Tuesday, November 8, 2016

The Taste of Ash

The economist Joseph Schumpeter said that the "essential fact about capitalism" is that it depends on a force that he called creative destruction.  It manifests as a constant restructuring and reallocation, as mergers and spin-offs, and these create and destroy production arrangements.  Sometimes what looks like a decision -- an abrupt clearing the chess board of all the remaining pieces and starting a new game -- is no decision at all.  Instead it was only the spasm of an ongoing slow-moving process of destruction.  

It is called creative destruction but it destroys far more than it creates.  It throws hard-working people out of their jobs.  It sows fear and constant anxiety among people who'd once had settled and predictable lives.  It tears down landmarks and builds up strip-malls in their place.

According to economist Ricardo Caballero, over 10% of existing jobs are destroyed each year, and about the same number are created in the following year.  People clear out their belongings, go home, sob and fret and sell their belongings.  They swallow their pride, learn new skills, and start again from the beginning.

I suspect that what ultimately doomed the Democratic Party was its refusal to so much as acknowledge the existence of a Second Great Depression.  (Former Fed Chairman Bernanke agrees with this assessment, source).  If the American people had been told, "you are not to blame for your suffering" then there would be less shame in poverty.  And if there had been less shame there would have been less anger.

We, the American people, have created a system based on ungoverned, rapacious capitalism.  This anarchic force has displayed some creative destruction today.  We may expect to see change in the months to come, and they will be unpleasant, but at the same time nothing has changed.  We have chosen -- through our complacency and inaction -- a form of government which is like a fire burning out of control.  It offers little by way of warmth or light, but is astoundingly efficient at producing smoke and ruin.