China and Schumpeter's 'Creative Destruction'

It’s a key question raised in a novel way as Xi Jinping and other leaders aim to take economic reform in China to the next level. “If, as Joseph Schumpeter said, creative destruction is the “essential fact about capitalism,” then just how capitalist is China?” asks a report released on Feb. 10th by Beijing-based China economic consultancy GavekalDragonomics.

As the economist Schumpeter saw it, creative destruction is a positive force, driving weaker companies to disappear and be replaced by more innovative ones. Or as the Austrian American economist himself wrote in his 1942 book Capitalism, Socialism and Democracy, it’s a process that “incessantly revolutionizes the economic structure from within, incessantly destroying the old one, incessantly creating a new one.”