Lateral Power and the Third Industrial Revolution

September 13, 2012

Lateral Power

It’s happened before, in 1848 and in 1968. The youth of the world took to the streets to protest the injustices of autocratic political regimes and rapacious business interests, and to demand the basic human right to participate as equal citizens in the affairs of society.

On October 15th, millions of young people – and their parents and grandparents – swarmed onto the streets in large cities and small towns around the world, decrying an economic system that favours the rich 1% at the expense of 99% of the people. The protesters are frustrated by a lack of jobs. They are angry over governments giving bailouts to global banks and subsidising corporate giants, whilst cutting vital public services to the middle class and poor. And they are worried by the steady rise in the Earth’s temperature that now threatens to disrupt the world’s ecosystems and trigger a mass extinction of life on the planet.

I recently spent time with many of the October 15th organisers in Spain and Italy – the countries which hosted the largest street protests. I came away with a clear impression that the young people in these countries, along with Wall Street and elsewhere in the world, are not just after reforms of existing political and economic policies and practices. They sense there is something fundamentally wrong with the very way the political and economic system is set up, and are beginning to search for a new economic vision that can put people back to work, establish a more responsive governing framework and protect the biosphere of the Earth.  Finding that new vision requires an understanding of the technological forces that precipitate the profound transformations in society.

The great economic revolutions in history occur when new communication technologies converge with new energy systems.  Communication / energy regimes largely determine the way societies are organised, and particularly, how the fruits of commerce and trade are distributed, how political power is exercised, and how social relations are conducted.

Energy revolutions make possible more expansive and integrated trade. Accompanying communication revolutions manage the new complex commercial activities made possible by the new energy flows. In the 19th century, cheap print technology and the introduction of state schools gave rise to a print-literate workforce with the communication skills to manage an increased flow of commercial activity. This was made possible by coal and steam power technology, ushering in the First Industrial Revolution. In the 20th century, centralised electricity communication (the telephone, and later radio and television) became the communication medium to manage a more complex and dispersed era of oil, autos and suburbs, and the mass consumer culture of the Second Industrial Revolution.

The Old Power Elite

The First and Second Industrial Revolutions were built atop the most centralised energy regimes ever conceived. Fossil fuels (coal, oil, and natural gas) are elite energies. They are found only in select places, requiring a significant military investment and continual geopolitical management to secure centralised command and control systems. This in turn demands massive concentrations of capital to move from underground to end users. The ability to concentrate capital – the essence of modern capitalism – is critical to the effective performance of the system as a whole. The centralised energy infrastructure then sets the conditions for the rest of the economy, encouraging similar business models across every sector.

The oil business is one of the largest industries in the world. It’s also the most costly enterprise for collecting, processing, and distributing energy ever conceived. Virtually all of the other critical industries that emerged from the oil culture feed off the fossil fuel spigot. Modern finance, the automotive industry, power and utilities and telecommunications were, in one way or another, similarly predisposed to large size in order to achieve their own economies of scale. And, like the oil industry, they require huge sums of capital to operate and are organised in a centralised fashion.

Three of the four largest companies in the world today are oil companies: Royal Dutch Shell, Exxon Mobil, and BP. Underneath these giant energy companies are five hundred global companies representing every sector and industry, with a combined revenue of $22.5 trillion, which is the equivalent of one-third of the world’s $62 trillion GDP. These companies are inseparably connected to and dependent on fossil fuels for their very survival.

The beneficiaries of the oil era, for the most part, have been the men and women in the energy and financial sectors, and those strategically positioned across the First and Second Industrial Revolution supply chain. They have reaped extraordinary fortunes.

By the year 2001, the CEOs of the largest American companies earned, on average, 531 times as much as the average worker, up from 1980 when that figure was only 42 times greater. Even more startling, between 1980 and 2005, over 80% of the increase in income in the United States went into the pockets of the wealthiest 1% of the population.

By 2007, the wealthiest 1% of American earners accounted for 23.5% of the nation’s pre-tax income, up from 9% in 1976. Meanwhile, during the same period, the median income for non-elderly American households declined and the percentage of people living in poverty rose.

