An interview with Jeremy Rifkin

Jeremy Rifkin is an economic and social theorist, writer, public speaker, political advisor and activist. Rifkin is president of the Foundation on Economic Trends and the bestselling author of 19 books about the impact of scientific and technological changes on the economy, the workforce, society, and the environment. He has recently been interviewed by David Ferris of Environment & Energy Publishing.

While it is not part of this article, Europeans should note that the Chamber of Commerce and Industry of the Nord-Pas de Calais region and the Regional Council of the Nord-Pas de Calais region in France entrusted Jeremy Rifkin with the task of putting together the road map that set the region on the energy development path. This forward-looking approach puts the Nord-Pas de Calais region at the cutting-edge in the area of energy development and the development of a post-carbon economy. This initiative that is unique in France has plenty of potential in many areas, particularly in the area of job creation, economic development and a new economic unity.

While you may not always agree with Rifkin, he certainly makes you think.

 

An author’s take on renewable energy and the end of capitalism

Jeremy Rifkin is the author of 23 books about the economy and technology, including his latest, “The Zero Marginal Cost Society.” In it, he postulates that a confluence of technologies — distributed renewable energy, 3-D printing and the Internet of Things, among others — will lead to the decline of capitalism and the rise of a new, collaborative economic system.

What follows is an edited version of the interview.

EnergyWire: In this book, you say that something called “zero marginal cost” will transform the economy. What is zero marginal cost, and what impact will it have?

Jeremy Rifkin: A new economic system is emerging onto the world stage called the collaborative commons. We’re just beginning to glimpse it in Europe. This is the first new economic system since the advent of capitalism and communism in the early part of the 19th century. It’s a big deal. It’s a remarkable historical event that is already transforming our way of life. It’s flourishing alongside the conventional, traditional capitalist market. Sometimes they advantage one another, sometimes they compete with each other.

The triggering event that is making possible this transformation into a dual economy — part capitalist market, part collaborative commons — is something called near zero marginal cost. Marginal cost is the cost of producing an additional unit of a good or service after your fixed costs are covered.

EW: So lowering the cost of making things will kill capitalism? That’s a big claim. What sort of precedent is there for that?

JR: How do the great economic revolutions occur? When we look at every great economic paradigm shift in history — there haven’t been that many — we see that three technology revolutions always merge into one general-purpose technology platform that changes everything. Those three components are a communications revolution, to manage economic activity; an energy revolution to power economic activity; and a transportation revolution to move economic activity.

In the 19th century, those three technologies came together. We had steam-powered printing replace manual printing. That was a big leap forward in efficiency. Steam power printing and the telegraph converged with cheap coal, and with a transportation system based on the locomotive and national rail systems. It allowed us to go from local to national markets and change the world.

In the 20th century, we had another convergence. The telephone, later radio and television, became the communications media to manage economic activity. Centralized electrification and cheap oil gave us the energy to power economic activity, and the internal combustion engine and the national roads system gave us the transportation and logistics to move economic activity.

The second industrial revolution isn’t sunsetting; it’s actually on life support. Fossil-fuel energies are getting more expensive. We’re going to the more exotic fossil fuels like tar sands, heavy oil and shale gas, and prices are volatile on the world market, destabilizing the global economy. The whole general-purpose technology platform — all the technologies that emerged with that energy regime, like the internal combustion engine and centralized electrification — have exhausted their productivity. We can’t get anything out of their S curve anymore. We’ve maxed out.

It’s a pivotal moment, not only for the global economy, but now for the species because we are confronting potentially catastrophic changes in our way of life. We clearly need a new economic vision that is deliverable quickly.

EW: So tell me about this new economic vision.

JR: We never anticipated a technology revolution so extreme in its productivity that it could actually reduce marginal cost to near zero for a whole array of goods and services, making them essentially priceless, abundant and beyond the market.

In the last 20 years, we’ve seen the zero marginal cost phenomenon invade entire sectors of the powerful media, knowledge and information industry. First with Napster and file-sharing services, when millions of young people began to be “prosumers,” and produced or mixed and matched their own music and shared it with each other through the communication Internet at near zero marginal cost. They simply bypassed the recording industry. Then young people began to make videos on YouTube, and they began to share with each other at near zero marginal cost, bypassing the TV and film industry.

Take the news and magazine industry. Millions of young people began to create their own news and knowledge with news blogs and then Wikipedia. Free e-books began to challenge traditional publishing. The recording industry crumbled, newspapers and magazines bellied up. The entertainment industry has taken a plunge, and TV has been devastated. The publishing industry has really bottomed out.

EW: But can you really compare the media industry, where it’s all just information, to other industries that make physical things?

JR: We never anticipated that near zero marginal cost would cross the firewall from the virtual world of bits to the physical world of atoms. The triggering agent is a new technology revolution called the Internet of Things. The Internet is morphing. It’s bringing together a communication Internet with a fledgling energy Internet in Europe and a nascent transportation and logistics Internet to create a super-Internet of Things, for a third industrial revolution.

