“Embrace change. Envision what could be, challenge the status quo, and drive creative destruction.”

— Charles Koch

“Creativity requires the courage to let go of certainty.”

— Erich Fromm

“The perennial gale of creative destruction.”

— Joseph A. Schumpeter

“When God desires to destroy a thing, he entrusts its destruction to the thing itself. Every bad institution of this world ends by suicide.”

— Victor Hugo

“It is not the strongest of the species that survives, not the most intelligent that survives. It is the one that is the most adaptable to change.”

— Charles Darwin

“The extinction of old forms is the almost inevitable consequence of the production of new forms.”

— Charles Darwin, Origin of the Species

There definitely seems to be a lot of destruction going on today – in nearly everything and everywhere. Doom and gloom pervades. Is this widely beneficial ‘creative destruction’, or just destruction done in order to acquire power and gains for just a very few? Or something else? The answer I found is far from obvious, and may surprise you.

Creative destruction is a concept in economics which since the 1950s is most readily identified with Austrian-born economist Joseph Schumpeter, who derived it from the work of Karl Marx and popularized it as a theory of economic innovation and the business cycle. It is also sometimes known as Schumpeter’s gale.

According to Schumpeter, the “gale of creative destruction” describes the “process of industrial mutation that continuously revolutionizes the economic structure from within, incessantly destroying the old one, incessantly creating a new one”.

Joseph Schumpeter, economist
Joseph Schumpeter

Creative destruction is how life itself works

Limiting this process to industrial contexts seems short-sighted. Evolution itself involves creating new forms, as Charles Darwin pointed out, and the extinction of old forms. Life is a process of creative destruction. Its create and destroy aspects are inseparable.

Create and destroy processes sometimes proceed first with destruction that in turn provides a need for creation – something better, and sometimes proceed with creation leading and forcing out – destroying – the old. It really doesn’t matter much which comes first, except to those adversely impacted by destruction activities, but they nearly always go together.

Even the extinction of the dinosaurs 65 million years ago was followed by an explosion of small-mammal life forms, and eventually even us humans. Creative destruction by nature?

So, the question seems to be whether the widespread destruction that we are now experiencing globally actually setting the stage for a period with a major burst of widely-beneficial creation? Is this now-unavoidable period of destruction an essential first step – preparation – for some much-needed creation?

Whatever follows destruction may not be “creative”

War is certainly destructive but what follows can often be anything but “better” (except perhaps for a favored few) or “creative” (except in a narrow, highly-partial context). What follows destruction may turn out to be much worse than what was destroyed.

The brutal Bolshevik Revolution of 1917, which replaced the increasingly corrupt and ineffective Russian Czarist Empire, was in turn replaced by Stalin’s totalitarian Soviet Union. Each destruction followed by more destruction, not creation in any positive, general sense.

Truly creative destruction is most often the result of major innovation – something new, positive, and broadly beneficial – that obsoletes and forces out an existing technology or process. Mass-produced automobiles replaced horse-driven buggies and carriages within a couple of decades. Destroyed were businesses serving the horse-and-buggy trade. A few losers but many more winners.

Destruction for its own sake is often used by groups trying to end a highly-disliked (or worse) situation but who have little or no idea, apart from support-building slogans, what might actually and practically be a better replacement. These groups, or crowds (as described in an earlier post), can often take on a direction that flows organically from the group or its leadership with no specific, practical goal in mind.

Professor Mattias Desmet, a Belgian psychologist and statistician, gained worldwide recognition toward the end of 2021 when he presented the concept of “mass formation” as an explanation for the largely irrational and short-sighted behavior in responses to the COVID pandemic and its countermeasures. Behavior that in hindsight was hugely destructive and virtually global in scope.

Did anything “creative” in a positive sense result? Well, technology has made remote and hybrid work not just feasible but highly attractive from a work-life balance viewpoint. This outcome was clearly not planned – driven instead by creative (or desperate) folks trying to cope with the destructive COVID mess of lockdowns and vaxx mandates.

Supply chains and essentials production are getting destroyed today

This is where the current destructiveness gets really serious. The drivers here are messing with life-sustaining processes – ones that provide food, fuel, housing, medical care, power, and much else – on a global basis.

Rampant inflation is beginning to price even these life-essentials out of reach for growing numbers of people – again, globally. This is fundamentally destructive. There is no creative, positive element evident here, except perhaps to a tiny elite pushing for a New World Order (NWO) of their own design and for their own benefit.

