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Concept
Creative destruction
Summary
Creative destruction (German: schöpferische Zerstörung) is a concept in economics that describes a process in which new innovations replace and make obsolete older innovations. The concept is most readily identified with the Austrian economist Joseph Schumpeter, who derived it from the work of Karl Marx and popularized it as a theory of 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.
The German sociologist Werner Sombart has been credited with the first use of these terms in his work Krieg und Kapitalismus (War and Capitalism, 1913). 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 ceaselessly 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.
In Capitalism, Socialism and Democracy (1942), Joseph Schumpeter developed the concept out of a careful reading of Marx's thought (to which the whole of Part I of the book is devoted), arguing (in Part II) that the creative-destructive forces unleashed by capitalism would eventually lead to its demise as a system (see below). Despite this, the term subsequently gained popularity within mainstream economics as a description of processes such as downsizing in order to increase the efficiency and dynamism of a company. The Marxian usage has, however, been retained and further developed in the work of social scientists such as David Harvey, Marshall Berman, Manuel Castells and Daniele Archibugi.
Although the modern term "creative destruction" is not used explicitly by Marx, it is largely derived from his analyses, particularly in the work of Werner Sombart (whom Engels described as the only German professor who understood Marx's Capital), and of Joseph Schumpeter, who discussed at length the origin of the idea in Marx's work (see below).
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