When Innovation Outpaces Ethics

From Creative Destruction to Destructive Innovation

Joseph Schumpeter’s concept of creative destruction described capitalism as a dynamic system in which new technologies dismantle existing sectors, functions, and jobs, while simultaneously creating entirely new ones. This was a recurring structural feature of capitalism. Progress came through the replacement of the old with the new.

Clayton Christensen’s theory of disruptive innovation narrowed the focus. Rather than the grand-scale renewal of economic systems, it examined how new entrants could displace market leaders with cheaper, simpler, or more accessible solutions often before incumbents had time to adapt. While disruption could open opportunities, it frequently destroyed existing industries without immediately creating equivalent value in new sectors.

AI straddles both frameworks. In line with what Schumpeter explained, AI eliminates outdated processes and gives rise to entirely new sectors such as AI-driven supply chain management, autonomous systems, and data-centric services. On the other hand, in accordance with Christensen’s theory, AI undercuts existing professions, such as content creation, translation, customer service, before social and regulatory systems have adapted, creating a destructive lag between the fall of the old and the rise of the new.

We should add the concept of creative synthesis to the discussion. Creative synthesis is the process by which technological change is combined with social, cultural, and institutional adaptation, so that the destruction of the old does not leave a vacuum. Without it, AI risks becoming more destructive than creative.

While the phrase creative synthesis itself isn’t widely established in innovation theory, the underlying idea appears in a number of works. The idea of integrating technological innovation with societal adaptation has echoes in Polanyi’s argument in 1944 for re-embedding markets in society and Drucker’s emphasis in 1985 on responsible innovation.

Neoclassical Economics and the Critique of Humanist Ideas

In the late 19th and early 20th centuries, the world witnessed the rise of neoclassical economics. It became mainstream through academic dominance, mathematical formalization, and political alignment.

Universities and journals adopted neoclassical models as the scientific standard for economics. Mathematics was extensively used to model individuals as rational utility-maximizers and markets as self-correcting systems. Neoclassical economics’ emphasis on free markets, minimal government intervention, and efficiency resonated with industrial and financial elites.

Through the market mechanism, the framework described above imposed a specific vision of social organization. Human beings were redefined primarily as consumers and producers. Social value became measurable in prices and profits. Non-market activities such as care, education, environmental protection were treated as “externalities” rather than integral parts of the economy.

In defining itself as a value-neutral, “positive” science, neoclassical economics systematically excluded ethical reasoning from its core framework. This separation from moral philosophy, once integral to political economy, left it ill-equipped to address questions of justice, fairness, and human well-being beyond market metrics. In this respect, neoclassical economics belongs to the ethically indifferent tradition within Enlightenment thought. One that privileges instrumental rationality and market efficiency over moral considerations.

Under neoclassical influence, freedom became synonymous with market choice rather than political agency or social equality. This shift allowed the coexistence of market “freedom” with authoritarian workplace structures, the normalization of inequality as a by-product of efficient markets, and the shrinking of democratic decision-making as more domains were placed under the control of markets and technocrats rather than citizens.

What began, in the Enlightenment and in Spinoza’s philosophy, as a vision of freedom rooted in rational self-determination and collective governance, was gradually hollowed out under the influence of neoclassical economics. Market freedom, celebrated as consumer sovereignty, came to replace the political and ethical freedom of citizens, eroding democracy’s substance. Ethics was displaced by the pursuit of efficiency and growth.

The Enlightenment’s humanism, grounded in dignity, reason, and universal rights, has come under sustained attack. Postmodern critique questions the universality of reason, exposing its complicity with colonialism and exclusion. Market-driven critique redefines human potential in terms of productivity, efficiency, and competitiveness. Technocratic critique replaces political debate with algorithmic optimization, treating governance as a technical problem rather than a moral and social one.

While the fundamentals of humanism have been criticized, it is important to recognize that Enlightenment thought was not monolithic. Some philosophers explicitly grounded the expansion of scientific knowledge in ethical principles, seeing moral responsibility as inseparable from reason. Immanuel Kant insisted that human beings must always be treated as ends in themselves, never merely as means, thereby placing ethics at the core of his vision of freedom. Baruch Spinoza, in his Ethics, linked rational freedom to living in accordance with the common good, arguing that the flourishing of individuals depends on the flourishing of the collective.

By distinguishing between ethically grounded and ethically indifferent traditions within Enlightenment humanism, we can better understand both the achievements and the failings of its legacy,  and see more clearly how the latter created fertile ground for neoclassical economics’ market-centered rationality to displace ethics altogether.

The historian Jonathan Israel has provided one of the most influential frameworks for understanding the internal diversity of Enlightenment philosophy. In his multi-volume study (Radical Enlightenment, 2001; Enlightenment Contested, 2006; Democratic Enlightenment, 2011), Israel distinguishes between a Radical Enlightenment, grounded in universal equality, secularism, and the inseparability of reason from moral responsibility, and a Moderate Enlightenment, which often sought compromise with religious authority, aristocratic hierarchy, and imperial power.

For Israel, figures such as Spinoza, Diderot, and Condorcet exemplified the radical tradition, viewing scientific knowledge and human development as inseparable from ethical principles and the common good. By contrast, the moderate tradition, represented by thinkers such as John Locke, Voltaire, Montesquieu, David Hume, and, in certain respects, Jean-Jacques Rousseau,  advanced reason and reform but accepted monarchy, aristocratic privilege, and religious authority as compatible with progress. While contributing to the spread of science and certain liberties, these thinkers were less committed to universal equality and secular ethics, embedding an instrumental strand within Enlightenment thought that could more easily be detached from moral considerations. This distinction helps clarify how Enlightenment ideals could simultaneously serve as a foundation for emancipatory projects and as a precedent for instrumental, market-centered rationalities that would later find expression in neoclassical economics.

The dominance of neoclassical economics and the erosion of humanism are connected. Both prioritize measurable market outputs over the unquantifiable dimensions of human life. Both have contributed to a narrowing of what counts as valuable, leaving non-market values and thus many human needs, politically and economically invisible.

The Innovation Imperative

Today, the survival of a company in the market depends on its capacity for relentless innovation. Product life cycles are shorter than ever. Competitive pressure is intensified by globalization and AI-driven automation. A single technological leap by a competitor can rapidly eliminate entire business models.

In this environment, innovation becomes an obligation, not an option. This constant pressure increases the risk that destructive innovation will outpace the ability of societies to adapt. When institutional and cultural frameworks cannot keep up, the destruction phase becomes longer and deeper, and the creative phase is delayed.

If AI is simultaneously a Schumpeterian engine of renewal and a Christensen-style disruptor, it forces a key question. Will AI’s long-term impact be primarily destructive, or can it drive a creative synthesis that renews both economy and society?

The answer depends on breaking the intellectual monopoly of neoclassical economics and restoring a humanist foundation to policymaking. Freedom must once again mean collective capacity to shape the future, not just individual capacity to choose between products.

Without this shift, AI risks amplifying inequality, undermining democracy, and reducing human beings to economic units in an innovation race they did not choose.

While neoclassical economics claims to uphold the tenets of freedom and democracy, it has in practice eroded democracy by aligning itself with the ethically indifferent strands of Enlightenment thought. The rise of tyrants under such conditions is no surprise, as the erosion of democratic norms creates fertile ground for authoritarianism.