If Britain Is to Succeed Post‐​Brexit, It Must Be Open to Creative Destruction

This article appeared on The Telegraph on August 30, 2019.
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In a new tour de force, Openness to Creative Destruction, University of Nebraska economist Prof Arthur Diamond outlines the problem. Public debates severely underplay the creative aspects of “creative destruction” and exaggerate the losses. We mourn the visible demise of high street stores, the decline of manufacturing jobs, or closing hospitals, almost as if they were the deaths of people. We do not celebrate the gadgets, design jobs or specialist units that replace them, nor acknowledge that it’s the very destruction itself that frees resources for yet more creations.

It’s a sign of our extreme complacency that we presume all this is inevitable. Economists commonly project out 50 years hence with forecasts of sustained growth, because that’s what we’ve recently experienced. We forget that almost all human history before 250 years ago was defined by grinding poverty and little meaningful progress.

Analyse stories such as the Wright brothers and the aeroplane, how Walt Disney developed colour cartoon movies, or Steve Jobs the Apple iPhone, and you’ll realise innovation really isn’t guaranteed. It is invented, made and earned, and quite often comes from self-funded entrepreneurs and inventors who tinker, challenge conventional wisdom and even the scientific consensus.

Yet if you accept progress from innovation isn’t certain, you realise we must be vigilant to the culture and policies needed to sustain it. A culture of openness to new ideas and businesses, and a policy framework conducive to that end, becomes crucial. Given we went from stagnation to lots of innovation in the 18th century, it stands to reason that bad policies and a turn against capitalism might quell innovation again.

With Brexit approaching, we already see the think tank Onward declaring the Conservatives should pivot from emphasis on “liberty” to “security”. Demands to insulate or protect certain industries will arise as trade policies are repatriated. The Brexit vote itself has been said to warrant government-led plans to “revive” towns, high streets and manufacturing. Policymakers in all cases delude themselves that we can keep the creative innovation, but eradicate the destruction. Yet the two are inextricably linked. Our past economic liberties are precisely what generated the securities we enjoy today. The word “comfort” was only first used in its modern sense in 1770.

In fact, if Britain truly wanted to be at the innovative frontier of growth, we would go further than today. Recognising that stagnation is miserable, we would adopt policies conducive to more creative destruction and the progress it delivers.

Ryan Bourne

Ryan Bourne holds the R Evan Scharf chair for the public understanding of economics at the Cato Institute