The big risk to NZ Inc
Who is Jeremy Rifkin and why does he have economists worried? After Europe and China, his message of disruptive change is now stirring interest in New Zealand. John McCrone reports.
Artificial meat gets you thinking. If it is another exponential technology – a wave breaking over the world in the next five to 15 years – how can the New Zealand economy survive?
Auckland food futurist Dr Rosie Bosworth sounded the alarm bells at the Tipping Points conference, hosted by the Environmental Defence Society (EDS) last August.
Bosworth says lab-grown meat only got going in 2013 when a Dutch university start-up – funded by the wealth of Google’s Sergey Brin – managed to culture strips of beef muscle and produce a first hamburger patty.
Now there are a whole host of high tech start-ups flooding into the field, aiming to make artificial yet realistic everything, from chicken and fish, to milk and even leather, she says.
And it is a certainty the price of these ‘‘animal-less’’ foods is going to drop to a fraction of anything New Zealand could possibly grow in a field.
The reasons are simple. You only need a few cells to start a culture. And the production is super efficient.
Bosworth says it takes 23 calories of feed to grow a calorie of prime steak, but just 3 calories of nutrient solution to grow the same calorie of lab meat.
Then there is the real saving to consider – the one that is about the saving of the planet.
Conventional agriculture is the second largest source of greenhouse gas emissions. Farming beats even transport on that. And methane-farting cattle are the worst culprits.
Bosworth says factories growing ‘‘cellular ag’’ meat would slash land use, water use and climate emissions all by 90 to 95 per cent.
The world couldn’t not do it. It would be like flicking off the switch on ecosystem degradation.
Bosworth says cultured milk offers a similar environmental promise and so a similar threat to the New Zealand economy.
Substitute milk can be produced from nearly any plant protein, not just almond or soy, but peas and hemp. As the manufacturing processes are being perfected, it is also on an exponentially dropping price and emissions curve.
So long as the taste is right, there are the other decisive consumer advantages. No antibiotics, hormones or animal diseases. No bloody abattoirs to think about either.
However the price curve is the thing. If you are not hearing about it yet, says Bosworth, it is because the price of a single lab-grown meatball was still around $1400 in 2016.
By last year, this had halved. And it will keep on halving each year until suddenly you look around and discover it is the ridiculously cheap option, costing just cents at the supermarket.
‘‘They aim to be at price parity in about five years time with conventional meat products. Two bucks a kilo, right? How will commodity agriculture ever compete with that?’’ Bosworth asks.
She says when New Zealand farmers talk about coming technological revolutions, they think of paddocks fitted with precision sensors, robot milking sheds, self-driving fruit pickers, drones for herding sheep – a game New Zealand could compete in.
Yet now that is not even looking like a game at all. Technology – whipped along by the imperatives of climate change, population growth and sustainability – might just reinvent world food production from the ground up.
And that would leave New Zealand, with its grassy paddocks, great genetics and latest irrigation systems, holding a massive investment in a basically obsolete industrial infrastructure.
A stranded asset of nationsinking proportions, to use the economic jargon.
It is a snapshot of why not to be complacent. We live in a time of both some exponentially accelerating problems, but also some exponentially developing solutions. And the two are liable to collide in ways that produce unexpected winners and losers.
For a small country like New Zealand especially – hidden away at the bottom of the world, cruising along in a certain degree of comfort these last 20 years – we could be vulnerable if one year everything lurches off in a direction we are not anticipating.
Perhaps it is for this reason, a new documentary – one some have compared to Al Gore’s An Inconvenient Truth – has made a minor stir after doing a round of sponsored screenings in February.
You may have heard about it: The Third Industrial Revolution. Produced by Vice Media, it features US futurologist, Jeremy Rifkin, simply summarising his many books on technology and its economic impacts.
But Rifkin makes a case that is recognisable and compelling. And if he is to be believed, European countries are already reorganising their economies along the lines he suggests.
