In school, you learn about the Industrial Revolution and how it took the US from being an agricultural nation to one booming with factories, businesses and innovation.
These days, some people say we’re living in the fourth Industrial Revolution. Klaus Schwab, who coined the term, claims that similar to “the revolutions that preceded it, the Fourth Industrial Revolution has the potential to raise global income levels and improve the quality of life for populations around the world.”
Is it possible, however, that we’re not simply living through another industrial revolution, but a whole new kind of economy?
Seth Godin, entrepreneur, author, speaker and blogger, thinks an entirely new economy, called the connection economy, is in its early stages. He also thinks that the connection economy has the ability to drive down unemployment levels until they simply don’t exist anymore.
No matter how you look at it, this is a pretty radical concept. But in order to understand Godin’s view of the future of the connection economy, we need to go back in time: all the way back to pre-Civil War America in the 19th century.
The History of the Industrial Economy
The early United States economy was based on one thing: land.
Wealth was based on land ownership, and status was (and often still is) related to wealth. Physical money was often scarce and unreliable. People tended to work for themselves or in family units. Trade-based guilds functioned as a sort of social safety net, much in the same way that trade unions work today.
Most people worked their own small plots of land, producing just enough to provide for their families. In 1820, only 17% of people did not work in agriculture (Mintz and McNeil). The landscape, economy and social structure of 19th-century America would be wholly unrecognizable to a modern time traveler.
So how did we get from where we were then to where we are now?
The transition from this agricultural economy to the industrial economy that came to characterize the 19th century actually began across the pond in Britain during the second half of the 18th century. Eventually, however, American “inventors” borrowed machine designs from British innovators and kickstarted the Industrial Revolution in the States. The water wheel and steam engines exponentially increased worker productivity and made the mass production of goods easy and affordable.
From Home to Factories
New machines that drastically improved worker productivity weren’t the only factor in the genesis of the industrial economy. Prior to that, most people had worked in their own homes, sewing, weaving, and crafting handmade goods. This was known as cottage industry. Goods weren’t produced in a centralized location, and machines had little to do with things.
Soon, however, factories began to crop up in towns such as Lowell, Massachusetts and Pawtucket, Rhode Island. For the first time, work was done on a large scale in a single location.
Along with factories came wage labor. Before the Industrial Revolution, people subsistence-farmed, growing enough food for their families and hopefully a little extra to sell at the market. But with the introduction of factories and large-scale production, people were paid hourly wages, regardless of the quality or quantity of their work.
It’s important to note that factories were, in general, bad places to work. Women and children as young as 10 were often hired for half or a third of the wages men made, and everyone was forced to work for up to 16 hours without breaks (Botham and Hunt). The average wage was 10 cents an hour, and conditions were dim, dirty, and dangerous. The machines used were dangerous and could easily cut off a limb or crush a skull if someone stopped paying attention for just a moment.
Despite these dangers, the factory economy drastically increased productivity and thereby made mass-produced goods more affordable and more widely available. Thanks to this major shift, standards of living in the US began to rise (along with the wealth gap between the richest and the poorest Americans).
Transportation
While factories began cropping up, mainly in New England, other innovations were spreading across the United States. State governments worked with private corporations to set up a network of railroads that traversed the country, connecting people, raw materials and finished goods. The Erie Canal, built between 1817 and 1840, also created a new national water transportation network.
(Caption: Construction of the Erie Canal. Drawing by William Henry Bartlett, engraved by William Tombleson, 1825.)
The Rise of Big Business
As industrialization spread and more goods were mass-produced, prices fell and exports increased. Americans made good use of the many raw materials, such as lumber and iron, available to them in the Western territories. Steam and electricity powered factories and homes by 1900.
Around this time, business giants such as John D. Rockefeller started to change the way businesses looked and ran. Rockefeller pioneered the concept of horizontal integration – merging smaller companies into a corporation – to create a national distribution system, while his lawyers created a new legal form, the trust. These new legal business practices allowed Rockefeller to manage a number of different firms as a single entity. By the turn of the century, America’s largest 100 companies controlled one third of the nation’s productive capacity.
The Worker
Before the Civil War, most American boys had hoped to become farmers, small businessmen, or independent craft workers (women were expected to stay home, raise children and care for their husbands).
After the Industrial Revolution, however, Americans gradually became accustomed to working for someone else. Work became more like we know it today – there were divisions between white-collar and blue-collar workers, and the new position of “middle manager” came into being.
As wage labor become more common, class differences emerged between the workers and the wealthy capitalists. There had always been disparities in wealth between the upper and lower classes, but now class distinctions became more nuanced. People began to identify either as part of the wealthy elite, or the emerging middle class, or the struggling class of workers.
Joblessness in the Industrial Economy
Before the Industrial Revolution (and well into it, in rural areas of the US), people generally worked for themselves or with their families. Because work generally centered on the land, periods of labor and periods of rest flowed with the seasons.
With the advent of industrialism and capitalism, people – particularly the young – were eager to leave their farms behind and move to the city for work. Once they arrived in urban areas, however, many were forced to live in small, unhealthy living quarters. Those who could find work generally accepted low wages because of the massive amount of competition flowing in from rural areas.
