Average growth in Europe, Japan and the United States keeps slowing down when compared with previous decades: It is near zero in Europe and Japan, and 2% in the U. S. Inasmuch as, in those countries, innovation is still thriving, many new services are being offered, many start-ups are going public and raising funds, and scientific research is still leading to new discoveries. So why isn’t this inventiveness (being able to do more with less) producing any economic growth?
Sadly, of course, there is one purely economic reason: The growing weight of government in the economy, high taxation and a mountain of red tape to discourage entrepreneurs and stifle initiative. But let’s get back to innovation…
Innovation has drawbacks, one of which would be ‘creative destruction’, a term coined by the economist Joseph Schumpeter: At first, it renders obsolete products that were selling well, thus pushing some complacent companies toward bankruptcy and destroying jobs. This is how capitalism normally functions in a society under economic freedom. This is the only way to bring wealth to a country, a higher standard of living and full employment, notwithstanding any growing pains.
However, more and more, governments are trying to intervene in order to protect existing corporations. We’ve seen it with the banks in the 2008 crisis, and this goes on today with central banks keeping interest rates near zero in order to facilitate the re-financing of the banking system.
This post was published at Gold Broker on Sep 25, 2014.
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