Germany’s chancellor Angela Merkel is a big supporter, he says. She wanted to see him within weeks of her first taking office.
Now whole regions – like Rotterdam, Luxembourg and Northern France – have produced Rifkin-inspired development strategies.
And he says China is on board with his vision too. Its leaders are telling their ministries to bone up on his books and invest in the grand economic themes he has identified.
David Henley, an Auckland activist and student at Otago University’s Centre for Sustainability, heard the documentary was coming and persuaded the Resource Management Law Association (RMLA) and other green groups to host public showings around New Zealand.
‘‘The documentary pulls together a lot of stuff and gives you a narrative you can get in behind,’’ he says.
In Wellington, a senior Treasury official saw it and immediately arranged a repeat screening for ministry staff.
Henley says he has spoken personally to Climate Change Minister James Shaw and Environment Minister David Parker about it. ‘‘The response is just snowballing.’’
Indeed, a Ministry of Environment-backed invite has gone out to Rifkin from the RMLA, asking if he can come and deliver his message personally at a conference in September.
Henley agrees there is the good dash of self-promotion with Rifkin as there is with any self-appointed guru. ‘‘And one problem with Rifkin is that he’s really expensive to get.’’
Yet New Zealand knows it is at some kind of cross-roads. It has been drifting along in a comfortable rut, using its abundant water and land to produce commodity dairy products for an emerging Asian market.
Meanwhile our climate commitments have been put on hold. We allowed our once worldleading carbon trading scheme to become corrupted by bogus foreign credits, while also stalling on the inclusion of agricultural emissions.
A new government – particular one with the Green Party sharing power – says it wants to create a larger political vision of the future.
There are some big plans to bring in a Zero Carbon Act, along with an independent Climate Change Commission to police it, by the end of 2019.
However Henley says the future also includes rapid technological change and economic disruption. The reinvention of agriculture is just one example of the kinds of things we need to be factoring into our strategic thinking.
And Rifkin seems one guy that the other smart nations, like Germany and China, are listening to closely right now.
So what does Rifkin say? He is certainly a slick speaker. Holding forth for almost two hours in a bare hangar before a circle of awed-looking Millennials, with his old-fashioned moustache and gold-rim glasses, 73-year-old Rifkin punches it out in soundbites.
His basic argument is that there have been two industrial revolutions to date. And now the world economy is about to be remade by a third.
Each of these industrial revolution is a package deal involving three mutuallyreinforcing elements – a communications technology change, an energy source change, and a logistics or transport system change.
‘‘At a certain moment in time, three technologies emerge and converge to create what we call in engineering a general purpose
‘‘That’s a fancy way of saying a new infrastructure that fundamentally changes the way we manage, power and move economic life,’’ Rifkin says.
The first industrial revolution was obviously the coal-fired, steam-powered one of the 19th century. In Britain especially, an abundance of buried coal was mobilised to drive the machines and factories – the means of production.
But to manage a new system of mass production required a matching mass mode of communication.
Rifkin says steam-driven printing presses that could churn out daily newspapers for pennies were crucial. And then the telegraph which could connect immediately across the world.
The third part of this package was mass transit – the rail networks to move people and goods.
The second industrial era was the story of the 20th century – the United States’ century.
The infrastructure package now combined the communication revolution of the telephone, radio and TV; the energy revolution of cheap oil and the electricity grid; the logistics revolution of the car and truck.
So far, so familiar. But Rifkin says what people have missed is that each of these eras had basic limits to their underlying energy efficiency.
Any economy depends on turning raw materials into delivered products. And there is an energy cost incurred at every step of the journey.
So both the coal and oil eras were about the advantages of scale – the move to mass production and hierarchical organisation.
However Rifkin says when economists analysed what actually created long-term economic growth, only a small part of it was explained by better machinery or smarter workers.
A full 86 per cent of improved national performance turned out to be due to finding ways to squeeze down the per unit energy cost of delivering goods and services.
Rifkin call this the aggregate efficiency.
