Wednesday, December 17, 2008

Reality Check

Thomas Sowell has a column today in which he discusses how bailing out the big three automakers postpones reality. Their way of producing cars failed, whether through their own business practices, the excessive demands of the unions or the excessive demands of the government.

One passage in the column introduced me to a concept I hadn't seen before. To wit:

"A renowned economist of the past, J.A. Schumpeter, used to refer to progress under capitalism as "creative destruction"-- the replacement of businesses that have outlived their usefulness with businesses that carry technological and organizational creativity forward, raising standards of living in the process."

Sowell then goes on to describe what happened to the horse and buggy business with the introduction of the automobile a hundred years ago.

"Creative destruction." I like that. It implies a constant renewal, like a snake shedding its skin or a butterfly leaving a cocoon. In economic terms it causes short term pain for groups that are displaced, but the process is what's necessary for long term economic growth. Plus, as Sowell said, a greater standard of living.

Try selling that idea to a politician who's trying to be re-elected. Feh.

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