When someone in England in the 18th century automated his factory, that was the start of the industrial revolution. Soon after, the steam engine was invented, and mass production was launched. Everything changed. Now they needed roads and railways to bring the raw materials for the factories and transport the final goods. With the increase in production and sales due to mass production, the banking system was expanded to facilitate the finances for all these economic activities. Even institutions had to be changed.
People started thinking about how to manage all these economic activities and development. A need for an economic system was felt.
Adam Smith was a gentleman from Scotland who observed the market and came up with economic theories. In those days science had made significant discoveries and inventions and was amazingly popular, so naturally, he formulated his system as a science.
It is important to note that economists have had this envy of physics and wanted to follow physics and present economics as a science and as good as physics.
Charles Darwin, later on, played his role by introducing the survival of the fittest, which found its way into economic activities and legitimized competition instead of cooperation.
Adam Smith, who has been called the father of economics, observed the market activities and made some assumptions, and based on those assumptions, he created a system to make wealth. He introduced them in his book “The Wealth of the Nations.” His basic assumptions were that everybody wants to make money and maximize their profit, and self-interest is their motivator. That market can correct itself, and government should not interfere with economic activities.
Adam Smith also made his system a science of creating wealth. To make it a science, he omitted human values such as honesty, generosity, love etc., since those values did not have a quantitative value. To him, economics was the science of making money. Sadly, Adam Smith was a very moral person. Many years before his book “The Wealth of the Nations,” he had written a book called “The Theory of Moral Sentiments,” He warned against acquiring wealth.
“This disposition to admire, and almost to worship, the rich and powerful, and to despise or, at least, neglect persons of poor and mean conditions, though necessary both to establish and to maintain the distinction of ranks and the order of society, is, at the same time, the great and most universal cause of the corruption of our moral sentiments.” – Adam Smith, The Theory of Moral Sentiments
Nobody paid attention to that, and economists followed his other book, based their assumptions on Adam Smith’s theories, and refined them. He clearly mentioned there is an inherent danger in possession of wealth that can lead to moral decay.
The Industrial Revolution changed everything: the governments, institutions, transportation, banking and all aspects of the life of society. Resources and raw materials for the industries became very important since mass production depended on these resources. Many of the colonization of different nations had economic reasons behind their political claims. In a nutshell, the whole world was totally changed.
To create the big picture of the changes, I like to share how Alvin Toffler, a great mind of our time, explained it. In his book “The Third Wave,” he simplified for me what happened with economics and where it is going. He was another visionary who perceived the lack of humanity in our economic system. He looked at economics from a very different angle.
Toffler explained that society needs people who care for the elderly and know how to be compassionate and honest. Society needs people who work in hospitals. Society needs all kinds of skills that are not just cognitive; they’re emotional and affectional. You can’t run society on data and computers alone.
Toffler described human economic activities and the history of economics in three waves:
- a) The first wave or Agricultural wave
- b) The second wave or Industrial wave
- c) The third wave
- First Wave refers to society after the agricultural revolution and after hunter-gatherers. “First Wave societies drew their energy from ‘living batteries’ – human and animal muscle-power – or from sun, wind, and water. Forests were cut for cooking and heating. Waterwheels, some of them using tidal power, turned millstones. Windmills creaked in the fields. Animals pulled the plow. As late as the French Revolution, it has been estimated, Europe drew energy from an estimated 14 million horses and 24 million oxen. All First Wave societies thus exploited renewable energy sources. Nature could eventually replenish the forests they cut, the wind that filled their sails, the rivers that turned their paddle wheels. Even animals and people were replaceable ‘energy slaves.’” -The Third Wave
- The second wave refers to a society in the Industrial Revolution (the late 1600’s to the mid-1900s). The main features of the Second Wave are the factory-type of the education system, the corporation and the nuclear family. Toffler writes: “The Second Wave Society is industrial and based on mass production, mass distribution, mass consumption, mass education, mass media, mass recreation, mass entertainment, and weapons of mass destruction. You combine those things with standardization, centralization, concentration, and synchronization, and you wind up with a style of organization we call bureaucracy.”
“All Second Wave societies . . . began to draw their energy from coal, gas, and oil – from irreplaceable fossil fuels. This revolutionary shift, coming after Newcomen invented a workable steam engine in 1712, meant that for the first time civilization was eating into nature’s capital rather than merely living off the interest it provided.” -The Third Wave
- Third-wave refers to post-industrial society. Toffler explained that since the 1950s, nations have been shifting from a Second Wave Society to a Third Wave Society, based on knowledge-based action as the primary resource. His description of a super-industrial society is similar to concepts from other theorists (e.g. Information Age, Global Village, Space Age, Technetronic Age, Electronic Age, or Scientific-Technological Revolution), which to some degree forecasted knowledge-based production, demassification, diversity, and accelerated change. “The Third Wave shows us . . . new potentials. It argues that, in the very midst of destruction and decay, we can now find striking pieces of evidence of birth and life. It shows clearly and . . . indisputably, that – with intelligence and a modicum of luck – the emergent civilization can be made more sane, sensible, and sustainable, more decent and more democratic than any we have ever known.” – The Third Wave
His idea of the third wave, in my opinion, is close to the vision of Baha’u’llah’s World Commonwealth. He believed in a very different yet better future for mankind. In essence, he was talking about and preparing us for the coming of a New World Order. He explained the characteristics of the third wave. He told us how and why the old industrial principles and theories would not work at this time, the same way agricultural principles did not work during the industrial time. He believed that humanity had entered an era in which we needed a brand new system to fit man’s needs. So maintaining the old economic system will not solve our ever-increasing problems.
I like the metaphor of the waves. Like the waves of the ocean that change everything, these waves changed the life on earth and its people.
That is what is happening now.
The Industrial wave with its institutions is crumbling down one by one, yet the new system has not arrived, which has led to confusion for experts and ordinary people. We are in a transition time where one system dies, and the new system takes its place.