Creative Destruction

Real wages grow when capital accumulates faster than the population. However, if capital accumulates at the same rate of population growth and technology remains stable then there would be no change in real wages due to the fact that supply and demand will not be changed, and population growth will need more resources and reduce profits. Generally activity of monopolists depends on the forces of barriers to entry. If the barriers are low, the normal competitive pricing would subsist indicating that antitrust agencies should emphasize on reducing entry barriers and if the barriers are high, monopolists can maintain high prices and make profits. Schumpeter was so fascinated by the evolutionary character and suggested that while dealing with capitalism we deal with evolutionary process. “Every concrete process of development finally rests upon preceding development … Every process of development creates the prerequisites for the following”  suggesting that the economic evolution is similar to the change in the economic process due to innovation.

Schumpeter was way ahead in analyzing modernity and the current economy, and it could not be more relevant to us today.He wrote “this evolutionary character is not merely due to the fact that economic life goes on in a social and natural environment which changes nor is this evolutionary character due cause a autonomic increase in population and capital of the monetary system. The fundamental impulse that sets keeps the capitalists engine in motion comes from the new consumer goods, the new methods of production or transportation, the new markets, the new forms of industrial organization that capitalist enterprise creates. The opening up of new market foreign or domestic and organizational development from the craft shop to the factory to such concern such as U.S. steel illustrates the same process of industrial mutation – 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. Is this the reason for economic crisis?



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