The Power of Creative Destruction: Economic Upheaval and the Wealth of Nations

by Philippe Aghion, Céline Antonin, Simon Bunel, Jodie Cohen-Tanugi (Translator)

Overview

Hayek Book Prize Finalist
An Economist Best Book of the Year
A Foreign Affairs Best Book of the Year
A Financial Times Summer Reading Favorite

“Sweeping, authoritative and—for the times—strikingly upbeat…The overall argument is compelling and…it carries a trace of Schumpeterian subversion.”
—The Economist

“[An] important book…Lucid, empirically grounded, wide-ranging, and well-argued.”
—Martin Wolf, Financial Times

“Offers…much needed insight into the sources of economic growth and the kinds of policies that will promote it…All in Washington would do well to read this volume carefully.”
—Milton Ezrati, Forbes

Inequality is on the rise, growth stagnant, the environment in crisis. Covid seems to have exposed every crack in the system. We hear calls for radical change, but the answer is not to junk our economic system but to create a better form of capitalism.

An ambitious reappraisal of the foundations of economic success that shows a fair and prosperous future is ours to make, The Power of Creative Destruction draws on cutting-edge theory and hard evidence to examine today’s most fundamental economic questions: what powers growth, competition, globalization, and middle-income traps; the roots of inequality and climate change; the impact of technology; and how to recover from economic shocks. We owe our modern standard of living to innovations enabled by free-market capitalism, it argues, but we also need state intervention—with checks and balances—to foster economic creativity, manage social disruption, and ensure that yesterday’s superstar innovators don’t pull the ladder up after them.

Product Details

ISBN-13:	9780674292093
Publisher:	Harvard University Press
Publication date:	03/07/2023
Pages:	400
Sales rank:	773,657
Product dimensions:	6.12(w) x 9.25(h) x 1.10(d)

About the Author

Philippe Aghion is Professor at the Collège de France, INSEAD, and the London School of Economics and was previously Professor of Economics at Harvard. He is coauthor, with Peter Howitt, of Endogenous Growth Theory and The Economics of Growth.

Céline Antonin is Senior Researcher at OFCE, the French Economic Observatory at Sciences Po in Paris, and Research Associate in the Innovation Lab at the Collège de France.

Simon Bunel is Senior Economist at INSEE, the French National Institute of Statistics and Economic Studies, and at the Bank of France. He is also Research Associate in the Innovation Lab at the Collège de France.

Table of Contents

Preface vii

1 A New Paradigm 1

2 The Enigma of Takeoffs 20

3 Should We Fear Technological Revolutions 40

4 Is Competition a Good Thing? 55

5 Innovation, Inequality, and Taxation 75

6 The Secular Stagnation Debate 104

7 Convergence, Divergence, and the Middle-Income Trap 125

8 Can We Bypass Industrialization? 149

9 Green Innovation and Sustainable Growth 173

10 Innovation: Behind the Scenes 194

11 Creative Destruction, Health, and Happiness 213

12 Financing Creating Destruction 229

13 How to Manage Globalization 250

14 The Investor State and the Insurer State 272

15 Creative Destruction and the Golden Triangle 289

Conclusion: The Future of Capitalism 312

Notes 321

Acknowledgments 361

Index 363

Editorial Reviews

A refreshing take on large, important societal questions. By making the case for a rightful role for government, institutions, civil society organizations, and issues of equity and fairness in the production of capitalist society, the authors produce a justification for a new political economy—one in which capitalism’s innovative power to produce novel, entertaining, and imaginative products is harnessed to increasing collective welfare and a more interesting and secure future for citizenry.

Administrative Science Quarterly - Neil Fligstein

Accelerating technological change, global warming, pandemics, individual and national stagnation, over-indebtedness: this century decidedly provokes anxiety. Armed with legitimate concerns, anti-globalization protestors and neo-Luddites look inwards and denigrate innovation. The Power of Creative Destruction offers another vision, more persuasive and based on the innovation that creates wealth and jobs. Philippe Aghion, Céline Antonin, and Simon Bunel dismantle contemporary myths about such economic phenomena as secular stagnation and the impact of automation on employment. They show the need for competition and the fight against rents. They advocate a regulated capitalism that will allow us to keep society prosperous and the planet green. They explain, in short, how to manage the creative destruction that over the past two centuries has brought to our society a previously unimaginable prosperity. Provocative and rigorous, this book is an important milestone in our reflections on the future of our societies. A must-read.

