Will AI Generate a New Growth Wave of Creative Destruction? | Herman Mark Schwartz

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Dec 9, 2024

Herman Mark Schwartz, a Politics professor at the University of Virginia and expert in economic development, joins for an insightful discussion. They delve into AI's potential to ignite a new wave of creative destruction rivaling past innovations. Schwartz outlines scenarios for future growth: an extension of current trends, a transformative AI-driven paradigm, or facing crises of resource shortages and geopolitical strife. The conversation also touches on the ethical implications of technology and governance in navigating these economic shifts.

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INSIGHT

Technology's Ethical Neutrality

New technologies are ethically neutral and can be implemented in various ways, impacting businesses and society.
Control over implementation and the prevailing social framework are crucial.

INSIGHT

Current Growth Wave

The current growth wave, starting in the late 70s, is based on information and communication technology (ICT) and biotech 1.0.
This wave leverages cheaper resources to overcome limitations of the previous wave.

INSIGHT

End of Growth Waves

Growth waves end due to internal factors like resource exhaustion and social unrest, not primarily regulatory problems.
The success of a growth wave can lead to its downfall by depleting cheap resources and breaking social compromises.

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In Episode 393 of Hidden Forces, Demetri Kofinas speaks with Herman Mark Schwartz, a professor in the Politics department of the University of Virginia and the author of three books on economic development, globalization, and the geopolitics of the subprime mortgage crisis.

Demetri and Mark discuss an article that he recently co-authored in American Affairs about AI’s potential to create a new growth wave of creative destruction that could rival or surpass those of previous innovation cycles, with enormous implications for business, society, and the role of government in the economy. They discuss what these so-called “Schumpeterian” growth waves typically look like, how they create complex interactions across all facets of the economy, and how they ultimately exhaust themselves, making room for the birth of a new innovation cycle.

In the second hour, Mark and Demetri apply this framework to the growth wave that we have been living through for more or less the last 50 years and which now appears to be in the late stages of endogenous decay. They examine three scenarios for what might come next. The first is an extension of the current wave, the second is a new paradigm driven by AI as the key general-purpose technology, and the third is neither an extension of the current wave nor a transition to a new paradigm, but rather a series of crises characterized by commodity shortages, energy insecurity, political polarization, and global conflict.

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Episode Recorded on 12/02/2024