The Frontiers of Management. Peter F. Drucker
A: Oh, no, no. The days of the welfare state are over, but we are not going to abolish it. We have to find its limits. What are the limits? At what point does welfare do damage? This is the real question, and it's brought up by the success of the welfare state. The problems of success, I think, are the basic issues ahead of us, and the only thing I can tell you is that they don't fit the political alignments of the nineteenth and early twentieth centuries. They do not fit liberal and conservative and socialist. The traditional parties make absolutely no sense whatever to anybody of age thirty. And yet, what else is there?
Q: Is Ronald Reagan's administration promoting or inhibiting this entrepreneurial society of yours?
A: It's a very interesting administration: totally schizophrenic. When you look at its deeds, it hasn't done one darn thing Mr. Carter wouldn't have done. And probably he wouldn't have done it any worse either, or any better. The words, however, are different.
This is a very clear symptom, I think, that there has been an irrevocable shift in the last ten years. No matter who is in power, he would no longer believe in big government and would preach cutting expenses and would end up doing nothing about it. This is because we, the American people, are at that interesting point where we are all in favor of cutting the deficit—at somebody else's expense. It's a very typical stage in alcoholism, you know, where you know you have to stop—tomorrow.
Q: Do you think we will?
A: Alcoholics usually don't reform until they're in the gutter. Maybe we won't wait that long. Three years ago, to do anything about Social Security would have been unspeakable. Now it's speakable. It's not doable yet, but I think we're inching toward solutions.
Q: You're not too worried about the future then?
A: Well, one can get awfully pessimistic about the world. It's clearly not in good shape, but it probably never has been, not in my lifetime. One of my very early childhood memories is the outbreak of World War I. My father and his brother-in-law, who was a very famous lawyer, jurist, and philosopher, and my father's close friend at the time, who was Tomás Masaryk, the founder of Czechoslovakia, a great historian and much older of course…. I still remember our house. Hot-air heating pipes carry sound beautifully. Our bathroom was above my father's study. I was not quite five, and I listened at the hot-air register to my father and my uncle Hans and Masaryk saying, “This is the end not just of Austria, but of civilization.” That is the first thing that I can remember clearly. And then I remember the endless obituaries in the newspaper. That's the world I grew up in and was very conscious of, the last days of anything that had any value. And it hasn't changed since. So it's awfully easy for me to be pessimistic, but what's the use of it? Lots of things worry me. On the other hand, we have survived against all odds.
Q: It's hard to place you, politically…
A: I'm an old—not a neo—conservative. The neoconservatives started out on the Left, and now they are basically old-fashioned liberals, which is respectable, but I've never been one. For instance, although I believe in the free market, I have serious reservations about capitalism. Any system that makes one value absolute is wrong. Basically, the question is not what are our rights, but what are our responsibilities. These are very old conservative approaches, and I raised them in the first book I wrote, The End of Economic Man, when I was in my twenties, so I have not changed.
Q: Were you ever tempted to go into politics?
A: No, I realized very early that I was apolitical, in the sense that I hadn't the slightest interest in power for myself. And if you have no interest in power, you are basically a misfit in politics. On the other hand, give me a piece of paper and pencil, and I start to enjoy myself.
Q: What other things cheer you?
A: I am very much impressed by the young people. First, that most of the things you hear about them are nonsense, for example, complaints that they don't work. I think that basically they're workaholics. And there is a sense of achievement there. But I'm glad that I'm not twenty-five years old. It's a very harsh world, a terribly harsh world for young people.
(1985)
This interview was conducted by senior writer Tom Richman and appeared in the October 1985 issue of Inc.
PART I
Economics
CHAPTER ONE
The Changed World Economy
THERE IS A LOT OF TALK today of the changing world economy. But—and this is the point of this chapter—the world economy is not changing. It has already changed in its foundations and in its structure, and irreversibly so in all probability.
Within the last ten or fifteen years, three fundamental changes have occurred in the very fabric of the world's economy:
1 The primary-products economy has come “uncoupled” from the industrial economy;
2 In the industrial economy itself, production has come uncoupled from employment;
3 Capital movements rather than trade in goods and services have become the engines and driving force of the world economy. The two have not, perhaps, become uncoupled. But the link has become quite loose, and worse, quite unpredictable.
These changes are permanent rather than cyclical. We may never understand what caused them—the causes of economic change are rarely simple. It may be a long time before economic theorists accept that there have been fundamental changes, and longer still before they adapt their theories to account for them. They will surely be most reluctant, above all, to accept that the world economy is in control rather than the macroeconomics of the national state, on which most economic theory still exclusively focuses. Yet this is the clear lesson of the success stories of the last twenty years: of Japan and South Korea; of West Germany, actually a more impressive though far less flamboyant performance than Japan; and of the one great success within the United States, the turnaround and rapid rise of an industrial New England that, only twenty years ago, was widely considered moribund.
But practitioners, whether in government or in business, cannot wait till there is a new theory, however badly needed. They have to act. And then their actions will be the more likely to succeed the more they are being based on the new realities of a changed world economy.
The Primary-Products Economy
The collapse in nonoil commodity prices began in 1977 and has continued, interrupted only once, right after the 1979 petroleum panic, by a speculative burst that lasted less than six months and was followed by the fastest drop in commodity prices ever recorded.
In early 1986, overall, raw-materials prices (other than petroleum*) were at the lowest level in recorded history in relation to the prices of manufactured goods and services—as low as in 1932, and in some cases (lead and copper) lower than at the depths of the Great Depression.
The collapse of raw-materials prices and the slowdown of raw-materials demand is in startling contrast to what was confidently predicted. Ten years ago The Report of the Club of Rome predicted that desperate shortages for all raw materials were an absolute certainty by the year 1985. Even more recently, in 1980 the Global 2000 Report of President Carter's administration concluded that world demand for food would increase steadily for at least twenty years; that food production worldwide would go down except in developed countries; and that real food prices would double. This forecast largely explains why American farmers bought up whatever farmland was available, thus loading