Destructive Creation

AAA

DEFINITION of 'Destructive Creation'

When innovation leads to destruction. Destructive creation was coined as a play on Joseph Schumpeter's famous term "creative destruction", which suggests that innovation leads to changes and economic growth. The term destructive creation was popularized during the financial crisis of 2007-2009, when large banks and insurance companies ceased to exist as a result of financial innovations.

INVESTOPEDIA EXPLAINS 'Destructive Creation'

Financial innovation is a different animal than other types of innovation. For example, when the PC was invented, it replaced the typewriter and increased efficiency; as a result, the economy profited. In other words, there was little downside to this innovation. However, some recent financial innovations could be said to me more destructive than productive. Derivatives, structured investment products and non-conventional mortgages have all fallen under public scrutiny in recent years as innovations that proved to bring more harm than good.

RELATED TERMS
  1. Game Changer

    1. A person who is a visionary. 2. A company that alters its ...
  2. Joseph Schumpeter

    One of the 20th century's great economic and political thinkers. ...
  3. Creative Destruction

    A term coined by Joseph Schumpeter in his work entitled "Capitalism, ...
  4. Old Economy

    A term for the old blue chip industries that enjoyed fabulous ...
  5. New Economy

    A buzzword describing new, high-growth industries that are on ...
  6. New Paradigm

    In the investing world, a new paradigm is a totally new way of ...
Related Articles
  1. Patents Are Assets, So Learn How To ...
    Investing Basics

    Patents Are Assets, So Learn How To ...

  2. Can Business Evolve In A Green World?
    Entrepreneurship

    Can Business Evolve In A Green World?

  3. Which Is Better: Dominance Or Innovation?
    Active Trading

    Which Is Better: Dominance Or Innovation?

  4. 3 Secrets Of Successful Companies
    Investing

    3 Secrets Of Successful Companies

Hot Definitions
  1. Debit Spread

    Two options with different market prices that an investor trades on the same underlying security. The higher priced option ...
  2. Leading Indicator

    A measurable economic factor that changes before the economy starts to follow a particular pattern or trend. Leading indicators ...
  3. Wage-Price Spiral

    A macroeconomic theory to explain the cause-and-effect relationship between rising wages and rising prices, or inflation. ...
  4. Accelerated Depreciation

    Any method of depreciation used for accounting or income tax purposes that allows greater deductions in the earlier years ...
  5. Call Risk

    The risk, faced by a holder of a callable bond, that a bond issuer will take advantage of the callable bond feature and redeem ...
  6. Parity Price

    When the price of an asset is directly linked to another price. Examples of parity price are: 1. Convertibles - the price ...
Trading Center