Creative destruction - AbsoluteAstronomy.com

Creative destruction is a term originally derived from Marxist

Marxism

Marxism is an economic and sociopolitical worldview and method of socioeconomic inquiry that centers upon a materialist interpretation of history, a dialectical view of social change, and an analysis and critique of the development of capitalism. Marxism was pioneered in the early to mid 19th...

economic theory which refers to the linked processes of the accumulation and annihilation of wealth

Wealth

Wealth is the abundance of valuable resources or material possessions. The word wealth is derived from the old English wela, which is from an Indo-European word stem...

under capitalism. These processes were first described in The Communist Manifesto
The Communist Manifesto
The Communist Manifesto, originally titled Manifesto of the Communist Party is a short 1848 publication written by the German Marxist political theorists Karl Marx and Friedrich Engels. It has since been recognized as one of the world's most influential political manuscripts. Commissioned by the...

(Marx and Engels, 1848) and were expanded in Marx's Grundrisse
Grundrisse
The Grundrisse der Kritik der Politischen Ökonomie is a lengthy manuscript by the German philosopher Karl Marx, completed in 1858. However, as it existed primarily as a collection of unedited notes, the work remained unpublished until 1939...

(1857) and "Volume IV" (1863) of Das Kapital
Das Kapital
Das Kapital, Kritik der politischen Ökonomie , by Karl Marx, is a critical analysis of capitalism as political economy, meant to reveal the economic laws of the capitalist mode of production, and how it was the precursor of the socialist mode of production.- Themes :In Capital: Critique of...

. 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

Werner Sombart

Werner Sombart was a German economist and sociologist, the head of the “Youngest Historical School” and one of the leading Continental European social scientists during the first quarter of the 20th century....

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.

From the 1950s onwards, the term "creative destruction" has become more readily identified with the Austrian-American economist Joseph Schumpeter

Joseph Schumpeter

Joseph Alois Schumpeter was an Austrian-Hungarian-American economist and political scientist. He popularized the term "creative destruction" in economics.-Life:...

, who adapted and popularized it as a theory of economic innovation

Innovation Economics

Innovation economics or economics of innovation is a growing economic doctrine that reformulates conventional economics theory so that knowledge, technology, entrepreneurship, and innovation are positioned at the center of the model rather than seen as independent forces that are largely unaffected...

. In Capitalism, Socialism and Democracy (1942), he 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. Despite this, the term subsequently gained popularity within neoliberal

Neoliberalism

Neoliberalism is a market-driven approach to economic and social policy based on neoclassical theories of economics that emphasizes the efficiency of private enterprise, liberalized trade and relatively open markets, and therefore seeks to maximize the role of the private sector in determining the...

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.

In Marx's thought

In The Communist Manifesto
The Communist Manifesto
The Communist Manifesto, originally titled Manifesto of the Communist Party is a short 1848 publication written by the German Marxist political theorists Karl Marx and Friedrich Engels. It has since been recognized as one of the world's most influential political manuscripts. Commissioned by the...

of 1848, Karl Marx

Karl Marx

Karl Heinrich Marx was a German philosopher, economist, sociologist, historian, journalist, and revolutionary socialist. His ideas played a significant role in the development of social science and the socialist political movement...

and Friedrich Engels

Friedrich Engels

Friedrich Engels was a German industrialist, social scientist, author, political theorist, philosopher, and father of Marxist theory, alongside Karl Marx. In 1845 he published The Condition of the Working Class in England, based on personal observations and research...

described the crisis tendencies of capitalism in terms of "the enforced destruction of a mass of productive forces":

Modern bourgeois society, with its relations of production, of exchange and of property, a society that has conjured up such gigantic means of production and of exchange, is like the sorcerer who is no longer able to control the powers of the nether world whom he has called up by his spells. [...] It is enough to mention the commercial crises that by their periodical return put the existence of the whole of bourgeois society on trial, each time more threateningly. In these crises, a great part not only of existing production, but also of previously created productive forces, are periodically destroyed. In these crises, there breaks out an epidemic that, in all earlier epochs, would have seemed an absurdity — the epidemic of over-production. Society suddenly finds itself put back into a state of momentary barbarism; it appears as if a famine, a universal war of devastation, had cut off the supply of every means of subsistence; industry and commerce seem to be destroyed; and why? Because there is too much civilisation, too much means of subsistence, too much industry, too much commerce. The productive forces at the disposal of society no longer tend to further the development of the conditions of bourgeois property; on the contrary, they have become too powerful for these conditions. […] And how does the bourgeoisie get over these crises? On the one hand by enforced destruction of a mass of productive forces; on the other, by the conquest of new markets, and by the more thorough exploitation of the old ones. That is to say, by paving the way for more extensive and more destructive crises, and by diminishing the means whereby crises are prevented.

