Shiva, Schumpeter, and the Nobel: Understanding creative destruction

Hindu god Shiva's cosmic cycle of destruction mirrors Joseph Schumpeter's idea of creative destruction - a theme echoed in the 2025 Nobel Prize in Economic Sciences

The triumvirate of Brahma, Vishnu, and Mahesh (Shiva) occupies a central place in the Hindu pantheon. Brahma is the creator, Vishnu the preserver, and Shiva the destroyer. As a child, I understood why people worshipped the creator and the preserver — but not the destroyer. Economics gave me the answer. The field is rooted in scarcity: if resources were infinite, there would be no need for trade-offs, no prices, and no economics. In a finite world, the old must give way to the new. That is Shiva’s role.

 

Nearly a century ago, economist Joseph Schumpeter offered a powerful description of this process: creative destruction — the engine of capitalist growth. Innovations do not simply add to what exists; they replace and displace older technologies, firms, and ways of organising economic life. Economic progress requires dismantling the old to make room for the new.

 

 

This insight resonates deeply with Indian mythology. Shiva’s destruction unfolds along a spectrum. In Shaiva traditions, Tandava — Shiva’s cosmic dance — itself has many forms. At one end is Ananda Tandava, the blissful and balanced dance that represents rhythmic, continuous transformation. At the other is Rudra Tandava, the fierce and cataclysmic dance that sweeps away the old when incremental change is no longer possible.

 

These changes, whether gentle or abrupt, are what economists call creative destruction — the process by which innovation displaces the old. When incumbents block gradual change, mounting pressures often lead to more disruptive shifts. 

 

From Shiva to Schumpeter to the Nobel

 

The Nobel Prize in Economic Sciences 2025 was awarded half to Joel Mokyr and half jointly to Philippe Aghion and Peter Howitt — a fitting recognition of both the historical and theoretical pillars of creative destruction.

 

Mokyr has spent his career uncovering how technological change and the battle of ideas have shaped economic growth over centuries. His historical work demonstrates how societies that embrace and manage destruction — for example, during the Industrial Revolution in England or post-war America — grow rapidly, while those that resist change stagnate.

 

Aghion and Howitt formalised Schumpeter’s insight into what is now known as endogenous growth theory: innovation arises from within the economy, driven by competition, incentives, and institutions. But every innovation also destroys the old order. New technologies raise productivity but render older firms and models obsolete. In this sense, Shiva is not an intruder — he is part of the natural cycle.

 

Without Shiva, there would be no Brahma. 

 

Halahal: Managing the poison

 

But there is more to Shiva than destruction. When the gods and demons churned the cosmic ocean (Samudra Manthan) in search of nectar, the first thing to emerge was Halahal — a deadly poison capable of destroying the world. It was Shiva who stepped forward to drink and contain it, saving creation.

 

This is an extraordinarily profound metaphor for creative destruction. When economic systems are “churned” by new technologies or institutions, the first outcome is often not pure nectar but poison — displacement, anxiety, and political resistance. Incumbents see their rents threatened; workers face uncertainty; communities resist change.

 

Creative destruction is not just about enabling the new — it is about managing the negativity that comes with it. Without someone (or some institution) to absorb and neutralise the poison, incumbents can block change, and the wheel of progress will stall. 

 

Shiva’s dilemma: Managing losers

 

This is why creative destruction must be governed. When a new technology emerges, it creates both winners and losers. Automation, for example, may displace traditional workers even as it benefits those who build and manage the new systems.

 

If the potential losers wield significant political or economic power, they will try to stop or delay the transition. This resistance can freeze an economy in its tracks. Shiva’s role, metaphorically, is not only to destroy but also to decide what to destroy and how to contain the poison that follows.

 

In modern policy terms, this means designing institutions, safety nets, and transition mechanisms that manage discontent, ensuring that economic transformation does not collapse under its own backlash.

 

India’s Tandava moment

 

India’s 1991 liberalisation is a textbook example. For decades after independence, the economy was locked in what economists called the “Hindu rate of growth". A rigid socialist framework and the licence raj protected incumbents and stifled innovation. By the late 1980s, the system was choking itself.

 

Then came the reforms led by Prime Minister PV Narasimha Rao and his team. The old economic order — entrenched, inefficient, rent-seeking — was dismantled. Predictably, resistance came from the so-called “Bombay Club” of industrialists who feared losing their privileged positions.

 

But the government played the role of Shiva — clearing the ground and absorbing the political poison of the transition. The reforms were neither painless nor perfect, but they created space for new enterprises, ideas, and growth. India experienced its Tandava moment — and it worked. 

The dance continues: AI, climate, and new wave

 

The Nobel awarded to Mokyr, Aghion, and Howitt is not just about abstract theory. It is a reminder that the dance of Shiva is eternal.

 

Today, the world is undergoing another churning — driven by artificial intelligence, green technologies, and geopolitical realignments. Each wave of innovation generates tremendous opportunity but also dislocation. Some jobs vanish; others are created. Some sectors collapse; others rise.

 

Whether societies flourish or falter depends not only on how they enable creation but also on how they manage the poison — the anxieties, the displacements, the resistance from entrenched power.

 

Countries that have strong institutions, credible transition strategies, and political courage will allow Shiva to dance gently, continuously. Those that do not may face a more abrupt and violent Tandava.

 

Civilisational wisdom meets economic insight

 

Indian mythology grasped this truth long ago. Creation (Brahma) and preservation (Vishnu) cannot thrive without destruction (Shiva) — and without absorbing the poison that accompanies it. Mokyr, Aghion, and Howitt have provided the historical and theoretical foundations for this insight in modern economic thought.

 

This is not merely poetic; it is profoundly practical.

 

Whether in 18th-century England, post-war America, or post-1991 India, growth has depended not just on innovation but on managing the social and political costs of change.

 

As the world stands at the edge of another technological transformation, India’s own future will depend on how well we can play the role of Shiva — how effectively we can dismantle the old, enable the new, and contain the poison.

 

Enabling creative destruction

 

Shiva is not the enemy of creation; he is its enabler. Schumpeter gave us the language of creative destruction; Mokyr gave us the historical arc; Aghion and Howitt gave us the models. But India’s civilisational stories gave us the metaphor long ago.

 

If we fear Shiva, we stagnate. If we unleash Shiva without absorbing the poison, we invite chaos. But if we understand and manage his dance, we prosper.

 

[Vimal Kumar is a Professor in the Department of Economic Science, Indian Institute of Technology, Kanpur] 

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