What is the economics of industrialization

The future of industry: technology-based services

We claim with some confidence that we are in the age of the service and knowledge society.1 But industry has not disappeared, just as material production remains the bedrock of the information society. The forms of industry are changing; their techno-system-based productivity manages without the large working masses of the 19th and 20th centuries. Modern industry is smart and capital-intensive. In its increased, but invisible productivity, it only becomes socially visible again as the interface to ecology and, politically requested, works off its burdens on nature. In contrast to its uninhibited use of resources in the 19th and 20th centuries, it is changing into a more or less intelligent ecological operator: we hardly perceive that as an industry - strangely enough.

The fact that we believe we have overcome the “industrial age” has to do with the disappearance of the large industrial complexes that dominated the cities - in their visibility as massive building complexes and as a daily inflow and outflow of workers. The tremendous increase in capital productivity has made industries smaller and smarter and outsourced them to the outskirts of cities (or already abroad, if labor costs are an even bigger item). Industry has become invisible as an aesthetic phenomenon - in its particular ugliness, but also power, including the enormous pollution - but no less productive and significant. It has adapted and modernized faster than many other social formations. These changes are still ahead of the service industries.

Industry has been understood as efficient production based on the division of labor since the end of the 18th century: that is the economic definition since Adam Smith, which combines a specific organizational form of corporate production with increases in productivity. Here the old sense of industry = hard work / effort is transferred into an organizational form. With Ricardo, there is also the machinery. Both classic economists see production as added value through the transformation / formation of materials.2 At the end of the 18th century, industry turns out to be a social and economic realization of the old Baconian maxim: to command nature in action.3

This definition consistently forms the basis of industry to this day - industry is, at its core, material transformation. Your products change the things we deal with on a daily basis. The thing / actor relationships of modern societies are essentially industry-based. But reducing industry to technical production alone is under-complex. It is true that the material transformation forms the core of the industry. Services handle the products but do not generate them. But industrial production - an economic, not merely technical form of production - cannot be explained without the services directly linked to it (from transport to accounting to management). Many non-technical forms of knowledge are entered into the industrial process, ultimately also the engineering and scientific forms, in addition to the administrations. That is why the development of industrial productions is inseparably service-based and knowledge-based right from the start. Industrial production - the core element of flourishing capitalism - is an organized mixtum compositum of technology, work, services and knowledge under economic direction. It is no different today, even if in new, IT-defined constellations. However, the dimensions of employment and the forms of organization have changed

The industrial production process

Five transformation processes are nested in industry:

1. the transformation of matter into goods and their differentiated forms (T1);

2. the transformation of the technologies that generate these productions (T2);

3. the extraction and transformation of energies by thermodynamic technology (T3);

4. the transformation of the organization of these processes (T4);

5. the transposition of energy, raw materials and products through infrastructural developed logistics (T5).

T2 and T3 generate the engineering function, T4 the manager function: as a specific management activity that coordinates the different processes T1 to T3 with regard to value creation.

From the beginning, industrial production was a multi-component system, the individual parts of which were differentiated in the course of industrialization:

  1. the technical core process (= material transformation);
  2. the accompanying process of constant innovation and implementation of new technologies (R&D = engineering-driven processes);
  3. accompanying manual work processes (storage, transport, loading, assembly, etc.), some of which have already been purchased externally;
  4. trading in products, including transport;
  5. the accompanying employee and administrative processes (accounting, financing, warehousing, purchasing and sales, etc.);
  6. banking (as external financing).

All of these processes together formed the industrial production process in the broadest sense. Four processes are initially not supported by technology (3 to 6), only the core process (1) and, in part, the engineering process (2). We see that the industry has been essentially service-supported or accompanied from the start. Each of these processes is subject to a different logic, the common bracket of which is the creation of added value. In order to achieve this, special forms of organization and their coupling must be used: Management.5 Management is a new service area within industrial companies that has arisen in industrial production; we have to add to the above list:

  1. Management (not only the company management, but also the professionalization of lower management levels).

Industrial management is the art of coordinating different processes of their own logic to create a value-added nexus. None of the individual departments or areas is sui generis designed to create value. Workers, engineers and employees are conditioned to their respective specialist areas and are not communicatively linked to one another.6 The dominance of technology (with its specific objective requirements) must be adapted in each case to the profitability. Technical and economic production must be coordinated in such a way that sustainable marketable products are generated.