A few years later, in the Grundrisse
Grundrisse
The Grundrisse der Kritik der Politischen Ökonomie is a lengthy manuscript by the German philosopher Karl Marx, completed in 1858. However, as it existed primarily as a collection of unedited notes, the work remained unpublished until 1939...

, Marx was writing of "the violent destruction of capital not by relations external to it, but rather as a condition of its self-preservation". In other words, he establishes a necessary link between the generative or creative forces of production in capitalism and the destruction of capital value as one of the key ways in which capitalism attempts to overcome its internal contradictions:

These contradictions lead to explosions, cataclysms, crises, in which [...] momentaneous suspension of labour and annihilation of a great portion of capital [...] violently lead it back to the point where it is enabled [to go on] fully employing its productive powers without committing suicide.

In the Theories of Surplus Value ("Volume IV" of Das Kapital
Das Kapital
Das Kapital, Kritik der politischen Ökonomie , by Karl Marx, is a critical analysis of capitalism as political economy, meant to reveal the economic laws of the capitalist mode of production, and how it was the precursor of the socialist mode of production.- Themes :In Capital: Critique of...

, 1863), Marx refines this theory to distinguish between scenarios where the destruction of (commodity) values affects either use values or exchange values or both together. The destruction of exchange value combined with the preservation of use value presents clear opportunities for new capital investment and hence for the repetition of the production-devaluation cycle:

the destruction of capital through crises means the depreciation of values which prevents them from later renewing their reproduction process as capital on the same scale. This is the ruinous effect of the fall in the prices of commodities. It does not cause the destruction of any use-values. What one loses, the other gains. Values used as capital are prevented from acting again as capital in the hands of the same person. The old capitalists go bankrupt. [...] A large part of the nominal capital of the society, i.e., of the exchange-value of the existing capital, is once for all destroyed, although this very destruction, since it does not affect the use-value, may very much expedite the new reproduction. This is also the period during which moneyed interest enriches itself at the cost of industrial interest.

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

Werner Sombart

(whom Engels described as the only German professor who understood Marx's Capital), and of Joseph Schumpeter

Joseph Schumpeter

Joseph Alois Schumpeter was an Austrian-Hungarian-American economist and political scientist. He popularized the term "creative destruction" in economics.-Life:...

(see below). Social geographer David Harvey

David Harvey (geographer)

David Harvey is the Distinguished Professor of Anthropology at the Graduate Center of the City University of New York . A leading social theorist of international standing, he received his PhD in Geography from University of Cambridge in 1961. Widely influential, he is among the top 20 most cited...

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".

Other early usage

In philosophical terms, the concept of "creative destruction" is close to Hegel´s concept of sublation

Aufheben

Aufheben or Aufhebung is a German word with several seemingly contradictory meanings, including "to lift up", "to abolish", or "to sublate"...

. In German economic discourse it was taken up from Marx's writings by Werner Sombart

Werner Sombart

, particularly in his 1913 text Krieg und Kapitalismus:

Again, however, from destruction a new spirit of creation arises; the scarcity of wood and the needs of everyday life... forced the discovery or invention of substitutes for wood, forced the use of coal for heating, forced the invention of coke for the production of iron.

It has been argued that Sombart's formulation of the concept was influenced by Eastern mysticism

Eastern mysticism

Eastern mysticism or Eastern spirituality is a broad and largely Western concept summarizing and sometimes amalgamating mystic traditions of the Middle East, the Indian Subcontinent and the Far East, a separate realm from Western mysticism...

