[칼럼] Korea Story 19 - Economy and Finance 2 by Atty Jeong-kee Kim

(Newskorea=Seoul) Digital News Team = Korea Story 19 -  Economy and Finance 2  by Atty Jeong-kee Kim

● The Basic Concepts of the 4th Industrial Revolution 

The American historian of science, Thomas Kuhn, in his book 'The Structure of Scientific Revolutions', argued that paradigm shifts in any given era are not inevitable outcomes of the accumulation and aggregation of existing scientific knowledge, but rather occur through revolutionary processes.

The existing paradigm and the resulting normal science face a crisis as various problems, loopholes, and errors are revealed in the process of continuous research and exploration, and a scientific revolution, that is, a new paradigm, emerges. In addition, it is said that a scientific revolution is a newly emerging paradigm that also repeats the same process and gives birth to another paradigm. So what is the paradigm of this era? Without any disagreement, it is the 4th Industrial Revolution. 

The term ‘The 4th Industrial Revolution’ was first used in 2010 to mean the convergence of manufacturing and information and communications when Industry 4.0 was proposed as one of ten projects in the High-Tech Strategy 2020 announced by Germany. It has been reported to have appeared.

However, the Fourth Industrial Revolution gained global prominence in January 2016 at the World Economic Forum (WEF) held in Davos, Switzerland. Often referred to as the Davos Forum, this event highlighted the Fourth Industrial Revolution as the main agenda item, and elevated it to a central issue in the global economy. Until then, the World Economic Forum had focused on major themes such as global low growth and inequality, but for the first time since its inception, the forum centered on scientific and technological issues. The Davos Forum defined the 4th Industrial Revolution as an era of technological convergence in which the boundaries between physical space, digital space, and biological space become meaningless based on the digital revolution, through the theme ‘Understanding the 4th Industrial Revolution.’ Technology convergence has become increasingly important.

Technology is driven by scientific advancement, particularly through the development of industry. The revolutionary technological advancements humanity has experienced so far have followed such processes. If we consider the technological revolutions that have significantly altered human life, the Agricultural Revolution, which fundamentally changed human living conditions and methods about 10,000 years ago, should be the first. However, the Agricultural Revolution occurred in prehistoric times and was more of a cultural revolution than a technological one.

Historically, the first full-fledged technological revolution—i.e., the Industrial Revolution—occurred in the 18th century. Klaus Schwab, the founder and executive chairman of the World Economic Forum and a renowned German economist, summarized the technological revolutions as follows. He described the era following the invention of the railroad and steam engine, where production was mechanized, as the First Industrial Revolution (1760–1840). The era in which electricity and mass production systems like assembly lines were established was the Second Industrial Revolution (late 19th century–early 20th century). The era of information and communication technology, which emerged with the development of semiconductors, mainframe computing (early 1960s), personal computers (1970s–1980s), and the internet, was classified as the Third Industrial Revolution.

He went on to say, "We are now on the brink of a technological revolution that will fundamentally change the way we live and work. The scale, scope, and complexity of this change are unlike anything we have experienced before." He then defined the Fourth Industrial Revolution that we are now facing as a technological revolution based on the Third Industrial Revolution, characterized by the convergence of technologies from three fields: digital, biological, and physical sciences, which are rapidly transforming our economic systems and social structures. In short, it signifies a "paradigm shift."

Of course, a paradigm is just a paradigm, not an absolute truth. Additionally, paradigm shifts in science occur approximately every 100 years, but the Third Industrial Revolution is a recent change and no one will object greatly to the fact that it is still in progress. It is only recent that the term Third Industrial Revolution emerged.

The Third Industrial Revolution was defined by American economist and futurist Jeremy Rifkin in 2011, saying, “The Third Industrial Revolution is a revolution that reorganizes the horizontal power structure due to the development of communication through the Internet and the development of renewable energy.” It was presented for the first time. Therefore, Rifkin has a negative view on the 4th Industrial Revolution.

Regarding the 4th Industrial Revolution defined by Schwab, he said, “It is still too early to talk about the 4th Industrial Revolution. “The amazing changes currently taking place are nothing more than an extension of the Information Revolution, the third industrial revolution,” he criticized.

