Rethinking Capitalism after Covid: The Power of Creative Destruction

The COVID -19 crisis was a wake-up call for academics and policymakers worldwide, and it revealed some of the serious problems plaguing our economic, social, and political systems. For instance, it showed the U.S.'s dysfunctional social welfare and healthcare systems, as well as the mounting working-class distress against a structurally unequal and unfair allocation of income and wealth. It showed the inadequate innovation system and the missed opportunities for growth originated from an unaccomplished process of political integration in Europe. The lack of transparency and the excess concentration of power in China and Russia. It showed the potential implications of a failed transition to more environmentally sustainable production models worldwide. But the crisis is also an opportunity for change. In this respect, the realization that creative destruction can serve as a lever for growth after COVID now challenges policymakers, who have to manage a protect-reallocate trade-off. On the one hand, they have to support viable firms to save jobs and preserve the human capital accumulated on those firms. On the other hand, they have to encourage the entry of new firms and activities which are more efficient and responsive to the needs of consumers, i.e., they have to accompany the process of creative destruction without obstructing it. The challenge is to unleash the power of creative destruction while softening its impact on employment and people's health and happiness. To direct creative destruction toward greener and more equitable growth. To avoid excessive concentration of wealth and power, leading to yesterday's innovators blocking new innovators and threatening our democracies.