Wednesday, August 10, 2016

We Should Celebrate Risk-Taking

There is a reason why the US and Western Europe grew out of historical economic slumber in the seventeenth century and eventually created the most prosperous societies that the world had ever seen.  The reason is "risk-taking." Prior to the 17th century, there really was no platform for risk-taking. Capitalism provided that platform.

Along the way, these economies experienced numerous booms and busts, perhaps essential requirements for true economic growth.  "Creative destruction" would be the term that Joseph Schumpeter would famously apply.

Then along came 1929 and then later 2008. These downturns convinced the body politic that capitalism was flawed and that having government intervene was the answer.  Much of the government bureaucracy put in place in the 1930s was overturned later in the 1950s and the US and Europe flourished.

But, at the turn of millenium, things began to change dramatically. The idea that government should run things displaced the view that consumers should make the larger decisions.

One of the casualties in the new millenium was the idea of risk-taking.  Corporate leaders who now take risk are courting criminal prosecution, often whether they succeed or fail.  This is the old Soviet system where arbitrary and autocratic decisions replace the rule of law.  Risk-taking disappears in this kind of world.  But, this means economic growth disappears as well.

Until risk-taking is once again celebrated and not criminalized, there will be no economic growth in the US or Western Europe.  No pain, no gain.

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