Editing Creative destruction (section)

{{Not to be confused with|Creative disruption|text=[[Creative disruption]], a marketing concept dating from the 1990s}}
{{Short description|Concept in economics}}
{{Technical|date=June 2021}}
{{Neoliberalism sidebar}}
{{Capitalism sidebar}}
{{Marxism}}

'''Creative destruction''' (German: ''schöpferische Zerstörung'') is a concept in [[economics]] that describes a process in which new innovations replace and make obsolete older innovations.<ref>{{Cite web |last= |first= |date= |title=Schumpeter's Theory of Creative Destruction - Engineering and Public Policy - College of Engineering - Carnegie Mellon University |url=http://www.cmu.edu/epp/irle/irle-blog-pages/schumpeters-theory-of-creative-destruction.html |access-date=2023-08-13 |website=www.cmu.edu |language=en}}</ref>

The concept is usually identified with the [[Austrians|Austrian]] economist [[Joseph Schumpeter]],<ref>{{cite book |last1=Ulgen |first1=Faruk |title=Encyclopedia of Creativity, Invention, Innovation and Entrepreneurship |chapter=Creative Destruction |date=2017 |pages=1–8 |doi=10.1007/978-1-4614-6616-1_407-2|isbn=978-1-4614-6616-1 |s2cid=240686671 }}</ref><ref>{{cite journal |last1=Loesche |first1=Frank |last2=Torre |first2=Ilaria |title=Creative Destruction |journal=Encyclopedia of Creativity (Third Edition) |date=2020 |pages=226–231 |doi=10.1016/B978-0-12-809324-5.23696-1|isbn=9780128156155 |s2cid=242692186 }}</ref><ref name="reinert" /> who derived it from the work of [[Karl Marx]] and popularized it as a theory of [[Innovation economics|economic innovation]] and the [[business cycle]]. It is also sometimes known as '''Schumpeter's gale'''. In [[Marxian economic theory]], the concept refers more broadly to the linked processes of the accumulation and annihilation of [[wealth]] under capitalism.<ref name="isbn0-14-044757-1">{{cite book
|author1=Marx, Karl
|author-link1=Karl Marx
|author2=Engels, Friedrich
|author-link2=Friedrich Engels
|others=Moore, Samuel (trans. 1888)
|title=The Communist Manifesto
|publisher=Penguin
|location=Harmondsworth, UK
|year=2002
|orig-year=1848
|page=[https://archive.org/details/communistmanifes00marx_5/page/226 226]
|isbn=978-0-14-044757-6
|url=https://archive.org/details/communistmanifes00marx_5
|url-access=registration
|access-date=2010-11-07
}}</ref><ref name="isbn0-14-044575-7">{{cite book
|author=Marx, Karl
|author-link=Karl Marx
|others=Nicolaus, Martin (trans. 1973)
|title=Grundrisse: Foundations of the Critique of Political Economy (rough draft)
|publisher=Penguin
|location=Harmondsworth, UK
|year=1993
|orig-year=1857
|page=750
|isbn=978-0-14-044575-6
|url=https://books.google.com/books?id=bDyemaqiZjUC
|access-date=2010-11-07
}}</ref><ref name="Marx1863">{{Cite book
|publisher=Lawrence & Wishart
|location=London
|last=Marx
|first=Karl
|author-link=Karl Marx
|title=Theories of Surplus-Value: "Volume IV" of Capital
|volume=2
|pages=495–96
|url=https://books.google.com/books?id=sU23AAAAIAAJ
|access-date=2010-11-10
|year=1969
|isbn=9780853151944
|orig-year=1863
}}</ref>

The German [[sociologist]] [[Werner Sombart]] has been credited<ref name="reinert">{{cite book |doi=10.1007/978-0-387-32980-2_4 |chapter=Creative Destruction in Economics: Nietzsche, Sombart, Schumpeter |title=Friedrich Nietzsche (1844–1900) |series=The European Heritage in Economics and the Social Sciences |year=2006 |last1=Reinert |first1=Hugo |last2=Reinert |first2=Erik S. |volume=3 |pages=55–85 |isbn=978-0-387-32979-6 }}</ref> with the first use of these terms in his work ''Krieg und Kapitalismus'' (''War and Capitalism'', 1913).<ref name="Krieg_Kapitalismus">Describing the way in which the destruction of forests in Europe laid the foundations for nineteenth-century capitalism, Sombart writes: "Wiederum aber steigt aus der Zerstörung neuer schöpferischer Geist empor" ("Again, however, from destruction a new spirit of creation arises").{{cite book
|author=Sombart, Werner
|author-link=Werner Sombart
|title=Krieg und Kapitalismus
|language=de
|location=München
|year=1913
|page=207
|url=https://archive.org/stream/kriegundkapitali00sombuoft/kriegundkapitali00sombuoft_djvu.txt
|access-date=2010-11-07
|isbn=978-0-405-06539-2
}}</ref> In the earlier work of Marx, however, the idea of creative destruction or annihilation (German: ''Vernichtung'') implies not only that capitalism destroys and reconfigures previous economic orders, but also that it must continuously devalue existing wealth (whether through war, dereliction, or regular and periodic economic crises) in order to clear the ground for the creation of new wealth.<ref name="isbn0-14-044757-1" /><ref name="isbn0-14-044575-7" /><ref name="Marx1863" />

