Creative Destruction

Where have all the cycle rickshaws gone’
Where have all the type writers absconded along with the typists’

So many call centres have materialised!
SEZs are sprouting out!

Well, the economy has undergone many changes, though all for the better. But the predicament is that, not all have gotten better. This has resulted in increasing disparities of income (Which is bound to happen in a meritocracy like India). I have been intrigued by this phenomenon.

Then I came across Joseph Schumpeter. And when I read through his works, I realised that he had already talked of this phenomenon, long back in 1942.

This is what creative destruction means- ‘Creative destruction refers to the incessant product and process innovation mechanism by which new production units replace outdated ones.’
This restructuring process permeates major aspects of macroeconomic performance, not only long-run growth but also economic fluctuations, structural adjustment and the functioning of factor markets.

Davis, Haltiwanger and Schuh (1996) concluded that over ten per cent of the jobs that exist at any point in time did not exist a year before or will not exist a year later. That is, over ten per cent of existing jobs are destroyed each year and about the same amount is created within the same year.

So be on the look out for such changes. I could pen down only two of them. If you have recognised others, please comment.

Do you feel that the creation outweighs the destruction’ Does this contribute to rising inequalities’ Is it not that the negative externalities from creative destruction do more harm than good’