Introduction to Updating Schumpeter’s Gales of Creative Destruction. Excerpt Available free at SSRN

Updating Schumpeter’s Gales of Creative Destruction: Exploiting the Vulnerability of New World Order Corporate Globalism With Regional Blockchain Entrepreneurial Economic Growth. 

Laurie Thomas Vass

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Introduction. Excerpt

In Capitalism, Socialism and Democracy, Joseph Schumpeter described capitalism as an evolutionary economic growth theory. [J. A. Schumpeter, Capitalism, Socialism and Democracy, George Allen & Unwin, 1942.].

If there is a dynamic force within the free market system that can be explained by the natural laws of supply and demand, then Schumpeter explained that the free market economy is either growing or it is dying.

Schumpeter states,

“The essential point to grasp is that in dealing with capitalism we are dealing with an evolutionary process. … Capitalism, then, is by nature a form or method of economic change and not only never is but never can be stationary…The funndamental impulse that sets and keeps the capitalist engine in motion comes from the new consumers’ goods, the new methods of production or transportation, the new markets, the new forms of industrial organization that capitalist enterprise creates. … This process of Creative Destruction is the essential fact about capitalism. It is what capitalism consists in and what every capitalist concern has got to live in.”

The creative destructive force is caused by entrepreneurial innovation in new products and new technology. [J. A. Schumpeter, The Theory of Economic Development. Harvard University Press. First published in German, 1911.].

From any point of equilibrium, according to Schumpeter, the economy could trace out an upward path of economic growth, to a new equilibrium, or, it could trace out a downward path of economic decline.

Schumpeter’s concept of economic evolution was in contrast to the prevailing wisdom of the time that the economy would return to the prior equilibrium after a perturbation knocked the economy out of equilibrium,

Schumpeter also broke with traditional macro economic theory by suggesting that the source of capital for investment for new manufacturing ventures was from capital gain exit events from prior ventures.

In Schumpeter’s analysis of the source of investment capital, it could either be a loan from a commercial bank, or it could be the capital gain profit from an earlier successful venture.