However, in today’s world, where science and civilization are well-established, there can be no paradigm shift as drastic as the one from the geocentric model to the heliocentric model. The invention of various patterns on car tires made of rubber tubes for efficiency and slip prevention represents a technological revolution. The organ and the pipe organ, while both based on keyboards and pedals, are played entirely differently. It would be incorrect to consider the organ and the pipe organ as the same instrument.

Just because we humans have differentiated from chimpanzees does not mean that humans are the same as chimpanzees. If you look closely at the 1st, 2nd, and 3rd industrial revolutions, they only developed from Hand Made → Manufacture → Production → Mass Production in the manufacturing process. In a way, it can be said that they are all an extension of technological development.

While it’s undeniable that the Fourth Industrial Revolution is an extension of the Third Industrial Revolution, the fact that it breaks down the previously clear boundaries between physics, digital, and biological industries and merges technologies makes it undeniably an industrial revolution. At some point, the Fifth Industrial Revolution with a new paradigm may emerge, but for us in the 21st century, the Fourth Industrial Revolution has already established itself as the new paradigm of our time.

● Core Technologies of the 4th Industrial Revolution

So what is the core technology that will lead the 4th Industrial Revolution? Although many experts have various opinions on this, we cannot help but talk about the 10 leading technologies presented by Klaus Schwab. The top 10 technologies he suggested are as follows:

Physics technology
 - unmanned transportation, 3D printing, advanced robotics, new materials

Digital technology 
 - Internet of Things, blockchain, sharing economy

Biological technologies 
  - genetic engineering, synthetic biology, bioprinting

Schwab predicted that industries like cloud computing, smart devices, big data, deep learning, and autonomous vehicles would experience significant growth based on these technologies. While Schwab's list of ten leading technologies may not be considered an absolute authority, these are technologies that are already familiar to us.

According to experts, the Fourth Industrial Revolution is undoubtedly built upon the Third Industrial Revolution and is characterized by hyper-connectivity and hyper-intelligence. Through information and communication technologies (ICT) like the Internet of Things (IoT) and cloud computing, it connects humans with humans, objects with objects, and humans with objects, and led to a more intelligent society with big data and artificial intelligence. This is what defines the Fourth Industrial Revolution.

In addition, when these technologies are applied to manufacturing sites, a Smart Factory is created that operates as a cyber-physical system and maximizes productivity. Cyber ​​Physical System (CPS) is a system that closely combines various physical, chemical, and mechanical engineering systems in the virtual world and reality on computers and networks. A smart factory, a factory to which this system is applied, can exchange information on its own and operate independently. For example, the Siemens Amberg factory in Bavaria, Germany is a smart factory of Germany’s Industry 4.0. In this factory, product manufacturers, assembly plants, logistics, and sales companies are connected to the Internet, and production equipment, parts, and products within the factory are managed and controlled in real time through sensors and barcode information.

The evolution of all living things, including humans, is a progressive change made to adapt to a given environment. Those who adapt to their environment survive, while those who do not either perish or become extinct. We are already facing a new paradigm, the environmental change known as the Fourth Industrial Revolution. To survive, we must adapt at all costs.

● The Fourth Industrial Revolution and Employment Issues

As innovative technological convergence becomes practical through the Fourth Industrial Revolution, there are growing concerns that many jobs previously performed by humans will be automated and replaced by artificial intelligence and robots, leading to a significant reduction in available jobs. If jobs decrease, the labor market could stagnate, wage gaps could widen, and social inequality could intensify.

Due to such concerns, the Davos Forum released the Future of Jobs Report, and  predicted that approximately 7.1 million jobs would be lost in developed and emerging markets, with 2.1 million jobs being created by the Fourth Industrial Revolution, resulting in a net loss of around 5 million jobs.

The job category most severely impacted would be office and administrative positions. On the other hand, jobs requiring specialized knowledge are expected to increase, with an estimated 500,000 new jobs in the management and financial services sectors, 400,000 in computer and mathematics fields, and 340,000 in architecture and engineering due to the Fourth Industrial Revolution. Additionally, the reshoring phenomenon, where manufacturing bases move back to developing countries with lower labor costs, is expected in the manufacturing sector.

