Philippe Aghion: Competition, education, flex-security the pillars of a successful growth structure

François Picard is pleased to welcome celebrated French economist, London School of Economics professor and Nobel laureate in Economic Sciences, Philippe Aghion as he walks us through the dynamic economic model of innovation through “creative destruction.” Creative destruction is a term from economics and innovation theory that describes the process by which new ideas, technologies, or ways of doing things replace the old and the obsolete. It’s the engine of growth in very dynamic economies, a cycle where the new displaces, and sometimes even takes a sledgehammer to the establishment. The term was popularised by economist Joseph Schumpeter in the 1940s, who described capitalism as a “perennial gale of creative destruction. Now you'd be forgiven if this led you to believe that Mr. Aghion embraced ruthless capitalism, for him it is quite the opposite: "Competition, education, flex-security are the pillars of a successful growth structure." And he advocates for a social democratic model rooted in the fabric of the Scandinavian countries. Remember the economic system embraced by Bernie Sanders? Here is how Mr. Aghion explains it: “I advocate a lot for a kind of Danish system of flex security. When you lose your job, you get 90% of your salary for two years. You are retrained and the state helps you find a new job. I think it's very important to make creative destruction socially acceptable and to make sure that nobody is left out of the process." He firmly believes that societies must build institutions: education, “flexicurity” (strong safety nets and retraining), healthy competition, and selective industrial policy, that make creative destruction politically and socially viable.