Joseph Schumpeter called creative destruction. They
replace the old with the new. New sectors attract resources
away from old ones. New firms take business away from
established ones. New technologies make existing skills
and machines obsolete. The process of economic growth
and the inclusive institutions upon which it is based create
losers as well as winners in the political arena and in the
economic marketplace. Fear of creative destruction is
often at the root of the opposition to inclusive economic and
political institutions.
European history provides a vivid example of the
consequences of creative destruction. On the eve of the
Industrial Revolution in the eighteenth century, the
governments of most European countries were controlled
by aristocracies and traditional elites, whose major source
of income was from landh