Please bear with me as I know little about general Economics, and I'm sure I am massively oversimplifying what I am trying to describe.

I'm looking for a term to describe what happens when an economy starts from a new place with sufficient resources, leading to rapid growth.

I feel like I notice a pattern when I learn about large economic changes:

  1. New place is discovered or old place is destroyed
  2. Things are built/rebuilt, government changes, technology is applied to resources
  3. New place overtakes all of the old, prosperous, stable places around it

I think some factors might be:

  • Every country fights political, economic, cultural, and regulatory inertia even though it may be relatively advanced or well-off.
  • When forced to start over or start fresh, people must consider each new piece of the system as it is created intentionally, instead of following or fighting what is already in place.
  • The rules and policies of a lasting economy were created long ago and may no longer match with the current state of technology, leading to stagnancy. Whereas after a large change the new rules can be made to fit the times.

Some examples I can think of are:

  • After World War 2, USA installed democracy in Japan, dismantled monopolies, and built schools. Japan started over from very little, worked hard, and their economy exploded.

  • Europe brought technology to the vast natural resources of North America, made a new government, and well, here we are.

  • The city of Seattle was completely destroyed in a fire. So they fixed their lasting sewer problem, made the roads wider and properly irrigated, built everything sturdy and fire-resistant, and the economy boomed.

  • Recent examples might be Singapore, Hong Kong, Shenzhen, Songdo.

Is there a term for this or common way to describe it?


1 Answer 1


With a bit of humor, you could use the Schumpeterian term "creative destruction" -the humor relates to the fact that Schumpeter used the term to describe an inherent structural feature of capitalism, not historical/natural accidents/disasters.

Apart from that tongue-in-cheek proposal, I am not aware of a compact term to express what you describe. A common way could be a "vintage theory of capital" approach, where it is recognized that "old and new" capital coexists with different levels of technology embodied in it, and so in a sense "averaging" the actual technological/efficiency level used in the economy. Then what you describe amounts to an abrupt loss of "old" capital which may lower the output level but creates a positive discontinuity in the actual average technology level used in the economy, creating abrupt and higer growth rates.

You can broaden the concept of capital to also include "human capital" and maybe also "institutional capital" (and so "technology" will then refer also to "knowhow/experience" and "transactional technology" as well).

  • $\begingroup$ Thanks! From the second link, "[capitalism] must ceaselessly devalue existing wealth...in order to clear the ground for the creation of new wealth." is great. Just I was looking for the phenomena, not the assertion. From you: "[The] abrupt loss of "old" capital which may lower the output level but creates a positive discontinuity in the actual average technology level used in the economy, creating abrupt and higher growth rates." would be the perfect dictionary definition for whatever term it is I'm trying to invent :D $\endgroup$ Commented Jan 20, 2017 at 4:05

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