[Cultural Policy Bulletin Vol.5] GyeongGi Province’s policy to the Fourth Industrial Revolution

Kim Eun kyung

senior researcher at Gyeonggi Research Institute

1. Introduction

The global financial crisis in 2008 served as an occasion to raise awareness of the importance of manufacturing for the maintenance of a sound economic structure. In fact, Germany and China wasn’t hit by the crisis as hard as other countries because they were strongly supported by their manufacturing industry. In addition, the remarkable development of information and communications technology became an essential tool for the innovation of manufacturing. Germany launched the “Industrie 4.0” in 2011 in an attempt to maximize productivity and efficiency by combining manufacturing and information technology. Since then, other developed countries such as the US, Japan, France and China have also reinforced their efforts to achieve the innovation of manufacturing. The Fourth Industrial Revolution is based on these developed countries’ policy on the innovation of manufacturing. The 2016 World Economic Forum, which clarified the concept of the Fourth Industrial Revolution, defined it as a technological revolution based on the development of artificial intelligence, machine learning, robots, the Internet of things, 3D printing and biotechnology.

Early response to the Fourth Industrial Revolution is an important challenge to be met by the Korean economy whose main axis of competitiveness is its manufacturing industry. In order to maintain and strengthen the Korean manufacturing industry’s competitiveness day by day, the industry needs to systematically prepare for the Fourth Industrial Revolution and to carry out its digital restructuring in order to be revive again as a more efficient and resource-saving industry. Therefore, not only the Korean government but also GyeongGi Province and relevant public institutions should devise a plan to respond to the progress of the Fourth Industrial Revolution, in step with this era of changes and innovation.

2. Ripple Effects of the Fourth Industrial Revolution

It is still questionable if the Fourth Industrial Revolution is a new industrial revolution. In fact, the Fourth Industrial Revolution can be regarded as an extension to the Third Industrial Revolution based on the development of information and communications technology. However, while the past industrial revolutions consisted in processes of replacing human labor with machine and automating labor, the Fourth Industrial Revolution can bee seen as a revolutionary change that replaces humans’ intelligent labor with artificial intelligence. Moreover, in the era of the Fourth Industrial Revolution, the convergence of ICT and manufacturing leads to completely automated production and smart systems and to the development of the Internet of things, thus forming a manufacturing ecosystem based on networks. ICT is going beyond production sites to reach all realms of human life including home and cities.

The Fourth Industrial Revolution is expected to accelerate economic growth through the increase of economic efficiency and productivity based on technological innovation. The Fourth Industrial Revolution will lead to the establishment of global supply chains based on ICT platforms and to the innovation of products and processes. Consequently, the Revolution will raise productivity by reducing the costs of transport and communication and by improving the efficiency of logistics and global supply chains. In addition, hyperconnectivity of the industrial structure and the superintelligence enabled by big data and AI are expected to form a new industrial ecosystem. The development of technology-based platforms will expand the sharing economy and economy on demand while consumers’ participation, mobile networks and data-based consumption will accelerate not only the innovation of processes and products but also that of business models. Not only office work and some of simple labor but also intelligent labor, which is regarded as requiring advanced technology, can be replaced with AI to result in higher labor productivity. Furthermore, cloud computing and distributed systems can help you reduce your investment in equipment and raise the productivity of capital. In individual service industries, advanced ICT and flexible working can boost productivity. Particularly in service industries, if you use big data to adjust your production activities to changing demand, you can maintain a high rate of operation to increase labor productivity. As consumers use customized services and products, they will also enjoy better usefulness. The progress of the Fourth Industrial Revolution will make production much more flexible. Consequently, consumers could make products they want, using a 3D printer at home. They could even supply designs modified by them to the production process making the product they want, in order to get the product fast, at a low price.

Meanwhile, the Fourth Industrial Revolution will lead to the replacement of labor with AI and machine. As a result, the existing demand for labor will decrease. At the same time, demand for new products and services will also lead to increasing demand for new types of labor. It is still not clear which of them will be bigger: the decrease of demand for the existing labor or the increase of demand for the new labor. Many say that the Fourth Industrial Revolution will result in reducing jobs. According to them, most of the current labor will be replaced by AI and robots so jobs will disappear. Moreover, the gap between the small high-income group with advanced technology and the unskilled low-income group is expected to widen. The replacement of jobs with AI and robots could not only reduce jobs but also lead to the collapse of the labor market. In digital society led by the Fourth Industrial Revolution, AI computers, which maintain connectivity and platforms, play an essential role so any labor (whether it be physical labor or intelligent labor) that can be conducted by AI and robots can be replaced by them. With the progress of the Fourth Industrial Revolution, people could also free themselves from the labor that doesn’t involve humanity (e.g. simple and repetitive work and physically demanding labor) and engage in high-quality services and activities that can be done only by humans (e.g. person-to-person communication, development of cutting-edge technology, the arts and culture). These areas of work are necessarily labor-intensive so they could maintain their jobs. Under these circumstances, if new forward markets for products and services develop and if small businesses make inroads into new markets more easily, technological revolution will be able to make up for the decreasing population and reduce the negative effects of the labor market.

