How Creative Destruction Could Yield New Market Opportunities

Livemint     3rd June 2020     Save    

Context: Pandemic induced economic crisis (exogenous shock) will fundamentally alter existing human behaviour that in turn will provide the opportunities for entrepreneurs to create new markets.

Causative factors of an economic crisis

  • Economic gyrations as a result of what is happening within an economic system.
  • E.g. The Great Depression can be explained by the collapse in aggregate demand across the world.
  • The primary task of economic policy is then to bring the system back to its old ways.
  • Exogenous shocks: from outside the economic system like new technology, natural disaster, or a virus:
  • The primary task of policymakers is to stabilize the old system, but also encourage entrepreneurs to grab new opportunities.

Affect of Ongoing Economic Crisis 

  • Temporarily suspension of education
  • Weak public investment 
  • Disrupted global supply chains 
  • Creative destruction: disruption of existing behaviour will lead to open up space for innovative new entrants.
  • New economic opportunities: like digital payments, demand for oximeters, and growth of the personal protective equipment industry.