Revolution

An Industrial Revolution can trigger national revolutions worldwide.

A century after the French Revolution and the wars it triggered, the Industrial Revolution followed. Labor was mechanised through engines and machines powered by fossil fuels. Farmers began purchasing tractors produced in the early urban factories.

In England, around 15–20% of the population worked in agriculture; in Germany 35–40%; and in Russia as much as 80–85%. For every tractor introduced, at least one farm labourer was dismissed. This happened rapidly and on a wide scale. These men could no longer apprentice or earn their livelihood in traditional ways. There was no social security system, so they were forced to leave home and seek employment in factories in the cities.

In Russia and Germany, however, there were far too few industrial jobs available. As a result, large numbers of unemployed workers and their families accumulated in urban slums, living in extreme hardship.

In Russia, Lenin rose to power, supported by these desperate and starving masses. The elite and factory owners were expropriated and sent to labour camps, while the communist ideology declared the laborer ‘sacred’.

The European elite observed this with great concern. Many subsequently supported Hitler, who aggressively opposed communism. In Berlin, large numbers of impoverished former farm labourers were competing for occasional work, including with Jewish communities. Hitler exploited these tensions with a nationalist “own people first” narrative. Hitler expanded the war industry, providing jobs in factories and the army, which temporarily restored incomes for many.

Ultimately, former Russian farm workers found themselves firing upon former German farm workers. Countries around the world sent their (unemployed) masses into what became an immense global conflict — over 50 million lives were lost. Whether one had been a farm worker in Russia or in the United States, you ended up in some field halfway across the globe shooting at other farm boys.

This later evolved into the Cold War, with the nuclear arms race and conflicts in Korea, Vietnam, and Afghanistan.

In essence, part of the origin of this global instability lay in the sudden temporal misallocation of labour and the lack of a social safety net during the first Industrial Revolution, particularly in Russia.

We are now approaching what could be described as the Fifth Industrial Revolution — one involving AI agents, drones, and increasingly autonomous robots. It is estimated that this may impact 50–60% of existing jobs worldwide. Consider the size of the impact, comparable to Russia and Germany back then, but now on a global scale, this is a moment that requires serious attention.

We are facing a similar reallocation. It has already started, tentatively.

A new type of economy is already forming: one centred around influencers, streamers, performers, and entertainers — from world-class athletes to digital personalities. For over a decade, a substantial industry has been developing around this phenomenon, offering a glimpse of the future direction of work and value creation.

The problem we face is that our current social security systems are built on the assumption that people can find alternative employment within three to six months. In many countries, unemployment benefits depend on prior years of employment, and once these expire, individuals must often use up their assets before qualifying for basic assistance. Broadly speaking, this model functions reasonably well today.

However, if automation removes a large share of jobs across all sectors — just as the tractor replaced farm labour — then this work disappears globally and almost simultaneously. A restaurant, for instance, may purchase a service robot for its terrace; supermarkets already use cleaning robots. Once an efficient, affordable robot is available, adoption can be near universal within a few years, as it costs only a fraction of a human employee.

There are currently, same as in Russia and Germany back then, too few available jobs in the new economy, and it will take 10, 15 years to develop that level of business. That would be a massive effort, though.

Retraining a person can take one to four years to reach a high level of competence, which is significantly longer than the standard unemployment benefit period that doesn’t require retraining.

The risk, therefore, is that large segments of the middle class will run out of their unemployment benefits and could become dependent on social assistance and be forced to sell their homes. This would lead to a massive increase in housing supply. Homes currently valued at €500,000 could fall dramatically in price — perhaps to €50,000 — while mortgage debts remain unchanged.

If 50% of jobs are affected over the next 20 years, that represents an average of 2.5% additional unemployment per year. In a country such as the Netherlands, that could mean 250,000 newly unemployed annually. If 40% of these belong to the middle class, that’s 100.000 people and if they are all couples, that could result in around 50,000 additional homes entering the market each year. At the same time, stricter lending conditions would prevent new buyers from entering the market, accelerating the collapse in housing prices.

Even those who remain employed would see their homes revalued at these lower market prices, while keeping their original mortgage obligations. Banks would respond accordingly. Meanwhile, with 20% unemployment, the tax burden on workers would increase substantially in order to fund social support for the rest of the population, potentially reaching extreme (80%) levels. At that point, the incentive to continue working diminishes significantly – an outcome similar to what Thomas Piketty warned about regarding the declining returns to labour.

This is a scenario we must avoid.

We also seriously don’t want 5 million unemployed homeless jobless angry disgruntled people in the streets of the Netherlands. We seriously don’t want the 5th IR to result in a global Communist revolt.

If we guide this reallocation of labour carefully — by supporting new pathways and creating incubators into creative, social, athletic, mentoring, care-based, and community-oriented roles, vision, policy development, control and management — then individuals will retain a sense of purpose and opportunity and find new ways to earn their keep and sustain their assets and lifestyle. Mutual understanding and social cohesion will be more important than ever: providing the unemployed people with some hope, and a sense of direction amidst uncertainty and disruption.

One potential solution could be to finance an extended transition period through controlled, Europe-wide monetary expansion of the Euro. This could allow for up to five years of unemployment support at 70% of the average last wage of five years, for instance, giving people sufficient time to adapt and retrain and find an audience or customers and find new forms of ‘value creation’ and social contribution, whilst keeping the house and the study fund for the kids. The Bitcoins might have to go.

Such a policy might result in an additional 30% Euro inflation over the next 15 years, on top of normal inflation rates (which is usually also 2% per year e.g. 30%). People with pension and savings, usually the retired middle class, loose that extra 30% but the alternative is losing your entire middle class world and ending up in the New Goelags or with 1% Superrich and 99% Paupers, and then another century of wars and conflicts over nothing, basically.

Maybe there are even some simple ways to compensate the middle class for that sacrifice.

Part of this inflation could be offset by substantial deflation in the costs of goods and services, as robotic labour reduces production labor costs to around 10-20% of current labor cost levels. In that way, inflation and deflation may partially balance one another.