Processes 1 to 7 are no longer necessary to organize within a company. What was previously managed hierarchically within an (industrial) organization is now partly divided into external contractual relationships or distributed over various international productions. The formerly block-like organizational structure is transformed into a network relationship structure that repeatedly cooperates with new partners on the fringes of market competition. Flexible efficiency criteria dominate here instead of hierarchically defined working relationships.7 Modern industry is all the more an organizational issue; In the case of critical technologies, questions arise about risks and their controllability.

What is new today is the fact that the technology is not reserved for industrial processes alone, but rather that it permeates everyday activities. In this respect, we are dealing with a “new industry” that leaves the company as a production site and functions as a techno base for service and other performance processes that work semi-industrially. Semi-industrial means the following: Techno-based actions do not produce material products like industry, but their generation (as a term of non-material transformations) cannot take place without technical media. In terms of IT, we are dealing with techno-informational hybrids. Industry has partially emigrated into society. 8

New industry

Capitalism is a great system of transformation. First as a transformation of materials, then, expanded, as an informational transformation of services, and finally as their extension through knowledge generation and knowledge entry. These expansions of the transformation processes did not abolish the industrial core, they only concealed it. The pure productions are combined with services and knowledge to create new hybrid goods. You don't buy a machine anymore, you buy “total service”; you no longer buy a consumer good, but at the same time a lifestyle. Nevertheless, the material production carries all these processes, but determines less and less the final application and form. It seems that the industry is becoming a service provider for added value and market applications; their productions are so flexible, adaptable and variable that they can take any form available on the market.

Modern everyday life is technically structured: in addition to the conventional technologies that we have always used: writing implements, clocks, bicycles, automobiles, TV, telephones, refrigerators, washing machines, etc., we are already in an expanded technocolonization: computers, laptops, Cell phones, music players, etc., will soon be integrated in one-for-all devices - all industrial products, the latter with the (economic) advantage that they technologically become obsolete so quickly that they are bought new every year. But these are only the obvious signs that we continue to buy our everyday objects (textiles, furniture, books, kitchen appliances, washing machines, tools, etc.) as industrially manufactured products, in addition to an increasing proportion of food, pharmaceuticals, etc. that is our everyday world a thing / network world in which the industrial part is immensely larger (and does not decrease with further IT penetration) than we perceive it.

The everyday things with which our actions are linked are essentially industrial products (which is particularly noticeable in the reproductions of art that are shown everywhere). Even sport is device-based (soon to be biotech-based), medicine through and through, and even gardening. All that remains is house construction, which still has a high level of craftsmanship (but using many industrially prefabricated components). There are hardly any things that are not industrially manufactured using materials. That is why so much importance is assigned to design that it conceals mass production by individual attribution of shape or high variety (mass customization: as a hybrid between industrial mass production and industrially sorted individuality of the products that we are increasingly choosing ourselves).

Rather, we perceive what is happening on these everyday technologies: our work, our pleasure, all the media events, games, documentaries, etc. Media are initially not perceived as material products. They are sets of pixels on electronic slides. But they are produced by material:

  • Firstly, not only similar to the industrial forms of mass production, but with a new immense reproducibility
  • Second, they are - which we tend to overlook - material products, but now in modern forms, as a combination of algorithmically organized electrics on manageable micro-universal machines.

The product of this new form of industry is a combination of material and informational transformation, the variety of services of which could not exist without the information technology dispositive.

Let's call it a “fourth industry” (after the classic first industrial mechanization, after the second series production, and after the third, the automation of the production process). The "fourth industry" is the "industrialization of everyday life" (including everyday office life), primarily through the IT machines that allow us to work industrially on levels that no longer belong to traditional industry: on human / Machine interfaces.

But the “fourth industry” goes on: the printer that I have installed at home is a small industrial production (like the microwave, the water heater, the automatic gas or oil heating; my solar panels produce electrical energy on the roof, etc.). Production processes that previously only took place in traditional industrial companies are widely distributed across households. The industrial value network is expanding to include society, and the older industry is shifting in this dimension to manufacturing and selling the production machines that serve these decentralized new "small industries". The first 3D printers are currently on the market that produce three-dimensional replicas from 3D models and heated liquid material.9 Neil Gershenfeld from MIT calls this step the introduction of “Fabs”: “from personal computers to personal fabrication” .10 We have it is a process of converting the production of goods to the production of production agents or "small factories". That is why classic industrial production is not decreasing; it only changes its product structure, becomes pre-production for a relatively independent domestic and office production. Overall, the company is expanding its industrial and production potential. We are being "thoroughly industrialized", but not in the sense of the negative utopias of the mechanization of the world ("steel housing"), but by everyday machinery that is increasingly becoming a matter of course for us, even if only as a collection of event machines and gadgets (computer Games, social machines like the iPhone, with which we operate our contact networks, etc.).