A depopulated world may be “creative” to the NWO folks but certainly not to us billions who are likely depopulation targets. Pretty much all downside for us, with little or no creative upside for the few survivors.

Inflation destroys the value of our money

Destruction is not always physical. Today in the U.S., we have a clearly non-physical but vital asset (ignoring actual cash currency and the like) being devalued rapidly – destroying its value and usefulness.

Bill Bonner in his Private Research post tells the story without embellishments: “Decision of the Century”:

“We are coming up to the Decision of the Century. There are only two real choices.  One way or another, this scam economy is going to blow up. So, the question is whether the Fed blows it up by stopping inflation now. Or, it lets inflation rip and the whole thing blows up later.” 

“Either way, there will be hard times ahead – with crashing stocks, bonds and real estate… and probably riots and maybe even revolution. But if the feds end the scam voluntarily, the wreck could be short and sweet, like ripping off a Band-Aid, with a crash followed by a depression, but ending in a fairly quick recovery. If the pre-Fed depressions (before 1913) are anything to go on, the whole thing could be over in 18 to 24 months.”

“If inflation is allowed to run wild, on the other hand, the disease will fester… and metastasize. These intentional, government-policy inflations last about 16 years on average. In the end, the economy is almost completely destroyed…and the nation’s political and social institutions are left as burnt-out hulks.”

Bill seems to have left out something here: the Federal Reserve Board (Fed) is not especially competent based on recent actions nor is it particularly aggressive or decisive. Inflation, as argued in a recent post, is likely to be the public target but the actions are likely to be wishy-washy, too-little-too-late. This will lead to Bonner’s “inflation allowed to run wild” scenario. A completely destroyed economy ultimately but much pain and suffering meanwhile?

What about “Build Back Better”?

The term “build back better” was first introduced to UN at the United Nations Economic and Social Council (ECOSOC) in July 2005 by former United States President Bill Clinton, the Secretary-General’s Special Envoy for Tsunami Recovery.

Subsequently, following the initial chaos of COVID, the World Economic Forum (WEF) picked up on this slogan. See for example here and here.

More recently, we saw the Build Back Better Plan (Agenda) introduced by the Biden administration early in 2021 and having the following goals:

“Build a Modern Infrastructure: The United States has consistently underinvested in the development of workers and millions of positions in rising industries, such as construction and healthcare, have not been fulfilled. President Biden’s Build Back Better Plan would invest in training initiatives to help the millions of American workers to create high-quality employment in expanding fields through high-quality career and technical education paths and registered apprenticeships.”

“Position the U.S. Auto Industry to Win the 21st Century with technology invented in America”

“Achieve a Carbon Pollution-Free Power Sector by 2035”

“Make Dramatic Investments in Energy Efficiency in Buildings, including Completing 4 Million Retrofits and Building 1.5 Million New Affordable Homes”: Schools were faced with an estimated shortage of 100,000 teachers before the pandemic, which undermined the education of children.  President Biden’s Build Back Better Plan will address the lack of teachers and enhance the education of teachers, including providing teacher residencies and by developing programs that provide greater results and generate more POC teachers. During the course of the school year, it would extend free school food to another 9.3 million students and assist families buy food in the summer. The plan includes investing in modernizing school infrastructure to ensure school buildings are up to date, energy efficient, robust, and have technology and laboratory equipment to educate children for the future.”

“Pursue a Historic Investment in Clean Energy Innovation”

“Advance Sustainable Agriculture and Conservation”

“Secure Environmental Justice and Equitable Economy Opportunity”

The Build Back Better Act

Of course, such a grandiose scheme requires tons of money. And enabling legislation, as Wikipedia outlines:

“The Build Back Better Bill is a bill introduced in the 117th Congress to fulfill aspects of President Joe Biden’s Build Back Better Plan. It was spun off from the American Jobs Plan, alongside the Infrastructure Investment and Jobs Act, as a $3.5 trillion Democratic reconciliation package that included provisions related to climate change and social policy. Following negotiations, the price was lowered to approximately $2.2 trillion. The bill was passed 220–213 by the House of Representatives on November 19, 2021.”

