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Disruption and disruptive
Commonomics

Disruption and disruptive

Narendra M Apte

City dwellers are familiar with common types of disruption: disruption caused by natural disasters, disruption of traffic and yes, disruption of proceedings of Parliament and Legislative Assembly.

Natural disasters like heavy rains and storms can disrupt normal life in both urban and rural areas, and in extreme cases, cause huge loss of lives, property and livelihood. Since disruptions are occurring with regularity, we have learnt to accept them as a part of our life.

History tells us about many disruptive events in the nineteenth and twentieth century.

Industrial Revolution is one major disruptive event which has changed the way we live. It started in Great Britain in mid eighteenth century when machinery began to replace manual labour.The lives of large sections of the population of Great Britain underwent massive changes during the Industrial Revolution. Work became more regimented and disciplined and began to take place outside the home. A movement of the population to the cities from the countryside produced dramatic changes in lifestyle.

The full impact of Industrial Revolution was realized 100 years later in the nineteenth century, when the use of machines to replace human labour spread throughout Europe and North America. This transformation often referred to as industrialization of Europe and America gave rise to sweeping increases in production capacity. It affected all basic human needs, including food production, medicine, housing, and clothing.

Industrial Revolution had many indirect effects. It changed lives of people as many of them moved to urban areas. It was also an indirect cause of many political developments, like rise of Communism, rise of America as a world power and later, fall of the British Kingdom.

During the last few decades a new form of disruptive industrial transformation is taking place on an unprecedented scale; manufacturing sector is losing its sheen.

Disruption in industrial and commercial world takes many forms. We are aware of fact that about forty years ago introduction of personal computers changed lives of an entire generation. Today, access to modern technology is much easier though it comes with a cost. In some sectors the use of technology and introduction of new cost-saving production methods and computer-based distribution and related processes has become quite disruptive. For those small and medium scale firms who refused to change with times, extensive use of new technology by new generation firms has become a disruptive curse. Use of new technology may thus have resulted in closure of hundreds of firms and job losses.

In today’s world, economic, (financial) and social impact of disruptions can be enormous. In insurance terms disruption may be regarded as an insurable risk and an opportunity to do business. Business firms do insure against possible losses from some disruptions.

It may not always be possible to do a reasonable estimate of impact of disruptions. Ideally, we should be prepared to face disruptions which are predictable. But some disruptions may be unpredictable and they can inflict a lot of damage.

It is necessary to recognise that in coming times use of new technological tools like robots and drones may be quite disruptive. Extensive use of artificial intelligence and other new theology application may have both immediate and long term impact. In short term it may be loss of jobs but in the long term unpredictable social cost of job losses and migration of people may require a detailed study.

Disruptions on account of climate change, particularly conditions of drought associated with climate change, may see migration of the poor in rural areas, in search of jobs, to cities. During the last few decades this kind of migration has become a recurring phenomenon. We need to deal with this disruption in a systematic manner.

Narendra M Apte, a qualified Chartered Accountant, is a freelancer.