Sensors are being connected to everything and every device and every human being in one neural network. We have 14 billion sensors now. By 2020, there’ll be about 50 billion sensors and by 2030, 100 trillion sensors. The first reaction is wow, we’re going to connect the human race. The second reaction is, this is scary! (laughs)

EW: So how do all these sensors change the economy?

JR: There are big questions about who’s going to control the pipes, what about data security, privacy, information transparency. Assuming we maintain that, what it means is that any prosumer can take their own technology and their own apps and can mine the data coming through this Internet of Things and use their own analytics and algorithms to increase your own efficiencies, reduce your marginal costs, increase your productivity, and put out your own physical goods and services at near zero marginal cost, just like we have been doing producing our own virtual information goods and services on the communication internet.

EW: Where does renewable energy come in?

JR: Look at what’s happening in Germany. Germany is now 27 percent green electricity, and they’re heading to 35 percent green electricity by 2020. Three Sundays ago, almost 75 percent of all the electricity powering Germany, the most powerful industrial country per capita in the world, was solar and wind. It was so much green electricity that we had negative prices the whole day.

This has changed the equation dramatically. In Germany, the green electricity is all being produced by small players. You’ve got millions of small players — think file sharing and music — who are producing cooperatives, rural and urban, just like we did between 1935 and 1950 in the rural areas of America when we put in electricity. They are producing the vast amount of electricity.

Meanwhile, the big four power companies — Vattenfall, EnBW, RWE and E.ON — these powerful, global, vertically integrated companies that both generate power and distribute electricity, they’ve been wiped in less than seven years, faster than any of us ever imagined. They’re producing less than 7 percent of the new power that will power Germany.

The reason is they can’t scale it. These vertically integrated organizations eliminated a lot of inefficiencies in the market, and they put out cheaper products and put a lot of people back to work. They worked. But they can’t compete now with the new lateral economies of scale when millions of small players come together on a communications, energy and logistics Internet.

What this means is that we are beginning to see in the energy industry what happened to the recording industry, the book publishing industry, newspapers and magazines, and TV and film.

EW: In the book, you say that a key part of this new economy is that costs for solar panels and small wind turbines are dropping. Say more about that.

JR: A solar watt cost around $66 in 1970. A watt is 66 cents this morning. Wind is on an exponential curve very similar. We’re going to see solar and small wind, and next geothermal and some form of bioconverters, they are going to become as cheap as cellphones and desktop computers and scaled within 20 years.

Even before the fixed costs are paid back, the marginal costs of producing an additional unit of wind and solar is free. Nuclear power promised electricity too cheap to meter, but never delivered. Now we have millions of early adopters who are producing green electricity, solar and wind, at near zero marginal cost. The wind and sun don’t send a bill.

EW: This is all very general. Is there a company that shows this zero marginal cost thing in action?

JR: If you want to see how this works, look at Uber. Cars are interesting from an energy point of view. The car was a centerpiece of the second industrial revolution. The whole economy of the world was centered around the vast production of automobiles. With car sharing, every car shared takes 15 automobiles out of production.

Uber and Lyft use all three of the emerging Internets. With Uber, you go up on your smartphone, so you use a communication Internet. The fixed cost of setting up the Uber network is very low. It’s just a website. Let’s say you’re a driver. For you to use your car, if you want to lease it out, you’re already paying for your car, and your insurance, so the marginal cost of having your car used is near zero. You’re using mobile technology with the communication Internet to find each other. You have GPS guidance, which will let you connect with that driver and know exactly who’s in the vicinity. In London and elsewhere, they’re introducing electric vehicles as big fleet vehicles. You can use elect vehicles, powered by a combination of electricity that’s going to be more and more renewable energy with near zero marginal cost. It’s a revolution that moves us toward a new economic model.

You see it with Airbnb. Again, marginal costs are low — it’s knocking off the hotel industry.

EW: Where does the U.S. energy industry sit in the transition to this new economy?

JR:The problem we’re facing is that the U.S., Canada and Australia are shaping up to be the outliers, with the exception of the West Coast — California, Oregon and Washington — and New York state, South Texas from San Antonio to Austin, and a few other enclaves.

In the U.S. and Canada, we bought the short-term devil’s bargain. We’re saying we’re now energy independent with tar sands and shale gas, and we will be the biggest fossil fuel producers in the 21st century. That keeps us in the old, second industrial revolution, of centralized communication, centralized infrastructure for energy, and an old logistics system.

The sad thing about shale gas is that we all know it’s a bubble. Massive investment by everyone in shale gas deposits in the U.S. at the same time. Each of those deposits has a short sweet spot. It’s not like a Saudi Arabian oil well for 30 years. The price of natural gas has plummeted because we’re milking all the sweet spots within 18 months. Even our Department of Energy and the International Energy Agency say that prices are going to go up by 2020 again. Our power and utility companies are putting in backup natural-gas-fired power plants on the grid. By installing those, they’re locking us in for another 20 years. That’s really critical for our future. The same thing is going on up in Canada with tar sands.

It’s locking us in to a dying second industrial revolution, and it’s allowing Europe and China to move ahead of us and begin to build out the Internet of Things platform, while we sit on our butt.