Measuring Creative Destruction: A Source or Indicator of Economic Growth
IntroductionCreative destruction, a term first coined by the economist Joseph Schumpeter, is the idea that the process of economic growth "incessantly revolutionizes the economic structure from within, incessantly destroying the old one, incessantly creating a new one." Despite the violent connation of the phrase, Schumpeter believed that creative destruction is the driving force of the capitalist economy. He even called it the "essential fact of capitalism." Within the capitalist economy, according to Schumpeter, as new businesses are created they break up or destroy existing businesses. In doing so these new businesses create untapped sources of wealth which fuels new growth within the economy. Of course, for this process to occur a number of economic actors must be present. For Schumpeter, the key actor within the creative destruction process was the entrepreneur as their work directly leads to the creation of new businesses within the economy.