Creative Destruction as Digital Colonization:

By Samson Williams Anthropologist-in-Residence, MilkyWayEconomy

TL;DR:

If you’re rich, adaptive, and mobile? It’s a golden engine. If you’re poor, static, or on the other side of the digital divide by design? It’s a wrecking ball.

Abstract: Creative destruction has long been hailed as the engine of capitalist progress. First defined by economist Joseph Schumpeter in the early 1940s, the concept describes how new innovations incessantly replace outdated structures in pursuit of efficiency and growth. But the elegant phrasing of Schumpeterian theory masks a brutal historical pattern: creative destruction has repeatedly served as a justification for imperialism, conquest, labor exploitation, institutional racism, and wealth consolidation under the guise of progress. In the age of artificial intelligence, this pattern not only continues, it accelerates. What we are witnessing today is not a technological revolution that benefits all, but a sophisticated form of digital colonialism. Unless the frameworks of economic participation are reimagined, AI may mark the endpoint of Creative Destruction and the beginning of algorithmic feudalism, aka Tech Feudalism.

A Theory Rooted in Conquest

Though codified in the mid-20th century, Creative Destruction was already in full effect during the early days of European imperialism. Colonial powers systematically dismantled indigenous systems (economic, social, and spiritual) and replaced them with racially codified, extractive models designed to enrich the metropoles. From the razing of Aztec temples to the destruction of India’s textile industry, to the current extraction of cobalt in the Congo today the logic was clear: eliminate local autonomy to create dependency on imported capital, goods, and governance.

This was not random violence. It was economic strategy. The colonizer's destruction was portrayed as necessary to bring about "civilization," and later, "development." The seeds of modern capitalism were fertilized in the ashes of pre-colonial systems of pillage, plunder, rape, murder and enslavement. By the time Schumpeter wrote his seminal work, the empire-building stage of global capitalism had simply morphed. The battlefield shifted from geographies to industries, and from military conquest to industrial domination.

Industrial Capitalism: Destruction Comes Home

In the 19th and early 20th centuries, the logic of creative destruction turned inward. Artisans and craftsmen in Europe and North America were displaced by mechanized manufacturing. Local communities were reoriented around railroad lines, steel mills, and extractive industries. Farmers were drawn into global commodity markets, subject to prices and shocks they could neither predict nor control.

What was lost was not just work, but entire ways of life. Yet economists and industrialists alike saw this as a "natural" and "necessary" evolution. Economic theory did not mourn what was systematically destroyed. It celebrated what replaced it. Schumpeter merely captured this transition in language that economists could institutionalize. But the underlying pattern was much older: growth through erasure, advancement through dislocation.

Globalization: Creative Destruction at Scale

The late 20th century ushered in a new frontier of Creative Destruction: globalization. Under the banners of free trade and economic liberalization, multinational corporations dismantled local industries in the Global South while optimizing labor costs across borders. Trade agreements such as NAFTA devastated U.S. manufacturing towns while turning Mexico into a maquiladora zone.

Institutions like the IMF and World Bank imposed structural adjustment programs that hollowed out state capacity in Africa, Asia, and Latin America. Public goods were privatized. Domestic industries were undermined by cheap imports. Labor became precarious. Communities became dependent. And yet, this too was framed as progress. Markets were opened. Capital flowed. Efficiency was maximized. But progress for whom?

Detroit: Anatomy of Abandonment

Perhaps no American city better illustrates the domestic consequences of creative destruction than Detroit. Once the jewel of American industrial power, Detroit’s population peaked in 1950 at nearly 1.85 million. As automation, globalization, and deindustrialization reshaped the automotive sector, the city hemorrhaged both jobs and people dropping from a population of 1.6M in 1960 to just over 639k by 2020.

Factories closed. Tax bases collapsed. White flight gutted the inner city. And in 2013, Detroit became the largest U.S. city to file for bankruptcy. Detroit wasn’t destroyed by accident...it was a deliberate outcome of shifting capital interests. Innovation moved elsewhere. Labor was offshored. Communities were left behind. And today, with AI set to replace not just factory workers but white-collar professionals, Detroit’s decline may become a cautionary tale for cities that once believed they were immune.

Other Cities on the Precipice

Several American cities now stand at similar crossroads....economically hollowed out, politically fragmented, and socially fraying under the pressure of AI and automation:

• St. Louis, Missouri: Lost over 60% of its population since 1950. Once a hub of aerospace and manufacturing, the city now struggles with urban decay and underinvestment.
• Cleveland, Ohio: Down from nearly 915k in 1950 to under 370k in 2020. Hit hard by deindustrialization and struggling to attract tech-sector reinvestment.
• Baltimore, Maryland: Population decline accelerated after the collapse of shipping and steel. Now contends with automation in logistics and port operations.
• Youngstown, Ohio: A textbook case of Rust Belt collapse. Population fell from 170k in 1930 to under 60k in 2020. AI and robotics are expected to impact remaining service and healthcare sectors.

Cities heavily reliant on transportation, logistics, customer service, and even medical billing are especially vulnerable. As AI absorbs these functions, the economic rationale for many mid-tier cities collapses unless they reinvent themselves.

Artificial Intelligence: The Next Conquest

AI is not the next chapter in Creative Destruction. It is the climax. Unlike past waves of disruption, AI does not simply displace labor. It renders entire professions (and by extension, populations) obsolete. It automates decision-making, creativity, logistics, and even emotional labor. It erases the need for many roles before society has built alternatives.

The labor force cannot retrain quickly enough. Educational institutions cannot adapt fast enough. Political systems cannot redistribute rapidly enough. And so we find ourselves facing an unprecedented scenario: an economic system predicated on labor, fueled by a technology that eliminates it. In this light, AI is not creative destruction. It is digital colonization. A few entities control the servers, the data, the algorithms, and the means of production. The rest...individuals, small businesses, even governments...must interface with these systems on terms they do not set.

The AI revolution, far from democratizing opportunity, risks entrenching inequality. Just as colonial subjects once worked for the benefit of imperial cores, today’s digital citizens feed the algorithms that will soon outcompete them.

Toward Creative Restoration

The response to this trajectory cannot be nostalgic Luddism or techno-utopianism. It must be systemic and intentional. We must shift from Creative Destruction to Creative Restoration.

This means:

• Investing in public AI infrastructure, not just private monopolies.
• Designing equity-sharing models so citizens benefit from the value their data and labor help generate.
• Implementing universal access to retraining, ownership, and dividends derived from technological productivity.

Restoration is not about reversing progress. It’s about ensuring that progress is broadly shared, democratically governed, and socially sustainable.

If we fail to do this, creative destruction will have fulfilled its arc, not as a cycle of rebirth, but as a terminal phase shift into a world where value is created without people, and power is wielded without accountability.