Matias Vernengo, “The Second Industrial Divide and the Third Industrial Revolution,” Naked Keynesianism, May 16, 2013.More interesting are the implications of large-scale industrial use of 3-D printing, or more likely a future form of it.
Current 3-D printing is an early form of nanotechnology. Back in the 1990s, “nanotechnology” was a buzzword that one kept hearing in speculations on future technology, and probably a lot people became skeptical that a “nanotech revolution” or anything like it was anything but a pipe dream, and only something realisable in the distant future.
But now one gets the sense that things are moving much faster than many people thought. 3-D printing and the ongoing technological advances in automation and robotics suggest that the world may experience a new or “Third Industrial Revolution” in the medium and long term future. I say the “medium and long term future”, because we are only just seeing the early signs of it now, and no doubt the progeny of these current technologies will make current 3-D printing look pretty primitive.
Moreover, these developments are another reason why re-shoring and the return of manufacturing to Western nations might happen (although as Vernengo points, the US still has a pretty impressive industrial sector). Of course, I do not think it will necessarily happen if left to market forces. What is called for is a kind of activist industrial policy and, above all, demand management and full employment policies to both accelerate it and take advantage of the growth opportunities opened up by new technologies.
We may see strong deflationary forces in the 21st century, in the sense that there will be steep price declines in the costs of manufacturing, certainly once human labour is reduced, productivity growth soars, and a few decades of innovation and price declines occur in these new capital goods themselves using all the technologies above.
Most probably, the great deflation of the late 19th century from 1873 to 1896 had just as much to do with productivity growth from new technologies and the opening up of production in the Americas and Australia as it did with poor money supply growth rates caused by a relatively inelastic monetary base in many nations.
But with fiat money and fully endogenous money supplies now we may avoid harmful deflation that induces debt deflationary forces, which were very probably a major economic problem from 1873 to 1896.