, specifically the image of the Hindu

Hindu

Hindu refers to an identity associated with the philosophical, religious and cultural systems that are indigenous to the Indian subcontinent. As used in the Constitution of India, the word "Hindu" is also attributed to all persons professing any Indian religion...

god Shiva

Shiva

Shiva is a major Hindu deity, and is the destroyer god or transformer among the Trimurti, the Hindu Trinity of the primary aspects of the divine. God Shiva is a yogi who has notice of everything that happens in the world and is the main aspect of life. Yet one with great power lives a life of a...

, who is presented in the paradoxical aspect of simultaneous destroyer and creator. Conceivably this influence passed from Johann Gottfried Herder

Johann Gottfried Herder

Johann Gottfried von Herder was a German philosopher, theologian, poet, and literary critic. He is associated with the periods of Enlightenment, Sturm und Drang, and Weimar Classicism.-Biography:...

, who brought Hindu thought to German philosophy in his Philosophy of Human History (Ideen zur Philosophie der Geschichte der Menschheit) (Herder 1790–92), specifically volume III, pp. 41–64. via Arthur Schopenhauer

Arthur Schopenhauer

Arthur Schopenhauer was a German philosopher known for his pessimism and philosophical clarity. At age 25, he published his doctoral dissertation, On the Fourfold Root of the Principle of Sufficient Reason, which examined the four separate manifestations of reason in the phenomenal...

and the Orientalist

Oriental studies

Oriental studies is the academic field of study that embraces Near Eastern and Far Eastern societies and cultures, languages, peoples, history and archaeology; in recent years the subject has often been turned into the newer terms of Asian studies and Middle Eastern studies...

Friedrich Maier through Friedrich Nietzsche

Friedrich Nietzsche

Friedrich Wilhelm Nietzsche was a 19th-century German philosopher, poet, composer and classical philologist...

´s writings. Nietzsche represented the creative destruction of modernity through the mythical figure of Dionysus, a figure whom he saw as at one and the same time "destructively creative" and "creatively destructive".

Other 19th century formulations of this idea include Russian anarchist Mikhail Bakunin

Mikhail Bakunin

Mikhail Alexandrovich Bakunin was a well-known Russian revolutionary and theorist of collectivist anarchism. He has also often been called the father of anarchist theory in general. Bakunin grew up near Moscow, where he moved to study philosophy and began to read the French Encyclopedists,...

, who wrote in 1842, "The passion for destruction is a creative passion, too!" Note, however, that this earlier formulation might more accurately be termed "destructive creation", and differs sharply from Schumpeter's formulation in the critical aspect of temporal precedence. For Schumpeter, the creation comes first; the destruction is an almost incidental effect of the creation.

Joseph Schumpeter

The expression "creative destruction" was popularized by and is most associated with Joseph Schumpeter

Joseph Schumpeter

Joseph Alois Schumpeter was an Austrian-Hungarian-American economist and political scientist. He popularized the term "creative destruction" in economics.-Life:...

, particularly in his book Capitalism, Socialism and Democracy
Capitalism, Socialism and Democracy
Capitalism, Socialism and Democracy is the most famous book by Joseph Schumpeter in which he deals with capitalism, socialism and creative destruction...

, first published in 1942. In it, Schumpeter borrowed the term from Marxist thought (analysed extensively in Part I of the book) and used it to describe the disruptive process of transformation that accompanies radical innovation

Innovation

Innovation is the creation of better or more effective products, processes, technologies, or ideas that are accepted by markets, governments, and society...

. In Schumpeter's vision of capitalism

Capitalism

Capitalism is an economic system that became dominant in the Western world following the demise of feudalism. There is no consensus on the precise definition nor on how the term should be used as a historical category...

, innovative entry by entrepreneurs was the force that sustained long-term economic growth

Economic growth

In economics, economic growth is defined as the increasing capacity of the economy to satisfy the wants of goods and services of the members of society. Economic growth is enabled by increases in productivity, which lowers the inputs for a given amount of output. Lowered costs increase demand...

, even as it destroyed the value of established companies and laborers that enjoyed some degree of monopoly

Monopoly

A monopoly exists when a specific person or enterprise is the only supplier of a particular commodity...

power derived from previous technological, organizational, regulatory, and economic paradigms. Schumpeter also elaborated the concept, making it central to his economic theory. The most likely source can be found in his 1939 book Business Cycles. Here the Western world first learned about Nikolai Kondratieff and his long-wave

Kondratiev wave

Kondratiev waves are described as sinusoidal-like cycles in the modern capitalist world economy...

cycle. These cycles, Schumpeter believed, were caused by innovations.