We choose the music we listen to and write a lot of lyrics ourselves, but most of it is media-industrial production that is only placed on the Internet to generate attention and generate sales in secondary markets. The rest goes to the customers via other channels (again in multiple recycling chains). Service and knowledge processes have long been hybrids, with a high technological component. Music, for example, has long been “more of a recording studio” than a musical performance; Medicine, classified as apparatus medicine, has long been technological diagnostics and, in some cases, therapy (including industrial pharmacy); Even administrative services have long been on the way to being based on technological processes via e-government; Training is technologized via e-learning. Fiddling around in private kitchens is also highly technological. In this sense, the classic differentiation into industry, services and knowledge generation must be rearranged. Industry - in its hypermodern form - will prove stable to the extent that older industry floods the other processes. We can speak of a renaissance of industry, different in its two forms: IT and ecology.

Knowledge production

We are in a process of technological medialization, i.e. every process turns out to be - more or less - technologically transformable. The fact that I write these lines on a computer with connected research and archive systems is the - trivial - indication of a technological basis for my knowledge production (+ increased productivity). I am no longer an individual author, but operate on a human / machine interface that does not increase writing speed, but transposition into accessible texts, without intermediate work by typesetters and printers and editors (to the chagrin of everyone), in addition to the wonderful research options in Internet (in which others have been preparing and helping me for a long time). I therefore work in an industrial dimension, i.e. I can individually use and socially distribute the technological potential that was previously limited to industry in the narrower sense.

The consequences of this for our previous cultural techniques cannot yet be assessed.11 But one thing is evident: I have already outsourced some of my memory to the research and archive systems. I have long worked in systems of quasi-industrial organization based on the division of labor, i.e. I have got used to using the materiality of the technical for any kind of intellectual transformation. We are so far that we can use specifically transformed matter (computer machines) for any informational and media processes, i.e. that we can use IT-based systems for individual processes: technology-based services and knowledge processes. All the more necessary, albeit less conspicuous, we are dependent on these technological bases and instruments, i.e. on their (industrial) production (and their diverse pre-productions, i.e. chemical, metallurgical, optical and system component-producing industries, etc.). The enormous industrial input disappears on the small IT machines, obliterating its industrial traces.

The technologies are dispositives that are themselves overtaken by the possibilities of their applications that they offer. The technology of our everyday world (coupled with the latent to manifest transfer of work into everyday life) is culturalized, ie it becomes culturally attractive to communicate via the micro-machines (not least because of their design: signs of modernity - the aesthetics of Apple of Steve Jobs).The attitude towards technology is different:

  • there are reservations against "big technology" (ecological (emissions) as well as risky types (nuclear power, coal)),
  • the “small” or smart technology, on the other hand, is becoming a kind of modernization attraction.

The fact that smart technology is essentially produced by “big technology” (chemistry, metallurgy, electronics, etc.) remains in the shadow of reservations and shapes the image (“mental scheme”) of the new industry. Strong, classic industrial productions work behind the inter-networks, which continue to create the material infrastructure of the virgile "informational clouds".

Industry and ecology

But this rich variety of forms is only one side of the coin; At the same time, we have increasing resource shortages, which limit the arbitrariness of industrial material transformations. It is now becoming apparent that the material transformation has to start again, transforming new materials in order to be able to bring them into production - a new relevance of proto-industries and recycling. Substitution processes are necessary in research, development and production. Suddenly, what historically seemed to have merged into a game of arbitrary manifolds, becomes a new field of requirement for industry: that it has to regenerate its materials, which it productively transforms ("ecological challenge"). The historical development of industry as an extension of its transformative potential becomes a requirement at the limit of the availability of resources to produce the materials in the first place, which they could continue to transform - up to the conversion to new materials and forces of energy production. Let us only remind you of the concern about the shortage of rare earths, the important components of "modern electronics".

