Americanized “creative destruction” comes from Indian philosophy

I’ve just come upon wikipedia’s article on “creative destruction,” to read that this term, popularized by Schumpeter’s (1948) cyclical framework of technological development, was not only taken from Marx (although he did not use the term literally), but was important in the work of the less-known historical economist and sociologist Werner Sombart. Probably the most important here is that he was heavily influenced by Marx and thought of himself as a “convinced Marxian,” and Engels even noted him as the only German who understood Das Kapital. In his Krieg und Kapitalismus (1913), he wrote:

“Again, however, from destruction a new spirit of creation arises; the scarcity of wood and the needs of everyday life… forced the discovery or invention of substitutes for wood, forced the use of coal for heating, forced the invention of coke for the production of iron. That these events, however, made possible the enormous development of capitalism in the 19th Century, is beyond doubt for any well-informed person. Thus even here, in this decisive point, the invisible threads of commercial and military interests appear closely intertwined.” (p. 207)

The Austrian-American Schumpeter became well known from the 1950s due to the rising American capitalist hegemony and his theory of economic innovation and business cycles which became to flourish in the rising field of neoclassical economics (inspite his prognosis of capitalism’s fall). Sombart, however, was more-or-less forgotten in the Americanized mainstream together with German historical economics, also partly due to his increasingly radical German nationalism which led him close to the Nazi party (although he became disillusioned after 1938). Later, the term “creative destruction” achieved ultimate popularity in its narrow and technical application in neoliberal economics.

Although I found this when I was meddling with Max Weber, this story connects to my research in the historical geographies of knowledge, where I look at the construction of the hegemony of American economics, and how they used German knowledge (and scholars) in a reinterpreted form, leading to an often biased selection of ideas and local interpretations. My episode comes in the picture, when Americans mainstreamed German location theories but totally concealed their origins, e.g. Alfred Weber’s ideas on industrial location and agglomeration effects were taken up but his historical context and critical thought were largely dismissed for the sake of his mathematized “model” to be applied in industrial planning. As for Sombart, he was a hugely important figure as the leading economist in the Younger German Historical School of economics, and the author of a highly influential book Der moderne Kapitalismus (1902), which many compared to Das Kapital. Nevertheless, his negligence is indicative in that his main work never got translated into English. Of course his anti-capitalist, anti-Jewish and anti-British sentiment might also have been an important factor, as according to Harris (1942: 813), he accused the British to possess the Jewish spirit of capitalism, which should be eradicated by the German Volk and National Socialism. As Hugo and Eric Reinert (2006) explain:

“However, during the period after World War II, Sombart and all pre-war II German economics went into an eclipse. Part of the explanation for this was the rise of mathematization of the profession, which was very much against the German tradition. Another part of the explanation was that to a surprising degree what was a healthy scientific baby was poured out with what was perceived as the post-nazi bath-water. The German tradition in economics therefore came to be represented solely by Marx and Schumpeter, a feature which made these two economists seem much more unique than they in effect are when seen in their own historical context. As we have already mentioned, Schumpeter himself assisted in this process, also by systematically neglecting the philosophical foundations of German economics in his History of Economic Analysis (Reinert 2002).” (Reinert and Reinert 2006: 72)

In fact, on Schumpeter’s role, they write:

“Schumpeter’s originality in the Anglo-Saxon environment was then to a large extent also a product of the ignorance, outside Germany, of the traditions on which he built. Part of what Schumpeter did was to filter Sombart’s work  and the economic debate in Germany between the world wars to the Anglo-Saxon world.” (Reinert and Reinert 2006: 73)

But what is even more interesting, as the Reinerts unravel, is that the dialectic idea of “creative destruction” must have arrived into German economic discourse from Johann Gottfried Herder’s philosophy, which influenced Arthur Schopenhauer and the orientalist Friedrich Maier via Nietzsche. The orientalist Herder wrote extensively on Hinduism in his Philosophy of Human History (Ideen zur Philosophie der Geschichte der Menschheit) (Herder 1790–92, volume III, pp. 41–64.) in turbulent times when Western Europe, and especially the Germans, were enthused by ideas from the “East” (Confucianism, Hinduism, etc.), which they interpreted in favor of enhancing their – often radical – political ideas. “Creative destruction” was a concept deriving from the Hindu god Shiiva, who represents the paradox nature of simultaneous destruction and creation. Sombart himself fished this idea second-hand from German orientalist discourse, quoting extensively from Goethe, Fichte, Schopenhauer and Nietzsche:

“Nietzsche’s influence on the work of Werner Sombart is well documented both through Sombart’s many references to Nietzsche and through his biographers. Also the people who most influenced Sombart, some of which were his close friends, were strongly influenced by Nietzsche (Lenger 1994:141). Sombart was himself known to quote frequently from Nietzsche’s Zarathustra (ibid.:247).” (Reinert and Reinert 2006: 73)

It is not that essentialized ideas should always derive from some sort of “authentic origin,” but if scratching the genealogical layers of Western discourse, one can find much more reason in these suppressed discourses and networks of interaction than from “out of nowhere” intellectual developments or historical statemens of founding fathers. This is especially true in cases as such, where the “East in the West” aspect can be highlighted so acutely. Another thing that beautifully surfaces from this is the role of shifting hegemonies in the dissemination of knowledge and interpretation. Truly geographical stuff, indeed.

Harris, Abram L. (1942). “Sombart and German (National) Socialism”. Journal of Political Economy 50 (6): 805–835.
Reinert, Hugo; Reinert, Erik S. (2006). “Creative Destruction in Economics: Nietzsche, Sombart, Schumpeter.” [Word document]
Sombart, Werner (1913). Krieg und Kapitalismus [War and Capitalism]. Leipzig: Duncker & Humblot. p. 207.
Sombart, Werner (1928[1902]): Der moderne Kapitalismus. Historisch-systematische Darstellung des gesamteuropäischen Wirtschaftslebens von seinen Anfängen bis zur Gegenwart. Final edn. 1928, repr. 1969, paperback edn. (3 vols. in 6): 1987 Munich: dtv. (Also in Spanish; no English translation yet.)