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working-through-time mental patterns


pyramid to dna

A Century of Social Transformation —
Emergence of Knowledge Society

by Peter Drucker


The Long Shadow:
The Great War and the Twentieth Century
by David Reynolds




#Note the number of books about Drucker ↓


Inside Drucker's Brain World According to Drucker

My life as a knowledge worker

Drucker: a political or social ecologist ↑ ↓


“I am not a ‘theoretician’;

through my consulting practice

I am in daily touch with

the concrete opportunities and problems

of a fairly large number of institutions,

foremost among them businesses

but also hospitals, government agencies

and public-service institutions

such as museums and universities.


And I am working with such institutions

on several continents:

North America, including Canada and Mexico;

Latin America; Europe;

Japan and South East Asia.


Still, a consultant is at one remove

from the day-today practice —

that is both his strength

and his weakness.

And so my viewpoint

tends more to be that of an outsider.”

broad worldview ↑ ↓


Most mistakes in thinking ↑seeing only part of the picture


#pdw larger ↑ ::: Books by Peter Drucker ::: Rick Warren + Drucker

Peter Drucker's work

Books by Bob Buford and Walter Wriston

Global Peter Drucker Forum ::: Charles Handy — Starting small fires

Post-capitalist executive ↑ T. George Harris


harvest and implement

Learning to Learn (ecological awareness ::: operacy)

The MEMO “they” don’t want you to SEE





No century in human history

has experienced so many social transformations

and such radical ones

as the twentieth century.

... snip, snip ...

In the developed free-market countries

— only one-fifth of the earth’s population,

but the model for the rest

work and work-force, society and polity are all,

in the last decade of this century,

qualitatively and quantitatively different


from those of the first years of this century

and from

anything ever experienced before in human history:

in their configurations,
in their processes,
in their problems,
and in their structures

Far smaller
and far slower
social changes
in earlier periods
triggered violent
intellectual and spiritual crises
and civil wars.

... snip, snip ...

They (the social transformations of the twentieth century) proceeded
with a minimum of friction,
with a minimum of upheavals,
and indeed with altogether a minimum of attention
from scholars, politicians, the press, and the public.

To be sure,
this century of ours
may well have been the cruelest
and most violent century
in human history
with its world wars and civil wars,
its mass torturers, ethnic cleansings,
and genocides

... snip, snip ...

Hitler, Stalin, and Mao,
the three evil geniuses of this century,


But they created nothing.





JUDGEMENTAttention-directing frameworks


harvest and implement



Awareness — we can only work with the things on our mental radar ↓ ↑


book harvesting

Just reading is not enough




Click here for the very most comprehensive starting point on another page


Page contents


No century in human history (top of the page)

star Context

star Drucker, Management, Thinking, History

star Work life assumptions

star “Century of Social Transformation” book sources and variations

star Post-Capitalist Society

star Work life Horizons


star Main content list

      More background resources

star Main introduction


bbx A change in the human condition begins

… different from anything

ever before experienced

in human history





The core topic (emergence of knowledge society) presented here is A (not THE) “broad and long view of the dynamic situationS in which we are embedded over time.

Broad refers to the entire world at a point in time and long refers to time — a century.

Some people move “forward” from one dynamic situation to another and then another.

This movement takes place over time — during a century of social transformation.

Some people are stuck at a point in time — with no “easy” way to move forward. They remain stuck because they make no “informed” attempt to design a way forward.




Surrounding and included within the chapter presented further down the page are several introductory brainscapes and sidebars.

This additional material provides a richer mental landscape as an aid for decision thinking.

Maintaining an adequate mental foundation is exceedingly difficult.

If you want to jump straight to the knowledge material, click here, but please remember the preceding sentences. The main content begins here.




There are conscious time-usage and time-investment decisions to be made.

There are: Broad areas of awareness ::: Horizons to work toward ::: Areas of work

↑ The contents of this page ↑


The future lies between our ears …

We can only work on and with the things on our mental radar.

In a world constantly moving toward unimagined futures
the topic of this page — that becomes a tremendous challenge

… the brain always want to work on the familiar with the familiar

which is totally the wrong thing to do in the knowledge society
discussed below …

This knowledge society is radically different
from the existing education system …
from beginning to end …


A starting point for individuals
(that’s better left until the surrounding timescape has been explored)





Drucker, Management, Thinking, History

The concepts presented here belong to
Peter Drucker (a social / political ecologist)


The managed institution is society’s way of getting things done today

about Management
(a multi-time dimensional shock to the system)

Just because an institution has people called managers,
doesn’t mean the institution
has management or is managed — regardless of
what Wall Street currently thinks.

Organizations in the midst of
competitive and financial meltdowns
have people called managers.

