Creative Destruction . . .
. . . is sweeping the American economic landscape.
12:00 AM, Jul 19, 2005 • By IRWIN M. STELZER
Then we have the auto industry. Historic leaders are saddled with "legacy costs"--pensions, health-care insurance for retirees, and union contracts that make plant closings almost as uneconomic in America as they are legally difficult in Europe. Ford and GM are struggling to meet the competition of mostly-made-in-the-USA vehicles rolling off the assembly lines of Toyota, BMW, and other companies which are becoming more foreign in marque than in manufacture.
Don't conclude that all of this is a pudding without a theme, to borrow an expression from our British friends. These examples, a few among many, show that one reason the American economy is growing at a relatively rapid rate, and creating millions of new jobs in the face of intense global competition, is that it is flexible. Rising oil prices encourage new supplies and fuel-shifting. Resources move from one kind of retailing to another, and from inefficient to more efficient automakers. Technologically "with-it" media moguls and workers replace those who once dominated their industry. All, in response to consumer demands.
That's the creative part of economist Joseph Schumpeter's "creative destruction"--the ability of resources no longer needed in one part of the American economy to move to another, rather than to the dole queue.
Irwin M. Stelzer is director of economic policy studies at the Hudson Institute, a columnist for the Sunday Times (London), a contributing editor to The Weekly Standard, and a contributing writer to The Daily Standard.