In the last few weeks I've heard mention of the economist and theorist Joseph Schumpeter a few times - and interestingly yesterday it came from Reserve Bank Board member Dr Luci Ellis when she was trying to explain away the Reserve's inability to change the direction of the Australian economy (Sydney Morning Herald)
;Reserve Bank board member Luci Ellis has said Australia should stop searching for the next mining boom or "an identifiable engine of growth" and accept that future economic prosperity will come from several directions... "Economic growth is far more conducive to innovation than recession is," she said. "Recessions do not engender creative destruction. They produce liquidations, which are destructive destruction."
Schumpter, an Austrian economist, first coined the phrase in the forties to describe what he considered to be a necessary part of the capitalist cycle. From Wikipedia:According to Schumpeter, the "gale of creative destruction" [also known as Schumpeter's Gale] describes the "process of industrial mutation that incessantly revolutionises the economic structure from within, incessantly destroying the old one, incessantly creating a new one". In Marxian economic theory the concept refers more broadly to the linked processes of the accumulation and annihilation of wealth under capitalism.
So I think Dr Ellis inadvertently invoking Schumpeter has actually drawn an important point - 25+ years without a (technical) recession in Australia would seem to point towards the fact that we have become very complacent that these events, part of the natural capitalist market system, are not ever going to happen again because we have somehow tamed the beast. Perhaps Rudd spending our way out of the last recession is going to make the next cycle down even worse? Dr Ellis also seems to think that the magical government spending and services fairy will rescue us. From the same SMH article:Dr Ellis, the Reserve Bank's assistant governor [economic], said most of the recent growth had been in household services such as health and education, which led some people to dismiss it as "bad growth". "Are people presuming that it's all driven by the public sector and therefore somehow artificial? Or is it that they think jobs in service industries are low-skill, low-wage jobs and therefore bad jobs?" she asked the audience at the annual Stan Kelly Lecture in Melbourne. She said growth in health and education sectors could provide sustainable growth, driving productivity and welfare in other areas.
She's telling us here that the lowest wage, most unstable jobs are going to form the engine of growth for our economy in the next few years - that sounds really likely doesn't it - that combined with even more jobs being created in health and education, all funded by the government of course. Of course, the government has an unlimited amount of money to keep spending on providing services to the public, doesn't it. Kind of reminds me of that image of a snake eating its own tail...?