Abby Ray, Period 1, Honorbound
When was the last time someone pulled out a CD player to play music? Probably, not for a while. Nowadays, if people want to listen to music, they simply pull out their phone and play music from there. No need to rush out to the store and buy your favorite band’s CD. Instead, just download it straight to your phone. Downloading is a lot more convenient and takes up less of your time. But what happens to the CD industry? It is destroyed. This real life situation provides an example of the process of capitalism: creative destruction. Creative destruction, a term created by Joseph Schumpeter, was used to describe the process of technological innovation in which new products replace old ones . However, is innovation really a good thing if it wipes out existing industries?
Charles Wheelan says it is in his book, Naked Economics, when he states, “creative destruction is not just something that might happen in a market economy. It is something that must happen” . In order for capitalism to work, innovation needs to happen. However, innovation comes at a price. While these advances push the economy forward, they may also push affected workers backwards. “Creative destruction is a tremendous positive force in the long run. The bad news is that people don’t pay their bills in the long run…it can be years or even an entire generation before the affected workers and communities recover” . So, while workers struggle to recover, the economy progresses.
Capitalism thrives off of competition. Therefore, it needs competition to work. Without competition, innovation will not happen and the economy will remain at a standstill. The only downside to this, as Wheelan points out, is that “competition means losers” . In the process of creative destruction, the losers are the workers.
Another example of creative destruction is the use of robots instead of workers. Frey and Osborne predict that the robots will impact 50% of current jobs . While the affected workers temporarily suffer, it makes much more financial sense to use robots over people because robots don’t receive wages, they are less prone to error, and they are much more productive. Yes, the workers will have to find new jobs and the government might have to find ways to help them, but this allows them to divert their skills to something else that maximizes their utility. Therefore, it is inevitable that workers will become less necessary to businesses.
What if all of our clothes were still sewn by hand? Would this be the most efficient method? Would we actually be better off? The answer to all of these questions is that sewing by hand would not be the most efficient method, making us worse off. Creative destruction is necessary. Innovation is a good thing for our overall well being. It allows for needed advancements. So the answer to the question, “is innovation really a good thing if it wipes out existing industries?”, is yes, it is a good thing. While industries might collapse due to innovation, the whole nation will be better off in the long run.
 Khan, Mynul. “Robots Won’t Just Take Jobs, They’ll Create them.” TechCrunch. May 13, 2016. Accessed June 19, 2017. https://techcrunch.com/2016/05/13/robots-wont-just-take-jobs-theyll-create-them/.
 “Creative Destruction.” Creative Destruction: The Concise Encyclopedia of Economics | Library of Economics and Liberty. Accessed June 19, 2017. http://www.econlib.org/library/Enc/CreativeDestruction.html.
 Charles Wheelan, Naked economics: Undressing the Dismal Science (New York: W.W. Norton & Company, 2010), 47.
 Charles Wheelan, Naked economics: Undressing the Dismal Science (New York: W.W. Norton & Company, 2010), 47-48.
 Charles Wheelan, Naked economics: Undressing the Dismal Science (New York: W.W. Norton & Company, 2010), 48.
 “Robots, the Economy and Creative Destruction.” RobotEnomics. March 28, 2014. Accessed June 19, 2017. https://robotenomics.com/2014/03/28/robots-the-economy-and-creative-destruction/.