Schumpeter (1949) in one of his examples used the "the railroadization of the Middle West as it was initiated by the Illinois Central." He wrote, "The Illinois Central not only meant very good business whilst it was built and whilst new cities were built around it and land was cultivated, but it spelled the death sentence for the [old] agriculture of the West."

Examples

Companies that once revolutionized and dominated new industries – for example, Xerox

Xerox

Xerox Corporation is an American multinational document management corporation that produced and sells a range of color and black-and-white printers, multifunction systems, photo copiers, digital production printing presses, and related consulting services and supplies...

in copiers or Polaroid

Polaroid Corporation

Polaroid Corporation is an American-based international consumer electronics and eyewear company, originally founded in 1937 by Edwin H. Land. It is most famous for its instant film cameras, which reached the market in 1948, and continued to be the company's flagship product line until the February...

in instant photography have seen their profits

Profit (accounting)

In accounting, profit can be considered to be the difference between the purchase price and the costs of bringing to market whatever it is that is accounted as an enterprise in terms of the component costs of delivered goods and/or services and any operating or other expenses.-Definition:There are...

fall and their dominance vanish as rivals launched improved designs or cut manufacturing costs. Wal-Mart

Wal-Mart

Wal-Mart Stores, Inc. , branded as Walmart since 2008 and Wal-Mart before then, is an American public multinational corporation that runs chains of large discount department stores and warehouse stores. The company is the world's 18th largest public corporation, according to the Forbes Global 2000...

is a recent example of a company that has achieved a strong position in many markets, through its use of new inventory-management, marketing, and personnel-management techniques, resulting in lower prices to compete with older or smaller companies in the offering of retail consumer products. Just as older behemoth

Behemoth

Behemoth is a mythological beast mentioned in the Book of Job, 40:15-24. Metaphorically, the name has come to be used for any extremely large or powerful entity.-Plural as singular:...

s perceived to be juggernauts by their contemporaries (e.g., Montgomery Ward

Montgomery Ward

Montgomery Ward is an online retailer that carries the same name as the former American department store chain, founded as the world's #1 mail order business in 1872 by Aaron Montgomery Ward, and which went out of business in 2001...

, FedMart

FedMart

FedMart was a chain of discount department stores started by Sol Price, who later founded Price Club. His first location in San Diego, California was in a converted airport hangar. It was originally a discount department store open to government employees, who paid a membership fee of $2 per...

, Woolworths

F. W. Woolworth Company

The F. W. Woolworth Company was a retail company that was one of the original American five-and-dime stores. The first successful Woolworth store was opened on July 18, 1879 by Frank Winfield Woolworth in Lancaster, Pennsylvania, as "Woolworth's Great Five Cent Store"...

) were eventually undone by nimbler and more innovative competitors, Wal-Mart faces the same threat. Just as the cassette tape replaced the 8-track, only to be replaced in turn by the compact disc

Compact Disc

The Compact Disc is an optical disc used to store digital data. It was originally developed to store and playback sound recordings exclusively, but later expanded to encompass data storage , write-once audio and data storage , rewritable media , Video Compact Discs , Super Video Compact Discs ,...

, itself being undercut by MP3

MP3

MPEG-1 or MPEG-2 Audio Layer III, more commonly referred to as MP3, is a patented digital audio encoding format using a form of lossy data compression...

players, the seemingly dominant Wal-Mart may well find itself an antiquated company of the past. This is the process of creative destruction in its technological manifestation.