Jean Tirole

[A] rigorous education in the economics of innovation…Extend[s] economic analysis to illuminate a wide range of contemporary political and cultural issues.

Project Syndicate - William H. Janeway

Gather a group of economists together and ask what most concerns them, and a wide variety of topics would soon emerge…Decade after decade, numerous books have been written about each of these issues. But here we have in one compact package a blockbuster book that deals with all of them…A magisterial book with something new and imaginative to say on such a wide and important range of topics.

Business History Review - Robert J. Gordon

The authors…argue that the socioeconomic problems revealed during the global pandemic—welfare, health, inequality, and many others—will not be fixed by abolishing capitalism but rather by inventing a better capitalism through the power of creative destruction, which they define as innovations that disrupt and lift societies.

Fast Company - Satya Nadella

An ambitious story of how Western countries escaped the Malthusian population-growth trap, hitting upon an innovation-lead growth trajectory that has so far resulted in immense improvements in longevity and quality of life for the vast majority of humankind. It was a pleasure to read this well-written book, which is full of easy examples and background data.

Economic Record - Paul Frijters

The term ‘creative destruction’ expresses a contradiction at the core of capitalism; creation brings innovation, growth, and prosperity while the destruction that it demands engenders resistance and stagnation. Philippe Aghion, Céline Antonin, and Simon Bunel are the leaders in exploring and understanding this story of action and reaction. Their insights are essential if policy is to restore growth in today’s faltering capitalism.

Angus Deaton

Philippe Aghion has been the leader of modern growth theory for the last three decades. He has shown that innovation and disruption, Schumpeter’s creative destruction, are at the heart of the productivity and power of a capitalist economy. In this book that story is clearly and compellingly told, but now he and his colleagues go still deeper into the kind of society we want to build, whilst keeping the power of creative destruction. We really can create a prosperous future which brings a supportive community and social cohesion, and a much better environment, climate, and biodiversity. This fine and crucially important book is ultimately optimistic about what we can do, but challenges us as to whether we will.

Nicholas Stern

Marvelous…Consistently thoughtful and, in its way, fearless. In The Power of Creative Destruction, readers will find much that transcends the facile arguments and moral posturing that too often characterizes today’s economic debates.

City Journal - Milton Ezrati

Sweeping, authoritative and—for the times—strikingly upbeat…The overall argument is compelling and, with creative destruction falling out of political favor, it carries a trace of Schumpeterian subversion.

The Economist

An important book for the times…The authors succinctly connect politics to economics and argue that ‘Innovation Needs Democracy.’…To paraphrase a quote referring to Keynes, another famous economist, this book may convince readers that we should all be Schumpeterians now.

New York Journal of Books - Craig R. Roach

Successfully navigating the supply chain disruptions created by COVID-19 requires strong political leaders to implement smart policies, but not leaders so strong that they can suppress organizational innovations that will disfavor them or their allies. The authors explain these dynamics and more in an eminently accessible fashion.

Foreign Affairs - Barry Eichengreen

Anyone curious about where modern capitalism is going and whether economic growth can be sustained should read this book. In accessible prose, based on cutting-edge economic analysis, the authors dissect the dynamics of the modern economies. They show brilliantly how capitalism in the twenty-first century is indeed as creative as it is destructive, and how innovation will affect modern economies and hence the life of every human on the planet, for better and for worse. Deeply researched and intelligently written, this is a genuine tour de force.

Joel Mokyr

Philippe Aghion is one of the founders of the new growth theory focused on the origins and implications of technological progress. This book, based on thirty years of research, shows the richness and usefulness of this approach. It is a fundamental document for thinking about the nature of growth, industrial policy, and the organization of the labor market.

Olivier Blanchard

[An] important book…[It] is lucid, empirically grounded, wide-ranging, and well-argued…Schumpeter himself feared capitalism would perish. So far, he seems to have been wrong. Another possibility is that democracy will die, as plutocracy allies with demagoguery. Either way, the civilizations of the contemporary high-income democracies would perish. By promoting a better understanding, this book could, with wisdom and luck, help us avoid that fate.

Financial Times - Martin Wolf

An impressive study…It convinces, to my mind, on what the path to a better world, with less inequality, injustice, environmental catastrophe might look like.

Society of Professional Economists - Bridget Rosewell