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.

The Press - - In Depth -

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

tech­nol­ogy plat­form.

‘‘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.

PHOTO: SCOTT HAM­MOND/STUFF

The bon­ing room of a meat works. How long will NZ ex­ports last when cul­tured beef is a frac­tion of the price?

PHOTO: DEAN KOZANIC/STUFF

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.

PHOTO: WAR­WICK SMITH/STUFF

The NZ farmer’s view of the fu­ture. Robot milk­ing ma­chines but still the fa­mil­iar herds of dairy cows.

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