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Politics : View from the Center and Left -- Ignore unavailable to you. Want to Upgrade?

To: TimF who wrote (7890)	12/21/2005 9:52:11 PM
From: TimF	Respond to of 541979

Destruction that is creating a better America IRWIN STELZER American Account GENERAL MOTORS, which like Ford lost $1.3 billion (£755m) in the third quarter, will lay off 30,000 workers and close or downsize 12 plants in a desperate effort to avoid bankruptcy. Kodak is frantically trying to build its digital business as the use of film declines. Knight Ridder shops for a buyer as the collapse of its local newspaper monopolies destroys its viability. Several airlines have declared bankruptcy as their uneconomic cost structures cripple their ability to compete. Telecoms companies watch the value of their wires drop as mobile phones, voice-over-internet and cable companies poach their customers. Blockbuster flirts with bankruptcy as new, more convenient ways of delivering films to the screens of couch potatoes make a trip to the rental shop unnecessary. That destruction of the value of existing assets and businesses is, fortunately, only half the story. The other half was long ago pointed out by Joseph Schumpeter. Schumpeter is said to have remarked: “Early in life I had three ambitions. I wanted to be the greatest economist in the world, the greatest horseman in Austria, and the best lover in Vienna. Well, I never became the greatest horseman in Austria.” Not having access to the historical records in Vienna, I have no way of knowing if Schumpeter achieved the last of his three goals. But he has a valid claim to having achieved the first, or at least to ranking right behind Adam Smith. Over 60 years ago, when the American economy was still in the early phase of a war-induced recovery from a decade of depression, and the future of capitalism was in doubt, Schumpeter wrote: “Capitalism ... is by nature a form or method of economic change and not only never is, but never can be, stationary. The fundamental impulse that sets and keeps the capitalist engine in motion comes from the new consumer goods, the new methods of production or transportation, the new markets, the new forms of industrial organisation that capitalist enterprise creates.” This process “incessantly” destroys the old economic structure, and creates a new one. “This process of creative destruction is the essential fact about capitalism. Every piece of business strategy acquires its true significance only against the background of that ... perennial gale of creative destruction,” Schumpeter concluded... timesonline.co.uk