Other examples are the way in which online free newspaper sites such as The Huffington Post
The Huffington Post
The Huffington Post is an American news website and content-aggregating blog founded by Arianna Huffington, Kenneth Lerer, and Jonah Peretti, featuring liberal minded columnists and various news sources. The site offers coverage of politics, theology, media, business, entertainment, living, style,...

and the Zero Hedge
Zero Hedge
Zero Hedge is an American financial blog. It reports on Wall Street and the financial sector and is credited with bringing the controversial practice of flash trading to public attention in 2009 via a series of posts alleging that Goldman Sachs' access to flash order information allowed the firm to...

are leading to creative destruction of the traditional paper newspaper. The Christian Science Monitor announced in January 2009 that it would no longer continue to publish a daily paper edition, but would be available online daily and provide a weekly print edition. The Seattle Post-Intelligencer
Seattle Post-Intelligencer
The Seattle Post-Intelligencer is an online newspaper and former print newspaper covering Seattle, Washington, United States, and the surrounding metropolitan area...

became online-only in March 2009. Traditional French alumni networks, which typically charge their students to network online or through paper directories, are in danger of creative destruction from free social networking sites such as Linkedin

LinkedIn is a business-related social networking site. Founded in December 2002 and launched in May 2003, it is mainly used for professional networking. , LinkedIn reports more than 120 million registered users in more than 200 countries and territories. The site is available in English, French,...

and Viadeo

Viadeo

Viadeo is a Web 2.0 professional social network with over 35 million members worldwide in 2010, and a membership base that was growing by more than one million per month in 2009. Members include business owners, entrepreneurs and managers from a diverse range of enterprises...

.

In fact, successful innovation

Innovation

Innovation is the creation of better or more effective products, processes, technologies, or ideas that are accepted by markets, governments, and society...

is normally a source of temporary market power

Market power

In economics, market power is the ability of a firm to alter the market price of a good or service. In perfectly competitive markets, market participants have no market power. A firm with market power can raise prices without losing its customers to competitors...

, eroding the profits and position of old firms, yet ultimately succumbing to the pressure of new inventions commercialised by competing entrants. Creative destruction is a powerful economic concept because it can explain many of the dynamics or kinetics

Activation energy

In chemistry, activation energy is a term introduced in 1889 by the Swedish scientist Svante Arrhenius that is defined as the energy that must be overcome in order for a chemical reaction to occur. Activation energy may also be defined as the minimum energy required to start a chemical reaction...

of industrial change: the transition from a competitive to a monopolistic market, and back again. It has been the inspiration of endogenous growth theory

Endogenous growth theory

Endogenous growth theory holds that economic growth is primarily the result of endogenous and not external force. In Endogenous growth theory investment in human capital, innovation and knowledge are significant contributors to economic growth. The theory also focus on positive externalities and...

and also of evolutionary economics

Evolutionary economics

Evolutionary economics is part of mainstream economics as well as heterodox school of economic thought that is inspired by evolutionary biology...

.

David Ames Wells

David Ames Wells

David Ames Wells was an American engineer, textbook author, economist and advocate of low tariffs.-Biography:...

(1890), who was a leading authority on the effects of technology on the economy in the late 19th century, gave many examples of creative destruction (without using the term) brought about by improvements in steam engine efficiency, shipping, the international telegraph network and agricultural mechanization.

Criticism

Creative destruction can cause temporary economic distress . Layoffs of workers with obsolete working skills can be one price of new innovations valued by consumers. Though a continually innovating economy generates new opportunities for workers to participate in more creative and productive enterprises (provided they can acquire the necessary skills), creative destruction can cause severe hardship in the short term, and in the long term for those who cannot acquire the skills and work experience.

However, some believe that in the long-term society as a whole (including the descendants of those that experienced short-term hardship) enjoys a rise in overall quality of life due to the accumulation of innovation - for example, 90% of Americans were farmers in 1790, while 2.6% of Americans were farmers in 1990. Over those 200 years farm jobs were destroyed by exponential productivity gains in agricultural technology and replaced by jobs in new industries. Present day farmers and non-farmers alike enjoy much more prosperous lifestyles than their counterparts in 1790.

In terms of individuals recovering from obsolescence caused by creative destruction, when a small entity lacks sufficient resources to retrain, this can lead to an absorbing state which may persist due to information asymmetries
that restrict borrowing. Small entities or individuals may prefer in such cases to obtain insurance

Insurance

In law and economics, insurance is a form of risk management primarily used to hedge against the risk of a contingent, uncertain loss. Insurance is defined as the equitable transfer of the risk of a loss, from one entity to another, in exchange for payment. An insurer is a company selling the...

