Creative Destruction Transformed

The concept goes way back in the intellectual history of the West, also the East.  Simply put, “creative destruction” suggests that in the creation of the new, something of the old is destroyed.  Innovation often makes “the old ways” of doing things obsolete.  Not surprising.  Examples abound in the history of the growth economies of the industrial era.  An obvious case: The American family farm virtually disappeared with the mechanization of agriculture driven by fossil fuel energy mostly in the twentieth century.

What is Creative Destruction?

Like so many fundamental concepts, creative destruction has a history of ideological dispute, at least in the West.  The Hindu god, Shiva, on the other hand, has offered a consistent vision of change.  Shiva, “the transformer,” is the god of creation and destruction in the world of the Hindu — he creates and he destroys.  Thus, he is seen as both the fearsome and beneficent agent of all change in the world.

In the West, however, the idea of creative destruction has been shaped by a history of philosophical debates about the politics of the economy.  The Hindu idea was brought into German philosophy by Herder, then used by Hegel in his dialectic of history.  Then Marx turned it on its head as his own dialectical principle of material (economic) change.  Later, for Austrian-American economist Joseph Schumpeter the idea was used  to explain how innovation transforms an economy from within.

Today, the Austrians, especially Friedrich Hayek, are the philosophical darlings of the quasi-libertarian anti-government neo-liberal economists.  These are the economic ideologists whose ideas about innovation are used to justify corporate actions that may have destructive consequences for society.  For Example, they use “free markets” to argue that the destructive consequences of unlimited financial “innovation” — manipulation of financial markets — are necessary and good for promoting economic progress.

That creative destruction is so easily adopted by both left and right economists should raise some questions.  Does it explain everything and thus nothing?  No.  But it is important to understand why its application is so broad, and with such different political implications.

For the capitalist, the importance of creative destruction is found in the effect of innovation on markets.  When capital is invested in new technologies, the result is said to be “disruptive,” and often is.  That is defined as good and healthy for economic progress.  In fact, it may wipe out existing industries and jobs.  But new and better ones are expected to result.  While people can be put out of work and factories shut down, the ultimate outcome is said to be good because of the growth and new products and profits that often result from such disruption.  “That’s progress.”  And, of course, it is all based on the idea that growth is always necessary for a healthy economy with full employment.  The argument is all internal to economics, as if it were a closed system.  But it is not.

Karl Marx admired the creative destruction he saw in capitalism resulting from the innovations it stimulates, but he saw within the capitalist system inherent “seeds of its own destruction.”  Without external constraints, it was never clear when Marx’s internal contradictions might actually produce the revolutionary end of capitalism as he had predicted.  Both the Russian and Chinese revolutions were largely agrarian in origin and did not really fit Marx’s model, although they adopted his terminology as their ideology.

The historical realization of Marx’s image of industrial revolution never quite materialized.  But the vision of Werner Sombart — that capitalism’s internal contradictions would lead to periodic crises — has been repeatedly confirmed by historical events.  The biggest and most obvious U.S. example was the Great Depression.  The New Deal was capitalism’s relatively effective response to that crisis — it worked for several decades.  The Great Recession of 2008 is another — it was caused in part by elimination of the New Deal financial reforms.  But in this case the responses were denial and bailouts, which are pushing the crisis down the road without real economic adjustments.  Be that as it may, Marx made the same mistake that today’s corporate economists make — they all treat the economy as if it were a closed system.  Internal contradictions aside, they all assume that the economy is unaffected by any environmental constraints such as resource limits or ecological destruction.

The Destruction of Creation

Neo-liberal economists attempt to justify the concept of creative destruction as inherent in innovation, the driving force in developing the economy.  It is required for capital growth and investment in new technologies, which have new resource-extraction and waste production requirements.  But their vision of economic growth has no direction or meaning, except that of an irrational faith that whatever innovation occurs and whatever the destruction, the result will be good.  After all, the illusion of Adam Smith’s “invisible hand” is still at play in their minds.

Economic theory is often not very empirical.  Of course, money is the easy measure of all undifferentiated economic activity.  But it says nothing of the value of an investment, an innovation, or a business decision or practice for humanity.  It’s about that darn externalization of costs, which is always ignored in the investment of capital.  What are all the consequences of an economic decision?  Well, consequences external to the unit in which capital is invested are routinely ignored.  The creation of phantom wealth by destroying the environment it attempts to dominate can be clearly seen as destroying creation.

Ending Destructive Capital, Creating a New Economy

One of the most important — and destructive — innovations in the use of capital today is the corporate application of micro-electronic computing power to the processes of capital investment, or, I should say, “programmed trading,” in the stock markets.  “High-speed institutional traders” — computer programs — can “capture” minute differences in price from one nano-second to another and issue buy/sell orders that intercede into an ordinary trade and in effect steal pennies that the ordinary trader would have received in a trade while the price information is being transmitted to the trader.  At super high rates of programmed trading, this results in millions of dollars skimmed off the market in any given week.  Yet the SEC does nothing.  This is only one of the many corrupt practices that are tolerated in a culture that deems whatever you can get away with as the highest value.

