Joseph Schumpeter

Joseph Schumpeter was born in
the Austro-Hungarian Empire in 1883

and he passed away in
the United States in 1950.

He's generally considered to have
been one of the greatest economists

of the first half of the 20th century.

We'll look just ever so briefly at

some of his contributions
to development economics.

Schumpeter, by the way, spent
the first part of his career

teaching in Central Europe,

he had a brief stint at
the Ministry of Finance in Austria,

and he also worked in the private sector.

The second half of his career,
he taught at Harvard University.

Early in the 20th century,
Schumpeter wrote a famous book,

Theory of Economic Development.

And in this book, he put forward
the notion of the entrepreneur

as a creative force driving
economic development.

The entrepreneur comes up with new ideas,

implements those ideas, and sweeps away
the older economic order

bringing some new set of
beneficial changes.

By now, this idea is pretty standard fare,

but Schumpeter deserves
a lot of the credit

for showing people how important it was.

Schumpeter also coined the phrase
"Creative destruction".

By this, he meant that economic creation
and economic destruction

were two sides of the same coin.

So if an economy was to be growing,

that would also mean that a lot of
sectors would be closing up shop,

there would be a lot of business bankruptcies,
there would be a lot of business losses.

And Schumpeter understood this process

of one as being inevitable
in a growing economy

whereby new ideas must mean
that older ideas are falling away.

Schumpeter very frequently
emphasized the notion

that growth is a process of
disequilibrium and change.

Schumpeter also wrote a very nice book
called Imperialism and Social Classes.

I read this book as a kind of
response to Lenin,

who suggested that imperialism
was the highest stage of capitalism.

Schumpeter had
a very different perspective.

He saw imperialism as coming
from earlier rooted forces

such as nationalism and militarism.

And for Schumpeter, imperialism was
something quite backward and atavistic,

and he identified capitalism
instead with free trade and peace.

There's much more
to Schumpeter than this,

but he has proven one of the most seminal
thinkers for development economics.