(particularly if they are risk averse),
although again this may be a problem due to adverse selection

Adverse selection

Adverse selection, anti-selection, or negative selection is a term used in economics, insurance, statistics, and risk management. It refers to a market process in which "bad" results occur when buyers and sellers have asymmetric information : the "bad" products or services are more likely to be...

. Large entities may wish to drive smaller entities to an absorbing state (as an anticompetitive practice.
(See also Kreps

David M. Kreps

David Marc "Dave" Kreps is a game theorist and economist and professor at the Graduate School of Business at Stanford University. He is known for his analysis of dynamic choice models and non-cooperative game theory, particularly the idea of sequential equilibrium, which he developed with Stanford...

et al's solution to Selten

Reinhard Selten

-Life and career:Selten was born in Breslau in Lower Silesia, now in Poland, to a Jewish father, Adolf Selten, and Protestant mother, Käthe Luther. For his work in game theory, Selten won the 1994 Nobel Memorial Prize in Economic Sciences...

's chainstore paradox

Chainstore paradox

Chainstore paradox is a concept that purports to refute standard game theory reasoning.-The chain store game:A monopolist has branches in 20 towns. He faces 20 potential competitors, one in each town, who will be able to choose IN or OUT. They do so in sequential order and one at a time...

)(This can also be conceptualized as raising the stakes in no-limit poker

Poker

Poker is a family of card games that share betting rules and usually hand rankings. Poker games differ in how the cards are dealt, how hands may be formed, whether the high or low hand wins the pot in a showdown , limits on bet sizes, and how many rounds of betting are allowed.In most modern poker...

).
As a result, it may be more efficient for the overall economy to provide insurance - (perhaps even mandatory insurance in order to obtain a pooling equilibrium) -
since insurance can give small entities and individuals sufficient resources to have the activation energy

Activation energy

needed to retrain and escape the absorbing state.

David Harvey

Radical geographer David Harvey

David Harvey

David Harvey is the name of:*David Harvey *David Harvey , geographer and social theorist*David Harvey , American luthier...

in a series of works from the 1970s onwards (Social Justice and the City, 1973; The Limits to Capital, 1982; The Urbanization of Capital, 1985; Spaces of Hope, 2000; Spaces of Capital, 2001; Spaces of Neoliberalization, 2005; The Enigma of Capital and the Crises of Capitalism, 2010), elaborated Marx's thought on the systemic contradictions of capitalism, particularly in relation to the production of the urban environment (and to the production of space more broadly). He developed the notion that capitalism finds a "spatial fix" for its periodic crises of overaccumulation through investment in fixed assets of infrastructure, buildings, etc.: "The built environment that constitutes a vast field of collective means of production and consumption absorbs huge amounts of capital in both its construction and its maintenance. Urbanisation is one way to absorb the capital surplus". While the creation of the built environment can act as a form of crisis displacement, it can also constitute a limit in its own right, as it tends to freeze productive forces into a fixed spatial form. As capital cannot abide a limit to profitability, ever more frantic forms of "time-space compression

Time-space compression

Time-space compression is a term used to describe processes that seem to accelerate the experience of time and reduce the significance of distance during a given historical moment. Geographer David Harvey used the term in The Condition of Postmodernity, where it refers to "processes that . ....

" (increased speed of turnover, innovation of ever faster transport and communications' infrastructure, "flexible accumulation") ensue, often impelling technological innovation. Such innovation, however, is a double-edged sword:

The effect of continuous innovation [...] is to devalue, if not destroy, past investments and labour skills. Creative destruction is embedded within the circulation of capital itself. Innovation exacerbates instability, insecurity, and in the end, becomes the prime force pushing capitalism into periodic paroxysms of crisis. [...] The struggle to maintain profitability sends capitalists racing off to explore all kinds of other possibilities. New product lines are opened up, and that means the creation of new wants and needs. Capitalists are forced to redouble their efforts to create new needs in others [...]. The result is to exacerbate insecurity and instability, as masses of capital and workers shift from one line of production to another, leaving whole sectors devastated [...]. The drive to relocate to more advantageous places (the geographical movement of both capital and labour) periodically revolutionizes the international and territorial division of labour, adding a vital geographical dimension to the insecurity. The resultant transformation in the experience of space and place is matched by revolutions in the time dimension, as capitalists strive to reduce the turnover time of their capital to "the twinkling of an eye".

