Creative destruction

Creative destruction is an expression used in economics, coined by Joseph Schumpeter. Creative destruction reflects the way technology acts.

The main idea of this principle is that innovation creats economic growth and so helps capitalism's functioning. Innovation leads to destruction.

There are several kinds of new technologies:

• New processes
• New products and goods
• New ways to transport
• New plants organization
• New markets
• New institutions

All these technologies contribute to growth but lead also to the (gradual) death of old technologies. Indeed, old technologies produce at higher costs.

For Schumpeter, the main principle of capitalism was innovation and technology (creative destruction) and not competition (invisble hand).

History

Schumpeter was probably influenced by Charles Darwin.

This expression was published first in the book "Capitalism, Socialism and Democracy." 1942

Miscellaneous

Several books concerning economics have creative destruction in their titles:

• Creative Destruction: Why Companies That Are Built to Last Underperform the Market--And How to Successfully Transform Them . A book by Richard Foster and Sarah Kaplan. ISBN 0385501331