President Barroso in Brussels a few weeks ago to look into “What do we do now? How do we coordinate?” We balance the Austerity Program in Europe against the Economic Development Plan with these questions in mind. It’s also being worked on by member states. I met Chancellor Merkel in September and we rolled this out for Germany. She is leading every country in the world, implementing all five pillars aggressively, right across German industry. Germany is absolutely at the spearhead of this revolution; it’s the engine of Europe.

What about China?

I have not had any work with China. I am working with India, with FCCI, which is the Federation of all Chambers of Commerce in India. It’s a massive umbrella group for the business community. I am also overseeing Third Industrial Revolution Master Plan collaboration with them, it’s a joint plan, to move the entire business infrastructure of India into a Third Industrial Revolution model. That will be announced January 19 in Delhi with FCCI. In addition, we’re working with the UN.

Which Agency?

With UNIDO. The Director-General Kandeh K. Yumkella and I have been meeting for the last year. We intend to lay this out as a UN Plan for developing countries. It is ideally suited to them because they can leapfrog in, with no need for infrastructures like the ones needed in the old second industrial revolution. We see this with cell phones in Africa. We were shocked. No electricity and they’re all getting cell phones. Then the electricity arrived. So, we did first the European Plans, the world’s largest economy, now the UN.

What contact do you have with the UN Secretary-general Ban Ki-moon?

In fact he was at my table when I went to Copenhagen, a couple of weeks ago, to give a dinner speech. The host was the new Danish PM. Unfortunately, twenty-five minutes into my speech I collapsed – had to go through heart surgery. What I heard afterwards (smiling) was that nobody remembered the talk, they just remembered looking at me on the floor, thinking “Oh, that could be me.” It was rough.

Who’s next to join the third industrial revolution?

The Third Industrial Revolution

What we’re going to see, starting next year, is Korea. They’re going to be highly interested in the Plan because of electronics and energy. And Japan. After Fukushima, everyone wanted the PM to quit. He said, “I’ll quit under one condition; we pass two bills – the deficit-financing bond bill and the new renewable energy promotion bill - or I won’t quit.” The bill was passed, he quit, and now everyone is on fire. These nuclear monopoly utilities - they’re going to be wiped out. All the young people in the IT industry want to move on this. Japan will see this as their renaissance because they will be able to move head to head with Germany, to compete in the international market. They’ve got IT, they’ve got transport, they’ve got great construction and they’ve got the Pillars.

So, watch Japan. Watch Korea. And Germany. Then watch India in the developing world and Brazil. China is prouder than that – they have a centralized regime. But this is distributive power.

In your book you also address the investment issue. How can we convince any politician to look beyond their next election, three to four years ahead?

That’s really challenging. Some countries do better than others. Germany for sure, does better than others. I think you have to have some predictability at government level when you create any public-private partnerships. When each city, metropolitan region and region begins to phase in the Five Pillars, they have to phase in together because it’s the synergies that make it work, the connections. And, as each city and region creates their node they quickly want to connect to the next node, like Wi-Fi, so they can share surpluses or losses. The third industrial revolution likes to move uninhibited across land until it reaches the ocean edges. It scales laterally. It requires continental political unions because this is going to move capital markets. It requires federal state-level regulation but then the regions have to implement that.

The key here is to understand that the great economic revolutions in history occur when energy regimes emerge; new energy regimes make possible much more complex economic ranges because they increase the energy flow. They allow you to bring more people together, differentiate skills, but then you have to integrate them into larger economic units: commerce, trade, social life, and politics. When these new energy regimes emerge you create more complex opportunities. You need communication revolutions to emerge that are agile enough to manage the contemporary context of the energy revolution. It’s when energy and communication revolutions combine as a nervous system that you can create an infrastructure for the new economic era. Historically, the energy guys only talk about energy and the communication people about communication, but all the great societal shifts have to have both. In the 19th century print technology became very cheap with the introduction of linotyping and rotary steam power; the transaction costs went down and we started mass-producing print. It was not a parochial business. Next we introduced public schools, creating a print-literate world, and then we organized coal and rail and national markets, which would not have been possible without a literate workforce. Similarly, in the 20th century, without centralized telephones, electricity as the communication management leader and radio and television as the marketing tools, we could not have organized such a dispersed auto-oil consumer culture. Now the sun is setting on this chapter, we’re in the endgame. There’s no way to get past 150 dollars a barrel. Every time we try to outgrow it we collapse.