“In the midst of negotiations and parliamentary procedures, Senator Joe Manchin publicly pulled his support from the bill for not matching his envisioned cost of about $1.75 trillion, then subsequently retracted support for his own compromise legislation. This effectively killed the bill as it needs 50 senators to pass via reconciliation. All 50 Republican senators opposed the bill, and there are minimal discussions with Manchin to salvage its contents as of June 2022. The chair of the Congressional Progressive Caucus, a major backer of the bill, had urged President Biden to enact the green energy and climate change provisions into law by executive order.”

As always, politics seems to have had its own way with this hugely ambitious project. Democrats attempted to pass key provisions of the bill during the spring, preferably by Memorial Day 2022. After missing the Memorial Day deadline, the new deadline is August 1, 2022, when Congress goes into recess.

Creative, or just spending more money we don’t have?

The BBB project seems to have some worthwhile goals that address quite a number of current needs and problems, but does it offer anything truly creative? While several items mention “innovation”, the nature of these seems more than a bit unclear. They look more like pretty much standard politically-driven “problem-solving” efforts that involve spending huge amounts of money we don’t have.

Financial impact of Build Back Better proposals.
Financial impact of Build Back Better proposals.
Source: https://www.crfb.org/papers/build-back-better-less-two-illustrative-packages

What are the real drivers of change here? Politics for sure in many cases. We have to look at major destructions underway now to see beyond politics:

  • COVID consequences
  • Ukraine war
  • Dollar decline
  • Overwhelming debt
  • … and many more

Destruction globally may be the big clue

Normally, not much happens in a truly global manner. Nasty events usually occur in a rather random subset of countries rather than in almost every country as seems the case today. Conspiracy theorists will see this as evidence of some kind of grand scheme for world domination, or perhaps competing grand schemes. Evidence of great evil afoot at the very least.

And while there may be some truth in such theories, as is so often the case, the real culprit may well be our critically-complex world system moving into failure mode.

Has our global system has finally become so complex after a century or so of chaotic, rapid development, and punctuated regularly by small and large wars that it is now fatally unstable?

Are the nasty events occurring nearly everywhere today simply a reflection of a collapsing world system?

Complex systems tend to become brittle and failure-prone as they grow organically to include more and more components. No one is smart enough to manage all of these tightly-interconnected pieces so the complex whole behaves unpredictably and uncontrollably. And, at some point, the whole system mess collapses. Not explodes or vaporizes but begins to disintegrate.

Formerly beneficial interdependence turns into pathological interdependence. We have the example today of EU dependence on Russian oil and gas, which worked great until the Ukraine war, now turning into an economic and social catastrophe for much of Europe.

Highly interconnected and interdependent complex system.
Highly interconnected and interdependent complex system.

How complex systems fail

I just ran across a real gem on this very topic written over twenty years ago by Richard I. Cook, MD, Cognitive Technologies Laboratory, University of Chicago: “How Complex Systems Fail”. A few key points:

Complex systems are intrinsically hazardous systems. All of the interesting systems (e.g. transportation, healthcare, power generation) are inherently and unavoidably hazardous by the own nature. The frequency of hazard exposure can sometimes be changed but the processes involved in the system are themselves intrinsically and irreducibly hazardous. It is the presence of these hazards that drives the creation of defenses against hazard that characterize these systems.”

Complex systems contain changing mixtures of failures latent within them. The complexity of these systems makes it impossible for them to run without multiple flaws being present. Because these are individually insufficient to cause failure they are regarded as minor factors during operations. Eradication of all latent failures is limited primarily by economic cost but also because it is difficult before the fact to see how such failures might contribute to an accident. The failures change constantly because of changing technology, work organization, and efforts to eradicate failures.”

Catastrophe is always just around the corner. Complex systems possess potential for catastrophic failure. Human practitioners are nearly always in close physical and temporal proximity to these potential failures – disaster can occur at any time and in nearly any place. The potential for catastrophic outcome is a hallmark of complex systems. It is impossible to eliminate the potential for such catastrophic failure; the potential for such failure is always present by the system’s own nature.”

Complex systems fail not because of some identifiable root causes but from the system complexity itself. As complexity grows, the likelihood of catastrophic failure increases. This is simply a fundamental property of such systems.

Our world system is just such a complex system – organic in that the primary constituents are people. Organic also means that it was not designed but took its form and behavior from the particular people and groups within it.

Our complex organic world system is failing and transforming

Symptoms of failure are the emergence of destructive behavior among system components – people, organizations, nations, and nation groups – each increasingly doing their own thing. Conflicts abound. There is nothing creative in any of this but simply inevitable system disintegration and destruction.

