However it is spurred, innovation and enterprise is what everyone is looking for. Even the Chinese here are bemoaning their insufficient creative class, fearing what, say, the Koreans might come up with.
A tribal war
During another period of global upheaval, the Industrial Revolution, a French economist named Jean-Baptiste Say popularized a theory that says successful products create their own demand. Say’s Law is again in vogue, often cited in debates about the iPad. No one asked for the iPad, or perhaps even needed it, but we all wanted one once tablets were on the market. And we found ways to pay for it, either insisting on paying less for other products or working harder to make more money, often using an iPad to do so.
That is a pollyannaish view that the technology enthusiasts might endorse.
Not Keynes, however. He was among the fervent critics of Say’s Law, for reasons that might just be playing out in Canada today.
All this creative chaos not only drives down prices, the argument goes, it spooks businesses and individuals who fear more disruption and so horde what they can. As prices fall further, disinflation sets in, a problem highlighted this week by the Bank of Canada, as it sent the dollar tumbling. Consumers stop buying as they wait for new and better things at even lower prices. And instead of investing in job-enhancing technologies and expanding exports, businesses are hoarding cash. As in Japan, many will see that as reason for more government intervention, to keep the economy as we know it going.
In Davos, those two scenarios are taking shape, like tribal forces on opposing mountainsides. The coming waves of innovation will show who’s right, whether government – having saved the financial system – should now get out of the way of a new industrial revolution. Or whether those states need to step it up, spending tax money on training, helping pick winning technologies and pumping consumers with even more credit to buy what the innovators are creating. At least for now there is general agreement with Eric Schmidt’s take on the race between humans and machines – “that it’s important the humans win.”
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