Creative destruction is the term economists use to describe industries that die due to better technology. The classic example is the typewriter. Before people used computers and after people wrote by hand, people used typewriters. These machines were so great! The type came out neatly, and people could write much faster with a typewriter than by hand. Because of the wonderful invention, sellers of typewriters sprung up across the nation - creating thousands of jobs. Then the computer came along. Typewriter shops across the nation and world went out of business. Thousands of jobs were lost. People demonized the computer industry and labeled it as a job destroying industry.
Laughable, right? Computers destroying jobs... Believe it or not, people are making the same argument today. Newspaper companies complain that news comes free online. And the President of the United States demonizes ATM machines for taking the place of bank tellers. Ignorantly he said, "there are some structural issues with our economy where a lot business have learned to become much more efficient with a lot fewer workers."
This argument has been made for centuries and will always be made by the people who don't understand the concept of creative destruction. When industries are replaced by better or more efficient methods because of changing demands of the customers, the jobs seem to disappear. The fact is though is that it is an ever-revolving cycle. The jobs don't disappear, they change hands. And society is better off. Any product you can imagine probably destroyed an industry, but made the world better.
This post was inspired by George Will's blog post today.
I completely agree with your economic minute and is makes good sense. There is no doubt that this is a real phenomenon that occurs and will continue to occur. Although, you did not comment on the fact that Pres. Obama followed the statement you quoted with an additional comment, that we need to focus on the training of individuals to accomodate the positions that as you said are "changing hands". Evolve with technology or be left behind. As I read this, a commercial against the ATM revolution of convenience came on, and it made a valid point, that as we become more dependent upon machines, we lose not only social interaction but the ability to address the problems that may arise. I love ATM's but I can also understand that viewpoint.
ReplyDeleteIn my defense, I included the video so I would not have to put his entire statement in quotes. You bring up a good point that I chose not to address in this post (because I try to keep it short and simple). But the argument made by Obama that we need to technically prepare our workers to match the jobs of the future is an argument often made by Progressives who yearn for government control over industries. George Will beautifully confronts this argument in his blog post. The fact is, the evolution of technology "is unpredictable, spontaneous, and ever shifting, a pattern created by millions of uncoordinated, independent decisions." And impossible to anticipate.
Delete"Theodore Roosevelt, America’s first progressive president, thought it was government’s duty to “look ahead and plan out the right kind of civilization.” TR looked ahead and saw a “timber famine” caused by railroads’ ravenous appetites for crossties that rotted. He did not foresee creosote, which preserves crossties. Imagine all the things government planners cannot anticipate when, in their defining hubris, they try to impose their static dream of the 'right kind' of future."
The point to take away is that when you try to foresee the future, and thus invest in what you believe to be advancing or better technologies, you most likely will invest inefficiently or be flat out wrong. Whereas if you let the free market prepare for such advances, technological preparation is a prerequisite. It can't happen without a technically prepared workforce. There is no gamble. Would the iPad exist if there was not a technically prepared workforce ready and able to produce them?