Joseph Schumpeter applied the term “creative destruction” to the dynamic of the market economy. Not only does the new technology displace the old: the new company displaces the old. Innovation mostly comes from entrepreneurs outside established businesses, engaged in an endless succession of experiments. Most fail, but not all.
…The established firm more often responds by using its market and political power to resist change. The tactic failed for music publishers, but does not always fail: see how state-supported dinosaurs have tightened their control of the banking system, or observe that the cars we drive have changed only incrementally in a century.
…Schumpeter applauded capitalism as much as Marxists despised it. But he shared the Marxist beliefs that creative destruction was at the heart of capitalism and that its inevitable consequence would be capitalism’s demise. Schumpeter feared that the very success of capitalism would give entrenched interests the power to resist the process of innovation that was at the heart of capitalism’s success.
…And perhaps Schumpeter was right. The prescient, cynical Adam Smith had still not imagined a world in which the Wealth of Nations would cross the world digitally at the click of a mouse. Nor had he envisaged one in which legislation would be drafted by paid lobbyists.