Jeune Street

Richard Florida thinks that the current recession will be painful in the short-run, but essential in the long-run:

It is possible that the United States will enter a period of accelerating relative decline in the coming years, though that’s hardly a foregone conclusion—a subject I’ll return to later. What’s more certain is that the recession, particularly if it turns out to be as long and deep as many now fear, will accelerate the rise and fall of specific places within the U.S.—and reverse the fortunes of other cities and regions.

...The Stanford economist Paul Romer famously said, “A crisis is a terrible thing to waste.” The United States, whatever its flaws, has seldom wasted its crises in the past. On the contrary, it has used them, time and again, to reinvent itself, clearing away the old and making way for the new. Throughout U.S. history, adaptability has been perhaps the best and most quintessential of American attributes. Over the course of the 19th century’s Long Depression, the country remade itself from an agricultural power into an industrial one. After the Great Depression, it discovered a new way of living, working, and producing, which contributed to an unprecedented period of mass prosperity. At critical moments, Americans have always looked forward, not back, and surprised the world with our resilience. Can we do it again?

Florida is basically repeating the ideas of Joseph Schumpeter, who argued that economies advance by developing more efficient ways of doing things -- innovation is the engine of growth. He called this process "creative destruction".

He may be right, but there is another dynamic at play: the disintegration of parochial systems, and the integration of global systems. In an economic crisis, countries are tempted to turn inwards and weather out the storm, hoping they can refocus on the fundamentals and get back to the good old times. What the US needs to do is to continue opening itself up to the world by building relationships and institutions that strengthen a global economy. Africa and China are both facing economic crises because of declining demand for their exports overseas (specifically in the US), and American protectionism could potentially cripple these economies. And in the long-run that's not good for America either.