The Economist Looks at Business Through Schumpeter's Eyes

This is probably the best article I have read to date that puts the past, the present and what may be the future of business and management into perspective. The Economist's "Schumpeter, Taking Flight" is a new column launched on September 19th, 2009, read here, says of Schumpeter - "Joseph Schumpeter was one of the few intellectuals who saw business straight." I agree.

As an entrepreneur and a global businessman, Schumpeter's concepts on economics have made the most sense to me. Especially, the concept of "Creative Destruction" (see a primer here) has been a key to my thought process in the past twenty years as I conduct and build businesses around the world. The Economist states:

"[Schumpeter] regarded business people as unsung heroes: men and women who create new enterprises through the sheer force of their wills and imaginations, and, in so doing, are responsible for the most benign development in human history, the spread of mass affluence."

I look forward to the Economist's perspectives as it perceives business today through Schumpeter's eyes.

Consumer Spending Vs. Savings in the USA

In The McKinsey Quarterly, "The economic impact of increased US savings" here. Here are a few quantitative insights based on the fact that household incomes have not been growing and in some cased globally have been decreased, a recent example being renegotiation of contracts at automakers in Germany.

"...holding incomes constant, each percentage point increase in the savings rate translates into roughly $100 billion less in consumer spending¬. A 5 percent savings rate would mean $530 billion less in spending each year if US incomes fail to rise; if they rose by 2 percent a year, a 2.3 percent savings rate would mean $250 billion less spending, all else being equal."

The conclusion:

"But without significant income gains, deleveraging could undermine consumption and the global economy for years to come."

Robert Shiller on the Current Economics

Excellent conversation with Robert Shiller at The McKinsey Quarterly "Surveying the economic horizon: A conversation with Robert Shiller" here. The quarterly's email states, "Robert Shiller, a professor at Yale University and cocreator of the Case–Shiller Home Price Index, discusses four aspects of the current crisis: regulating for financial innovation, reducing trust in models, redesigning institutions, and the time line for turnaround. His perspectives are informed in part through his research that psychology—particularly an understanding of human irrationality—can play a key role in explaining economic breakdowns and exploring effective solutions."

On innovation, Robert Schiller states:

"I don’t want to see us killing off innovation, and this is what may get lost—and I hope it doesn’t get lost—in the current crisis. Ultimately, let’s not forget that we’ve learned lessons that a capitalist economy is an economy that promotes entrepreneurship, and entrepreneurship is not the province for government bureaucrats."

On the possibility of an economic turn around:

"I don’t want to say that I don’t think there will be a turnaround soon, but I think that many of us are too much expecting that it might come tomorrow or the day after. And this volatility is evidence of that. So I think it is quite possible that the stock market and the housing market, five years from now, will be close to where they are now."