I tend to shy away from politics and political matters, but I was intrigued by some comments I came across recently in a Wall Street Journal Editorial penned by Karl Rove. Here’s what Mr. Rove said that captured my attention:
And do we really want the government deciding how profits should be invested? If so, should Microsoft be forced to invest in Linux-based software or McDonald’s in weight-loss research?
Mr. McCain’s angry statement shows a lack of understanding of the insights of Joseph Schumpeter, the 20th century economist who explained that capitalism is inherently unstable because a “perennial gale of creative destruction” is brought on by entrepreneurs who create new goods, markets and processes. The entrepreneur is “the pivot on which everything turns,” Schumpeter argued, and “proceeds by competitively destroying old businesses.”
Most dramatic change comes from new businesses, not old ones. Buggy whip makers did not create the auto industry. Railroads didn’t create the airplane. Even when established industries help create new ones, old-line firms are often not as nimble as new ones. IBM helped give rise to personal computers, but didn’t see the importance of software and ceded that part of the business to young upstarts who founded Microsoft.
So why should Mr. McCain expect oil and gas companies to lead the way in developing alternative energy? As with past technological change, new enterprises will likely be the drivers of alternative energy innovation.
You can read the rest of the article here.
It is rare to read political pundits discussing Schumpeter’s economics and the creative destruction process. I must say I find it very refreshing. Thank you, Mr. Rove and the Wall Street Journal.
If readers come across other articles mentioning Schumpeter and the creative destruction process in the media, please send them along to us. We love to see them.
Schumpeter lives!
