Creative Destruction: Impacts and Debates

This assignment delves into the concept of 'creative destruction' coined by Joseph Schumpeter. It examines how this process, involving the continuous innovation and obsolescence of industries, impacts the labor market and economic structure. The assignment analyzes different perspectives on creative destruction, including those from free-market economists and critics who argue for government intervention to manage its potential negative consequences. It also discusses Universal Basic Income (UBI) as a possible solution to address challenges posed by automation and widespread unemployment.

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CREATIVE DESTRUCTION
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Question 1:
Creative destruction was coined by Joseph Schumpeter and details the process of
mutation of industries which ceaselessly transforms economic structure right from within,
continually abolishing ancient one, relentlessly establishing a novel 1. It takes place where
innovation deconstructs long-standing arrangements thereby freeing resources for elsewhere
deployment. It can as well as be looked at as the process by which capitalism culminates in a
constantly altering economic structure (Kirchhoff, Linton and Walsh 2013). Ancient industries as
well as firms that are no longer profitable, shut down allowing resources, both labour and capital
to be shifted into increasingly productive processes. It means that a closure of a company and job
losses remain good for long-term economy’s well-being. The example unmentioned in the video
is luddites.
Question 2:
The economist believe that the effects of creative destruction on labor market could be
dissimilar currently compared to the past observation. This is because there is a never a
guarantee that the workers who lose jobs have sufficient skills required to be deployed to other
newly created jobs hence further forcing the government intervention. Moreover, creative
destruction has led to many people being replaced by machines that can now do a job that
initially employed many (Woodbury 2017).
Question 3:
The free-market economist have viewed creative destruction as an essential as well as
inevitable economic development process and generally oppose the attempts by the government
to hold back the process of decline as well as renewal. This is an optimistic view as economist

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extend to argue that if banks fail, the administration need not to intervene since it is appealing to
permit bad banks to fail and avoid administration artificially propping the financial system up.
This can be justified by viewing the threat of going out of business as a golden incentive for
firms to move with altering market and keep cost low. Also, though short-term layoffs are bad
for those involved, individual usually forget the less visible novel jobs established in the course
of economic change. Periods of labor market change in the long run have permitted increasing
real wages.
Question 4:
Free market economics makes for permitting any unprofitable organization to exit the
business regardless of the consequences. Nevertheless, some argue that the creative destruction
process could lead to long-run damage and hence must be managed carefully. The process will
lead to structural unemployment, regional unemployment and winner and losers (Schlesinger and
Doyle 2015). For example, a closure of certain industries leaves no guarantee that the
unemployed will be adequately skilled ready for redeployment to shift employment prospects. At
a minimum, there might be need for government intervention to provide better skills to long run
unemployed as machines replace many people.
Question 5:
Universal basic income describes a form of social security whereby each citizen/resident
of a given economy working or not receives certain regular, unconditional amount of money,
either from the administration irrespective of wealth and employment income. This aims at
solving an array of widespread economic challenges, from poverty to long-lasting unemployment
which are probably to deteriorate in future. The opponent of basic universal basic income say
that it is merely a lure for starving administration support which enhances collective child-care/

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free tuition for college. Others say that it is 1 more ill-advised scheme poised to culminate in the
elimination of work incentives, rendering huge amounts of individuals reliant on government.
Many skeptics alongside advocates, soon/later will arrive at a conclusion that related
costs will be ridiculously extortionate eventually. A single critic places figures in United States
at three-trillion dollars yearly. Other opponents that more generous program to support UBI will
call for huge tax hikes as well as cannibalization of most non-health associated social spending.
Another barrier to UBI implementation stems for the UBI potential impact on labor force and
productivity. Opponents further hold that UBI will discourage citizens from looking for long
term security in job market since they can comfortably live without working.

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References
Kirchhoff, B.A., Linton, J.D. and Walsh, S.T., 2013. Neo‐Marshellian Equilibrium versus
Schumpeterian Creative Destruction: Its Impact on Business Research and Economic
Policy. Journal of Small Business Management, 51(2), pp.159-166.
Schlesinger, P. and Doyle, G., 2015. From organizational crisis to multi-platform salvation?
Creative destruction and the recomposition of news media. Journalism, 16(3), pp.305-
323.
Woodbury, S.A., 2017. UNIVERSAL BASIC INCOME. The American Middle Class: An
Economic Encyclopedia of Progress and Poverty [2 volumes], p.314.