It might be useful to picture the Industrial Revolution as a tipping point. Before it, economic growth was relatively stagnant. People made enough to keep their families going, but not much more. When the Industrial Revolution came along, it changed the world. Economic activity and the production of goods exploded.
In fact, the whole concept of time as we know it was changed by the Industrial Revolution. As the famous British labor historian E.P. Thompson wrote, pre-industrial people didn’t even use clock time. Instead, they understood time as related to nature and labor tasks. For example, rather than planning to meet your neighbor at 7am, you would plan to meet them after the cows were milked, or at sunrise. The growth of factories replaced these natural time rhythms with industrial ones. Standardized labor practices like the 9-to-5 workday, which was implemented to discipline industrial workers, have completely changed modern life.
Before the Industrial Revolution, unemployment in agricultural America was essentially non-existent because people didn’t have “jobs” like we think of them today (Kumar). They worked on their land as needed to provide for themselves and their families. They weren’t paid for their labor; they were paid for what they produced. As industrialization spread, however, the number of people willing to work in factories, while being paid hourly and closely supervised by their employers, outstripped the number of laborers needed. As a result, some people were shut out of the industrial economy, creating what we now know as unemployment.
What Causes Unemployment?
The concept of unemployment was born during the Industrial Revolution and has plagued society ever since. During the Great Depression in the 1930s, unemployment levels reached an all-time high of 24.9% (Bureau of Labor Statistics). After the ’40s, unemployment levels decreased again, and these days the Federal Reserve sets the “natural rate of unemployment” between 3.5% and 4.5%. Strangely enough, the Federal Reserve argues that if the unemployment rate were to fall any lower than those numbers, it would actually be bad for our economy, as it could encourage inflation.
In fact, unemployment has become so normalized that American economists have come up with three categories of unemployment:
- Frictional unemployment,
- Structural unemployment, and
- Cyclical unemployment.
Frictional Unemployment
Frictional unemployment is so common that it is “always present” in the economy. If you have ever quit or been fired, looked for a job in a new city, or changed your career path, you’ve experienced frictional unemployment. It’s temporary and is part of normal labor turnover.
Structural Unemployment
On the other hand, structural unemployment occurs when the labor demographic isn’t suited to a local economy. For example, a tech company that decides to base its headquarters in rural Alabama may have a difficult time finding coders and engineers. On the other hand, an area with lots of new college graduates but no job openings also experiences structural unemployment.
As modern times “phase out” industries like print newspapers and family farms, we also see victims of structural unemployment.
Cyclical Unemployment
Finally, there is cyclical unemployment. This happens when there are more jobless people than there is a demand for goods to be produced. John Maynard Keynes, a famous capitalist economist, argued that this was part of the natural “boom and bust” cycles of industrial capitalism (International Monetary Fund).
However, cyclical unemployment can serve to worsen conditions, digging us into a deeper hole than before. As people are laid off or otherwise unemployed, they have less money to spend on goods and services. This, in turn, further decreases demand and increases joblessness.
In the industrial economy, it’s a never-ending cycle.
The Connection Economy
What is the Connection Economy?
These days, economists and thought leaders like Seth Godin believe that we’re in the early days of the “connection economy”. The industrial economy focuses on mass-producing goods and finding ever-increasing ways to sell more and sell faster. The connection economy, on the other hand, focuses on the value of human relationships – who and what you know. In a way, it’s a return to a pre-industrial kind of economy.
Seth Godin, who coined the term “connection economy”, argues that it is based on 3 pillars:
- Coordination
- Trust
- And permission.
By coordinating interpersonal introductions, laying the groundwork of trust in relationships, and by granting permission to try and fail, Godin argues that the connection economy will forever change our businesses and our society.
One huge way it will do this is by bringing joblessness levels to zero.
Industrial Economy Versus Connection Economy
The industrial economy was built on exploiting physical labor and leveraging technological advancements to increase production. As countless intellectuals, politicians and activists (ranging from Karl Marx to Alexandria Ocasio-Cortez) over the years have pointed out, this model was dehumanizing and exhausting.
As factories cropped up, cities and industrial towns began to overflow with laborers looking for work who were forced to live in shanty towns with no running water or sewage. Natural resources were mined to unsustainable extents, and pollution began to pour into our air and waterways. Factory owners exploited laborers, including women and children, forcing them to work 14–16 hours a day, six days a week (Britannica). Wages were low and conditions could be deadly.
As Godin wrote in The Icarus Deception, “Just because you’re winning a game doesn’t mean it’s a good game.” The western world was “winning” at industrialization, but the process was creating enormous wealth gaps, social inequality, and a new class of people who were unemployed.
According to Godin, in the 21st century, business has become so impersonal that mass marketing and unique selling propositions don’t work anymore. Markets have become so standardized that customers believe the only differentiation is price. The winner will be whoever can produce, market and sell something for the least amount of money.
