Creative Destruction? #5

Another in a series of posts tracing the evolution of two vacated business sites.

The opening up of new markets, foreign or domestic, and the organizational development from the craft shop and factory to such concerns as U.S. Steel illustrate the same process of 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. It is what capitalism consists in and what every capitalist concern has got to live in. . . .

Joseph Schumpeter

32nd and Market Streets, Camp Hill, PA, 13 June 2009

Excavation done, the framework of the new structure starts to rise.

Carlisle Pike, Silver Spring Township, PA, 13 June 2009

The song remains the same at LB Smith.

Prior posts in this series:
Creative Destruction?
Creative Destruction? #2
Creative Destruction? #3
Creative Destruction? #4

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  • Bob May

    This is really interesting, John. I think my next non-fiction book I read will be by Shumpeter. I'm not yet convinced this is the correct way to think about the problem. Don't you think we are about to enter into an era where the projects being destroyed will be privately owned enterprises, and the replacements will be government owned enterprises? Maybe the future of creative destruction is the model of the PA LCB? That was created out of the Great Depression, replacing all private liquor stores – and we still have it today. What if in this current recession, they destroy all the private gas stations and replace them with the PA Gasoline Control Board? We can buy all our gas from the PA GCB? I think the weakness of the creative destruction argument is that it assumes the replacement will be privately owned, but, in fact, history shows us that a private failure is often replaced by a government run enterprise, which could mark the end of progress in that field of enterprise. Any ideas on that?

  • http://caddellinsightgroup.com jmcaddell

    Hi, Bob,

    I hadn't thought about creative destruction from that perspective until your note. I was feeling that there is this assumption about creative destruction that is pretty uniformly positive (which you also state), but that the reality isn't clear. My ambivalence about it is contained in the ? in each post title.

    Your scenario is one plausible one. Government-controlled enterprises, along with their innate distortions (i.e, a bailed out GM competing with a standalone Ford) are definitely on the upswing.

    I think at some level the destruction part of creative destruction didn't work as well as expected with the biggest enterprises, which have caused the biggest problems. GM has been rotting from the inside for 30 years, and only now collapsed. Bank of America and Citibank built colossusses on foundations of sand, and now the taxpayer is out hundreds of $billions as a result.

    It's a fascinating time to live through, isn't it!

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