No one or no one group is to blame for this. Many are contributors but none can be singled out as a root cause. Many situations are occurring but no single one or group is truly responsible. The system itself is creating its own failure path.

The relatively recent push toward globalization of almost everything seems to have created a highly brittle, extremely interconnected world system. Redundancies that once ensured resilience have been systematically eliminated. No one intended to build such a system. It was just the outcome of billions of system components struggling to do whatever it is that they do.

Failure of a complex system typically does not end in a pile of inert rubble but becomes a jumble of still-functioning – locally – pieces. These will reassemble in unpredictable ways, transforming the former world system into something quite different. Not necessarily better but almost certainly different.

Bottom line:

The global destruction that we are experiencing today is far from an example of Schumpeter’s creative destruction. It appears instead to be destruction reflecting the collapse and disintegration of the overly-complex world system of the twenty-first century. No one or one group is responsible – causal – but only a contributor in some invisible manner. What we are seeing today are symptoms of the world complex system failure and eventually its emerging transformation.

Related Reading

“Systems tend to be resilient and adaptive, reorganizing and mutating in response to change. They can even benefit from variability and stress. At the same time, there are often thresholds after which systems struggle to cope with increasing stress and variability, and become fragile. Once you cross this threshold, the system changes — often in a dramatic fashion.”

“Complex systems usually contain flaws that stress events or sudden shifts exacerbate. For example, the COVID-19 pandemic didn’t create mistrust in the U.S. federal government or an erosion in its ability to mobilize and deploy resources. Systems, like humans, are inherently flawed and adaptive.”

“Failure, therefore, is rarely a function of a single shock event. Fragility arises from a combination of factors that interact in unpredictable ways. In the 1990s, Richard Cook outlined 18 treatises on why systems fail, highlighting that catastrophe — true system collapse — usually arises from multiple failures. There is rarely one cause. Multiple events combine to shift an otherwise functioning public health system or economy into a death spiral that threatens global supply chains. Failure in one part of the system can cascade into other parts — such as how the current pandemic stresses public health — and, through our response, ripples into the economy, causing mass layoffs and a collapse in consumer confidence, trade, and industrial production. It also explains sudden, dramatic state failure similar to that seen at the end of the Cold War in multiple countries where the removal of U.S. and Soviet patronage triggered larger governance issues linked to deep colonial legacies.”

“If we don’t seize this opportunity to build back better – to reset and reinvent rather than ‘return to normal’ – systemic risks and vulnerabilities will continue to accumulate, making future shocks both more likely and more dangerous. Despite the tragedy, we must leverage the COVID-19 pandemic, and make sure that it becomes the catalyst for a profoundly positive transformation of the global economy, taking us closer to a world in which everyone can live well, within planetary boundaries.”

“A true recovery from COVID-19 will not be about putting things back together the way they were: we need to ‘build back better’, to ‘reset’, if we are to address the deep systemic vulnerabilities the pandemic has exposed. For businesses, building back better is about much more than corporate social responsibility: it is about truly aligning markets with the natural, social and economic systems on which they depend. It is about building real resilience, driving equitable and sustainable growth, and reinventing capitalism itself.”

“Resilience. To ensure they are better prepared for the next shock when it comes, companies will need to establish a better balance between efficiency and resilience in everything from financial management to supply chain configuration. Complex supply chains may give way to simpler ones. “Just-in-time” may be superseded by “just-in-case” as the mantra of procurement and production teams.”

“Business will need to work with a wide range of partners to ensure that all risks – financial, environmental and social – are properly understood, priced and – wherever possible – mitigated. Increasingly, comprehensive and integrated risk assessments will be essential for companies to fulfil their fiduciary obligations and maintain their social license to operate.”

“Ultimately though, we are only as resilient as the systems on which we depend. Businesses must face up to their need for – and impact upon – systemic resilience. Post-COVID-19, this will require investment in regeneration (of weakened economies, shaken communities and over-exploited natural ecosystems) and adaptation (to increase our capacity to cope with future disruptions).”

See also: https://www.weforum.org/reports/building-back-better-an-action-plan-for-the-media-entertainment-and-culture-industry/

68530cookie-checkDo We Have ‘Creative Destruction’, or Just Plain ‘Destruction’?