The part of the industry that operated the extraction of materials (proto-industry) in order to leave them to production, becomes itself a manufacturing industry (recycling or manufacturing of new materials, which will require the conversion of the productions of classic industry, e.g. from steel to Carbon fibers in the automotive industry or, as part of the energy transition, from uranium to wind and sun etc.). Here we experience the emergence of new industries that would be inconceivable without knowledge input. In other words, we invent new materials, which are then implemented industrially, in such a way that their transformability is already conceived in the construction of the materials (with regard to the further use of existing technologies, with regard to their recyclability and as a driver of the invention of new technologies - in addition to their ecological degradability and recyclability). Research not only generates new technologies, but also new materials, the form of which already contains the disposition of new productions. We are currently expanding - in this dimension - the production process from the transformation of matter to the production of matter. This type of industry will grow.

Industry is facing a renaissance; Let us take only the requirements from the climate issue: new forms of energy generation (e.g. through hydrogen fusion, through solar receptors, through geothermal energy, through biological photosynthesis and lunar gravity, tidal range), intensification of local public transport (electromobility), thermal insulation and electric heating, stimulation of algae growth in the oceans (geo-engineering), other forms of soil cultivation in agriculture, etc. All of this requires research, technical solutions and their productions. Large substitution processes are also beginning in the chemical industry - from metal to plastic, to electrical and nano-chemistry. Investments in these dimensions alone, to a large extent substitutions of previous technologies, generate industrial growth (in the context of Schumpeter's “productive destruction”, in which those that disappear are overcompensated for by new ones).

Industry and IT

There is also the IT dimension: the variety of programs (“soft dimension”) is based on the technical production of excellent hardware. Their mass production makes them more and more cost-effective, but the requirements for an expansion of the processing procedures require in ever higher sequences to produce and sell new devices. Here, the service sector, to which the IT “industries” are broken up, is clearly shaped by industry. Let us call this process a through-industrialization of everyday life: all everyday objects are increasingly shaped by industrial production, most noticeably in the food sector as in the penetration of everyday life with electronic media and machines (household and lighting electronics, heating and thermal insulation electronics, automotive electronics, envelope from Book in readers, music, etc.). Everyday life is hardly conceivable without electronic-technical media (not even e.g. in Kenya; as poor as the average people there are, many have a cell phone); The development potential is considerable (just e.g. the upcoming electronically controlled optimization of all house systems; the heat-regulating clothing; the electronic payment systems; not to mention the future of traffic optimization, the "energy transition", etc.). In the future, even human / machine communication will be optimized: instead of entering data and commands by hand, later via voice, we will soon achieve direct communication via eye, ear and brain couplings

The knowledge gained here from new technologies diffuses back into the industry and changes its processes, increasing their automation and variance. Nevertheless, every new phase of new hybrid offerings sometimes requires new production technologies. For geo-engineering, for example, and new energy generation, completely new technologies are being developed - just like in the IT area itself. We have not yet addressed the med-tech and biotech dimensions (not even the upcoming transformation of the media sector into the cyber dimension) .13 We are facing an enormous industrialization of services. This will affect the form of work and its diffusion in all areas of society; Above all, we will do a lot of what used to be a separate service ourselves on our IT machines (prosumption = production and consumption in one): To the extent that I manage my account at the bank myself, I will take over the service, which therefore ceases to be a service. And as I can only do this with an IT machine, I “produce” in the context of the new IT industry, whose name “network” or “cloud” only conceals the global industrialized process in which I operate and which I assume got to.

It is no longer just industrial companies that enter the value-added network, but every user (mostly private individuals). The material transformation / production remains in the network of classic industry, but the products, insofar as they are self-made machines, bring the users (= consumers) into semi-industrial modes of production, which not only partially dissolve the services as industries, but above all the informational transformation are technically based. Basically, all users are then connected in a wide arc to the industrial network, but with one crucial difference: not in the material production, but only in the technically sound solution of any tasks. The next step is the ecological and energetic optimization of this global machine park without reducing its optionality (presumably through auto-referential automatisms).

The disappearance of industry was a phenomenon that was read from the shifts in workforce. The workers found themselves more and more in the service industries. The industry did not disappear, however, it only became more capital-intensive and at the same time more output. Whether we are right with the categorizations of the service and knowledge society becomes questionable when we perceive the spread of everyday machines and hardware / software IT hybrids in offices and everyday life. In general, human / machine interfaces are spreading: Gershenfeld's “Fabs” (“personal fabrications”), some of which have what the industry supplied themselves or no longer think about everyday work without the high-tech basis of IT to let. If, however, general production no longer takes place in industry (which, however, continues to manufacture the hardware for it), but diffuses widely into society and its economy, we are dealing with an extension of industry. The service and knowledge society are then carriers of this expansion of industry, as it were, driving moments of expanded industrialization. We have long been a hybrid society with a technological-informational dimension. We can end the phrase about the end of industrial society.

