Gov. Brown excuses Toyota move with Schumpeter

03 May, 2014 by John Seiler

It was free-market economist Joseph Schumpeter who coined the phrase, “creative destruction.” He meant that a dynamic economy doesn’t stand still. That cars replace buggies; trucks replace conestoga wagons; computers replace typewriters; smartphones replace line phones. A dynamic society is different from a stagnant society, such as under socialism, or the economic edicts of the Roman Emperor Diocletian.

That’s the context of Gov. Jerry Brown quoting Schumpeter about the loss of Toyota’s HQ to Texas. And it’s one thing I like about the governor. He comes up with these references. It’s doubtful Texas Gov. Rick Perry ever heard of Schumpeter. But who got the jobs?

Brown talked about “the creative destruction of capitalism…. I put the emphasis on creative. Change is inevitable. There’s a fellow named Schumpeter who talked about the creative destruction of capitalism…. If you’re totally static, you’re a dead economy. Things are always moving.”

Right. And one thing that “moves” is capital, from areas of too much government to areas with more reasonable government. It’s South Vietnamese fleeing before the invading North Vietnamese tanks in 1975, then taking to boats to America. There a couple hundred thousand Vietnamese in California right now who can tell you about that. Human capital was “destroyed” in Vietnam, so it moved here.

With AB 32, SB 375 and thousands of other absurd anti-business laws, California has been repelling businesses, which “are always moving” to Texas and other states, or to other countries, to find freedom.

“We do have Tesla,” Brown said. “We have an electric bus company from China. Certainly we would like more. But not every state can do everything. That’s why we have 50 states.”

But Tesla exists only because of massive state and federal subsidies. The BYD Motors electric buses were bought by the Los Angeles County Metropolitan Transportation Authority, a government monopoly. If L.A. had a private-sector bus system, as do many cities around the world such as the jitneys in Manila, what’s called “paratransit,” would the private owners buy these electric buses? No way.

“Creative destruction” replaces the inefficient with the efficient. That’s why California jobs are being creatively destroyed and replaced with Texas jobs.