A primer on this primary’s hottest issue.
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And were there YouTube a century ago, one can imagine a bitter movie being made about any of these great men by the few, or even not so few, whose lives were disrupted by the inevitable creative destruction of capitalism:
Narrator: So, Ethel, I know this is difficult for you, but what happened after Thomas Edison came to town?
Ethel: Our lives were never the same. I worked the afternoon shift at the Amalgamated Wick Company, supplying wicks to Acme Candle and Sealing Wax Inc. But once those electric lights came along, people only needed candles for séances and church services. I lost my job and have never been able to look at a light bulb again with having a panic attack.
Narrator: And Obediah, how did Henry Ford impact your life?
Obediah: I used to be the chief street sweeper in Rockport, Illinois. Our residents had the finest horses and buggies in the state. What’s more, we had the finest Illinois grain to feed the horses, and so sweeping the streets was such a pleasure, with large piles of the best horse manure a person could ever hope to shovel. It was never too runny, never too smelly — unlike the stuff I had to clean up as a boy growing up in Arkansas. Once the Tin Lizzie came along, though, people stopped appreciating the fine aroma of our well-fed horses, the fine consistency of their excrement, and instead rode around in those furless masses of steel and rubber, leaving the streets horribly clean, with an unnaturally s**t-free smell in the air. Can I say “s**t” on the wireless?
Yes, Ethel and Obediah were hurt, at least for a time, by the inventions of others which improved the lives of millions. And while nobody is claiming that Mitt Romney belongs in a pantheon with greatness like Ford, Edison, and Gates, the arguments against him could almost as easily have been made against them or against any other businessman competing in the marketplace.
The argument is easy to make because someone who lost his job is a sympathetic face to pose as a victim of a heartless capitalist. But it’s the wrong argument, the wrong yardstick, especially for a presidential race where the issue is the long-term benefit of the entire nation. Would it have been better had Ethel and Obediah’s jobs never gone away?
As Cox and Alm put it, “The disruption of lost jobs and shuttered businesses is immediate, while the payoff from creative destruction comes mainly in the long term. As a result, societies will always be tempted to block the process of creative destruction, implementing policies to resist economic change.
“Attempts to save jobs almost always backfire. Instead of going out of business, inefficient producers hang on, at a high cost to consumers or taxpayers. The tinkering shortcircuits market signals that shift resources to emerging industries. It saps the incentives to introduce new products and production methods, leading to stagnation, layoffs, and bankruptcies. The ironic point of Schumpeter’s iconic phrase is this: societies that try to reap the gain of creative destruction without the pain find themselves enduring the pain but not the gain.”