, and those cracks were to continue widening as time passed. britain ’ s heavily controlled economy was under persistent stress as it vaulted from one crisis to another in the early postwar decades. in the united states, unbalanced macroeconomic policies led to a gradual uptrend in the rate of inflation in the 1960s. the imposition of wage and price controls in the 1970s to deal with the problem of inflation proved unworkable and ineffective. the notion that the centrally planned soviet economy was catching up with the west was, by the early 1980s, increasingly viewed as dubious, though it was not fully discarded until the collapse of the berlin wall in 1989 exposing the economic ruin behind the iron curtain. the east - west divisions following world war ii engendered an unintended four - decades - long experiment in comparative economic systems, which led, in the end, to a judgment by the vast majority of policymakers that market economies were unequivocally superior to those managed by central planning. many developing nations abandoned their soviet - type economic systems for more market - based regimes. but even earlier in the developed world, distortions induced by regulation were more and more disturbing. in response, starting in the 1970s, american presidents, supported by bipartisan majorities in the congress, deregulated large segments of the transportation, communications, energy, and financial services industries. the stated purpose was to enhance competition, which was increasingly seen as a significant spur to productivity growth and elevated standards of living. assisting in the dismantling of economic rigidities was the seemingly glacial, but persistent, lowering of barriers to cross - border trade and finance. as a consequence, the united states, then widely seen as a once great economic power that had lost its way, gradually moved back to the forefront of what joseph schumpeter, the renowned harvard professor, called “ creative destruction, ” the continuous scrapping of old technologies to make way for the innovative. in that paradigm, standards of living rise because depreciation and other cash flows of industries employing older, increasingly obsolescent, technologies are marshaled, along with new savings, to finance the production of capital assets that almost always embody cutting - edge technologies. workers, of necessity, migrate with the capital. through this process, wealth is created, incremental step by incremental step, as high levels of productivity associated with innovative technologies displace lesser productive capabilities. the model presupposes the continuous churning of a flexible

technologies, are occupying an ever - increasing share of the workforce and are gradually replacing work that requires manual skills. those industries in which labor costs are a significant part of overall costs have been under greater competition from foreign producers with lower labor costs, adjusted for productivity. this process is not new. for generations human ingenuity has been creating industries and jobs that never before existed, from vehicle assembling to computer software engineering. with those jobs come new opportunities for workers with the necessary skills. in recent years, competition from abroad has risen to a point at which developed countries ’ lowest skilled workers are being priced out of the global labor market. this diminishing of opportunities for such workers is why retraining for new job skills that meet the evolving opportunities created by our economies has become so urgent a priority. a major source of such retraining in the united states has been our community colleges, which have proliferated over the past two decades. we can usually identify somewhat in advance which tasks are most vulnerable to being displaced by foreign or domestic competition. but in economies at the forefront of technology, most new jobs are the consequence of innovation, which by its nature is not easily predictable. what we in the united states do know is that, over the years, more than 94 percent of our workforce, on average, has been employed as markets matched idled workers seeking employment to new jobs. we can thus be confident that new jobs will displace old ones as they always have, but not without a high degree of pain for those caught in the job - losing segment of america ’ s massive job - turnover process. * * * the onset of far greater flexibility in recent years in the labor and product markets of the united states and the united kingdom, to name just two economies, raises the possibility of the resurrection of confidence in the automatic rebalancing ability of markets, so prevalent in the period before keynes. in its modern incarnation, the reliance on markets acknowledges limited roles for both countercyclical macroeconomic policies and market - sensitive regulatory frameworks. the central burden of adjustment, however, is left to economic agents operating freely and in their own self - interest in dynamic and interrelated markets. the benefits of having moved in this direction over the past couple of decades are increasingly apparent. the united states has experienced quarterly declines in real gdp exceeding 1 percent at an annual rate on only three occasions over the past twenty years. britain has gone forty - six quarters without a down