Last modified on April 1, 2023, at 23:25

Joseph Schumpeter

Joseph Schumpeter (1883-1950) was the leading Austrian-American economist in the first half of the 20th century.

Theory of creative destruction

He viewed the entrepreneur as the prime mover of capitalism, and that in seeking profits the entrepreneur creates innovative organizational methods and production techniques. This innovation causes economic growth, but also leads to business cycles, which leads to criticism of capitalism.

Schumpeter argued that capitalism is constantly re-inventing itself through innovation and improvements for greater efficiency, which leads to economic benefits to the wider society as a whole, a process he called creative destruction. Unemployment and worker retraining are downside effects of creative destruction, as older industries are replaced by technological improvements, lower costs, and rising living standards in the greater population.

Schumpeter's theory evolved as a response to Marxist economic theory, which focuses on keeping stale, outdated, and stagnant industries alive by eliminating oppressors and the ruling class,[1] operating on a thin margin, or forbidding profit-making completely, leaving nothing for maintenance, upkeep, improvements, or competitiveness.

Schumpeter saw that occurring, citing the disappearance of the capitalistic institutions that had fostered entrepreneurship in the late 1800s and early 1900s.

Criticism of empire and militarism

In 1919 Schumpeter wrote about the Roman Empire and its policy which pretended to aspire to peace but unerringly generated war, the policy of continual preparation for war, and the policy of meddlesome interventionism:

"There was no corner of the known world where some interest was not alleged to be in danger or under actual attack. If the interest were not Roman, they were those of Rome's allies. And if Rome had no allies, then allies would be invented. When it was utterly impossible to contrive such an interest, why then it was the National Honor that had been insulted. The fight was always invested with an aura of legality. Rome was always being attacked by evil-minded neighbors, always fighting for a breathing space. The whole world was pervaded by a host of enemies, and it was manifestly Rome's duty to guard against their indubitably aggressive designs. They were enemies who only waited to fall on the Roman people."


  1. Identity politics is based on the Marxist notion of an oppressor ruling class whose aim is to keep people impoverished.