Years ago, probably in the mid to late 1950s, Grand Union opened a grocery store on the outskirts of Peterborough, New Hampshire, thereby ringing the death knell for the two or three small, independent grocery stores in the village. It was my first experience with Joseph Schumpeter’s dictum of creative destruction. For a few months, my mother hung to her principles and refused to enter what she called, the “grand onion.” But eventually, lower prices and dwindling products on the shelves of the financially-strapped independents forced her to change.
What prompted this subject was an article in the business section of Monday’s New York Times, headlined, “Principles Are No Match for Europe’s Love of U.S. Titans.” The article discusses how tech behemoths, like Amazon, Google and Facebook create a love-hate relationship, with consumers. Many feel principled when independent stores are placed in jeopardy or by the perceived ill-treatment by “Big-box” companies of warehouse employees. But for Guillaume Rosquin of Lyon, in the Times article, a $200 savings on a Blackberry was enough to put his “issues with working conditions aside.” Seven of the ten most visited websites in Europe are operated by American companies. Google has an 85% market share for search in Europe, compared to 65% in the U.S. Facebook, the target of several investigations for its tax practices in Europe, continues to add users – now numbering 150 million Europeans, or roughly one in three.
Amazon is the most visited website in Europe and the world. In June, they had a total of 282.2 million visitors, 35% of which were Americans and 31.8% were Europeans. Twenty years ago, the company did not exist. Principle versus price/convenience is an issue with which we all struggle. But it is also “creative destruction” that is at work. I have a brother who owns what some people claim is the best independent bookstore in the United States, the Toadstool in Peterborough, NH. In full disclosure, I own one share, or four percent of the business. Yet, on a Sunday morning, reading the New York Times book review section, I often – shamelessly – log onto Amazon.
Creative and aspirant individuals have always led innovation. When they live within a democratic capitalistic society they thrive. It is no surprise that American companies dominate web-based businesses in Europe rather than European, because America’s culture has allowed and encouraged the creative forces to be unleashed that provide for a dynamic society. However, a natural consequence of unleashing the creative spirit is inequality in terms of outcomes. For those who are bright, creative and aspirant will do best. However consumers benefit as well. Two principal benefits of creative destruction are reduced prices and greater availability of goods and services.