  • 1 Cf. N. Stehr: work, property and knowledge. On the theory of knowledge societies, Frankfurt a.M. 1994; ders .: Knowledge and economics. The social foundations of modern economy, Frankfurt a.M. 2001.
  • 2 B. P. Priddat: Nature-Substance and Value-Form. On the modernization of the concept of nature in the economy of the 18th and 19th centuries, in: G. Figal, R.-P. Sieferle (Ed.): Self-Understandings of Modernity, Stuttgart 1991, pp. 67-99.
  • 3 C. Mitcham: Thinking through Technology. The Path between Engineering and Philosophy, Chicago 1994, p. 208.
  • 4 Cf. G. Bosch: The so-called service gap in Germany: a comparison of concepts for more employment and new forms of labor market organization in the tertiary sector, gray series of the Institute for Work and Technology, No. 2002-01, Gelsenkirchen 2002; A. Picot, R. Reichwald, R. T. Wigand: The limitless enterprise. Information, Organization and Management, Wiesbaden 2003; J. Zentes, B. Swoboda, D. Morschett (Eds.): Cooperations, Alliances and Networks, Wiesbaden 2005; A. Bramme: The reorganization of the social through technology, Marburg 2007; E. Feser, H. Renski, H. Goldstein: Clusters and Economic Development Outcomes. An Analysis of the Link Between Clustering and Industry Growth, in: Economic Development Quarterly, 22nd year (2008), no. 4, pp. 324-344; G. Hagoort, R. Kooyman: Creative Industries: Colorful Fabric in Multiple Dimensions, Delft 2010; B. P. Priddat: knowing / not knowing. New epistemes of the world of work, in: M. Moldaschl, N. Stehr (ed.): Knowledge economy and innovation: Contributions to the economy of the knowledge society, Marburg 2010, pp. 431-454.
  • 5 P. Drucker: Was ist Management ?, Düsseldorf 2005, p. 20 ff.
  • 6 B. P. Priddat: Organization and Language, in: J. Wieland (Ed.): Governance im Diskurs, Marburg 2004, pp. 147-180.
  • 7 See J. Zentes, B. Swoboda, D. Morschett (eds.), Loc. Cit.
  • 8 Cf. B. Latour: A new sociology for a new society. Introduction to Actor Network Theory, Frankfurt a.M. 2007.
  • 9 Cf. C. Kurz: The First Replicators, in: Frankfurter Allgemeine Zeitung, No. 192, from August 19, 2011, p. 34.
  • 10 Cf. N. Gershenfeld: Fab: The Coming Revolution on Your Desktop - From Personal Computers to Personal Fabrication, New York 2007.
  • 11 Cf. D. Baecker: Studies on the Next Society, Introduction, Berlin 2007, p. 14 ff .; C. Hubig: Human-machine interaction in hybrid systems, in: C. Hubig, P. Koslowski (Ed.): Machines that will become our brothers. Human-machine interactions in hybrid systems, Munich 2008, pp. 9-20.
  • 12 M. Kaku: Physics of the Future. How science will shape human destiny and our daily lives by the year 2100, London 2011; how machine / body integration will begin at all, see R. Brooks: Flesh and Machines: How Robots Will Change Us, Vintage 2003; N. Karafyllis: Nature as genetic engineering. On the necessity of a technological philosophy of biofacts, pp. 73-92, in: N. Karafyllis, T. Harr (Ed.): Technikphilosophie im Aufbruch, Berlin 2004.
  • 13 C. Hubig, loc. Cit.

Title: The Future of Industry: Technology-based Services

Abstract: The industrial society has become history, substituted by the service economy, the knowledge economy or the information economy. But industry has only changed its form: the IT processes in particular are fundamentally industry-based, not only because of the hardware required by the informational processes, but also due to their infiltration into all service economy dimensions and our every-day lives. Modern life does not work without the IT infrastructure. Man-machine interfaces have become micro-industry structures, which transform IT users into producers. Besides, all ecological problems and climate change challenge our industrial competences. Industry is the tacit power of our time.

JEL classification: L16, O31, O33