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Creative destruction after Brexit

According to reports the effects of Brexit can already be seen. Fruit rotting on trees, restaurants and bars closing, but Matthew Lynn writes on the website Money Week that all those developments could be positive in the long term. He points to the economic principle of 'creative destruction'.

All sectors dependent on cheap labour and imported raw materials will face a difficult time after the Brits leave the EU. "And yes, some will go bankrupt. But the main thing is: it's not necessarily a bad development," writes Matthew. "It's part of a process of creative destruction, which makes countries richer," he continues.

He points to the fruit sector as an example. Growers are dependent on cheap labour to pick the fruit. This is why many Eastern European workers are used to pick apples for instance. Due to the Brexit the access to cheap Eastern European labour is being cut off, but this isn't necessarily bad. "Apples can be grown in Poland and exported to the United Kingdom. Poland is already a big supplier of apples in Europe. Picking fruit is a low paid job. It is exactly the type of work an affluent economy should be outsourcing to a less developed country."

Because companies are going bankrupt, Matthew believes there will be space for new companies. This process is called 'creative destruction' in economics. Old industries disappear, new ones rise. In the end this is supposed to lead to a wealthier country.

Source: Money Week

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