‘From the heart of all matter

Comes the anguished cry -

‘Wake, wake, great Siva,

Our body grows weary

Of its law-fixed path,

Give us new form.

Sing our destruction,

That we gain new life…’

Rabindranath Tagore, Indian Poet.

Creative Destruction in Vogue

The 1990's brought Joseph Alois Schumpeter (1883– 1950) into the center stage of the economic debate. The Austrian-born economist had been teaching at Harvard from 1932 until his death. As the phenomena surrounding the ‘New Economy’ temporarily seemed to have cancelled the normal laws of economic gravity, Alan Greenspan heralded Schumpeter as the theoretician and prophet of the events. At the core of the phenomenon was the process of creative destruction that had become associated with the name of Schumpeter. This concept seemed tailor-made to describe the process by which information and communication technology destroyed previous technological solutions and laid waste old companies in order to make room for the new.

In today's standard economic theory, Schumpeter stands out as being highly original. However, his great intellectual independence is generally misinterpreted as meaning that his ideas appear on the scene only with him. This is far from the truth (see Reinert 2002), also as it applies to the key concept of ‘creative destruction’. This idea itself is a very old one. In this paper we shall argue that the idea of ‘creative destruction’ enters the late 19th Century Zeitgeist through the works of Friedrich Nietzsche. Going back further in time, the process of creation and destruction plays a central role in Hinduism, the religion which so inspired Nietzsche's Erzieher (educator) Arthur Schopenhauer. Nietzsche's own ideas about creative destruction, as popularized through his Also Sprach Zarathustra, had a profound and wide-ranging influence on generations of German-speaking artists and intellectuals (Sokel 1959). We shall further argue that – contrary to the firm beliefs of the economics profession – the term ‘creative destruction’ was brought into economics not by Schumpeter but by Werner Sombart (1863– 1941), the economist who was probably most influenced by Nietzsche.