Friday, September 03, 2010
I am presently watching Niall Ferguson speak on entrepreneurial freedom in the global financial system, a presentation given at the St. Gallen Symposium 2010.
According to Professor Ferguson, the innovations brought about during the industrial revolution not only increased the efficiencies of goods manufacturing, it also made it easier for the very people who made those goods to buy more. These advances in economic ingenuity and processes are at the heart of rising living standards and economic growth.
Ferguson begins this lecture with some frank talk about Americans' delusions over their rapidly rising wealth twice over a ten year period (first in the dot com bubble, followed by the real estate boom); he then moves on to address the realities of economic decoupling, as seen in the recession in the developed world vs. slowing growth in developing economies.
He then offers a quick rundown of the factors which brought on the recent financial crisis, leading up to a historical overview of the industrial revolution and the efficiencies created by the "entrepreneur-driven process". Where industrial technologies and industrial processes were successfully spread, they came about mainly as a result of risk taking by entrepreneurs.
Relentless innovation and competition from entrepreneurs have driven down the costs of manufactured goods ever since. Schumpeter's description of the process of "creative destruction" speaks to the realities of economic survival; according to the evolutionary mode of thought, there are businesses and business models that, not unlike a species doomed to extinction, are not supposed to survive.
Unfortunately, we seem to face some very real threats to the workings of this spontaneous cycle of innovation and renewal. The long-term economic prosperity that has come about as a result is also in danger, says Ferguson.
What are the principal threats to entrepreneurial freedom and innovation? Let's tune in and find out.