The effect is the bankruptcy of less-economical models

The effect is the bankruptcy of less-economical models

Entrepreneurs are coming up with newer and more productive solutions that increase the number and quality of goods delivered to people. The effect is the bankruptcy of less-economical models. His artificial containment, prohibitions and, in extreme cases, nationalization of the economy, only stop economic progress.

The phrase “creative destruction” (sometimes also “creative destruction”) has made a great career in economic literature, but above all in economic journalism. It is difficult to deny its author Peter picker a cunning sense of writing, since the history of the use of this term undoubtedly proves his aptness. However, this is not only a linguistic achievement, but also a very good description of the socio-economic system that has pulled masses out of poverty over the past two centuries and has made the benefits of progress all members of the community.

One of the driving forces of this system is bankruptcy and the possibility of bankruptcy

One of the driving forces of this system is bankruptcy and the possibility of bankruptcy

Companies are constantly emerging on the market. They are also constantly closed. Some are flourishing, others are dying. The continuing formation and closing of companies is connected with the process of economic evolution. Their creators – entrepreneurs – change existing production patterns, inventing completely new ways to create something needed for consumers, which after some time eliminates companies based on outdated schemes from the market.

Thanks to such changes, new economic value is created, previously not noticed by other entrepreneurs. And because ultimately the consumer decides, the activity of an efficient entrepreneur indirectly leads to the collapse of other enterprises (including abandoning old schemes and firing people). Bankruptcy. The greater bankruptcy in the communities and political order, the greater the tendency to contain economic progress that increases the welfare of the masses.

Routine – a former innovation

Routine - a former innovation

Many of the past innovative processes initiated by entrepreneurial activity become routine over time, although they were once radical and new. One of the most famous of this type of historical cases is the invention of a threshing machine, i.e. a device that allows mechanical – and thus fast – separation of grains from ears of wheat. Earlier, many employees were hired for this, and it took many weeks of tedious work to obtain grain from the harvested grain. The invention allowed to replace them, and in particular it allowed for the creation of many specialized companies that produced threshers and sold to customers.

Companies competing to produce as much as possible and as cheap as possible, as a result of which agricultural productivity grew dramatically – at the expense of bankruptcy of obsolete solutions. If the bankruptcy of the vote won the ideological struggle, if it were not allowed to market this type of innovation, the story would probably have gone completely differently. Terrifyingly different.

Over time, the threshing machine became a standard, of course, then incorporated into the construction of the combine harvester. At the time when the market for such tools began to develop, social resistance, protests and even riots emerged. How can you allow the release of such a large number of employees? Should the goal not be maintaining high employment? Here, in essence, the core of social resistance to bankruptcy, the heart of bankruptcy, or the belief that the process of economic evolution and dying of old production methods is dangerous, because the more important than cheap and mass production for the consumer is high and less productive employment.

Evolution in the economy

Evolution in the economy

It would seem that we are talking about very distant times, but in this story there is something universal. It is no different with economic evolution in every industry. For example, discount store chains can be a source of problems for some of the outdated ways of delivering products to consumers. Old stores have to adapt. Change the type of products delivered, switch to a different industry or other quality. Discount stores offer products as cheaply as possible, including non-food products, which means that many of us can watch queuing people who want to buy outlet products on Monday mornings.

Similarly, it is now with paper books and newspapers. Until a few years ago, some people were hoping that paper would be able to win, survive, and newspapers would live by providing obsolete (day-to-day) information, while the network did it immediately. This does not mean, of course, that the paper must disappear in its entirety. People even ride horses today, despite the fact that cars have been increasingly mass-produced for more than 100 years. Old ways of producing and providing utility to consumers do not have to be completely dead, but if someone thinks they are able to stay in the previous, intact state, it enchants reality.

Jezz Bedos, one of the largest entrepreneurs in recent years, a co-creator of Visona’s success, who is ruthlessly finishing up bookstores around the world – creative destroys, is the symbol of a huge transformation from real paper to e-paper. He has recently purchased, without a loan, 250 million dollars.  The television brokers are soon waiting for similar market shifts.

Conspiracy or natural process

Conspiracy or natural process

Similarly with the transformation process in Poland. Until today, stories are circulating in Poland about the powerful branches of Polish industry that have been destroyed. If they really were so powerful, if they really were chickens bearing golden eggs, you can only wonder why no one wanted to make a huge fortune on them. Of course, there are a lot of conspiracies in politics, especially in transformation policy, and more than one had evil intentions! Except that hens laying golden eggs are stealing, not killing. Naturally, it is impossible to judge everything by generalizing, however the truth is that many enterprises straight from the PRL were simply not adapted to new methods of production and management (a separate issue is that in Poland other types of industry do not have a bad taste at all).

The same is currently experienced in the large-surface stores that are being forced out of the market by many of them. Decades ago it was a great idea. Today the idea is even better and soon more will appear.

Perhaps some people think that it is convenient to write these words from the position of an academic teacher, but I know that “they are coming for us”. The mere dissemination of textbooks has reduced the importance of personal attendance to lectures. The emergence of audio and video records will only strengthen this process, especially in the light of the development of the Internet, which allows personal education. Very often available low, if not practically zero cost.

Economic evolution over the last centuries is a process based on creative destruction. Entrepreneurs are inventing increasingly more economical and effective ways to create productive solutions that increase the number and quality of goods delivered to people. And they are doing it cheaper, which results in bankruptcy less economic solutions. Bankruptcy is, of course, painful for those who are affected by it.

However, bankruptcy, the ideas leading to crowding out bankruptcy, the ban on bankruptcy (in an extreme case, the nationalization of the economy) can only stop economic progress. Economic evolution is a better solution than brutal biological evolution. Economic Darwinism is better than social Darwinism. Companies must die so that people do not have to die.