Perhaps the most apt description of the top-down organisation of economic life that characterised the First and Second Industrial Revolutions is the oft-heard “trickle-down theory”, the idea that when those atop the fossil fuel-based industrial pyramid benefit, enough residual wealth will make its way down to the small businesses and workers at the lower levels to benefit the economy as a whole. While there is no denying that the living standards of millions of people are better at the end of the Second Industrial Revolution than at the beginning of the First Industrial Revolution, it is equally true that those on the top have benefited disproportionately from the Carbon Era, especially in the United States, where few restrictions have been put on the market and little effort made to ensure that the fruits of industrial commerce are broadly shared.

A New Economic Paradigm

Today, internet technology and renewable energies are beginning to merge to create a new infrastructure for a Third Industrial Revolution that will change the way power is distributed in the 21st century. In the coming era, hundreds of millions of people will produce their own green energy in their homes, offices and factories and share it with each other in an “Energy Internet,” just like we now generate and share information online. The creation of a renewable energy regime, loaded by buildings, partially stored in the form of hydrogen, distributed via an energy internet, and connected to plug-in zero-emission transport establishes a five-pillar infrastructure that will spawn thousands of businesses and millions of sustainable jobs.

The Third Industrial Revolution will also bring with it a more democratic economy. The distributed nature of renewable energies necessitates collaborative rather than hierarchical command and control mechanisms. This new lateral energy regime establishes the organisational model for the countless economic activities that multiply from it. A more distributed and collaborative industrial revolution, in turn, invariably leads to a more distributed sharing of the wealth generated. The new, green energy industries are improving performance and reducing costs at an ever-accelerating rate. And just as the generation and distribution of information is becoming nearly free, renewable energies will also. Sun, wind, biomass, geothermal heat and hydropower are available to everyone and, like information, are never used up. The shrinking of transaction costs in the music business and publishing field with the emergence of file sharing of music, ebooks, and news blogs, is wreaking havoc on these traditional industries. We can expect similar disruptive impacts as the diminishing transaction costs of green energy allow manufacturers, retailers, and service industries to produce and share goods and services in vast social networks with very little outlay of financial capital.

How the Internet Generation is Using Lateral Power to Transform the Political Landscape

The democratisation of the economy goes hand and hand with the democratisation of governments. The internet generation is driven by a new political agenda. Their politics has little in common with the right / left economy that characterised the ideological politics of the First and Second Industrial Revolutions. The young activists of the October 15th movement judge institutional behaviour through a new lens. They ask whether the institutions of society – political, economic, educational, social – behave in a centralised manner and exercise power from the top down in a closed and proprietary fashion, or whether they function in a distributed and collaborative way, and are open and transparent in their dealings. The new political thinking is a game-changer that has the potential to remake the political process and reshape political institutions in every country.

Lateral power is a new force in the world. Steve Jobs and the other innovators of his generation took us from expensive centralised mainframe computers, owned and controlled by a handful of global companies, to cheap desktop computers and cell phones, allowing billions of people to connect up with one another in peer-to-peer networks in the social spaces of the internet. The democratisation of communications has enabled nearly one third of the human population on Earth to share music, knowledge, news and social life on an open playing field, marking one of the great evolutionary advances in the history of our species.

But as impressive as this accomplishment is, it is only half of the story. When internet communications manage green energy, every human being on Earth becomes his or her own source of power, both literally and figuratively. Billions of human beings sharing their energy in vast social networks, like they now share information online, creates the foundation for the democratisation of the global economy and a new beginning for the human race.

The youth protest, that began in the Middle East, Spain and Italy and spread to Wall Street and then the world, is a harbinger of a new era.  “Lateral power” has become the battle cry of a new generation, determined to create a more just, equitable, and livable society.

The youth have shown that they know how to use lateral power via Facebook, Twitter and other social networks to bring millions of people to the streets to protest the inequities and abuses of the current economic and political system. Now, the looming question is whether they can harness the same lateral power to create a sustainable economy, generate millions of new jobs, transform the political process and restore the Earth for future generations.


Jeremy Rifkin is the author of The Third Industrial Revolution: How Lateral Power is Transforming Energy, the Economy, and the World.