The Shein app on the App Store is reflected in the Temu logo in Washington, D.C., on 23 February 2023. (Photo: Stefani Reynolds / AFP) 
On Monday, the Royal Swedish Academy of Sciences awarded the Nobel Prize for Economics to Joel Mokyr, Philippe Aghion and Peter Howitt.
The rationale for the decision was that they had investigated what really leads to economic growth. Or, to put it in a better way, what makes our lives better now than they would have been 500 years ago.
It is a fundamental human question: What is it that drives an economy and thus makes us able to eat better food, fight disease and live so much longer?
In short, the idea of “creative destruction” is that when a new innovation or technique is invented, one group of people (or a company) will benefit from it, while another will lose customers and eventually go out of business.
The obvious example is Uber. Before it came to South Africa, finding a metered taxi outside an airport or a train station was difficult, and the service was often unsafe and patchy.
/file/dailymaverick/wp-content/uploads/2025/10/ED_199526.jpg "A passenger uses Uber in Cape Town. (Photo: Gallo Images / Misha Jordaan)")
Uber created a whole new service, and in the end, metered taxis began to go out of business.
As the academy explained it, “In different ways, the laureates show how creative destruction creates conflicts that must be managed in a constructive manner. Otherwise, innovation will be blocked by established companies and interest groups that risk being put at a disadvantage.”
From Uber to electricity
To look at our economy may well be to ask the question: are we managing these conflicts properly, and if we are not, is innovation being blocked by established companies and interest groups?
For example, Uber drivers are almost routinely prevented by minibus and metered taxi drivers from picking up customers in certain places. That means that those potential customers are denied the benefits of creative destruction.
The arguments we have seen in our electricity sector are all about this.
The idea of a “Just Transition” in which people who currently work in coal mines are trained to work in the solar industry is an attempt to manage the conflicts in a “constructive manner”.
But, because the government essentially lost control of that transition, wealthier people and companies just went ahead and installed solar panels, thus reducing the role that coal and Eskom play in their lives.
To look at our economic stagnation, the fact that our economy has not grown, and thus our people have not begun to live longer and eat better food, is to look for what might be blocking this necessary innovation.
And it is not just the minibus taxi industry.
It can sometimes look as if politicians in general, and government in particular, are almost trying to stop innovation.
For any innovation to succeed, it requires investment to scale up the resulting business.
The political disruption that we see, the sheer ineptitude, the fact that Joburg is in the state it is in, must all encourage people to invest elsewhere.
And of course, the fact that violent crime is at such a high level means that people with new ideas might feel they have to pay off violent extortionists just to run their businesses.
It is also virtually impossible to predict what government policy will look like five years from now. As new industries take time to scale up, so other places look much more attractive to those who come with new ideas.
And government sometimes seems determined to prevent new products and services from gaining ground.
Obstruction to innovation
On Tuesday, both DTIC Minister Parks Tau and the National Consumer Commission confirmed that the commission would carry out a scoping exercise to investigate whether it should have a full-scale investigation into e-commerce.
/file/dailymaverick/wp-content/uploads/2024/07/ED_381165-1.jpg "Trade, Industry and Competition Minister Parks Tau. (Photo: Gallo Images / Luba Lesolle)")
The real reason for this is obviously that Temu and Shein are gaining ground in our society, and Temu is about to open warehouses here.
But the competition has confirmed that, in fact, it has not received complaints about Temu. Instead, it says it is basing this potential investigation on social media activity. When it was
style="font-weight: 400;">suggested to its spokesperson that social media content cannot always be believed, she pushed back, saying the commission was happy to base its investigations on what people say on social media.
This also follows a comprehensive Online Intermediation Platforms Market Inquiry report in 2023 by the Competition Commission.
Now the National Consumer Commission wants to do its own investigation just two years later, when it hasn’t received any complaints.
Of course, we do see innovation in our society.
Zulzi founder Donald Valoyi created his delivery business from just two rooms in Fourways to the point where his software was bought by Shoprite as the basis for its Sixty60 delivery service.
Uber is obviously reliable in suburbs and middle-class areas.
This suggests that only the richer people in our society might benefit from this creative destruction. The conditions to allow this to happen are absent from so many other parts of our society.
There is, unfortunately, another more fundamental reason why there is a lack of innovation that can scale up here.
In many other economies, if there is this “destruction”, the people who lose their jobs can find other incomes. And even if they can’t, other people in their families or communities benefit from economic innovation.
One family might produce first coal miners, then telesales operators and finally bankers and lawyers.
As our economy has stagnated, people with jobs, those who are inside the economy, are forced to fight harder to keep their positions. Their actions are entirely rational; they are often the sole breadwinners for a growing group of people.
This is why minibus taxi drivers are prepared to use such violence. They stand to lose so much if they are deprived of just a small piece of their business.
The fact that our unemployment is now so high might well have created what amounts to a wall against innovation.
Those who have jobs will do anything to keep them, thus preventing the innovation and the “creative destruction” that we need.
And in the process, they form a constituency that can lead to politicians acting in their interests, thus setting up more roadblocks to innovation.
Winners and losers
While the Royal Swedish Academy of Sciences might have many reasons for its decision (last year’s Nobel prize winners were also economists who studied why some economies develop and some don’t, including the authors of Why Nations Fail), it might also be sounding a slight warning for the future.
Currently, the focus of the investment world is on Artificial Intelligence. The US and China appear to be almost locked in a fight to win dominance in this field.
But this is a good example of a technology that creates a conflict that may not easily be managed constructively.
If it appears that AI will enrich only a small minority while the vast majority will be left without jobs, there will be huge social tensions.
These might well be felt first in countries where the adoption of AI happens first. But that unease would surely spread.
The risk, of course, is that if this innovation is held back, the global economy could stagnate.
The idea of “creative destruction” can be inherently contentious. It creates winners and losers.
And while it is correct for any government to help those who lose out, it should not stand in the way of innovation.
Unfortunately, the perception that our society prevents innovation might be one important reason why our economy continues to stagnate. DM