All Hail Ragnarök!

Our weekly explainer on economics using lessons from popular culture. In Installment 21, Thor learns about Creative Destruction.

Norse Gods cop a lot of criticism, but there’s more to them than sartorial flamboyance. They know their economics. In that most excellent romp of a movie, Thor: Ragnarök, Odin teaches Thor an important lesson about how economies work.

Before that, though, a spoiler alert. I give away the ending of the film, so unless you’ve already seen it or don’t care about it, stop reading now.

Couldn’t stop, eh? Okay, so the film starts with Thor battling a funky fire demon named Surtur, who wishes to bring about Ragnarök, or the destruction of Asgard. Thor kicks his ass and moves on. Later in the film, Thor’s half-sister Hela, the Goddess of Death, decides to take over Asgard and pursue colonial ambitions. Thor manages to get to Asgard in time to help Heimdall and the beleaguered people of Asgard get away from their new ruler’s wrath, but it seems to be a losing battle. Then Thor loses an eye and has a vision: he sees his dad Odin tell him that Asgard resides in its people, and not in the physical space it occupies. Thor realises that there is only one way to defeat Hela: to let her have Asgard, and resurrect Surtur, thus unleashing Ragnarök. The realm of Asgard would be destroyed — but the people of Asgard would live on, having escaped just in time.

The script could have been written by Joseph Schumpeter.

Schumpeter, an Austrian-born economist, popularised a term, Creative Destruction, that perfectly explains Thor’s revelation. As per one definition, Creative Destruction is the “process of industrial mutation that incessantly revolutionizes the economic structure from within, incessantly destroying the old one, incessantly creating a new one.” In simpler words, it is the churn within an economy that keeps companies and entrepreneurs innovating to find new ways to satisfy customers. In this process, some companies and brands die or are reinvented, but progress is relentless.

All progress depends on Creative Destruction. Henry Ford’s automotive assembly lines were forces of creative destruction. They accelerated the demise of the horse-driven coach, perhaps even put a few coach manufacturers out of jobs, but made the world so much better off. Similarly, technological progress killed off giants like Kodak and Xerox, and LPs gave way to cassettes gave way to CDs gave way to digital music. The internet disrupted every industry — ‘disruption’ is just a form of Creative Destruction — and Uber is a recent product of this process.

Consider what is common to all these examples: the consumers benefited. Markets exist as a mechanism to satisfy people’s desires, and in each case, We the People were left better off. The ‘destruction’ that happened was always temporary. With every technological advance, for example, some jobs are lost, but the productivity gains from that makes consumers wealthier, and they spend that wealth elsewhere. Luddites have spent centuries complaining about technology — and the creative destruction it unleashes or enables — but those complaints have always turned out to be baseless.

This is why protectionist measures are so wrong. They help specific interest groups at the expense of consumers at large, amounting to a redistribution of wealth from the poor to the rich. (Here’s an old piece I wrote about this.) Indeed, Creative Destruction is a consequence of the evolving desires of people, and anything that interferes with it harms the public at large. It also shows the wisdom of Odin in telling his son that Asgard resided in the people of Asgard, and all else was temporary. (Well, people are temporary too, but I won’t bore you with musings on mortality.)

It must be noted here that Creative Destruction comes about because of the voluntary actions of individuals, and there is no coercion required. It has been suggested by dubious Loki-like thinkers that some of the Modi government’s schemes, like Demonetisation, are a form of Creative Destruction. That is nonsense. The coercive hand of government is never creative, only destructive, and societies and economies generally progress in spite of their government, not because of it. India is a great example of it — and so, I suppose, is Asgard.

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Also read: My old piece on the economics lessons of Wonder Woman, co-written with Kumar Anand.