Joseph Schumpeter would have loved today’s stock market. Schumpeter (1883-1950), an Austrian economist who emigrated to the U.S. and taught the dismal science at Harvard, would have seen opportunity around the corner for those applying his theories on growth in today’s marketplace. Schumpeter focused his studies on the role of the entrepreneur in the economy. He believed that innovation driven by individual and business entrepreneurs created gales of “creative destruction” that spurred on economic growth.

In his book Capitalism, Socialism and Democracy (1942), Schumpeter stated, “The fundamental impulse that sets and keeps the capitalist engine in motion comes from the new consumers, new goods, new markets and new forms of industrial organization that capitalist enterprise creates.”

He also believed that the entrepreneurial cycle began with the individual entrepreneur who could take advantage of new innovations and translate them into successful economic enterprises. Successful innovators reap large short-term profits that are soon bid away by new imitators. These new entrants create too much capacity and a natural shakeout occurs.

The entrepreneurial innovation then enters a second stage where the individual is replaced by a larger corporate structure, having more resources to drive innovation and growth in the economy.

That is where we are today, and that is why Schumpeter would see opportunity ahead. We have seen the individual entrepreneurial stage develop and mature. We have experienced the overcapacity and the natural shakeout that follows . . . just look at the telecom sector. Now, we are about to see an even stronger growth cycle kick in as the largest and strongest corporations survive and stand poised to take advantage of their strengths and entrepreneurial drive.

We are seeing the effects of a serious shakeout—falling prices, rising unemployment, little appetite for new ventures (witness the lack of new public offerings), and a universal pessimism that the economy will never recover. In short, the economy is shaking out the remaining companies that did not win the race for leadership in their industries. They are laying off workers and shutting plants.

Lurking in the background are the industry leaders, who are beginning to absorb market share left behind by their weaker brethren. These larger, growth-oriented companies have the resources, the money, and the entrepreneurial spirit to surge ahead once the economy begins to pick up.

When the “pick-up” begins is the $64 question. There are a few positive signs. Saddam’s statue coming to the ground and POWs coming home are positives. Oil prices have come off their highs, and gasoline prices are headed south. Low interest rates make corporate borrowing for investment again a possibility leading to potential rehiring. And consumers are still spending. For the month of March, the Census Bureau indicated that households were back buying big-ticket items like vehicles and furniture.

Pessimists continue to make persuasive arguments against this recovery. Like their counterparts in the late 1990s who predicted we would never see another recession, they have forgotten that the economy moves in cycles.

Sometimes we just need to step back and look at what really makes an economy move, and what really matters. It matters that we all need to eat. It matters that we get up every morning and go out to make a buck. It matters that we educate our children and teach them new skills that will allow them to feed themselves when they’re older.

Finally, it matters that we are an entrepreneurial society in a free market system with access to capital, personal freedom and plenty of incentive to create and be productive. There’s a lot to like about our situation today.