Creative Destruction and the Welfare State

Recently, the rise of digital cameras put a lot of firms in the film and film-development trade out of business. But now it seems that smartphones are killing the market for point-and-shoot digital cameras.

Adam Ozimek observes that this is an example of “creative destruction” in action and says we should “[k]eep stories like these in your head for when someone argues that we are worse off because of some creative destruction.”


And perhaps we should. To me, though, what keeping these stories in mind mostly does is drive home the case for a reasonably generous welfare state. As we see here, the ebbs and flows of technological change have profound implications for the organization of the economy. And while the forward march of technology is definitely a good thing, the metaphor that “a rising tide lifts all boats” is badly inadequate. The economic sea churns a lot, and it’s very easy for decent, competent, hardworking people to suddenly find themselves worse off than they were the year before through no fault of their own. The guy with the film development shop didn’t suddenly become lazier or less skilled the day his business became unviable, but he took an economic hit nonetheless. This churn and the attendant levels of risk and anxiety that it creates are an undesirable feature of the capitalist order. And the welfare state is the answer.