However, my perspective differs. Instead of merely worrying about job losses, I firmly believe that it is possible to overcome these challenges if nations create jobs that align with the new paradigm and demands of the era, and if individuals use their creativity to devise and invent work that can adapt to the era of technological revolution. The work I am referring to is not a job, but work that one can perform.

When television first emerged and began to be distributed to households, the film industry was the most shocked. There was a deep sense of despair that this innovative technological revolution would spell the end of cinema. The reasoning was that if people could comfortably watch movies and dramas on their sofas at home, who would pay to go to a theater to watch a film? Not only the film industry, but also the media, which was dominated by newspapers, and experts shared this concern. However, the film industry had individuals with a strong spirit of challenge. They quickly recovered from the shock and began actively seeking new ways for the film industry to survive. What they focused on were the small screens of televisions and the various moral and ethical broadcasting regulations imposed on TV programs, which were watched by families, both young and old, together at home. Consequently, the challengers in the film industry began to expand the screens to Cinemascope, 70mm large screens, IMAX, and more. They also produced grand spectacles and daring adult-rated erotic films to offer audiences. These were things that were impossible for television to do. Despite having TVs at home, audiences flocked to movie theaters.
Although the film industry seemed to stagnate temporarily, it soon regained vitality and continued to develop further. As we know, no matter how diverse TV programs have become today, TV remains TV, and film remains film. Last year, the number of moviegoers in our country surpassed 200 million. Filmmakers did not lose their jobs; instead, technological advancements led to an increase in jobs.

In the 1810s, as the First Industrial Revolution, the mechanical revolution, got underway, major social problems arose in England, its birthplace. As the spinning process of making thread and cloth became mechanized and mass-produced, many skilled workers lost their jobs and became unemployed. Moreover, spinning factories hired unskilled workers who could easily operate the machinery, instead of higher-paid skilled workers. As a result, wages for spinning factory workers continued to decline, while prices kept rising, causing many workers to suffer from poverty. British workers blamed their miserable conditions and suffering from poverty entirely on the machines and became enraged. Eventually, workers banded together spontaneously. They rushed to the factories, set them on fire, and began destroying the machinery indiscriminately.
The workers' machine-breaking movement that began in the Nottingham area spread across the country. This is the historically famous "Luddite" or "Luddite Movement," which refers to the destruction of machines.

However, through continuous research and experimentation, mechanical engineers improved the functions of machines, expanded the scope of machine use, and created new machines. As a result, new, never-before-seen jobs related to machine development and machine operation were created, finally leading to the Second Industrial Revolution.

In our country as well, jobs will temporarily decrease. According to an analysis of the employment effects of the Korean version of the Fourth Industrial Revolution by the Maeil Business Newspaper and Deloitte Consulting in 2016, it was predicted that artificial intelligence and robots would lead to a reduction of 1.64 million jobs and an increase of up to 640,000 jobs by 2025. This would result in a net decrease of approximately 1 million jobs.

However, scholars say that there can be no theory of the end of innovation in which innovation completely takes away the role of humans, but rather that innovation brings about new growth. Innovation always comes with its own rewards.

As pointed out by the Davos Forum, jobs requiring specialized knowledge are expected to increase. If the sharing economy leads to the activation of 3D printing, P2P, social enterprises, various cooperatives, digital currencies, and renewable energy sectors, many jobs will be created.

Furthermore, as mentioned earlier, individuals must make efforts to devise work that aligns with the new paradigm and trends of the times. This, too, is a "shift in thinking." Personally, I am particularly pleased with the Davos Forum's prediction that many jobs will increase in the management and financial services sectors. There is always a way, anytime, anywhere. If there is no way, one must create it.

●  Korea's Response to the Fourth Industrial Revolution

The 4th Industrial Revolution, which has already become a reality, is sure to bring great changes to our lives. In a column for a daily newspaper, novelist Bok Geo-il said that artificial intelligence has entered our lives deeply and that economic, social, and cultural shocks are inevitable. He went on to say that although superintelligence has emerged that threatens the survival of humanity, it should be accepted as an evolutionary phenomenon of the ecosystem. He said it was because it was out of control and could not be controlled.