From the perspective of social integration, the Fourth Industrial Revolution could also generate negative impacts by spreading bipolarization throughout society. In fact, the Fourth Industrial Revolution is expected to intensify social bipolarization by worsening inequality in a capitalist society and by reducing the middle-income bracket. That is because the wider gap between “the group with advanced technology and high income” and “the group with simple technology and low income” and bipolarization could result in the collapse of the middle-income bracket. If the gap between the rich and the poor continues to widen and the winner always takes it all, the middle-income group will feel anxiety and inertia, thus leading to a bigger social conflict. Furthermore, a more unstable labor market could worsen the unemployment and poverty of low-income workers, thus raising demand for social welfare. Consequently, the government’s fiscal soundness will worsen, intensifying the conflict among different income brackets over tax and expenditure. Technological revolution could gradually worsen the bipolarization of the labor market. As a result, unskilled workers will have to face more intense competition in the labor market and unstable and temporary work will also continue to increase. The great flexibility and lack of jobs in the labor market will weaken unskilled workers’ bargaining power, thus leading to more temporary work. The bipolarization between large and small businesses will also accelerate and the gap between the developed and developing countries will also widen further.

The success of the Fourth Industrial Revolution requires the government to minimize its role and to become small. Indeed, one of the success indices of the Fourth Industrial Revolution will be a “small government and big market.” To achieve technological innovation, the government should reduce its involvement and regulations regarding the private sector including markets and businesses. Innovation is not something the government can predict and make deliberately. Innovation is full of uncertainties so it is also difficult to achieve concrete results shortly after investment. That is why the government, which is characterized by inflexibility, must not lead technological innovation. Moreover, technological innovation is a process of making a great leap forward so an inflexible administrative system cannot lead innovation. Lastly, leading the Fourth Industrial Revolution needs enormous investment followed by a big investment risk and uncertainties so it is difficult to invest in the Revolution with the government budget.

Therefore, the market is vital to the progress of the Fourth Industrial Revolution. Innovative technologies and businesses should survive through competition in the market. Meanwhile, the government should remove all regulations that limit competition and put a barrier to the market so that businesses can invest and innovate to survive in the market. After all, the government’s role in the Fourth Industrial Revolution is to make laws and systems that contribute to the voluntary and creative energy of entrepreneurs and researchers who develop successful technologies. In addition, the success of the Fourth Industrial Revolution will naturally lead to a smaller role played by the government. That is because technological innovation, which is based on hyperconnectivity and platforms, will reduce the scope of the government’s intervention.

3. GyeongGi Province’s Policy

First, GyeongGi Province needs to participate in the Fourth Industrial Revolution in its own style. In Korea, innovation in manufacturing hasn’t started in earnest because the country’s regulations and application capacity are still not commensurate with its advanced information technology. Like the Korean economy, GyeongGi Province’s local economy is gradually facing lower growth potential. Under these circumstances, new industries with high added value are needed to ensure the sustainable growth of the local economy. More than any other Korean region, GyeongGi Province has developed both manufacturing and IT so the province has the best conditions in the country for innovation in manufacturing with IT. The province should thus transform its manufacturing industry from the existing mass production type (e.g. assembly-based production and machining) into a business model connected to services. Policy support should also be provided to encourage the convergence of manufacturing and service industries.

Second, it is also important to strengthen local R&D capacity in order to facilitate the progress of the Fourth Industrial Revolution. For the province to carry out R&D fit for the local situation, the central government should allocate its R&D budget in two ways. First, in the case of general R&D, the province should allocate its budget to each project. Second, as for R&D regarding local policy, the central government should support it with Single Pot funding because such R&D activities are regarded as part of local policy. For example, the government needs to provide provinces with a “subsidy for innovation in manufacturing (tentatively named)” in order to support their R&D projects intended to pursue the localization of the Fourth Industrial Revolution. The distribution of such a subsidy should be based on each province’s “innovation capacity.” In addition, GyeongGi Province could also consider the establishment of the “GyeongGi R&D Institute (tentatively named)” which will serve as an R&D incubator for local small businesses’ technological innovation. In fact, the province’s current R&D capacity actually means that of its large businesses. In other words, the innovation capacity of the province’s small businesses is almost negligible. The Fourth Industrial Revolution consists in comprehensive innovation and it could widen the existing technological divide. Consequently, the gap and conflict among businesses could grow further. Therefore, the province should help its small businesses not with simple individual policy funds but with systematic and public R&D support.

Third, the province needs a variety of innovative startups and their ecosystem for innovation. To do so, it should invigorate local strategic base of startups. As in the case of La French Tech, Korea should also come up with an innovative public initiative to form a local ecosystem for startups. La French Tech has attracted diverse private participants of startups’ ecosystem including incubators, accelerators and funds. Korea has also implemented diverse policies on support for starting businesses. Nevertheless, most of the policies have been limited to supporting individual businesses and the government still lacks in concrete policy on innovative business creation. It thus needs policy on support for business creation that goes beyond the existing financial support in order to provide technical support and help businesses make innovative business models.