Globalization can be viewed as some ultimate form of time-space compression, allowing capital investment to move almost instantaneously from one corner of the globe to another, devaluing fixed assets and laying off labour in one urban conglommeration while opening up new centres of manufacture in more profitable sites for production operations. Hence, in this continual process of creative destruction, capitalism does not resolve its contradictions and crises, but merely "moves them around geographically".

Marshall Berman

In his 1987 book All That is Solid Melts into Air: The Experience of Modernity, particularly in the chapter entitled "Innovative Self-Destruction" (pp. 98–104), Marshall Berman

Marshall Berman

Marshall Berman is an American philosopher and Marxist Humanist writer. He is currently Distinguished Professor of Political Science at The City College of New York and at the Graduate Center of the City University of New York, teaching Political Philosophy and Urbanism.-Biography:An alumnus of...

provides a reading of Marxist "creative destruction" to explain key processes at work within modernity. The title of the book is taken from a well-known passage from The Communist Manifesto
The Communist Manifesto
The Communist Manifesto, originally titled Manifesto of the Communist Party is a short 1848 publication written by the German Marxist political theorists Karl Marx and Friedrich Engels. It has since been recognized as one of the world's most influential political manuscripts. Commissioned by the...

. Berman elaborates this into something of a Zeitgeist
Zeitgeist
Zeitgeist is "the spirit of the times" or "the spirit of the age."Zeitgeist is the general cultural, intellectual, ethical, spiritual or political climate within a nation or even specific groups, along with the general ambiance, morals, sociocultural direction, and mood associated with an era.The...

which has profound social and cultural consequences:

The truth of the matter, as Marx sees, is that everything that bourgeois society builds is built to be torn down. "All that is solid" — from the clothes on our backs to the looms and mills that weave them, to the men and women who work the machines, to the houses and neighborhoods the workers live in, to the firms and corporations that exploit the workers, to the towns and cities and whole regions and even nations that embrace them all — all these are made to be broken tomorrow, smashed or shredded or pulverized or dissolved, so they can be recycled or replaced next week, and the whole process can go on again and again, hopefully forever, in ever more profitable forms. The pathos of all bourgeois monuments is that their material strength and solidity actually count for nothing and carry no weight at all, that they are blown away like frail reeds by the very forces of capitalist development that they celebrate. Even the most beautiful and impressive bourgeois buildings and public works are disposable, capitalized for fast depreciation and planned to be obsolete, closer in their social functions to tents and encampments than to "Egyptian pyramids, Roman aqueducts, Gothic cathedrals".

Here Berman emphasizes Marx's perception of the fragility and evanescence of capitalism's immense creative forces, and makes this apparent contradiction into one of the key explanatory figures of modernity.

Manuel Castells

The renowned sociologist Manuel Castells

Manuel Castells

Manuel Castells is a sociologist especially associated with information society and communication research....

, in his trilogy on The Information Age (the first volume of which, The Rise of the Network Society
Network society
The term Network Society describes several different phenomena related to the social, political, economic and cultural changes caused by the spread of networked, digital information and communications technologies. A number of academics are credited with coining the term since the 1990's and...

, appeared in 1996), reinterpreted the processes by which capitalism invests in certain regions of the globe, while divesting from others, using the new paradigm of "informational networks". In the era of globalization, capitalism is characterized by near-instantaneous flow, creating a new spatial dimension, "the space of flows". While technological innovation has enabled this unprecedented fluidity, this very process makes redundant whole areas and populations who are bypassed by informational networks. Indeed, the new spatial form of the mega-city

Megacity

A megacity is usually defined as a metropolitan area with a total population in excess of 10 million people. Some definitions also set a minimum level for population density . A megacity can be a single metropolitan area or two or more metropolitan areas that converge. The terms conurbation,...

or megalopolis, is defined by Castells as having the contradictory quality of being "globally connected and locally disconnected, physically and socially". Castells explicitly links these arguments to the notion of creative destruction:

The "spirit of informationalism" is the culture of "creative destruction" accelerated to the speed of the optoelectronic circuits that process its signals. Schumpeter

Joseph Schumpeter

Joseph Alois Schumpeter was an Austrian-Hungarian-American economist and political scientist. He popularized the term "creative destruction" in economics.-Life:...

meets Weber

Max Weber

Karl Emil Maximilian "Max" Weber was a German sociologist and political economist who profoundly influenced social theory, social research, and the discipline of sociology itself...

in the cyberspace of the network enterprise.

