Creative Destruction

Creative destruction, sometimes known as Schumpeter's gale, is a term in economics which has since the 1950s become most readily identified with the Austrian American economist Joseph Schumpeter, who adapted it from the work of Karl Marx and popularized it as a theory of economic innovation and the business cycle. The term is derived from Marxist economic theory, where it refers to the linked processes of the accumulation and annihilation of wealth under capitalism. These processes were first described in The Communist Manifesto (Marx and Engels, 1848) and were expanded in Marx's Grundrisse (1857) and "Volume IV" (1863) of Das Kapital.

At its most basic, "creative destruction" (German: schöpferische Zerstörung) describes the way in which capitalist economic development arises out of the destruction of some prior economic order, and this is largely the sense implied by the German Marxist sociologist Werner Sombart who 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 neoliberal or free-market economics as a description of processes such as downsizing in order to increase the efficiency and dynamism of a company. The original Marxian usage has, however, been maintained in the work of influential social scientists such as David Harvey, Marshall Berman, and Manuel Castells.

Read more about Creative DestructionAlternative Name, Media Reflections of Creative Destruction

Other articles related to "creative destruction":

Degrowth - Criticisms - Liberal Critique - Creative Destruction
... This is what is known as creative destruction, the process by which the "old" companies from a sector (as well as their costly and polluting technologies) disappear from the ...
Capitalism, Socialism And Democracy - Creative Destruction
... The book also introduced the term 'creative destruction' to describe innovative entry by entrepreneurs was the force that sustained long-term economic growth, even as it destroyed the value ...
Technical Change
... The outflow of this condition is the "creative destruction" of a portion of the means of production as evidenced by businesses discontinuing the production of obsolete products and/or the cessation of ... form, capitalism entails a constant level of creative destruction of a portion of the means of production and the increase in Gross Domestic Product (GDP) of the subject economy reflects the ... The "natural process" of capitalism (including creative destruction) is the subject of great contention by adherents of other systems of macroeconomic organization who see the end-result of obsolescence ...
Media Reflections of Creative Destruction
... The film Other People's Money provides contrasting views of creative destruction, presented in two speeches regarding the takeover of a publicly-traded wire and cable company in a small New ...

Famous quotes containing the words destruction and/or creative:

    The least pain in our little finger gives us more concern and uneasiness than the destruction of millions of our fellow-beings.
    William Hazlitt (1778–1830)

    The creative artist seems to be almost the only kind of man that you could never meet on neutral ground. You can only meet him as an artist. He sees nothing objectively because his own ego is always in the foreground of every picture.
    Raymond Chandler (1888–1959)