The free market at work in Nevada: creative destruction

Victor Joecks

Everyone's heard the news about Nevada's unemployment rate breaking the 10 percent mark, and we probably all know people who are affected by businesses that are shutting down.

What's often not reported are the new jobs that are being created. There was a trio of encouraging articles from the Reno Gazette-Journal today – Staples is opening two new stores in Reno in April after just opening a new store in Henderson, 29 jobs in diverse industries are coming to the Capitol Region, and Carnival Cruise Line just posted a 10 percent profit increase.

Even in the midst of an overall economic downturn, there are industries of growth. In fact, downturns are necessary for economic growth. The technical term is creative destruction.

The opening up of new markets, foreign or domestic, and the organizational development from the craft shop and factory to such concerns as U.S. Steel illustrate the same process of industrial mutation if I may use that biological term that incessantly revolutionizes the economic structure from within, incessantly destroying the old one, incessantly creating a new one. This process of Creative Destruction is the essential fact about capitalism. It is what capitalism consists in and what every capitalist concern has got to live in. . . .

Looking back at America's history, we can clearly see this process at work.

In 1780, over 95 percent of Americans were farmers; today about 3 percent are, and they grow many times more food per acre than their ancestors ever dreamed was possible. Those who abandoned farms were displaced to cities. But would their descendents, including urban environmentalists, prefer to give up their modern comforts and return to the era of sunup-to-sundown, back-breaking farm labor?

Think also about all the horse and buggy manufactures who were put out of business by the automobile.

Creative destruction isn't fun or ideal, but it sure beats the alternatives – like the Fed artificially propping up housing prices and contributing to the housing market collapse.