Wall Street Journal sale: "Creative Destruction" at work?

WSJ & “creative destruction”

In reaction to the sale of the Wall Street Journal (and its owner, Dow Jones Co.) to Australian media mogul Rupert Murdoch, a lot of commentary has focused boldly on the future. Analysts and commentators are full of firm predictions, many of them portending doom. I find the future pretty inscrutable, so I try to focus instead on the past.

In the history of the American economy, the Wall Street Journal has long occupied a special place. Indeed, it is hard to imagine the course of U.S. capitalism without the Journal or something very much like it. Here are some reasons for the Journal’s prominence in our economy:

--The newspaper’s publisher, the Dow Jones company, is a pretty significant for-profit enterprise in its own right, with nearly $2 billion in revenues.
--The editorial page of the Wall Street Journal serves as a consistent cheerleader for capitalism, supplying arguments in favor of the things that business owners want to do.
--Far more importantly, the Journal plays a key role in bringing rationality to the entire system by providing reliable information about markets, prices, and the like. This improves the flow of capital and makes the whole economy more efficient.
(Imagine if you had to get up every morning and make 500 phone calls yourself to find out how the S&P 500 did the day before?)

It is also worth keeping in mind one of the essential features of the capitalist system, which is its relentless, unsentimental process of destroying old businesses and creating new ones. This process was first widely articulated by the Harvard professor (and admirer of capitalism) Joseph Schumpeter in 1942. He called this phenomenon “creative destruction,” arguing that it is an essential feature of capitalism.

The opening up of new markets, foreign or domestic, and the organizational development from the craft shop and factory to such concerns as U.S. Steel illustrate the same process of industrial mutation–if I may use that biological term–that incessantly revolutionizes the economic structure from within, incessantly destroying the old one, incessantly creating a new one. This process of Creative Destruction is the essential fact about capitalism. It is what capitalism consists in and what every capitalist concern has got to live in. . . .
(from “Capitalism, Socialism and Democracy,” 1942)


It’s a more comprehensive way of looking at entrepreneurship. For there to be winners, there often (not always, of course) are losers.

For a clear example, look at the original companies that made up the Dow Jones average when it was launched in 1896. Most of those once-giant enterprises are now out of business, absorbed into others, or irrelevant. Reflecting the economy of the era, they were big companies involved in industries like lead, leather, rubber, coal, sugar and tobacco. Of the original dozen industrial stocks in the Dow Jones average, only one remains in the current DJIA – General Electric, founded by Edison, but morphed almost beyond recognition into a global conglomerate.

In the media world, it’s easy to see the process of “creative destruction” at work. Let’s go back 50 or 60 years. In that period, if you asked any literate, aware, discerning American about the most important institutions in American journalism, a few names would certainly have cropped up on most lists. Here are three:

--CBS Radio News (home of Murrow, et al)
--Life magazine (home of Eisenstadt, Capa et al.)
--The New York Herald Tribune (the smartest, best written paper in the country).

Since then, all three have been creatively destroyed. Will the Journal survive? Hard to say. But the record suggests that there’s always someone else to create something new out of what is being destroyed.

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