Short Term Versus Long Term: The Capitalist’s Dilemma

05/05/2014

The United States economy has seen 9 recessions since World War II. For the first six, the economy has recovered to previous peak levels first, with the employment rate lagging about six months behind. However, the last 3 recessions have seen 'jobless recoveries,' or recoveries in which employment recovery has lagged increasingly further behind economic recovery.

In this video, Professor Clayton Christensen of the Harvard Business School explains why this pattern is not coincidence, but an occurrence that helps to illustrate the current definition of economic success, one that for the past 30 years has increasingly focused on short term financial gain over long term sustainable growth.

Christensen explains that modern practices in finance have created a disconnect in capital flows, one that encourages companies to invest and reinvest capital in actions that promote efficiency and short term creation of more capital, making it "impossible for innovators to invest in the kinds of things that create jobs" and also produce financial returns, but over a longer period of time.

 

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