The Stress of Innovation and the Need for Educational Change According to Schumpeter

People must continually update their skills or a large percentage of society will find themselves unemployed. Schumpeter believed that as innovation increase people's lives would be impacted by creating stresses that test our skills and abilities. Some will move to higher standards of living and some will lose their jobs and opportunities. He called these unpleasant actions vicissitudes as they inherently disrupted society and create chaos that eventually leads to a better life but can be a painful transition experience.

Sometimes people will be alienated and pushed to the side while at other times they will move to the center and be more connected.  Those who do not have the necessary skills to compete will feel angry and upset as their income and opportunities dwindle. They will begin to question the legitimacy of some institutions and demand change.

Schumpeter believed that government should encourage entrepreneurial activity to enhance their economies and arrest decline. While change occurs government also has the responsibility to push for greater education and training to meet market needs.  Without continuous change there is a slow decline in society. He so eloquently expresses the decline of people as....

"A] process of degeneration, of degradation of large circles (of society) accompanies the upward
movement … Large circles see their economic basis being pulled away. This does not happen
abruptly, but gradually. Through generations, the people affected live a deprived existence full of
hopelessness. Their moral and intellectual powers dwindle, the more so the more the economic
atmosphere they find themselves in is darkening. (Schumpeter, 1912 [2006], p. 503)"

As the pace of change increases so will the need to retrain and educated people. Global competitive skills will be sought through reformation of the higher education system and public school systems. Long-time educational institutions will need to adjust to meet market demands and needs or otherwise the nation will loose competitiveness and large swaths of society that doesn't have access to higher levels of education will be forced into poverty.

A system that continuously changes requires constant innovation based on opportunities full of individual choices and actions. Entrepreneurs will seek to push and adjust society and will succeed in materializing change when they challenge, establish, and defend their market power (Schumpeter, 1942, p. 105). The perpetual need to personal mastery of the market leads to constant risk taking and turmoil.

In the "Shumpeterian" approach it is necessary to help people catch up to the market by encouraging them to find new ways of competing in the market. While entrepreneurs will start new businesses it is the people and their skills that are needed to fill available positions. Markets that have high growth potential also have a skilled and educated work population that can take positions. Revamping our educational system from primary school all the way through college will help ensure that the classes most likely to be impacted by change can adjust to new market realities. Adults will need access to physical and online education in order to ensure continually training.


Schumpeter, J. A. 1912 [2006]. Theorie der Wirtschaftlichen Entwicklung, facsimile of the 1st edn,
Berlin, Duncker & Humblot

Schumpeter, J. A. 1942 [1976]. Capitalism, Socialism and Democracy, London, Routledge

Schubert, C. (2013). How to evaluate creative destruction: reconstructing Schumpeter's approach.

Cambridge Journal of Economics, 37 (2)