Image: World Economic Forum/Benedikt von Loebell Image: World Economic Forum/Benedikt von Loebell

Almost every adult in the UK will have heard of the 'industrial revolution'. But far fewer will have heard of the 'Fourth Industrial Revolution'. It's a term you will hear or read frequently if you're keeping up-to-date with the latest developments at the World Economic Forum, taking place in Davos this week.

But what is the 'Fourth Industrial Revolution'?

In 1784, the First Industrial Revolution came when water and steam was harnessed to power production. In the Second Revolution nearly a century later, in 1870, was the division of labour, electricity and mass production. Fast forward another 99 years to 1969 and the Third Industrial Revolution - the introduction of IT, electronics and automation.

In a blog post, Klaus Schwab, founder and executive chairman of the World Economic Forum, said: "We stand on the brink of a technological revolution that will fundamentally alter the way we live, work, and relate to one another."

The Fourth Industrial Revolution builds on the digital principles set during the Third. Given the relatively short space of time since the Third Industrial Revolution, some have argued that this is just an extension, rather than an entirely new revolution. But Mr Schwab says "there are three reasons why today’s transformations represent not merely a prolongation of the Third Industrial Revolution but rather the arrival of a Fourth and distinct one: velocity, scope, and systems impact".

He said: "The speed of current breakthroughs has no historical precedent. When compared with previous industrial revolutions, the Fourth is evolving at an exponential rather than a linear pace. Moreover, it is disrupting almost every industry in every country. And the breadth and depth of these changes herald the transformation of entire systems of production, management, and governance."

But what it is?

The Fourth Industrial Revolution centres around the rapid developments being made in technology, and how they will dramatically alter the way we live and work.

Huge breakthroughs are already being made in artificial intelligence, robotics, the Internet of Things, autonomous vehicles, 3-D printing, nanotechnology, biotechnology, materials science, energy storage, and quantum computing.

What does it mean?

Mr Schwab expects that the increased speed of processes brought by the above developments have "the potential to raise global income levels and improve the quality of life for populations around the world".

"In the future, technological innovation will also lead to a supply-side miracle, with long-term gains in efficiency and productivity. Transportation and communication costs will drop, logistics and global supply chains will become more effective, and the cost of trade will diminish, all of which will open new markets and drive economic growth," he added.

However, a report by Swiss bank UBS has suggested that the richest in society stand to benefit from the Fourth Industrial Revolution more than the poorer in society. UBS claimed that it will have less of a negative impact on developed economies, but emerging markets in places like India and South America will be hit hardest when artificial intelligence becomes the norm as they lose their competitive advantage in cheap labour.

Axel Weber, the chairman of UBS, said: “Inequality increases not just between developed and developing and emerging countries. It’s also within our society. It will have an impact not only between the rich and the poor but also the young and the old.”

The report claims the workforce will become polarised, with “greater income inequality imply[ing] larger gains for those at the top of the income, skills and wealth spectrums”.

The report reads: “These individuals are likely to be best placed from a skills perspective to harness extreme automation and connectivity; they typically already have high savings rates and will benefit from holding more of the assets whose value will be boosted by the fourth industrial revolution."

The Fourth Industrial Revolution is also likely to mean a lot of job losses. A report by the World Economic Forum warned that five million jobs will be lost around the world by 2020.