Friday, May 22, 2009

A Point For Capitalism

With the economy the way it is, capitalism has taken a beating lately. Much to my amazement, people are starting to doubt that capitalism works. They seem to have forgotten that it is capitalism that has lifted the quality of life for so many across the globe. I came across this article on Andrew Sullivan's blog at The Atlantic that makes a push for capitalism.

With all the hits capitalism has taken lately its easy to forget that countries who reward innovation and the entrepreneurial spirit are rewarded with more entrepreneurs! It’s a perpetual cycle that increases the standard of living for all, not just those who are rewarded most heavily.

We all know the power of an Apple or a Google to create new business models and generate massive new wealth. But, long ago, the great economist Joseph Schumpeter argued that the formation of new entrepreneurs lies behind the great "gales of creative destruction" which set in place new firms and industries and revolutionize old ones.
The last couple of days, we've looked at how class effects economic growth and innovation. We now look at the relationship between class and entrepreneurship. In the graphs below, Charlotta Mellander compares countries' performance on the Global Entrepreneurship Index developed by economist Zoltan Acs to shares of the creative class and working class.
Again, the results speak for themselves. Entrepreneurial countries are creative class countries. Those with high percentages of the creative class have higher scores on the Global Entrepreneurship Index.

The opposite is true of countries with a large share of the working class. Their scores on the Global Entrepreneurship Index are considerably lower.

Interesting stuff that serves as a reminder that even in tough times we are standing on the shoulders of the achievements of many entrepreneurs who came before us. Your alarm clock, your toaster, that mass produced cereal you eat every morning are the fruits of the labors of entrepreneurs across the globe.


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