Demand Destruction vs. Creative Destruction vs. Opportunity Destruction

Demand destruction is an economic term used to describe a permanent downward shift in the demand curve in the direction of lower demand of a commodity such as energy products, induced by a prolonged period of high prices... _Wikipedia

Sometime late last spring, Al Fin warned that the world's economy could not support the ongoing upswing in energy prices, predicting demand destruction at the least, and perhaps even a recession as a result of the unsustainable costs of energy. In hindsight, it appears that last summer's price surge did indeed help trigger the current world economic recession -- along with other factors.

The expression "creative destruction" derives from the Austrian economist Joseph Schumpeter’s book, Capitalism, Socialism and Democracy, published in 1942. He coined the phrase to describe the process of change that accompanies innovation. In the book Schumpeter commented that capitalism:

…incessantly revolutionizes the economic structure from within, incessantly destroying the old one, incessantly creating a new one. This process of Creative Destruction is the essential fact about capitalism. _Business Opportunities

"Opportunity destruction" is a phrase that was either coined or re-coined by Al Fin. It refers to the a process that is exemplified by what the Obama / Pelosi reich is currently doing to the US economy. This process involves the narrowing of economic activities that are allowed, using unwarranted regulation or difficult license requirements. Or it may involve the restricting of potential gains from economic activity through extortionate penalties such as taxation, or mandated parasitism, eg labour union special preferences. Or opportunity destruction may involve mandated risk, eg tort liability structure that is slanted wildly in favour of trial lawyers. Or it may occur when the government actually takes over an entire industry, and prevents by law the entry of private individuals into that industry. Special hiring, contracting, or admissions preferences to preferred groups also constitutes opportunity destruction. Opportunity destruction is practised by politicians who do not understand the importance of freedom in the marketplace to the prosperity of the overall society.

Given enough time and power, virtually every government will practise opportunity destruction, since the advantages of favouring campaign contributors, cronies, and loyal voting blocs are far more obvious than any advantages of allowing the marketplace to work to create widespread prosperity.

Notice I said "widespread prosperity", rather than "universal prosperity." Universal prosperity is unlikely to happen in the real world given the variability of human aptitude and potential. But even if every citizen were healthy and given every opportunity to succeed, some would fail to live up to the achievements of others. This "inequity" of achievement -- even in the face of equitable opportunities -- would be grounds for a certain class of politician to campaign in the name of "universal and equal prosperity."

And so, in the name of universal prosperity -- equal or not -- politicians will gain power, and in order to solidify power they will re-structure the opportunity structure to favour their supporters. This re-structuring necessarily limits -- indeed it destroys -- overall opportunity in the society. Hence, "opportunity destruction."