Several years ago, the Dallas Fed's annual report featured an essay entitled "The Churn." The churn is our term for what economist Joseph Schumpeter called "creative destruction." A dynamic economy like ours can grow and make room for the new only if we allow parts of the economy to shrink. Unprofitable firms and industries must be allowed to fail and go out of business so their workers and other resources can move into firms and industries whose products are more favored or needed by consumers. This is, as the essay's subtitle says, the paradox of progress.
