An Economic Revolution is Coming

One of the main reason why we decided to expedite this Ummatic Innovation initiative is because the economic revolution predicted by Alvin & Heidi Toffler are starting to become real. The impact will be huge and we can’t escape from it. In fact, certain economic sectors are already feeling the heat.

Just to bring dear readers up to speed, the idea of Revolutionary Wealth is quite simple. It categorized economic changes as waves – First wave, second wave and third wave.

• First Wave : Extract value from the earth – agriculture, mining, fishing, etc
• Second Wave: Process what had been extracted from the earth to create something of more value. This is what industrialization is all about.
• Third Wave: Value are created from knowledge, idea, connection and creativity.

To make it clearer, let’s use the district of Sepang in Selangor as an example where all three waves are present.

First Wave

Believe it or not, Sepang folks still plant sugarcanes. They plant it quite literally in the backyard of the ultramodern KLIA and KLIA2 airport. This is straightforward First Wave economy, plant and harvest from the earth.

Second Wave

In the second wave, machines get involved. It can be small machines like the sugarcane juice machine. This allows small entrepreneurs to get more income selling sugarcane juice as a finished product rather than just selling sugarcane as a commodity.

A bit further away in Shah Alam, we can see how bigger machines and factory means bigger output and revenue. Central Sugar Refinery processes sugarcanes to become granulated sugar and distributed worldwide.

Third Wave

Of course, Cyberjaya is the obvious home of third wave economy in this district. But is it really third wave economy? Or is it just Second Wave economy masquerading as Third Wave economy? Early companies based in Cyberjaya are mainly MNCs taking advantage of the various incentives given by the government. Mostly they are outsourcing operations to support the main companies overseas. They don’t really create new values, just allowing greater efficiencies in extracting values from Second Wave economy.

MaGIC, MDEC, and the likes are set up by the government to spur the growth of the real Third Wave economy. But so far, not much success yet. At least, not in the way that can replace jobs lost due to the decline of Second Wave economy.

Second Wave economy are starting to unravel. Many factories are closing down in Shah Alam. Malaysia Airlines – arguably the biggest employer in Sepang recently fired thousands of workers and many are still unable to find a replacement job. This is despite the comprehensive training and job placement program. The odds are against them because they assume the Second Wave is still alive while in fact it is dying.

Taxi drivers are the most recent and visible casualties of this revolution. At first, Third Wave companies such as MyTeksi a.k.a GrabTaxi helped them to increase revenue by helping them to get customers. But then GrabTaxi introduced GrabCar services that let anybody with a car be taxi driver without the added cost of license, training, and rent. And all along Uber is already providing similar service, first with premium cars and then with UberX that directly competes with taxi.

The scary thing is, nobody had figured out how to embrace Third Wave economy in a way that dignifies the society. As of now in the world of Tech Startups, only a few companies becomes super-rich while the rest are exploited to feed these giants.

Resorting to laws and policies to stem the decline of Second Wave economy and prevent Third Wave economy is futile. The government failed with taxis and they can’t prevent factories from closing down.

So, what is the way forward? I for one is taking a step back to be re-acquinted with our great Islamic intellectual tradition in search of the meaning of economy. Taking a step back is not to dwell there and be nostalgic about it but to gain momentum to move forward to the future.