The Internet is interesting because this communication is distributed collaboratively and scales laterally. Reciprocally, energy is distributed by nature and it is collaborative in a form that scales laterally. So, when distributed Internet technology manages distributive energy you get a nervous system. If you bring the Five Pillars together, over fifty years of development, you create the whole infrastructure. Then you have another fifty years of living off the multiplier factor. It’s important for us to understand historically how these things happen, and to fix systemically. You need certainty. The first industrial revolution had centralized power because the energies were elite and they required huge military, political, geopolitical investments; it required national governments and national markets. The third industrial revolution scales laterally and favors millions of small players and vast social networks; it likes to run across landmasses until it reaches the ocean. So it favors continental markets and continental political unions. Which could not happen with centralized power. The next stage of globalization is definitely continentalization. There are international posts in my group, the CEOs of logistics, and they all know it.

The meeting on that theme took place in Paris, didn’t it?

Yes, it was a really interesting meeting outside of Paris. Continental markets need continental political unions to provide the kind of regulations and standards that apply across continents. The EU is ideally positioned, the Asian union is forming very quickly and they are moving to a third industrial revolution infrastructure. That’s the way you get a continental market. A continental union follows - the South American Union formed about 24 months ago. We’re going to see a third industrial revolution favoring continental markets and continental political unions, for sure. It is not really enough to have only austerity in your plan, but if that’s all you have, whether in Europe or the world, use it, because the financial markets say they want to see government cuts, to show your credit lines are worthy. But then you make cuts, and then the international financial market says, aha, you have no growth plan so we still won’t give you any credit. So, austerity has to be mindful. If it is not combined with a growth plan, there is no way to get through the 21st century. This is what I have to decide with the Chancellor in December when we roll this out. How can you roll the economy on a 20th century second industrial revolution? Energies are waning, climate change is impacting us, technology and the infrastructure are made of carbons - this is no way forward. However, the EU has a golden goose, which is 500 million consumers, and an additional 500 million in the partnership regions (Mediterranean and North Africa). That’s a billion people. So the next stage in European integration is to create a single market by spreading the third industrial revolution infrastructure nodes across each region. Everyone becomes a player. Then you really have connectivity, everyone is embedded, because everyone has to share the energy. It creates a kind of democratization of the economy. Then, through that network, create a seamless energy mix, a seamless green electricity mix, a seamless communication-energy mix: we call this connectivity Europe, that’s in the European plan. A billion people in a single internal market that is based on the sustainability of its existing energy. It’s a beautiful plan. Getting there is really tough, but there is no plan B. What I say to folks is, “If this isn’t the plan then you tell me what the plan is,” but no one seems to have another plan. The good news is Germany. It’s very good, because the Chancellor is with it, all three parties are in. That is unusual.

What about the US?

It’s still a huge market where things are not moving in the right direction. The problem with the USA is that although Obama’s heart is in the right place he did not think systemically. He did not understand how communications and energy come together.

What about Steve Chu, in the Department of Energy?

Chu is a top-down guy. He comes from nuclear, centralized … he just does not grasp the TIR concept. For example, in the book, I mention that they want to build huge solar parks and wind parks in the West and ship this energy to the Eastern populations. The Eastern governors said, “We can create our and businesses.” They wanted to distribute energy and share it with their circle. Consequently, Obama spent billions on standalone projects: battery factories, auto - he never connected the Five Pillars. We can all learn from the mistakes made in Europe. Last fall, the Commission sent out a memo that said a trillion Euros was needed for the energy grid. Why? We set up a feed-in tariff energy law (Feedin TEL). It was so successful –there are thousands and thousands of sources that are trying to feed their green electricity– that the old grid cannot take it.

The old grid is leaking 20% of electricity and it is not even digitalized. We realized that not only did Pillar Four (IT to transform the power grid) have to come into play, but, because the Feed-in TEL scheme was so successful that some regions already produce 20, 30, or 70% green electricity, we are losing 3 out of 4 KW because there is no storage. It’s a mess. We need to pay more attention to Pillar Three (storage, hydrogen). Then we realized we did not incentivize Pillar Two (‘Buildings as Power Plants’) for the little guys. The big companies in my group, Axiona, are putting in their solar parts and wind parts, but what about the SME (small and medium enterprise) and the homeowner? How do they afford a 30,000 euro green home? Finally, Germany and Italy banks have come together and they issue green loans at low-discount rates and low mortgages. In Italy you can sign a piece of paper and get 30,000 euros worth of photovoltaic on your roof in sixty days. The banks look at your electricity bill, see how much you are going to save each month and you pay as you save. If you incentivize Pillar Two you get a return from the consumers. Then we realized that these Four Pillars weren’t phased in. Now our automobile companies in the group are worried, because if the other Four Pillars don’t phase in, how do you plug in the cars, buses, trucks to a network? Up to now, General Motors have never talked to me about systemic thinking, but that’s what we need.

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Jeremy is the author of The Third Industrial Revolution: How Lateral power is Transforming Energy, the Economy and the World, Palgrave MacMillan, £16.99/$27.00. Read the book review here.

Interview by Jean-Christophe Nothias