Creative destruction is the process of new things replacing old ones in a capitalist system, which some believe is necessary for progress. It was first discussed by Joseph Schumpeter in 1942. Entrepreneurs and innovators are rewarded, and companies unable to adapt are penalized. However, interference with creative destruction can cause problems, such as government assistance to failing companies or protests against mechanized systems in manufacturing.
Creative destruction is a concept that posits that in a healthy capitalist system, new things are constantly outpacing the old, overthrowing previous economic and technological systems to make way for progress. In a simple example of this concept, the advent of affordable cars has caused the use of horses to decline. Some people believe that the process of creative destruction is vital to maintaining a healthy economy and that, for an economy to prosper, this process must be allowed. Others feel that, left unchecked, it could harm an economy or the well-being of a population.
Numerous writers have brought up the concept, under various names. Joseph Schumpeter is generally credited with raising awareness of creative destruction in his 1942 book Capitalism, Socialism and Democracy. Indeed, he brought up the concept as part of a broader discussion of how capitalist systems eventually become socialist systems, but many economists leave this part of the discussion out, focusing entirely on creative destruction.
In a healthy economic system, entrepreneurs and innovators are rewarded for their work, and companies unable to change or adapt are penalized. People who are able to think outside the box and predict future market trends can use creative destruction to their advantage by developing products that will replace products currently on the market. In addition to dealing with products, this concept also encompasses supply lines, management techniques, advertising, and many other aspects of the business world.
The idea of creative destruction may seem like common sense to some people: if a new product or method is better, obviously many people will be driven to adopt it, eclipsing the old product. However, creative destruction has far-reaching implications. The rise of Internet media, for example, has threatened traditional print newspapers. While some people argue that the death of print newspapers is a natural and acceptable part of the evolution of modern culture, others feel that newspapers, magazines and print newspapers are an important resource and that the loss of this resource can have unpleasant consequences.
When creative destruction is interfered with, other problems can arise, sometimes creating a backlash. Government assistance to failing companies, for example, could be seen as an interference with free market capitalism and a failure to promote innovation. Likewise, protests over the use of robotics and mechanized systems in manufacturing also impede the process of creative destruction, highlighting the plight of workers who find themselves unemployed after being replaced by machines.
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