A note on “creative destruction”

I realized after reading this Browser interview with Michael Lind on American economic history that my usage of the term “creative destruction” in Finance and Wealth was primarily rooted in the contemporary, neoliberal understanding:

This is where we see the term “creative destruction” come into play, or where the market rids itself of unworkable or inefficient enterprises and promotes beneficial and positive aspects of the economy.

Lind would probably take me to task for using it as such (my emphasis):

 Robert Atkinson is one of the leading scholars of what is sometimes called evolutionary economics or sometimes the neo-Schumpeterian school. He goes back to Joseph Schumpeter who emphasised the role of technology in transforming the economy. And Schumpeter was the one who coined the phrase “creative destruction” back in the 1940s. It’s one of those phrases that’s thrown around by people who have no idea what it means – they say it’s just ordinary market operations when some businesses go bust and others are formed. That is not what Schumpeter meant. What he meant by creative destruction was what he elsewhere referred to as “industrial mutation” – that is the entire replacement of one kind of technology and all the businesses built on it by a radically destructive new technology. So, for example, canals did not evolve into railroads – they were just completely wiped out and replaced. Railroads have largely been wiped out by trucking and automobile travel. The telegraph was wiped out by the telephone.

But of course the term’s philosophical roots date back even further than Schumpeter, a point that I think escapes Lind:

Although the modern term “creative destruction” is not used explicitly by Marx, it is clear that subsequent usage of it derives from these analyses, particularly in the work of Werner Sombart (whom Engels described as the only German professor who understood Marx’s Capital),[12] and of Joseph Schumpeter (see below). Social geographer David Harvey sums up the differences between Marx’s usage of these concepts and Schumpeter’s: “Both Karl Marx and Joseph Schumpeter wrote at length on the ‘creative-destructive’ tendencies inherent in capitalism. While Marx clearly admired capitalism’s creativity he […] strongly emphasised its self-destructiveness. The Schumpeterians have all along gloried in capitalism’s endless creativity while treating the destructiveness as mostly a matter of the normal costs of doing business”.

Of course those variations of the term – whether based on technological evolution, a “normal” mode of operations, or a Marxian “mixed-blessing” – all describe the same aspect of capitalism’s penchant for creation and destruction. It is, perhaps, less about “phrases…thrown around by people who have no idea what it means” than phrases thrown around with different spins on the same observation.


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