Rethinking growth through creative disruption

SARAWAK Premier Datuk Patinggi Tan Sri Abang Johari Tun Abang Openg has carved for himself the image of a pragmatist with a passion for the concept of ‘creative destruction’.

During his recent visit to Sarawak, Malaysian Prime Minister Datuk Seri Anwar Ibrahim publicly recognised the visionary leadership of the Sarawak Premier, who is capable of engaging in creative destruction to dismantle the old and create new approaches to development and change.

Given this, Anwar has characterised Sarawak’s accomplishments under Abang Johari as surpassing those of many other states in the nation, particularly in the crucial fields of energy and electrical and electronics (E&E).

Dismantling antiquated industries

Unlike the vast majority of his predecessors in the post, Abang Johari has not sought to shield the economy of the state from the inescapable forces of change, but instead has opened the arms of Sarawak to the forces of change by systematically destroying the antiquated and low-value-added industries that have long dominated the economic map of the state.

In their place, the Premier is actively promoting industries that are rich in technological content, with the ability to create value in the future.

The traditional industries of small-scale timber processing, as well as the extraction of basic commodities, are being re-engineered or replaced with advanced manufacturing, digital industries, renewable energy, biotech, and other high-tech ventures, with the objective of re-positioning the state of Sarawak as an innovation hub.

Diversified economic system

Abang Johari’s approach points to a clear understanding of the reality that economic resiliency is not found by holding on to the past, but rather by continuing to dismantle the old and foster new knowledge-based business entities.

The end result is a thriving, more diversified economic system, designed to flourish in the global marketplace with the promise of growing wages and opportunities for the state’s workforce.

In other words, one can see the Premier’s strategy as a calculated risk-taking.

By dismantling the old economic scaffolding and simultaneously laying the foundations for high‑value, innovation‑centric enterprises, the Premier is not merely reacting to global shifts; he is actively reshaping the state’s growth trajectory, turning what might have been a period of disruption into an opportunity for lasting, inclusive prosperity.

What really sets Sarawak’s development apart from other states is the complementarity between its energy sector and E&E industry.

With the strategic combination of the abundance of clean energy with the forward-looking E&E policy framework, Sarawak has been able to take a few strides ahead of the rest of the other states in Malaysia.

Shaping future course

All things considered, it is a move that aims to seize new opportunities and develop new enablers and initiatives that shape the course for the future, measured in ways other than being dependent on past and present forces and variables.

As a result, the force of ‘creativity’ must step in and ‘demolish’ what are thought to be antiquated practices and systems that impede progress and development.

Therefore, ‘creative destruction’ must be at the forefront of agendas and sectors whenever it is deemed required.

Students of social anthropology as well as political economy will be able to understand the relevance of the phrase ‘creative destruction’ in the context of Sarawak transformation agenda.

The phrase ‘creative destruction’ entered the lexicon of economic theory through the work of Austrian‑born scholar Joseph A. Schumpeter.

Cycle of innovation

In his theory, Schumpeter contends that the dynamism of capitalism is not in the continuous and gradual build-up of wealth, but rather in the continuous cycle of innovation that, at the same time, generates new products, processes and markets, as well as destroys the old ones that are not able to compete in the market.

To Schumpeter, the entrepreneur is the key driver of this change process, as the entrepreneur brings in new technology or business models that make old companies or industries obsolete; thus, ‘purging’ the economy of inefficiency and redirecting resources to more efficient uses.

This simultaneous process of construction and destruction is what Schumpeter calls ‘creative destruction’ – a concept that underlies the growth process, albeit in the long run, while creating social frictions in the short run.

However, critics warn that unless the ‘creative’ part of this equation is matched with robust safety nets, education systems, and competition-friendly regulatory policies, the ‘destruction’ part risks leading to greater inequality and political backlash.

Joseph Schumpeter, father of ‘creative destruction’

In today’s policy debate, the theory of Schumpeter is an important framework in seeking an appropriate balance between nurturing entrepreneurial energy and offsetting social costs.

In other words, understanding that creative destruction is an essential feature of capitalism, policymakers can implement strategies that seek to maintain Schumpeter’s entrepreneurial energy and offset the social costs of creative destruction.

In this way, Schumpeter’s ‘creative destruction’ model continues to be an essential building block for understanding economic change, economic growth, and why constant change driven by innovation is both the promise and the problem of modern capitalism.

The notion of ‘creative destruction’ has turned out to be startlingly accurate in describing how technological breakthroughs reshape entire economies.

The power of innovation behind this acts as a disruptive force that tears down established players, reshapes the demand for labour, and compels governments to rethink regulation, taxation and social safety nets.

Beyond static solution

The challenge for policymakers, then, is to think beyond the static solution, one industry at a time; and to think of adaptive strategies to assure that the benefits of the new technology are spread as widely as possible, even as the old technology is destroyed.

To say the least, creative destruction is not just a passing fad, but a continuing reality in the evolution of the economy, requiring visionary entrepreneurship as well as visionary public policy.

The promise of such a dynamic renewal can only be achieved, however, if all participants in the growth process, namely industry sectors, research bodies and especially the public sector apparatus, understand the logic of such a process and respond appropriately.

This, in turn, requires policymakers to make the abstract concept of creative destruction into a set of incentives, regulatory flexibility and social safety nets that mitigate the dislocations for workers and communities in the short run.

It also requires the private sector actors to internalise the notion that creative destruction is a permanent aspect of a healthy economy, rather than a source of resistance.

In reality, however, it is a dialogue between innovators and bureaucrats that requires coordination in order for equilibrium to be achieved, as it is also important to assess the benefits as well as the social costs.

When the goals of governments and industries are aligned towards the disciplined rejuvenation that creative destruction requires, it is possible for them to cultivate an environment for entrepreneurs, while protecting the welfare of the broader populace.

* Toman Mamora is ‘Tokoh Media Sarawak 2022’, recipient of Shell Journalism Gold Award (1996) and AZAM Best Writer Gold Award (1998). A holder of PhD in Social Anthropology (Nottingham UK), this communication and research consultant remains true to his decades-long passion for critical writing as he seeks to gain insight into some untold stories of societal value.