Creative Destruction
The process by which new innovations continuously replace existing industries, driving long-run economic progress.
What is Creative Destruction?
Creative destruction, a concept coined by economist Joseph Schumpeter in "Capitalism, Socialism and Democracy" (1942), describes how innovation continuously displaces existing products, companies, and industries — destroying old economic structures while creating new ones. Schumpeter viewed this as the defining feature of capitalism, arguing that the entrepreneur is the primary driver of long-run growth despite the short-term disruption caused.
Example
The smartphone destroyed feature-phone manufacturers like Nokia and Blackberry while creating entire new industries — mobile apps, ride-sharing, food delivery, and digital payments. Simultaneously, it drove GDP growth and productivity gains that dwarfed the losses in displaced sectors.
Source: Schumpeter — Capitalism, Socialism and Democracy (1942)