A Gale of Creative Destruction: The Coming Economic Boom, 1992-2020

Rating:
Summary: What is "Creative Destruction"
Review: Immediately, upon beginning to read this book, I began to ask the question, "What is "Creative Destruction?"

Basically this is a term coined by Joseph A. Schumpeter (1883-1950), an economist who taught at Harvard University starting in 1932. Creative Destruction is essentially old technologies and the resulting processes, products, and companies based upon these older technologies being replaced by the new. Examples include the horse and buggy being replaced by the automobile in the early 1900s; carbon paper copies being replaced by "Xerox" copies in the 1960s; and in electronic circuits, the vacuum tube being replaced by the transistor (in the 1950s and 60s) and, subsequently, by the integrated circuit (in the 1980s).

Schumpeter, until his death in 1950, was a leading economic researcher and author of several economic textbooks. One of the theories he promoted extensively was the existence of long, repeating economic cycles. In the 1920s, a Russian economist, Nikolai D. Kondratieff (1892-1932), originally hypothesized - based upon empirical research - that long economic cycles containing both boom and then bust phases, lasting in length from 50 to 60 years did exist. This theory was based upon an extensive review of late 18th, 19th, and early 20th century commodity prices, wages, interest rates, gold prices, and foreign trade in both Europe and the United States. These cycles, later termed "Kondratieff cycles" and, also, "long cycles," were shown to vary in duration from cycle to cycle and, thus, were not strictly periodic. An average cycle length was approximately 56 years. The cycles were shown to contain an initial period of rising economic growth with rising productivity and wages followed by a period of decline, with each cycle terminating at a higher level than the previous.

Ross, a professor of economics at Western Michigan University until his retirement, believes that the next Kondratieff cycle will begin about 1992. Other authors and economists date the beginning of this next cycle - the 5th Kondratieff cycles since the beginning of the United States in 1787 - somewhat differently. Some put the date further in the future - as far forward as 2003. However, all economists who adhere to the existence of Kondratieff cycles seem to believe that the next Kondratieff cycle is either at hand or eminent.

Ross writes in the opening pages of his book: "In the early 1990s, the United States economy will experience the beginning of a rising phase of a long (economic) wave, with the economy booming for two or three decades, interrupted only briefly by shallow recessions. Combined with some favorable structural changes in the economy, the fundamental underlying cause of the booming economy will be the momentum associated with a significantly above-average rate of technological advance. This 'gale of creative destruction' will be associated with an unimagined increase in the level of living by the average American."

Thus, if you believe in long economic (Kondratieff) cycles, the next 28 years or so may be a period of improving quality of life for residents and citizens of the United States. As Ross states in the last sentence of his book: "Prosperity makes civilization possible and perhaps even probable."

Rating:
Summary: What is "Creative Destruction"
Review: Immediately, upon beginning to read this book, I began to ask the question, "What is "Creative Destruction?"

Basically this is a term coined by Joseph A. Schumpeter (1883-1950), an economist who taught at Harvard University starting in 1932. Creative Destruction is essentially old technologies and the resulting processes, products, and companies based upon these older technologies being replaced by the new. Examples include the horse and buggy being replaced by the automobile in the early 1900s; carbon paper copies being replaced by "Xerox" copies in the 1960s; and in electronic circuits, the vacuum tube being replaced by the transistor (in the 1950s and 60s) and, subsequently, by the integrated circuit (in the 1980s).

Schumpeter, until his death in 1950, was a leading economic researcher and author of several economic textbooks. One of the theories he promoted extensively was the existence of long, repeating economic cycles. In the 1920s, a Russian economist, Nikolai D. Kondratieff (1892-1932), originally hypothesized - based upon empirical research - that long economic cycles containing both boom and then bust phases, lasting in length from 50 to 60 years did exist. This theory was based upon an extensive review of late 18th, 19th, and early 20th century commodity prices, wages, interest rates, gold prices, and foreign trade in both Europe and the United States. These cycles, later termed "Kondratieff cycles" and, also, "long cycles," were shown to vary in duration from cycle to cycle and, thus, were not strictly periodic. An average cycle length was approximately 56 years. The cycles were shown to contain an initial period of rising economic growth with rising productivity and wages followed by a period of decline, with each cycle terminating at a higher level than the previous.

Ross, a professor of economics at Western Michigan University until his retirement, believes that the next Kondratieff cycle will begin about 1992. Other authors and economists date the beginning of this next cycle - the 5th Kondratieff cycles since the beginning of the United States in 1787 - somewhat differently. Some put the date further in the future - as far forward as 2003. However, all economists who adhere to the existence of Kondratieff cycles seem to believe that the next Kondratieff cycle is either at hand or eminent.

Ross writes in the opening pages of his book: "In the early 1990s, the United States economy will experience the beginning of a rising phase of a long (economic) wave, with the economy booming for two or three decades, interrupted only briefly by shallow recessions. Combined with some favorable structural changes in the economy, the fundamental underlying cause of the booming economy will be the momentum associated with a significantly above-average rate of technological advance. This `gale of creative destruction' will be associated with an unimagined increase in the level of living by the average American."

Thus, if you believe in long economic (Kondratieff) cycles, the next 28 years or so may be a period of improving quality of life for residents and citizens of the United States. As Ross states in the last sentence of his book: "Prosperity makes civilization possible and perhaps even probable."