Godin wants to ditch this bleak, impersonal economy for the connection economy. This runs on emotional abundance, which, unlike physical labor, is infinitely available. While the industrial economy broke down human connections, the connection economy depends on companies building trust with consumers based on shared values and passions. If you can’t make and sell your product for the lowest price, your differentiator will have to be the connection you have with your audience.
But how do we build those relationships? Companies who want to separate themselves from the pack need to begin with a mission, goal or motivation. There needs to be an authentic, driving reason why you do what you do. Once you have this, you can connect with a likeminded audience which wants to buy your product or service.
The easiest and most natural way to come up with your mission is by collaborating with people who are interested in the same things you are. Join a professional networking group or a Zoom mixer like the ones VideoSocialize puts together. Godin argues that exchanging ideas with people who share your passions is the key to business in the connection economy.
Toward Zero Unemployment
As Godin notes in a blog post entitled Toward Zero Unemployment, “The industrial age was about scarcity…the connection economy, our economy, the economy of the foreseeable future, embraces abundance.”
He sees an abundance of choice, knowledge and human connection. With endless resources available to us and the technological ability to form connections with people halfway around the world, we can change the world’s economy.
In this blog post, he notes that before the Industrial Revolution, there was no unemployment because there were no “jobs” as we think of them today. As I described earlier, people worked in their homes or on their land. No one went to a factory or office to work. When there was planting, spinning or building to be done, people worked. When there was nothing to harvest or no clothes that needed mending, people rested.
Godin isn’t necessarily recommending we go back to an agricultural life, but he does want to see the modern economy free itself from the strictures of industrialism. One of those strictures, as he sees it, is the scourge of unemployment. In his blog post, he wrote, “I can’t wait until we return to zero percent unemployment, to a time when people with something to contribute (everyone) pick themselves instead of waiting for a bureaucrat’s permission to do important work.”
Unemployment and the Connection Economy
How is it possible that there can be zero unemployment in the connection economy? To truly understand this, you need to understand how the Industrial Revolution changed the world.
According to Godin, “the connection economy doesn’t create jobs where we get picked and then get paid; the connection economy builds opportunities for us to connect, and then demands that we pick ourselves.”
First, let’s break down the idea of “getting picked” and “picking yourself”. In the industrial economy, there are “pickers” and those being picked. Pickers are the bosses, publishers and record labels who give you permission to do what you want to do – whether it’s starting a company, publishing a book, or anything else. According to Godin, “It’s a cultural instinct to wait to get picked. To seek out the permission and authority that comes from a publisher or talk show host or even a blogger saying, ‘I pick you.’” However, he argues that we don’t actually need anyone to pick us. We can pick ourselves and give ourselves permission to create opportunities and solve problems.
In the connection economy we can pick ourselves, and this lets us get closer to zero unemployment.
This requires a new understanding of work and jobs. In the connection economy, “stuff” is not what is valuable. People and relationships are valuable. As Godin says, “Friends bring us more friends. A reputation brings us a chance to build a better reputation. Access to information encourages us to seek ever more information. The connections in our life multiply and increase in value. Our stuff, on the other hand, becomes less valuable over time.”
We need to stop thinking about work as something we do for someone else. Instead, it’s about picking the right opportunities and building the right relationships to help us live our best lives.
Labor is not just about working in a factory or slogging away at spreadsheets for 8 hours a day anymore. Now it’s emotional labor, too.
The relationships we build, the connections we make, the opportunities we create – those are all forms of labor.
And if we’re laboring simply by being social creatures, can we ever really be unemployed?
Conclusion
The Industrial Revolution completely shifted the American way of life. Once a rural society made up of independent farmers, the United States transformed into an industrial, capitalist nation on the rise. Along with this growth, the Industrial Revolution brought new ideas about labor. People went from working and farming to directly support their family, to working in a factory for someone else, hoping to make enough in hourly wages to send back home to the farm.
Seth Godin thinks we are on the brink of another revolution, one that will bring about the connection economy. A system based on human connections and intangible emotional labor, the connection economy does not conceptualize jobs in the same way that Americans historically have. Once we free ourselves from the idea that a job is only done from 9 to 5 on a weekday, we start to realize that simply by forming human relationships and creating opportunities, we are working. This form of labor is far more likely to give you financial success because today’s consumers crave authenticity and relationships. Theoretically, it is possible to reach Godin’s ultimate goal: zero unemployment.
Ready to “pick yourself” but not sure where to get started? Before you can build a relationship with your audience, you need to form connections with likeminded people who inspire and challenge you. You can meet people who are passionate about your interests at one of VideoSocialize’s Zoom mixer meetings. Get to know people from all around the world from the comfort of your couch and start your journey towards employment in the connection economy.
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Author
Andrea Spencer is a freelance content writer who specializes in placing modern concepts in a historical context. She has a Bachelor’s in English and History. She received her Masters in American history at Villanova University. She now has begun her journey as a Ph.D Candidate at the University of Delaware studying American history with a concentration in race and gender. She particularly enjoys teaching and studying about the intersections of race, gender, and sexuality in the 19th Century US.
