Okay, in light of the economic apocalypse, I just can’t resist quoting a couple of paragraphs from the final chapter of my book, Slackonomics.
In these two graphs, I am writing about the economist Joseph Schumpeter, who used the phrase “creative destruction” to describe the process by which capitalism renews itself, often through violent convulsions that cause quite a bit of pain. He was originally describing the industrial revolution, but I am repurposing the phrase by calling it creative destruction 2.0 to describe the global/technological revolution:
This is truly a new era of creative destruction, not only altering everyday life for Generation X—from how we work, where we live, how we play, when we marry and have children, to our attitudes about love, humor, friendship, happiness, and personal fulfillment—but the world as we know it. Powerful forces have been unleashed in our lifetime, and to assume that it’s all going to work out, that creative destruction will continuously renew the economy via radical transformation from within, could turn out to be the ultimate in naivete.
Schumpeter argued strenuously in favor of capitalism at a time when socialism and communism were considered viable options (“the capitalist process, not by coincidence but by virtue of its mechanism, progressively raises the standard of life of the masses.”) But he was also well aware of its shortcomings. Not only do people and industries get hurt in the churn, they become “free to make a mess of their lives” with enough “individualist rope” to hang themselves. What’s more, capitalism sets up a tension “between two interests in society, the interest in present enjoyment, and the interest in the nation’s economic future.” Schumpeter actually predicted that capitalism couldn’t survive because governments would eventually quash creativity, an understandable conclusion when communism was a serious consideration. What Schumpeter didn’t count on, however, is that capitalism can overwhelm democracy, and in the current age of creative destruction 2.0, it’s working far too well.
We have entered a whole new era of creative destruction, folks. Here are a couple of paragraphs from an article in today’s Times:
The Bush administration on Saturday formally proposed to Congress what could become the largest financial bailout in United States history, requesting virtually unfettered authority for the Treasury to buy up to $700 billion in mortgage-related assets from financial institutions based in the United States. …
A $700 billion expenditure on distressed mortgage-related assets would be roughly what the country has spent in direct costs on the Iraq war and more than the Pentagon’s total yearly budget appropriation. It represents more than $2,000 for every man, woman and child in the United States.
And from the Economist:
Ten short days saw the nationalisation, failure or rescue of what was once the world’s biggest insurer, with assets of $1 trillion, two of the world’s biggest investment banks, with combined assets of another $1.5 trillion, and two giants of America’s mortgage markets, with assets of $1.8 trillion. The government of the world’s leading capitalist nation has been sucked deep into the maelstrom of its most capitalist industry. And it looks overwhelmed.
I’ve now read the Times, WSJ, the Economist and the Financial Times, and still I simply cannot get my head around what is happening. I suspect there’s a lot of people who are IN CHARGE of financial institutions and government agencies who can’t, either.
As I argue in my book Slackonomics, it could very well be up to Generation X to bring the economy back from the brink. I guess that was overly optimistic. In fact, it is going to be up to us to rebuild the economy from the ground up.
Creative Destruction is not yet a household term like “laissez-faire” but it’s getting there — helped along today by the Freakonomics guys writing on their New York Times blog:
The turbulence of the U.S. economy has lots of people railing against capitalism itself, and with good reason: capitalism is inherently turbulent. That’s why the legendary economist Joseph Schumpeter called it “creative destruction.”
In my book Slackonomics — an obvious derivative of the Freakonomics title — I try to expand the term “creative destruction” beyond its strictly economic definition into a cultural realm. The subtitle of the book is “Generation X in the Age of Creative destruction,” and in the final chapter, I use graffiti and street art as a metaphor for creative destruction. But it’s more than just a metaphor, it IS creative destruction. The cultural milieu we create is very much a reflection of the economic era that we live in, from extreme sports to graffiti art to alternative comedy (i.e. a sardonic sense of humor as perfected by Banksy the graffiti artists, whose work is pictured above). Read the rest of this entry » »
So every now and then I check links to this website, and I saw a blog post written by Suzy who is actually a member of Gen Y (or the Millennials) but seems to have a very Xer-ish attitude, right down to blogging about how she’s trying to live within a budget: “This budget blog chronicles my valiant attempts to make a living off my writing and stay in the black…” Who knows how she heard about my book and website, but she read the INTRO online and liked what she read, and contributed her own analysis:
For instance – take social security (note: this is my own example, not Chamberlain’s). Scottrade Investing just completed a survey that noted that although 87% of Gen X’ers believe they deserve social security benefits from the government, most aren’t counting on actually getting any benefits. Other highlights from the survey:
43% believe they won’t be able to retire fully
26% aren’t sure they’ll ever be able to leave the workforce
37% predict they’ll need $1 million to retire
40% haven’t hit the $25 thousand mark yet
40% are saving more as a result of their insecurity over social security
I think those stats exemplify Chamberlain’s definition of creative destruction – because of all of the financial insecurity (first four bullets), Generation X will be forced to create a new economic reality for themselves (last bullet). Right now, they are just saving more, but will there be a reinvention of how we save for retirement, or protest that results in genuine change to the entire social security infrastructure.
I’m definitely encouraged by the fact that Millennials are relating to the book (‘Millennials’ seems like a much better term than Gen Y, which is only in reaction to Generation X — the same way we hated “boomerangers” and the like — but I digress). The fact is, a lot of the forces that came about when Gen X was coming of age are still very much in play. So, for instance, people like Rachel Balik, a Millennial reviewer for a website called PopMatters, liked the book for many of the same reasons that Suzy is relating to it as well. That is definitely a happy surprise…
The band most associated with Generation X — in the cliche version of the term — is of course Nirvana. But I think Beck is much more representative of the Gen X experience. His career resonates beyond the music world, revealing interesting twists and turns as one very successful and talented person has bridged the analog and digital worlds.
In today’s Times, a feature about Beck touches on the main point I make in my book Slackonomics:
The paths taken and not taken have brought [Beck] to another valedictory point in his mercurial career. On Tuesday, his 38th birthday, Beck will release “Modern Guilt,” his eighth major-label studio album. … The completion of his contract with DGC Records, which has since been absorbed by Interscope Geffen A&M Records, could be a climactic event, occurring as the music industry continues to implode. Beck could now seek a new deal with a major label, an indie or a concert promoter, or he could go it alone, as contemporaries like Nine Inch Nails, Radiohead and Tori Amos have done [all Xers, it should be noted]. Or his label could decide not to sign him again.
The title of this piece is, “In A Chaotic Industry, Beck Abides,” which is essentially a neat little summary of the entire premise of my book. Creative Destruction (in the subtitle) is an economic phrase to describe the process by which old economic arrangements and cycles get upended by new ones as a result of innovation and technology. Generation X has essentially been the middle demographic of the middle class in this current era of Creative Destruction.
The result is an entire generation having to adapt in its formative years and beyond to two very contradictory forces: economic insecurity on the one hand, but great potential for entrepreneurial and creative fulfillment on the other. So even as Beck has gone from a “Loser” to musical valedictorian, he still doesn’t know where the music business is going to be in six months.
That is the story of Generation X. But we’ll always have two turntables and a microphone.