In 1919, Captain Dwight D. Eisenhower led a convoy of about 80 army trucks from Washington DC (a monument now marks the spot) to San Francisco.  They followed the then-famous Lincoln Highway and completed the epic 3000 mile journey in 62 days.  That experience, along with having used the Nazi-built autobahns during the dash across Germany to get to Berlin ahead of the Soviets in 1945, convinced Eisenhower to support the building of the US’s Autobahn-inspired interstate highway system, starting in 1956.  It’s now possible to take Eisenhower’s same approximate route in three to four days. The Interstate Highway System arguably was a key enabler of the vast economic expansion of the post-WWII US.

Such monumental infrastructure creation in the US is now in our rear view mirror.  Nothing approaching the significance of this now-complete system and the enormous economic expansion that followed, appears anywhere on the road ahead.  Nothing resembling the technology stimulating lunar mission program of the 1960s is on the horizon.  All of these facts have direct bearing on what is now becoming the new normal in the US’s economy.

Simply put, we are now encountering the effects of the final stages of the Second Industrial Revolution.  As I stated in my previous blogs of 25 and 31 December, 2011, we now have nearly completed the economic expansions enabled by the Second Industrial Revolution and have yet to segue into what one would hope to be a resumption of economic growth enabled by the Third Industrial Revolution (TIR).

While the economic, technological and political changes our country underwent in the first two economic revolutions were astonishingly transformative and unprecedented from the perspective of history, the transition between the two epochs was evolutionary in the sense that change was driven by the availability of new opportunities and occurred without much societal ado.  While we were willingly pulled along to prosperity for over two hundred years, the situation we all face now is that transitioning to the TIR will be driven by the irresistible need to change the fundamental basis for our economic and political systems.

Another salient feature of the Second Revolution is that the revolution is largely a story of Western Europe, North America and later, Japan. Now, in these waning decades of this revolution the enormous presence of India and China has begun to strain the so-called “built out” infrastructure I mentioned above.  India and China are two mammoth economies that have been plopped down somewhere in the middle of the Second Industrial Revolution from an economic development and infrastructure standpoint — yet with many characteristics of our own late-stage position, primarily in regard to energy, raw material consumption and wireless communications.   As a result, we are now being pushed by a changed world largely out of our direct control to a new economic and political state of affairs that we haven’t yet been able to imagine, much less control its nature or timing.

The consequences of this situation can play out in many ways.  One thing is certain, the incentives to develop reliable and affordable renewable energy sources will become much more pressing.  Unfortunately, history teaches that humans rarely act to get ahead of events and will nearly always be guided by their self interest, thus allowing opportunities to manage transformation in an orderly manner to slip through our collective fingers.  Competition for scarce resources promotes instability.

Another likely outcome is that we will discover the current economic downturn affecting Europe, Japan and the US, along with our current levels of employment, is the new normal.  For instance, productivity in the US jumped 20% in the decade between 1990 and 2000.  This improvement is additive to decades of similar improvements.  The dividends are astonishing.  For example, according to the American Enterprise Institute, a 21 inch color TV from the 1964 Sears catalog cost $750.  In 2011 dollars, the same amount of money can buy a much larger flat screen TV, a washer and dryer, a laptop, an iPad, a GPS and a BluRay player with amplifier, with money left over.  Said another way, we can meet the demand for goods and services with the current workforce.  This means the current “downturn” (regardless of how it got started) is, in fact, a seismic economic contraction with an attendant permanent loss of jobs, abetted by very low birth rates and aging populations.   Logically, future economic activity will substantially consist of replacing infrastructure as it ages and supplying new consumer goods and services to a shrinking population ( the exception, of course, being health care.)

The unknown variable is whether Western economies can participate in any meaningful way in helping to satisfy the needs and wants of the vast and growing middle classes of India and China.  If so, growth in sales of high value-added consumer products and services will help grow employment figures.  Forget commodities, low value consumer goods and raw materials.

All of the above will play out for longer than any of us will want (decades) before the TIR will become real enough to sustain a global economy based on nearly universal access to renewable energy sources and the attendant improvement in the standard of living it should bring.  I hope we can last long enough to see it happen.