Others

In 1992, the idea of creative destruction was put into formal mathematical terms by Philippe Aghion

Philippe Aghion

Philippe Aghion is a French economist. He is Robert C. Waggoner Professor of Economics at Harvard University, having previously been Professor at University College London, an Official Fellow at Nuffield College, Oxford, and an Assistant Professor at Massachusetts Institute of Technology .His main...

and Peter Howitt

Peter Howitt (economist)

Peter Wilkinson Howitt is a Canadian economist. He is the Lyn Crost Professor of Social Sciences at Brown University. Howitt is a Fellow of the Econometric Society since 1994 and a Fellow of Royal Society of Canada since 1992...

in their paper "A Model of Growth through Creative Destruction," published in Econometrica
Econometrica
Econometrica is a peer-reviewed academic journal of economics, publishing articles not only in econometrics but in many areas of economics. It is published by the Econometric Society and distributed by Wiley-Blackwell. Econometrica is one of the most highly ranked economics journals in the world...

.

In 1995, Harvard Business School

Harvard Business School

Harvard Business School is the graduate business school of Harvard University in Boston, Massachusetts, United States and is widely recognized as one of the top business schools in the world. The school offers the world's largest full-time MBA program, doctoral programs, and many executive...

authors Richard L. Nolan

Richard L. Nolan

Richard L. Nolan is an American business school professor. He has held various positions, including the Philip Condit Chair of Management at University of Washington and the William Barclay Harding Professor of Business Administration emeritus at Harvard Business School. A founder of consulting...

and David C. Croson released Creative Destruction: A Six-Stage Process for Transforming the Organization. The book advocated downsizing to free up slack resources, which could then be reinvested to create competitive advantage.

More recently, the idea of "creative destruction" was utilized by Max Page in his 1999 book, The Creative Destruction of Manhattan, 1900-1940. The book traces Manhattan

Manhattan

Manhattan is the oldest and the most densely populated of the five boroughs of New York City. Located primarily on the island of Manhattan at the mouth of the Hudson River, the boundaries of the borough are identical to those of New York County, an original county of the state of New York...

's constant reinvention, often at the expense of preserving a concrete past. Describing this process as "creative destruction," Page describes the complex historical circumstances, economics, social conditions and personalities that have produced crucial changes in Manhattan's cityscape.

Neoconservative author Michael Ledeen

Michael Ledeen

Michael Arthur Ledeen is an American specialist on foreign policy. His research areas have included state sponsors of terrorism, Iran, the Middle East, Europe , U.S.-China relations, intelligence, and Africa and is a leading neoconservative...

argued in his 2002 book The War Against the Terror Masters that America is a revolutionary nation, undoing traditional societies: "Creative destruction is our middle name, both within our own society and abroad. We tear down the old order every day, from business to science, literature, art, architecture, and cinema to politics and the law." His characterization of creative destruction as a model for social development has met with fierce opposition from paleoconservatives.

Alternative name

Per the following text, this process is also known as Schumpeter

Joseph Schumpeter

Joseph Alois Schumpeter was an Austrian-Hungarian-American economist and political scientist. He popularized the term "creative destruction" in economics.-Life:...

's Gale:

Media reflections of creative destruction

The film Other People's Money
Other People's Money
Other People's Money is a 1991 drama/romantic comedy film starring Danny DeVito, Penelope Ann Miller and Gregory Peck. It is based on the play of the same name by Jerry Sterner. The director was Norman Jewison and the screenplay was credited to Alvin Sargent.-Plot:Corporate raider Lawrence...

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 England town. One speech is by a corporate raider, and the other is given by the company CEO, who is principally interested in protecting his employees and the town.

In Marx's thought

Other early usage

Joseph Schumpeter

Examples

Criticism

David Harvey

Marshall Berman

Manuel Castells

Others

Alternative name

Media reflections of creative destruction

See also

Further reading