Joseph Schumpeter is described in The Bob Zadek Show excerpts as an economist associated with the concept of “creative destruction.” He is named in three episodes, each by a different speaker, and in each instance the reference is brief: the term is invoked to explain a feature of free-market capitalism rather than to examine Schumpeter’s own work. The excerpts do not state his nationality, dates, institutional affiliations or the title of any book.
Tom G. Palmer: creative destruction and the culture of innovation
In an episode on the morality of capitalism, Tom G. Palmer calls Schumpeter “the great Austrian economist” and credits him with the term “creative destruction.” Palmer’s argument is that free-market capitalism is characterized, from a sociological perspective, by constant change — the introduction of new products, new ways of doing business and new kinds of organizations. Schumpeter, in Palmer’s account, said that people often look at capitalism and business firms as though the system were merely administering a static set of institutions to deliver a product in a static way, when the real question is how it creates and destroys institutions, products and ways of life. The Morality of Capitalism (2012)
Palmer places this observation inside a broader account of what capitalism presupposes. He identifies a legal foundation of rule of law, well-defined and legally secured property rights, and the ability to transact at relatively low cost. In poor countries that do not benefit from free-market capitalism, he says, property rights are not well-defined, so people spend much of their time fighting over them, whether water or land; the legal system or the police do not work; and the government is typically the biggest robber and predator around. Beyond the legal foundation, Palmer adds a culture that embraces innovation — one open to the future. The Morality of Capitalism (2012)
The scale of the change is Palmer’s illustration of Schumpeter’s point. He asks listeners to think about their grandparents and whether they would have recognized cell phones, tweeting and text messages. Going back a few generations, he notes, electric lights were unknown and people read by whale oil. These last 200 years, he says, have seen more change than all the change in previous millennia. Bob Zadek responds that the change is so profound people are not aware of it, and that it is the direct result of a free-market system; capitalism, in his framing, is not simply a way to acquire property and get rich but a system that more than any other improves the well-being of the planet. The Morality of Capitalism (2012)
Derek Khanna: creative destruction, incumbent firms and regulatory capture
In a later episode on what is stifling innovation, Bob Zadek introduces creative destruction as an important Austrian economics concept and asks Derek Khanna to explain it for listeners who may be unfamiliar with it. Khanna gives what he calls Economics 101: economic growth comes from figuring out new ways to do things that people had not thought of before, more efficient for the economy — innovation, new products and new services that are better than before. Schumpeter, Khanna says, came up with the term “creative destruction,” which he describes as new companies coming to the fore, providing new services, and forcing incumbent firms to innovate or die. Derek Khanna - What’s Stifling Innovation? (2014)
Khanna stresses the “die” part. If old companies that refuse to innovate are not allowed to die, he argues, they stay on and hold to old market models, and the economy continues using vacuum tubes when it could be using transistors. He points to churn in the economy and says that of the Fortune 500 over the past 80 years, only about 12 companies are still on it. Derek Khanna - What’s Stifling Innovation? (2014)
The obstacle Khanna identifies is political rather than technological. When big companies face a challenger — particularly disruptive innovation, small challengers with perhaps an inferior product but gaining market share — and realize they are in trouble, they often come to Washington, D.C. and open a lobbying office to seek a law or regulation protecting their market model, instead of innovating, because innovating is hard. He says this is happening more and more and that innovation is slowing down in the country, which he argues is a direct result. Bob Zadek frames the same dynamic as companies that cannot compete on the merits — offering an inferior, overpriced product — running to Washington or to state houses for governmental protection so they are kept on life support artificially, with everybody in America paying out of pocket so an inferior product is not competed out of existence. Derek Khanna - What’s Stifling Innovation? (2014)
The episode’s concrete examples are Uber and Tesla. Bob Zadek notes resistance by taxi cartels in various cities and by regulators who cannot stand technology getting out in front of their regulation, and says every user of Uber loves it while the cab companies hate it. Khanna says Uber is banned in a number of jurisdictions and that Republicans should champion the issue in every city where it is banned, naming Austin, Texas. On Tesla, Khanna says that in Texas it is illegal for Tesla to sell cars to the consumer through a Tesla dealership and that they cannot even tell you how much the car costs; Bob Zadek notes that this is under a Republican governor and adds Chris Christie as unsympathetic to Tesla and therefore sympathetic to Big Auto, protecting the franchise network. Khanna cites studies that these types of rules add about 12% to the cost of buying a car, which he characterizes as a 12% tax paid not to the government but to crony capitalists getting rent from the economy. Derek Khanna - What’s Stifling Innovation? (2014)
Caller Nick: creative destruction and the family environment
A caller identified as Nick from San Carlos raises Schumpeter in an episode on inclusive capitalism. Nick says he has traveled to Europe, Eastern Europe, Africa and Latin America, and that the model under discussion is great on paper. He says Europe post-World War II has failed and refers to an article by David Cameron in the Economist about innovation being dead in Europe — that good ideas come out and are sent to countries willing to innovate and with paradigm-changing support, where they are launched. Nick says he truly believes Schumpeter had a point that creative destruction creates new opportunities for people. Inclusive Capitalism: Economic Savior or Socialism in Disguise? (2015)
Nick agrees that education is vital and access to healthcare matters, but argues that more important is the family and the environment in which children grow up. He describes his own background: his father died very young, his mother raised the children herself, and the family was, in his words, a WIC victim on food stamps; all of them went to the military, all to university and grad school. He attributes that outcome to his mother taking the time to provide an environment where they could be successful, and asks how the guest’s idea can provide such an environment for children. He also cites the book Dead Aid on Africa and asks how much money poured into Africa for infrastructure has helped those people develop infrastructure, arguing it has failed. Inclusive Capitalism: Economic Savior or Socialism in Disguise? (2015)
Sean McElwee responds that he would like to table the discussion of developing countries because the issues they face are very different from those the United States faces, and that they do not even have the governance structures to begin the type of work he is talking about. Focusing on the United States, he says family structure can be very important and that it matters for children to go home to a stable environment, but that what really prevents that from happening a lot of times is poverty; he says it is great when people on different public assistance programs can provide a good environment and that more robust public assistance programs can make that job easier. He says he does not see why not to give families more of a chance by making sure none of them are ever faced with poverty. Inclusive Capitalism: Economic Savior or Socialism in Disguise? (2015)
Across episodes
Three episodes touch on Schumpeter, and the excerpts show no development in the treatment: Tom G. Palmer in the morality-of-capitalism episode and Derek Khanna in the innovation episode both define creative destruction and apply it to capitalism’s constant change, while caller Nick in the inclusive-capitalism episode endorses Schumpeter’s point that creative destruction creates new opportunities. Each speaker uses the term for his own argument, and no speaker in the excerpts responds to another’s use of it.
What the sources do not cover
The excerpts do not state Schumpeter’s nationality, birth or death dates, academic posts, or the titles of his books, and they do not describe his theory of entrepreneurship or his views on democracy or socialism. No excerpt quotes Schumpeter directly; every reference is a speaker’s paraphrase or attribution of the term “creative destruction.” The excerpts also do not say whether Palmer, Khanna and Nick are drawing on the same text or lecture, or whether any of them has read Schumpeter at length.