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creative destruction |
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The process by which relatively sudden bouts of capital disinvestment and devaluation destroy invested value in such a way as to establish the opportunity for new rounds of investment.
Marx was the first to argue that creative destruction was endemic to capitalism. The destruction of value amidst crises accomplished several things to Marx. It drove down the price of labour through mass unemployment, reduced the price of raw materials insofar as these were unused, and destroyed value invested in fixed capital insofar as production is idled. This in turn readjusts the organic composition of capital and recalibrates the rate of profit upward. In this sense the wholesale destruction of social value establishes the conditions for new rounds of capital investment. But Marx also understood creative destruction in a broader social sense. Of necessity, the bourgeoisie continually revolutionizes the technical as well as social conditions of capitalism in search of profit; he writes in the Communist Manifesto: \'All that is solid melts into air\'. And yet by so doing, the bourgeoisie also produces \'its own gravediggers\' (Marx and Engels, 1955, pp. 13, 22).
This argument was developed by the socialist economist Joseph Schumpeter in the 1930s and 1940s as he reflected on the global depression that came after 1929. Schumpeter believed that capitalism would inevitably self-destruct and the creative destruction internal to capitalist society would lead to the creation of socialism. \'The opening up of new markets, foreign or domestic\', and the periodic reorganization of capitalist production amidst crises, \'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\' (Schumpeter, 1975, p. 83; see Hall, 1998).
The importance of this argument for geographers is that the built environment is subject to creative destruction according to the rhythms of the capitalist economy. Major building booms are followed by periods of dramatic or incipient destruction, whether at the local scale or the global. The economic obsolescence of even relatively new buildings, the destruction of neighbourhoods for highways, and the emergence of ghettoes are as much instances of creative destruction as are major economic crises such as that which engulfed East Asia then Russia after 1997. As a history of the Marshall Plan suggests, war, whatever its other motivation, also serves this creative destruction insofar as it obliges an economic reconstruction. (NS)
References Hall, P. 1998: Cities in civilization. London: Weidenfeld and Nicolson. Schumpeter, J.A. 1975: Capitalism, Socialism and Democracy. New York: Harper Torchbook. Marx, K. and Engels, F. 1955: The Communist Manifesto. New York: Appleton, Century Crofts. |
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