All of the back-and-forth about Mitt Romney’s role at Bain
Capital — along with the moral denunciation about creative
destruction — recalls an experience I had which makes this issue
much more concrete and understandable.
Several years ago, as I pulled into the driveway of the house my
religious community lived in, I was horrified to see that someone
had hacked away much of the green holly bushes surrounding the
front and side of the house. Going in, I saw Fr. James washing up
from some strenuous labor.
I asked him what happened to the holly bushes.
“I cut them back,” he replied.
“You did that? Why did you kill them?”
“I didn’t kill them,” was his reply. “I pruned them. If you want
them to be healthy for the next year, it’s important that they not
divert their energy into the more extended branches. If we let the
branches go, they would threaten the entire bush and we’d have
nothing.”
Fr. James is a born and bred Midwesterner. I grew up in
Brooklyn, and I was out of my depth. What he was saying made sense
to me on a technical level, but all my intuitions cried out against
it. It looked horrible.
Sometimes what appears to be beaten back and damaged is really
healthy and preparing for new growth. This is the case with what
economists call creative destruction — the phenomenon whereby old
skills, companies, and sometimes entire industries are eclipsed as
new methods and businesses take their place. Creative destruction
is seen in layoffs, downsizing, the obsolescence of firms, and,
sometimes, serious injury to the communities that depend on them.
It looks horrible, and, especially when seen through the lives of
the people who experience such economic upheaval, it can be
heartrending.
But think of the alternative. What if the American Founders had
constructed a society where no industry was ever allowed to go
under because it would mean a lot of innocent people losing their
jobs? I mean, have you ever met a livery yard owner or a stable
boy? How about a blacksmith or a farrier? Do you have among your
acquaintances any makers of bridles, saddles, chaises, coaches, or
buggy whips?
All of these once-booming forms of employment are either extinct
or occupy tiny niches in today’s economy. Their doom was sealed on
October 1, 1908, when Henry Ford introduced the Model T — the
culmination of a long period of experimentation and advance in
automobile technology involving many inventors across many
countries. Many of these inventors were tied to what had been to
that point a primary means of land transportation over short
distances (and over long, until the introduction of the railroad)
— namely, the horse.
This reality does not relieve us of our concern and even social
obligation to those caught in the midst of economic progress, but
whatever efforts we may devise to ensure their well-being and a
secure transition to a new livelihood, the one choice we cannot
make is to hold back progress. To do so would mean threatening the
well-being of those who remain employed in those new and growing
industries.
What policies are best suited to encourage innovation and
growth, while fostering a humane economy?
- Ample and responsive local, state, and national assistance to
those displaced by creative destruction, with an aim to retraining
and education, with the government as the resource of last
resort.
- Low corporate taxes that encourage investment in new
technologies, expansion of existing businesses, and the hiring of
new workers.
- A regulatory climate that combines reasonable protection of
air, water, and land with plenty of room for economic growth.
- A rejection of crony capitalism and bailouts, which only serve
outdated technologies and uncompetitive enterprises.
- Right-to-work laws that ensure the ability of employees to
decide for themselves whether or not to join or financially support
a union.
We need to think about would happen if we didn’t bother to prune
those holly bushes and let them dissipate their energy. Of course,
people are not branches to be discarded, but there are better and
worse ways to respect workers. Attempts that will stall the engines
of economic progress will only result in massive unemployment, a
stagnating economy, and waste.
