Economist Josef Schumpeter’s observation that capitalism is a process of “creative destruction,” was insightful. A market economy inherently engenders forces that create new ventures but destroy others. The sorts of incentives, and responses to them, that brought Intel, Microsoft and Google into dominance are one with those that have largely crushed or dramatically changed Western Electric, IBM, U.S. Steel and General Motors.
That so many of the historic corporations that dominated the U.S. economy at mid-20th century could have faded so dramatically could not have not widely foreseen in the first decades after the Austro-American economist first expressed his view.
Indeed, John Kenneth Galbraith, another economist who like Schumpeter was famous 60 years ago, argued that modern, technocratic corporations like U.S. Steel, General Motors and IBM, so visible after World War II, would dominate not only the economy, but all of public life, from then on out. His book, “The New Industrial State,” in which he laid out this view, was on national best-seller lists for months.
Events proved Galbraith very wrong, at least in part.
Economists cite this “creative destruction” as an advantage of capitalism over other economic systems. The concept explains the efficient use of resources and improvement of productivity. But, as when advocating the economic advantages of free international trade, most in the discipline tend to understate the painful social dislocations often inherent in “creative destruction.” The destruction takes place in communities, and in their values, as much as in corporations.
That was evident to me Christmas morning as my wife and I ate in an IHOP in Cicero, Ill. This suburban municipality just a few minutes west of downtown Chicago is famous for having been a base for mobster Al Capone and for ethnic populist politician Anton Cermak, as well as for racial segregation. It was called “the Selma of the North.”
When Martin Luther King Jr. and others led marches there 50 years ago, Cicero was solidly white and opposed to what we now term “diversity.”
Indeed, the mob and political machine that had long controlled the town exploited fears of blacks moving in to defeat a citizens reform movement in 1948, one led by a Dutch Reformed pastor who had grown up on a farm in southwest Minnesota only a mile or so from the one where I was raised.
If one looked around the pancake house last week, the die-hard white ethnic blocs that so resisted desegregation in the 1960s were gone. It was a large restaurant, with dozens of tables and well over 100 patrons. My rough estimate was that 75 percent of them were of Hispanic origin. Another 20 percent or so were African-American. There was one family, in which all the women wore hijabs, that seemed North African in background. My wife and I were clearly in the minority here.
It is hard to imagine how that was in any way bad for U.S. society. The people around us were working class people out for a family brunch on a holiday morning. They just had different physical appearances from the working class Cicero residents of 1964.
We can condemn members of that older group as being racist in their resistance to desegregation. Some were. Similarly, one can hear overtly racist remarks back in Murray and Pipestone counties in Minnesota, around where I grew up, as the Hispanic population there grows. A quick scan of last fall’s school bus route lists indicates that about a third of the rural kids riding buses into Edgerton public schools had Hispanic surnames. I doubt anyone would have anticipated that even 20 years ago and many old-timers hate the change. And racist or not, the cultural changes can seem wrenching.
However, this is nothing new. When I was a kid, an old “Yankee” in my home town was wont to remark, “Yeah, Chandler was an awful nice town until all those damned Dutchmen started showing up around 1900.” My grandfather and grandmother arrived from Holland around 1904. (In Chandler, a Yankee was anyone, usually with an English, Scottish or Irish surname, who traced his roots to a place like Ohio or New York State rather than to Norway, Germany or the Netherlands.)
Economic forces drove much of this change, rural or urban. Plentiful meatpacking jobs drew Czechs, Italians and others from Europe. Unjust land tenure and stagnant rural economies there drove them away. Meatpacking jobs were dirty ones that, some said, “Americans don’t want to do anymore.” Sound familiar?
With acculturation and better education, many descendants of these initial immigrants moved out to suburbs like Cicero for better housing and higher-skill, higher-paying jobs in plants like the Western Electric Hawthorne Works, which once employed 45,000 people.
They were replaced in South Chicago by African-Americans who took railroads north from the Mississippi Delta and other areas of the Deep South. Some were drawn by manufacturing jobs plentiful during World War II. Some were driven off the land as the newly invented mechanical cotton picker allowed landowners to wrench acreages back from sharecroppers.
As their economic situation improved, many also wished to move to suburbs like Cicero for the same reasons — better housing and education, more jobs and less crime — that had motivated the ethnic groups before them.
Hispanics, nearly all immigrants from Mexico, followed a similar pattern, either drawn by employers looking for inexpensive labor or driven by a lack of opportunity in the rural areas where they were born. Hence 80 percent of Cicero’s population is listed as being of Mexican descent in the 2010 census. The Hawthorne works, hailed as “the seedbed of the quality control revolution,” is no more, but there still is much manufacturing employment and Cermak Road shows a bustling retail sector, nearly all with signage in Spanish.
In southwest Minnesota, technological change in farm machinery and chemical weed control greatly changed the economies of scale of crop production over the past several decades. Livestock production changed scale more recently, and the old model of farm families supplying virtually all the labor for their own livestock operations is now nearly dead.
Hence the estimate that two-thirds of Minnesota cows are now milked by someone who speaks Spanish and even greater dependence on immigrant labor in hog and poultry production. Pipestone and Murray county populations remained below 5 percent Hispanic in the 2010 census, but the proportion is far higher in the livestock-production workforce.
It is easy to sit in a largely white, largely white-collar, highly educated neighborhood like St Anthony Park, where I live, and sniff at the bigotry in Cicero in the 1960s or apparent racism in Chandler or West St. Paul today.
It is harder to live where the social and cultural dislocations stemming from creative economic destruction actually are occurring. Discretionary policies, including a whole complex that affect immigration, can slow or speed these changes. But much of this change is inevitable and ongoing through generations.