The World According to Peter Drucker
by Jack Beatty
Free Press. 204 pp. $25.00
For all its astonishing economic success, the modern corporation remains an institution more often criticized than celebrated. Movies and television routinely cast it as a villain; journalists catalogue its depredations; academics implicate it in the disintegration of family life and/or the inner city; and politicians eye it suspiciously when it grows too large.
Yet the corporation also has its admirers, and none more influential than Peter Drucker. The author of 29 books and countless articles, Drucker is almost universally regarded as the foremost thinker on corporate management, a field that many of his followers credit him with having invented. Now approaching his ninetieth year, he has received a splendid birthday gift in The World According to Peter Drucker by Jack Beatty, a senior editor at the Atlantic Monthly. In this concise and generally sympathetic overview, Drucker emerges not just as an innovative adviser on everything from balance sheets to marketing strategies but as a sophisticated, if ultimately over-anxious, defender of a much-maligned entity.
Drucker has always seemed an exceedingly improbable big-business guru. Educated in the European tradition before fleeing from the growing Nazi presence in the Austria of his youth, he ranges easily over such subjects as Japanese art, the philosophy of Kierkegaard, and the history of British rule in India. His prose is stylish, direct, and refreshingly jargon-free. For all his fame in corporate America, he has never really been a part of it, opting instead for the life of a professor.
But what most distinguishes Drucker is the wider perspective in which his ideas about the practice of business are rooted. As early as his first book, The End of Economic Man (1939), Drucker raised doubts about the viability of classical market economies. Echoing the economist Joseph Schumpeter (1883-1950), he argued that capitalism does well in achieving material progress but poorly in distributing its fruits. This failure “to establish equality by economic freedom,” he wrote, could eventually destroy “belief in capitalism as a social system.” For Drucker, fascism was an attempt to attain through political will what the market system itself could not deliver, resulting not only in economic chaos but much, much worse.
As Beatty shows, Drucker’s fascination with corporations—and the people who run them—arose from his desire to find a solution to this tragic failing. In the large business firm, he saw an organization that could socialize the market, spreading wealth and ensuring a degree of stability for workers. Properly understood, then, the job of the corporate executive was not just to run a productive enterprise but, more grandly, to save civilization from a reprise of the despair and violence of the 1930’s.
Drucker presented the practical side of his project in The Concept of the Corporation (1945), the work that first established his reputation. Though focused on the workings of General Motors and how to improve the company’s bottom line, the book, Beatty observes, also laid out Drucker’s vision for the industrial society of the postwar world. His primary concern was to make the case for measuring corporate success not only by profitability but by “noneconomic criteria” as well. To ensure that GM’s employees did not feel like Chaplinesque robots on a production line, he urged the company to adopt a series of quite radical policies, including worker participation in factory governance, a corporate pension plan, and a “guaranteed annual wage” to cushion the impact of periodic layoffs.
To Drucker’s dismay, the leaders of GM showed little interest in the heroic social role he envisioned for them. Alfred P. Sloan, the company’s legendary chairman, was so unhappy with the book’s portrayal of GM that he wrote his own account, My Years With General Motors, which itself became a business classic. Even Walter Reuther, the head of the United Automobile Workers, dismissed Drucker’s ideas about factory governance, curtly declaring that “managers should manage and workers work.”
But Drucker’s advice did not go unheeded elsewhere. The Japanese took it to heart, creating corporations whose extraordinary success has been due in no small part to a concerted effort to build solidarity with workers. In the U.S., the rapidly expanding field of management education came to embrace Drucker’s views on employee relations and the responsibilities of top executives; today, even the most profit-driven businesses wish to be seen as “good corporate citizens.” General Motors eventually came around as well, incorporating Drucker’s no longer quite so controversial notions into the operations of its much-admired Saturn plant in Tennessee.
To judge by his more recent work, however, Drucker now doubts that such changes go far enough. In response to globalization, he has lately called for the international regulation of wages to prevent American workers from losing their jobs to cheap competition. Disappointed with the performance of corporate managers, he has also turned his attention to nonprofit organizations in the hope that they might be a new instrument for building social cohesion. Indeed, so pessimistic has Drucker become that he has condemned the wave of hostile takeovers that began in the 1980’s as “the final failure of corporate capitalism” to control itself.
Jack Beatty ranges over all these issues and more in an analytical biography that nimbly explicates and assesses Drucker’s contributions and thought. Beatty’s own approving take is that Drucker is first and foremost a “moralist” who, by examining not the flow of money but the values, relationships, and quality of economic life, has “take[n] the capital out of capitalism.” Perhaps for that reason, Beatty tends to become alarmed whenever Drucker seems too partial to the capital in capitalism, as in his call for the “reprivatization” of government services. At the same time, Beatty not unexpectedly endorses Drucker’s recent expressions of pessimism about corporate capitalism.
But what are we to make of that pessimism? Given Drucker’s track record, his views deserve a serious hearing. Still, it is difficult not to consider them an overreaction, colored perhaps by his own encounter as a young man with the fateful consequences of economic collapse.
Things look rather different today, when the anti-capitalist response to capitalism’s “creative destruction” (in Joseph Schumpeter’s term) appears to have utterly petered out. Despite the rigors of foreign competition and corporate restructuring, and in the face of studies purporting to show rising inequalities in income, traditional champions of the working class like Democrats in the U.S. and Laborites in Britain sound increasingly like classical 19th-century liberals (even if they do not always act accordingly). In Asia, too, the present economic crisis, for all its seriousness, has bolstered rather than weakened the forces of both political and economic democracy.
It would seem that modern capitalism has won a far greater degree of popular support than even its friends have supposed. In exchange for a rising standard of living, the public appears willing to tolerate the high corporate salaries, plant closings, downsizings, and other phenomena that so dismay critics. Although the day may yet come when popular opinion turns on the corporation, for now, the productive if morally imperfect industrial giants that Peter Drucker has done so much to explicate, and whose practices he has done so much to refine, continue to prove extraordinarily capable of providing the things that ordinary people want.