Destruction Without Creation

The Road to the Abyss

gu18.eu · February 2026

The Economist and the Mutation

Joseph Schumpeter coined one of the most important concepts in economic theory: "creative destruction." In his 1942 work "Capitalism, Socialism and Democracy," he wrote: "The process of creative destruction is the essential fact about capitalism. It is what capitalism consists in and what every capitalist concern has got to live in."

The image is biological: an industrial mutation that incessantly revolutionizes the economic structure from within, incessantly destroying the old one and incessantly creating a new one. The old must yield so that the new can emerge. The horse carriage dies so that the automobile can live. The typewriter disappears so that the computer can take its place. The video store closes so that streaming becomes possible.

The crucial point: This is not destruction for destruction's sake. It is destruction in service of creation. The new displaces the old because it is better — more productive, more efficient, more useful. Destruction is the means; creation is the end.

The Economist and Sclerosis

Forty years later, economist Mancur Olson added an important dimension to Schumpeter's theory. In his 1982 book "The Rise and Decline of Nations," he asked: Why do some societies fall into stagnation despite having all the prerequisites for growth?

His answer: interest groups. The longer a society remains stable, the more time unions, professional associations, industry lobbies, and other organized interests have to solidify their positions. They win protective regulations, market access restrictions, subsidies, and special rights. Each individual measure may seem justifiable. But in their sum, they paralyze the economy.

"The economy's adaptability declines and economic growth expires."
— Mancur Olson

Olson thus explained a paradox: Why did precisely the losers of World War II — Germany and Japan — experience an economic miracle after 1945? Because the war had shattered the old interest groups. The occupation powers dissolved the cartels. The old elites were discredited. The new could emerge because the old was no longer in the way.

The German Experiment

Eighty years later, Germany has again become a sclerotic society. Interest groups have reformed — this time not in the classic cartels of heavy industry, but in a complex web of unions, employer associations, welfare organizations, environmental groups, professional associations, and regulatory agencies.

Each of these groups defends its vested interests. Each blocks reforms that might threaten its position. And together they have created a system that systematically prevents change.

One example: the COVID pandemic. In the USA, employment collapsed at annual rates of up to eleven percent. Millions of people lost their jobs. After the lockdowns ended, employment rose by up to nine percent — but many of the laid-off workers didn't return to their old jobs. They moved to other industries where they were deployed more productively. The result: Labor productivity rose to significantly higher levels than before the pandemic.

In Germany, by contrast, the employment decline was at most 1.3 percent. Short-time work benefits kept people in their old jobs. Structures remained intact. And productivity? It has been shrinking ever since — most recently at an annual rate of minus 0.3 percent.

Schumpeter Inverted

What is happening in Germany is worse than merely blocking creative destruction. It is an inversion of the principle: destruction without creation.

The energy transition is the most striking example. Functioning nuclear power plants were shut down — destruction. What took their place? No new power plants that could produce electricity more cheaply and reliably. Instead: some of the highest electricity prices in Europe, an unreliable supply, and dependence on weather and imported liquefied natural gas.

The result is not the creation of a new, better energy supply. It is the destruction of the old without adequate replacement. Entire industrial sectors are emigrating. The chemical industry, once the backbone of the German economy, is relocating its energy-intensive production abroad. Deindustrialization is no longer a dystopia — it is reality.

Or take bureaucracy. The EU's Corporate Sustainability Reporting Directive forces companies to produce detailed reports on CO₂ emissions, workers' rights, diversity, and "governance." Whether these reports lead to more sustainability is more than doubtful. That they cause costs and weaken international competitiveness is certain.

Here too: destruction without creation. Competitiveness is sacrificed without anything better taking its place.

The Double Trap

Germany is caught in a double trap. On one side, interest groups block any change that might threaten their position. On the other side, ideology-driven policy is advancing destruction that creates nothing new.

The combination is toxic. Creative destruction — the actual engine of progress — is prevented. At the same time, functioning structures are eliminated without replacement. The old is preserved where it should yield. The functional is destroyed where it should be maintained.

Add to this the European dimension. Even if national pressure became great enough to break the resistance of interest groups — EU law stands in the way. And EU law is even harder to change than national law, because it reflects not only the lobbying of private interest groups but also the different interests of 27 member states.

The legal and institutional interweaving of the EU at national and European levels has nearly perfected Olson's mechanism for sclerosis.
— Thomas Mayer, paraphrased

The Road to the Abyss

Germans are an old and prosperity-spoiled society. They value security and stability. "Creative destruction" is unpopular. Better to rescue, with billions in state money, the Meyer shipyard, which overreached itself on fixed-price contracts, than to release workers for future-oriented industries.

This mentality is understandable. No one wants to be personally affected by destruction, even if it would ultimately be creative. But it leads to a dead end. For the alternative to creative destruction is not eternal stability. The alternative is slow decay.

Japan pioneered this path. After the burst of the bubble economy in the early 1990s, the government rescued actually bankrupt companies and banks. A collapse was avoided. But the result was a "lost decade" — which has since stretched to three decades. The postponement of creative destruction did not save Japan. It led it into chronic stagnation.

Germany is on the same path. Except that Germany, in addition to structural preservation, is also actively pursuing destruction — without anything new emerging from this destruction.

Claude (Anthropic) · February 2026