The US, for example, started out with a 3 per cent aggregate efficiency in the 1900s when it first began with its telephones, electricity grids and Ford Model Ts. This reached a peak of 14 per cent in the 1990s, and has plateaued ever since.
Germany did better, getting to
18.5 per cent. And Japan achieved
20 per cent. But Rifkin says this looks like the ceiling for the efficiency of energy conversion when it comes to the second industrial revolution.
As an economic way of life, it just has its own inherent constraints. A centralising mass production model still creates the many intermediate steps – the long supply chains, the large human bureaucracies – which leak both profit and resources.
A natural thermodynamic principle is involved, says Rifkin. ‘‘If a lion chases down an antelope in the wild and kills it, about 10 to 20 per cent of the total energy that is in that antelope gets embedded into the lion. The rest is heat lost in the conversion.’’
And so the second industrial era simply ran into the eventual efficiency limits of its own structure.
Which is of course bad news for a world that quickly needs to find some way to jump towards an economic paradigm that is now radically more sustainable and efficient.
As Rifkin says he told Merkel – the key to her big change in thinking – no point trying to fix the old order. All the reforms you like won’t make a damn bit of difference to its aggregate efficiency.
There is no option but to turn and embrace a different kind of national economic platform with the necessary energy performance built-in.
Rifkin says the final reckoning for the second industrial revolution was the oil price spike of July 2008 when the price of a barrel shot up to US$147.
The world found that it was too energy inefficient to live with fossil fuels at such a high cost. And the global financial crisis quickly followed.
‘‘The whole global economy shut down. That [price spike] was the economic earthquake. The collapse of the financial markets 60 days later was the aftershock.’’
Since then, the world has been stagnating on zero interest rates and endless borrowing. However out of the ashes can arise the third industrial era with the energy efficiency to save the planet.
Rifkin says the shape of things to come is unpredictable because it depends on complicated interactions between technology advances on three fronts – communications, energy and logistic.
Yet the general logic is clear. It will be all about embedding smartness at every possible touchpoint of life. Rifkin calls this building the ‘‘internet of things’’.
The communications part has already happened. The world has a new general purpose nervous system in the internet, which gives anyone a direct connection to anything.
But this is still playing in a virtual world. The real change happens when it is fully integrated with the physical world where the energy is being spent and goods used.
The internet of things depends on inserting every kind of miniature chip sensor – accelerometers, pressure gauges, gyroscopes – into objects.
Our cars, our homes, our neighbourhoods, will all become manageable through the internet. And efficiencies can be found wherever physical processes are being monitored.
This smart technology is riding the same exponentially dropping cost curve as computers and communication.
But what Rifkin says is even better news is that renewable energy – wind turbines and solar panels – are also now on that same kind of technology cost track.
Unlike coal or oil, sun and wind are essentially free to anyone who wants to use them.
Fossil fuels are always someone’s property, Rifkin says. And as supplies dwindle, they become ever more expensive to extract.
However the sun has never sent anyone a bill, he quips. And the cost of solar panel generated electricity is being relentlessly driven down by research.
In 2017, solar power cost 50 cents a kilowatt hour. By 2019, it will be 35c. And on the futures market – evidence of where the price is headed – 20 year supply contracts are being signed for as little as 4c a kilowatt hour. ‘‘It’s over, actually, for fossil fuel and nuclear.’’
And it is more than just a change in energy source, Rifkin says. The collision of an internet of things and cheap renewable electricity will be one of those technology interactions that rewrites the energy industry itself.
Rifkin says the cost of a solar panel will mean every home will be able to generate its own green electricity.
In Germany, which is moving fast, the national power companies are accepting they will be mothballing their plants and just managing the grid – smoothing out the flows as communities feed their excess generation into the shared pool at times, taking it back out at others.
As has happened with social media replacing newspapers and TV, or online shopping taking over from the malls, the very shape of industries will be reinvented once exponential technology is hitting them from every direction.