As I have repeatedly said, we must adapt to the Fourth Industrial Revolution and be able to utilize it. This reality is not just a problem unique to us but a global phenomenon. Therefore, advanced countries are already busy preparing various measures to cope with and adapt to the Fourth Industrial Revolution. The most agile in formulating a strategy was Germany, a technological powerhouse. As early as 2010, they announced the High-Tech Strategy 2020 and launched ten major projects, one of which was Industry 4.0, the convergence of manufacturing and information and communication technology. The ambitious plan is to introduce information and communication technology into automated production systems to create a Smart Factory and connect all manufacturers in Germany into a single large virtual factory by 2025. The goal is to achieve ubiquitous customized production that understands global market conditions in real-time. The United States plans to create platforms based on big data accumulated by manufacturing and internet companies, focusing on cloud services utilizing the internet, and generating added value. Japan is focusing on advancing its world-leading robot technology. According to the New Robot Strategy announced in 2015, Japan plans to actively use robots in manufacturing and enhance artificial intelligence technology by accumulating data on robot use in various fields. China also announced ‘Made in China 2025’ and established a plan to realize an intelligent production system by adding IT technology to the current labor-intensive manufacturing method, and invested a huge amount of money which is equivalent to 240 trillion Korean won.

So, how is Korea responding to the Fourth Industrial Revolution? Six years ago, the government established the Presidential Commission on the Fourth Industrial Revolution, which has since begun its official activities. Additionally, the Ministry of Trade, Industry, and Energy is actively promoting Fourth Industrial Revolution policies by mobilizing a large number of innovative experts with specialized knowledge in various fields, such as science, technology, industry, and society, to gather private-sector innovation capabilities while communicating with the public and the market.

However, as is often the case with government administration, it feels like a rhetorical listing of words. It is excessively comprehensive, with little practical substance or specificity. Although each sector may be preparing practical, actionable plans, advanced countries have already established and implemented detailed measures. The fact that we are only now formulating our plans is far from the image of a technological powerhouse or an IT powerhouse that we claim to be. In 2016, a Swiss global financial group released a ranking analysis report of countries thought to respond well to the 4th Industrial Revolution, and of course developed countries and technology-based emerging countries were at the top. It is expected that developing countries with low-skill and low-cost labor strengths will become less competitive and that the gap with advanced countries will widen further. Korea ranked 25th out of 139 countries surveyed. Although 25th place might seem relatively advanced, it is not at all. For example, if 139 people were running a marathon and someone finished 25th, they would be far behind the leading group and receive no attention. I felt deeply troubled. Nevertheless, we cannot stand still or turn a blind eye to reality. Even now, we must urgently formulate and implement concrete measures and plans to respond to and utilize the Fourth Industrial Revolution. Moreover, simply gathering various disjointed plans in a department-store-like fashion will not be effective. Like the advanced countries' measures, there needs to be a concentrated and focused approach.

☆ Author:  Atty Jeong-kee Kim ☆

● Education

- Bachelor of Arts in Political Science, Summa Cum Laude, State University of New York at Stony Brook

-  Doctor of Jurisprudence, Marquette University Law School

- Senior Executive Program, John F. Kennedy School of Government, Harvard University

- Research Scholar in North Korean Studies, Peking University

● Experience

- Consul General of the Republic of Korea in Shanghai

- Commissioner General for the Korean Pavilion at the 2010 Shanghai Expo

- CEO, Asia-Pacific Local Government Network for Economic and Social Development (CityNet)

- Secretary General, World Smart Sustainable Cities Organization(WeGO)

- Law Clerk, Milwaukee Circuit Court, USA

- Senior Attorney-at-Law, Dr & Aju LLC

- Distinguished Visiting Professor, World Economy Research Institute, Nanjing University

- Research Professor, Institute of Oriental Studies, Peking University

- Distinguished Professor, Graduate School of Political Science, Kookmin University

- Chair Professor, Graduate School of Business, Dongguk University

- First President of Soongsil Cyber University

● Publications

- Georo English Studies Series for College Students [10 volumes] (Georo Publishing)

- I Challenge the Possibility of One Percent (Chosun Ilbo)

- The Art of Negotiation (Cheongnyonneongsin Publishing)

- Korea and the World (Chekmidum Publishing)