Only by setting human and ecological values as the primary criteria for allowing or banning economic system “features” can a new ecological economy be shaped in the public interest.  The highest public interest in the economy is to foster practices that support the health and well-being of people and the planet.  Any economic practice or institution that conflicts with that value must be destroyed.  New practices and institutions that serve the interests of life on the planet must be created.  Creative destruction is an economic process with limited justification.  Only if an innovation supports life and the practices and institutions it destroys are damaging to human life and the biosphere that supports us, can it be justified.

Chaotic Convergence

In the New Age idea of “harmonic convergence,” there are a few “power centers” around the world. Near the beautiful cliffs surrounding Sedona, AZ, for example, people are said to experience converging forces of spiritual energy. But another convergence is taking place and it has nothing to do with stunning red-rock landscapes or mystical feelings of harmony. Far from it. Instead, I have noticed an extraordinary set of outwardly unrelated indicators of increasingly chaotic societal trends in the U.S.A., cascading throughout the world. And they appear to be converging.

Random Anomalies?
A recent Homeland Security report* concluded that “sovereign citizens” are perceived as a greater threat by law enforcement than are “Islamic terrorists.” Of course, it’s hard to even find an Islamic terrorist in the U.S. – racist targeting of any Muslim aside. But the Cliven Bundies are definitely out there and growing in numbers.

The extreme individualist anti-government meme has taken hold for a growing number of people. But these folks usually don’t understand the source of the dysfunctions of the governmental they hate. Of course, their hyper-libertarian ideology itself is seriously dysfunctional. It sees all problems as inherent in government itself. But in politics the biggest problem for democracy is the widespread distortion of governmental functions by the corporate imposition of money and power.

“Stand your ground” legislation and its expression in morally unjustifiable shootings point to a growing cultural need to express personal power with violence. Bizarre “open carry” imbeciles marching into restaurants with their AR-15s appear to be expressing their twisted juvenile sense of manhood. But there is more to it than that. Instability breeds fear; fear breeds hatred; hatred finds its target, even school children.

Racist Congressmen refuse to act on anything proposed by the African-American president they find inherently illegitimate and “un-American.” They even reject his proposals that originated in Republican ideas. The obsessiveness of their loathing is quite astounding, though consistent only with rabid racism and the gut urge to bring down that “Other.” There is no “post-racial America.”

Automated programmed trading at hyper-speed by powerful financial institutions obtains market information nanoseconds ahead of ordinary traders. This allows them to make pennies a trade so fast that they skim millions of dollars from the stock market every week. What is a “free market,” really? Cheating is pervasive and tolerated in U.S. business and political culture, and markets are not free.

Cities are going bankrupt and are forced to raid their retirees’ pension funds because Koch brothers funded politicians legislate to serve their rich patrons, not the public. The people are an inconvenience. Who protects the public interest? Almost nobody with any power, actually. Corruption is rampant.

The “change we can believe in” president elected on an ‘end the wars’ platform, bombs wedding parties in Afghanistan and funerals in Yemen. His lawyers draw up secret legal opinions authorizing him to assassinate American citizens along with anyone else he deems a “threat.” His drone kills a teenage American boy visiting his grandparents in Yemen. In response to disclosures about the CIA crimes, he responds, “we tortured some folks…and it’s important for us not too feel too sanctimonious in retrospect…”
Absurd levels of secret “intelligence” spy operations capture nearly all the private communications of Americans. No particular reason or authorization is needed other than the stated institutional goal of amassing full-spectrum of information about everyone. You may “have nothing to hide,” and foolishly accept it. But spying on everyone by powerful agencies whether federal or local, has ominous implications for everyone’s political freedom. The NSA director lies to Congress and is tolerated. That alone heralds an emerging totalitarian corporate state retaining only a thin veneer of democratic formality.

The Convergence
Collectively, these ostensibly uncharacteristic and unrelated trends provide a context for understanding part of where the “sovereign citizens” paranoia comes from. They seem unconnected, though each is disturbing. But are they simply anomalies? I doubt it.

The personal, the social, the economic, and the political uncertainties we experience or observe today are real, if confusing. They are exacerbated by the recognition, sometimes subliminal, that we live in a society that is increasingly unstable and violent – a bad combination. As if that were not enough, the stability of the biosphere we are part of is itself is being placed at accelerating risk by our institutions and our way of life.

We look around and find little to justify a sense of security. Many escape into the smaller worlds of their everyday lives or stupefying mass media. We see the largest institutions, whether military, corporate, financial, or governmental, and notice the growing trend. Each is expanding its own surveillance/security programs. And in all institutional sectors, the security and secrecy measures are directed at protecting those institutions’ ability to control the population – us – in some way. Why? Because we know that as they grow more irrelevant and opposed to our needs, these institutions increasingly resort to force and violence.

Yet, those hierarchical control structures are themselves engaged in increasingly chaotic reactions to environments that they cannot control. The most powerful institutions in the world were not designed to engage conditions they never anticipated. It seems clear that we need a process of non-violent “creative destruction” to transform these institutions. But what we are getting is a growing process of destruction of humanity emanating from the institutions supposedly serving the public.
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* David Carter, et al, Understanding Law Enforcement Intelligence Processes. Report to the Office of University Programs, Science and Technology Directorate, U.S. Department of Homeland Security (July 2014), p. 7. Accessed at: https://www.start.umd.edu/pubs/START_UnderstandingLawEnforcementIntelligenceProcesses_July2014.pdf