Fourth, GyeongGi Province should move from job creation policy to human resources development policy. The public sector’s role is to nurture human resources that have capabilities that are necessary for the Fourth Industrial Revolution and to help them work in appropriate positions. In response to changes in industry and employment structure brought by the Fourth Industrial Revolution, the province urgently needs to retrain the existing human resources from a short-term perspective. In this way, jobs in scientific technology and others that need trained employees will be able to function properly. From a medium and long-term perspective, the province should establish an education system that meets the demand of new industries, reform the content of education and subjects taught at school and train human resources through industry-academia cooperation. The government should play its role of building infrastructure that enables citizens to freely benefit from vocational training and self-directed learning. The country’s education policy should shift its paradigm from school education to lifelong learning. Under these circumstances, GyeongGi Province should cooperate with businesses in implementing concrete policy on the development of human resources in connection with the existing technical training system and polytechnic colleges. This is to enable workers to be retrained and to meet the demand of the Fourth Industrial Revolution.

Fifth, GyeongGi Province could also form a local public-private cooperation body in charge of the Fourth Industrial Revolution. That is because innovation inevitably starts from local areas even if the central government also needs to establish relevant governance bodies. GyeongGi Province should take the lead in ensuring close cooperation among its businesses, scientists and other relevant experts in order to plan and implement the Fourth Industrial Revolution customized to the province.

Sixth, the concrete progress of the Fourth Industrial Revolution requires a concrete reform in the existing system. It is necessary to break away from the regulatory paradigm of the past ara of manufacturing era and move on to a new regulatory paradigm suitable for digital economy. To be more specific, the province should improve regulations on selecting locations such as industrial complexes, redefine the concept of ownership and rights for the development of the sharing economy and reform systems related to economic activities (e.g. innovation in labor regulations in preparation for shorter working hours and for a changing way of working and adjustment of industrial classification for the convergence of industries). The province also needs to reach a social consensus on ethical issues: 1. scope and protection of privacy and 2. human identity in the context of the development of artificial intelligence and biotechnology. Above all, the province should resolutely remove regulations that block the development of new technology and industrialization. In particular, the regulations that are stricter than those of the developed countries need to be abolished promptly.

4. Implications regarding Cultural Policy and Cultural Industries

In Korea, cultural industries tend to be analyzed only from the perspective of consumption, Today, they should be analyzed from the perspective of added value and production. That is because cultural industries will be able to lead the era of technological innovation called the “Fourth Industrial Revolution” and generate high added value. Therefore, cultural policy needs to focus not only on supplying culture as consumable public goods but also on nurturing new cultural industries based on the principles of capitalism and market economy. Indeed, culture may be the only area centered on humans in the era of AI and robots.

First, data-based cultural policy is needed to implement cultural policy customized to demand. Data, which forms the basis of the Fourth Industrial Revolution, is not only utilized in economic sectors but it is also the basic infrastructure of digital society. Thus, the establishment of “digital cultural policy” is urgently needed. To do so, GyeongGi Province should secure budget and professional human resources in order to collect and analyze data on cultural projects by building IT infrastructure. Second, it is necessary to implement policies and projects based on mutual communication with the demand side because technological innovation will personalize and customize the supply of culture. The success of a cultural project will mainly depend on a digital space where the demand and supply sides meet and interact with each other to improve goods and services. Therefore, it is necessary to carry out cultural projects based on a platform where supply and demand meet. Third, the province also needs to expand its cultural realm by nurturing cultural human resources and diversifying projects. It should create and maintain new goods and services in cultural projects through ceaseless innovation. It also needs to create new jobs that could make up for the decrease of jobs caused by the adoption of AI and robots. In particular, it is necessary to strengthen IT training for cultural human resources. Fourth, it is also important to foster cultural industries actively. Generating high added value and contributing to export, cultural industries have the potential to serve as a new driving force for the country’s growth. It is thus necessary to abolish diverse regulations on cultural industries while strengthening support for them. What is also vital is to come up with policy on the improvement of the unfavorable working conditions of those working in cultural industries in order to nurture human resources in these industries. Fifth, it is necessary to nurture startups in cultural industries and devise business models for innovative business creation. The province needs an incubator specializing in cultural industries like France’s CREATIS. Cultural industries require innovative ideas more than any other industry. One of the policies that could support the invigoration and innovation of cultural industries would be to help young entrepreneurs start and run their own cultural startup.

#Bulletin #Bulletin Vol.5 #Cultural Policy #Fourth Industrial Revolution #Gyeong

@Kim Eun kyung

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    Writer/ GyeongGi Cultural Foundation

    About/ Everything about the GyeongGi arts and culture, GGCF

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