Empty buildings can power growth
Author Jeremy Rifkin, known for his much-discussed theories, says China could turn a major economic drag into an engine, Sun Ye reports.
Jeremy Rifkin, the celebrated American economic and social theorist, thinks he has the cure for China’s real estate problem, saying that the nation’s ghost cities and surplus apartments, when tweaked, might stoke the country to unprecedented growth.
Rifkin, 69, founder and president of the Foundation on Economic Trends, has advised the European Union in the past decade and penned the New York Times best-seller The Third Industrial Revolution as well as 19 other books on his economic ideas. He also teaches at Wharton, the prestigious business school at the University of Pennsylvania.
Now he has his eyes on China, and said its real estate bubble also carries a rare opportunity for the country to excel in the third industrial revolution, the one where the country’s Internet Plus goal of incorporating the Internet into the economy triumphs.
“What you think of as liability is actually your asset,” he said during a recent trip to Beijing. “If you reformulate, it can move the economy and make a new page for China and the world.”
China’s real estate market has taken a downturn in the past couple of years due to weak demand and an excess of unsold homes.
In some cases, whole areas were built but have been slow to fill up, causing some to dub them “ghost cities”.
The cooling has continued, despite various policies announced to combat the slowdown, such as four cuts to benchmark interest rates since November, according to a Xinhua News Agency report.
But for Rifkin, who has been lionized and sometimes lambasted for his futuristic concepts, the problematic real estate industry, which by his account takes up as much as 30 percent of the country’s GDP, can again become the engine to unstoppable development. That could happen, he said, if the idle houses are retrofitted to become multifunctional “nodes”.
By nodes, he means updated, all- in- one houses that function individually and simultaneously as data centers, green power plants and storage sites, as well as transport and logistics hubs. The nodes would all be connected, too, in a matrix where everything flows freely.
It’s all part of what Rifkin has called the “democratization of energy” and “distributed capitalism” that he said are hallmarks of the third industrial revolution’s move away from a carbon-based, top-down economy.
Because node owners have access to big data, they can use it to make immediate decisions to tailor the entire exchange process — say, develop an application that caters to its exact niche market, or turn off production the very minute they sniff excess.
“They can make use of the data and increase aggregate efficiency every step on the value chain,” Rifkin said. “(By becoming nodes), they dramatically increase the productivity and lower marginal costs.”
At the center of his proposal is the concept of aggregate energy efficiency, a thermodynamics term that deals with the amount of energy that is used and not wasted.
Rifkin believes that it’s the same law — which states that the total sum of energy is constant, only changing in form — that governs economic activities. A large share of energy in the economic process also is wasted.
That is, unless a paradigm shift — a fundamental change in approach or underlying assumptions — comes along to improve efficiency. Or, for example, if petroleum-based energy is unable to propel any further growth.
“Eighty- six percent of growth is determined by aggregate efficiency, the rest by capital and productivity,” he said. “GDP is slowing everywhere because efficiency cannot go up.”
For Rifkin, the way to amp up growth is to embrace the new age where “the communication Internet, renewable energy Internet, and automated transportation Internet converge”. “Great economic paradigm shifts in history occur when new communication technologies, energy sources or modes of transportation emerge to create a new platform for economic activity,” he said.
While telecommunications, oil, railways and highways fueled the last industrial revolution, Rifkin said the combined force of the Internet, wind and solar power, and automated transportation would do the same in the next few decades.
That’s why, he said, he envisions the retrofitting of empty buildings in China to be part of the groundwork for what the future needs. “What China needs to do right now is connect the dots,” he said.
The country proposed its Internet Plus strategy in July in order to encourage the integration of the Internet into traditional sectors.
China already is the world’s largest producer of solar and wind power, and it also is a leader in research and technology in that area.
The State Grid has announced plans to equip the country with a smart power grid. It also pledges to establish a Global Energy Network through ultrahigh voltage to transfer renewable energy.
A national five-year plan to refurbish and update existing buildings is already underway.
Rifkin also notes that some of the country’s pioneering developmental zones are already trying out things similar to his vision, as the country has positioned these zones as converging points of energy, communications and transportation.
From his previous meetings with Chinese officials, including Vice-Premier Wang Yang, Rifkin said he believes the country is indeed connecting the dots. Apart from hardware issues, Rifkin considers China culturally wired for the new economic era, too.
The “sharing economy”, ubiquitous now with Uber, Airbnb and their Chinese counterparts, is one feature of the new economic paradigm, according to Rifkin. Providers of goods in this economy often pay minimal marginal cost, work for a greater good and don’t have to play the zero-sum game of the competitive capitalist economy.
“The sharing economy is the baby that capitalism gives birth to,” Rifkin said. “Capitalism in the next 25 years will not be the exclusive, arbitrary system (it has been). It will share center stage with the sharing economy.”
And this climate, one that encourages sharing and thinking of the community good, is what Chinese are used to, Rifkin said.
“In China, Confucius said individual identity is bound with how they share and serve the larger community. One’s sense of self is always measured with his relationship with others,” he said.
“With the Confucian and Buddhist traditions, you have the sharing economy’s cultural DNA.”
A 2014 Nelson survey in 60 countries on people’s willingness to share or rent personal items also confirmed his observation, with 94 percent of surveyed Chinese willing to share their own goods and rent from others. The global average is 68 percent.
“In the West, especially in Britain and the US, we tend to think of people as individual … agents, an island for themselves,” Rifkin said. “But the younger generation now think of freedom not as exclusivity but inclusiveness, not as autonomy but with a sense of belonging.”
Rifkin said he is hopeful that spirit will be extended through developments like China’s Belt and Road Initiative, which refers to the Silk Road Economic Belt and 21st Century Maritime Silk Road, which would use trade and investment to boost ties to China along ancient trade routes and elsewhere. It would connect 3 billion people and scores of countries.
“China now has the opportunity to draft a new journey for the entire world, to bring a (better) quality life to everyone involved,” he said.
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