Author
Joseph A. Schumpeter
1 reading card from 1 book · 1942.
1 card
Capitalism, Socialism and Democracy · 1942
Capitalism advances not through price competition but through creative destruction of old industries from within.
Schumpeter argues that capitalism's dynamism comes not from price competition among similar firms but from innovations that render old methods, products, and organizations simply obsolete. The mechanism: an entrepreneur introduces a new technology or business model, gains a temporary advantage, and established firms lose their revenues — they adapt or disappear. His example: the factory displaced the craft shop, and the modern corporation displaced the factory; each stage brought prosperity while wiping out entire occupations.
“industrial mutation—if I may use that biological term—that incessantly revolutionizes the economic structure from within, incessantly destroying the old one, incessantly creating a new one. This process of Creative Destruction is the essential fact about capitalism.”