An oracle’s job is difficult at any time and often dangerous as history shows. The changing times have not made the job easier as there is the printed word to hold up to undo the soothsayer.
Reprints of prophecies, as the collection of essays of Peter Drucker, Towards the Next Economics thus run a fairly serious risk.
That sense is accentuated in the eponymous essay, the very first one in the book. But before that, Drucker offers a lucid survey of the underpinnings of economic theory right from the beginning of the discipline, a formidable task. One must say even after the lapse of so many years, it will be rare to come across such a clear narrative of the main course of economic theory beginning from mercantilism. By itself, the section is a must read in any compilation of essays on economic history that any author may compile, ever.
Despite that, Drucker obviously would not have any looking glass to espy both the rise of finance capital and the hurricane it created across the world. But Drucker’s analysis is a good reference to understand the climate from where finance capital took root. Writing in 1980, the management guru describes the crisis Keynesian economic theory had run into. The decline in the production of capital in the developed economies as savings rate dipped. The condition was considered impossible in the Keynesian framework and so economists were ill-prepared to deal with it, he says. Finance capital took root shortly thereafter as nations like UK and later USA moved rapidly to remove restrictions on the creation of capital.
But Drucker is better when he narrates the woeful lack of literature to track the development of technology, over the heydays of capitalism. That is hardly surprising from the man who predicted the emergence of the information society and coined the term knowledge worker, the latter as early as 1959. While Marx recognised the role technology played in creating asymmetry between the production base and the super structure to ring in changes in eras, his canvas too was limited. Yet, as Drucker shows, the wrong call on technology has wounded companies and even countries. Reading this reminds one of the luddite attitude of the communists in India, especially West Bengal that condemned the state to the rear in the IT sector for so many years.
Talking about how science fiction writers and the US government office on technology assessments goofed simultaneously, he says the agency will only ?guarantee full employment? to a lot of those authors. He too made a mistake when he along with most UN agencies assumed rising population would be one of the four emerging challenges of the new century. But he is right on the other three?not a bad score card at all. These are that of energy, of resources and ?a problem of the basic community, that is, the city?.
According to Drucker, this will make technological response more critical. Businessmen , he says will have to learn how to build and how to manage an innovative organisation. He defined innovation as the sum of anticipation of technological challenges and that ?management systematically abandon yesterday?. To make the structure a reality he says these need to be built differently in the management structure of the firm, and free of the need to manage for the firm’s daily needs. And what are the signs that an industry needs to slough off old technology. ?Wherever and industry enjoys high and rising demand, without being able to show corresponding profitablity, there is need for major technological change and opportunity for it.?
The twelve essays in the book as Drucker describes them are strung together as all are concerned with social ecology, his pet theme. He says all these essays ?also share the conviction that sometime in the last decade there have been genuine structural changes in (this) social ecology?. While one now finds an analysis of Japan over two essays, fairly dull read now the most telling is the obvious omission of China and India. It is difficult to blame him for this, as there is almost no evidence of any author having been able to predict in the early 1980s in less than thirty years the world economy will transform so drastically.
In fact Drucker, as it now turns out was writing in a most difficult epoch. Three of the most significant developments, the collapse of the communist empire, the rise of finance capital that will turn business logic on its head and the Asian century were just beyond the horizon and in a sense way beyond the logic of the times.
Here is the problem. The book was directed at the thinking managers of the period. The Drucker list included giants like Coca Cola, IBM, Intel, Citi and General Electric. Yet reading him, is it a coincidence that almost all of them built on these premises are struggling to adapt to the new world.
Still the Drucker magic is visible in his take on environment. He makes a very prescient point that environment clean up requires faster economic growth?often glossed over in the debate. Speaking of the US economy he says ?if there is no expansion of output equal to the additional cost of cleaning up the environment, the cost burden will?indeed, must?be met by cutting the funds available for education, health care, or the inner city, thus depriving the poor…..The only way to avoid these evils is to expand the economy…( at a )higher rate than we have been able to sustain in this country in the postwar years.?