In ''[[Capitalism, Socialism and Democracy]]'' (1942), Joseph Schumpeter developed the concept out of a careful reading of Marx's thought. In contrast with Marx - who argued that the creative-destructive forces unleashed by capitalism would eventually lead to its demise as a system - Schumpeter reinforced the evolutionary nature of capitalist economies, downplaying the concerns of static competition analysis (i.e., market concentration), and reinforcing the importance of dynamic competition analysis (i.e., threat of entry, new technologies and means of production, competition in dimensions different than price). In his words, "This process of Creative
Destruction is the essential fact about capitalism. It is what capitalism consists in and what every capitalist concern has got to live in [...] The problem that is usually being visualized is how capitalism administers existing structures, whereas the relevant problem is how it creates and destroys them. As long as this is not recognized, the investigator does a meaningless job. As soon as it is recognized, his outlook on capitalist practice and its social results changes considerably."<ref name="Schumpeter1942">{{cite book
|last=Schumpeter
|first=Joseph A.
|author-link=Joseph Schumpeter
|title=Capitalism, Socialism and Democracy
|url=https://books.google.com/books?id=6eM6YrMj46sC
|access-date=23 November 2011
|year=1994
|publisher=Routledge
|location=London
|page=139
|isbn=978-0-415-10762-4
|orig-year=1942
}}</ref> Despite this, the term subsequently gained popularity within mainstream economics as a description of processes such as [[Layoff|downsizing]] to increase the efficiency and dynamism of a company. The Marxian usage has, however, been retained and further developed in the work of [[social science|social scientists]] such as [[David Harvey (geographer)|David Harvey]],<ref name="isbn1-84467-095-3">{{cite book
|author=Harvey, David
|author-link=David Harvey (geographer)
|title=Limits to Capital
|edition=2nd
|publisher=Verso
|location=London
|year=2007
|orig-year=1982
|isbn=978-1-84467-095-6
|pages=[https://archive.org/details/limitstocapital00davi/page/200 200]–03
|url=https://archive.org/details/limitstocapital00davi
|url-access=registration
|access-date=2010-11-07
}}</ref> [[Marshall Berman]],<ref name="isbn0-86091-785-1">{{cite book
|author=Berman, Marshall
|author-link=Marshall Berman
|title=All that is Solid Melts into Air: The Experience of Modernity
|publisher=Viking Penguin
|location=Ringwood, Vic
|year=1988
|isbn=978-0-86091-785-4
|url=https://books.google.com/books?id=mox1ywiyhtgC
|access-date=2010-11-07
}}</ref> [[Manuel Castells]]<ref name="isbn0-631-22140-9">{{cite book
|author=Castells, Manuel
|author-link=Manuel Castells
|title=The Rise of the Network Society
|edition=2nd
|publisher=Blackwell Publishers
|location=Oxford
|year=2000
|orig-year=1996
|isbn=978-0-631-22140-1
|url=https://books.google.com/books?id=hngg4aFtJVcC
|access-date=2010-11-07
}}.</ref> and [[Daniele Archibugi]].<ref>{{cite book
|last1=Archibugi |first1=Daniele |author1-link=Daniele Archibugi
|last2=Filippetti |first2=Andrea
|title=Innovation and Economic Crisis. Lessons and Prospects from the Economic Downturn
|publisher=Routledge
|location=London
|year=2003
|isbn=978-0-415-74559-8
|url=https://www.routledge.com/Innovation-and-Economic-Crisis-Lessons-and-Prospects-from-the-Economic/Archibugi-Filippetti/p/book/9780415602280
|access-date=2016-06-25
}}.</ref>

In modern economics, creative destruction is one of the central concepts in the [[endogenous growth theory]].<ref name="AghionHowitt">{{cite book
|last1=Aghion
|first1=Philippe
|last2=Howitt
|first2=Peter
|title= Endogenous growth theory
|url=https://mitpress.mit.edu/9780262528467/endogenous-growth-theory/
|access-date=29 December 2023
|year=1998
|publisher=MIT Press
|location=Cambridge, MA.
|isbn=9780262011662
}}</ref> 
In [[Why Nations Fail]], a popular book on long-term economic development, [[Daron Acemoglu]] and [[James A. Robinson]] argue the major reason countries stagnate and go into decline is the willingness of the ruling elites to block creative destruction, a beneficial process that promotes innovation.<ref>{{cite book |last1=Acemoglu |first1=Daron |last2=Robinson |first2=James A. |title=Why nations fail: the origins of power, prosperity and poverty |date=2012 |publisher=Crown Publishers |location=New York |isbn=978-0307719218 |page=100 |edition=1st |url=https://www.univ.ox.ac.uk/book/why-nations-fail/ |access-date=2 November 2024}}</ref>