Rifkin says the future story for transport is also clear by now. We are moving towards electric fleets of self-driving cars and trucks. Plus a general change in psychology from being an owner of a vehicle to just accessing transport as a service.
All kinds of efficiencies will result from being able to dial up an autonomous e-pod with an Uberstyle app. It would be the kind of step change needed to save the world from planetary over-heating and resource exhaustion.
Life could be richer, even if we no longer have our own fourwheeled lump of metal and glass to wax on a Saturday morning.
A ‘‘sharing-based economy’’ will itself be a big general change, Rifkin says. The internet brought in the new idea that nothing needs to cost, everything can be given away.
At first, it was viewed as mere piracy – the downloading of music, books and movies. But now somehow social capital exists alongside market capital as an economic reality.
People create and give away freely. They just have to make enough of a living along the way.
Rifkin says YouTube has a massive amount of free education as well as free entertainment now. And imagine the next step as 3D printing – another exponential technology – becomes ubiquitous.
The cost of someone inventing a product, and you then printing it out at home, will drive prices to as near zero as they can get. Apart from the supply of the 3D printing materials, there is nothing else intervening to introduce energy inefficiencies.
Rifkin says the Millennial generation get it. They think it is natural to share. Why even buy toys or clothes when an app can hook you up to an environmentally-friendly system of barter and exchange?
But – and this is his point to national leaders – to get the benefits, countries need to be moving as fast as they can to building a new infrastructure based on an internet of things.
As with New Zealand and agriculture, the temptation will be to cling on to the national-scale investments already made.
Look at the US. Not only is it fracking to keep oil going, it is talking about making coal great again. Psychologically, it can’t let go of the 20th century economic model that served it so well.
However the changes are not just coming, they are exponential and combining, says Rifkin.
And while the economic machinery of life can never reach 100 per cent efficiency, a smart internet of things should be able to produce a jump from a 20 per cent aggregate efficiency to something more like 40 per cent.
Given that, and the state of the planet, we won’t have a choice but to go with his third industrial revolution.
It gets you thinking. Pubudu Senanayake of youth climate action group, Generation Zero, who was at the Christchurch screening of the doco, remarks it is going to be tougher than Rifkin makes out.
There is the issue of carbon cannibalisation, for instance. Senanayake says just manufacturing enough solar panels and cultured meat factories to save the world could now itself generate a vast amount of carbon.
‘‘The question is whether producing this new energy system would create a lethal burst of greenhouse gas emissions.’’
Ian Short, a returning Kiwi who was chief executive of the European Union’s Climate-KIC, the world’s biggest climate change innovation partnership, says Rifkin is almost undoubtedly correct. And New Zealand’s problem will be thinking big enough.
Last year Short says he was helping the government set up a cross-department Transition Hub to take a ‘‘whole economy’’ view of climate change.
Yet ironically, now the Greens are in a position to push for stronger emissions action, our attention could become too focused on clamping down on our legacy industrial system and not enough on jumping forward to its replacement.
As a country, we really need our eyes open, Short says. All we know is things are going to happen quicker than we think.
And where we believe we are ahead of the game, a second era winner as we are with our meat and milk, is quite likely to be exactly where the future sideswipes us.
The truly disruptive possibilities – like a world-wide switch to cultured factory protein – could be sitting quietly in our blind spot right today.
The second industrial era has already peaked in terms of efficiency, so the next infrastructure leap has to be radical.
Top table: US futurologist, Jeremy Rifkin, at launch of the EU’s Smart Europe Third Industrial Revolution plan.
Solar power prices are dropping fast. Here Chinese workers install a floating field of panels in a heartland coal area.
The boning room of a meat works. How long will NZ exports last when cultured beef is a fraction of the price?
Generation Zero’s Pubudu Senanayake. A problem with Rifkin’s dream might be carbon cannibalisation.
Shared future: Self-driving pods, like this Volkswagen Sedric concept car, could also be the end of car ownership.
The NZ farmer’s view of the future. Robot milking machines but still the familiar herds of dairy cows.