And, together, those two industries employ more Canadians and produce more output than all of Canada’s manufacturers. Creative destruction at work Economists’ understanding of the evolution of economies is based on hundreds of years of history. Advances in technology lead to higher productivity and greater production, which in turn permit the development of new economic activities and increased specialization in jobs.
Over time, the lion’s share of these new activities has arisen in the service sector. Joseph Schumpeter called this process “creative destruction,” because improving how we do things destroys the old while creating the new. And the key facilitator of this growth process is trade, both domestic and international; otherwise, we would all have to be jacks-of-all-trades. Let me illustrate with the Canadian experience.