Warren Buffet’s ABCs of decay:
Arrogance, Bureaucracy, Complacency
also applies to communities —
Detroit …

There is far, far more to management than
jobs and organization charts.

Supplying knowledge to find out how existing knowledge can best be applied to produce results is, in effect, what we mean by management. continue


Management’s essence is making knowledges productive

which is intertwined with the knowledge society
explored below


culture eats strategy

Real management = economic and social development

drucker books concept of the corporation Adventures of a Bystander Managing the Non-profit org Management Revised Ed The End of Economic Man Age of Discontinuity The New Realities Post-Capitalist Society

Outline of his books




Thinking is needed





A century of social transformation

The history of the world in two hours — YouTube
something leads to something different … which
leads to something different … which leads to …




Work life assumptions

… “They [individuals] can no longer assume that what they have learned as children and youngsters will be the “foundation” for the rest of their lives.

It will be the “launching pad” — the place to take off from rather than the place to build on and to rest on.

They [individuals] can no longer assume that they “enter upon a career” which then proceeds along a pre-determined, well-mapped and well-lighted “career path” to a known destination — what the American military calls “progressing in grade.”

The assumption from now on has to be that individuals on their own will have to find, determine, and develop a number of “careers” during their working lives.

Try exploding find, determine, and develop using
thinking broad and thinking detailed along with
information is not enough

Thinking canvases may prove helpful


And the more highly schooled the individuals, the more entrepreneurial their careers and the more demanding their learning challengesmore


Consider the production hierarchy that guides a movie making project, who do they want involved? Will they employ people they don’t trust?




Main Text Origins

The chapter presented here ( further down the page) is from: Managing in a Time of Great Change.

The Essential Drucker contains an abbreviated version as part of a comprehensive introduction to Drucker’s top-of-the-food-chain work.

The Essential Drucker answers the questions: “Where do I begin to read Drucker and which of his writings are essential?

Don’t get left behind in the transformation.

Continuing to do what worked in the past is a road to failure.

All over the world there a people who are anxious to learn (from someone at the top-of-the food-chain) and then do and maybe learn again.

The world is going to get a lot more competitive across multiple time dimensions.

It is a gigantic mistake to extrapolate the organization schemes of the past.

It is prudent to expect everything to change radically rather than being just a minor modification.


The two previous book links take you to outlines of those books. These outlines are useful for exploring work horizons and areas of work.



Amazon links: Managing in a Time of Great Change and The Essential Drucker





Post-Capitalist Society

a more detailed thinking landscape and worldview

Unimagined Futures: “EVERY FEW HUNDRED YEARS in Western history there occurs a sharp transformation.

We cross what in an earlier book, I called a “divide.”

The New Realities—1989.

Within a few short decades, society rearranges itself—its worldview; its basic values; its social and political structure; its arts; its key institutions.

Fifty years later, there is a new world.

And the people born then cannot even imagine the world in which their grandparents lived and into which their own parents were born.

We are currently living through
just such a transformation

... snip, snip ...

The one thing we can be sure of is that the world that will emerge from the present rearrangement of values, beliefs, social and economic structures, of political concepts and systems, indeed, of worldviews, will be different from anything anyone today imagines.

... snip, snip ...

Unless we can learn how to increase the productivity of knowledge workers and service workers, and increase it fast, the developed countries will face economic stagnation and severe social tension.

... snip, snip ...

To improve the productivity of knowledge workers will in fact require drastic changes in the structure of the organizations of post-capitalist society, and in the structure of society itself





Work life Horizons

Managing Oneself is a REVOLUTION in human affairs.” …

… “It also requires an almost 180-degree change in the knowledge workers’ thoughts and actions from what most of us—even of the younger generation—still take for granted as the way to think and the way to act.” …

… “Managing Oneself is based on the very opposite realities:

Workers are likely to outlive organizations, and the knowledge worker has mobility.” — source






main content overview ↓

Managing in a Time of Great Change
chapter contents ↓


Please read slowly and explode the mental landscape(S) you encounter

Introduction to a A Century of Social Transformation

The Social Structure and Its Transformations

The Rise and Fall of the Blue-Collar Worker

The Rise of the Knowledge Worker

The Emerging Knowledge Society

How Knowledges Work

The Employee Society

What Is an Employee?

The Social Sector

Knowledge Economy and Knowledge Polity

School and Education as Society’s Center (not the present system)

The Competitive Knowledge Economy

How Can Government Function?

Conclusion: The Priority Tasks — The Need for Social and Political Innovations

bonus material

Executive Effectiveness — executives really don’t understand the world they live in

Creating Tomorrow's Society Of Citizens

Refining the Mission Statement

The importance of financial measurements and financial results


Trade Lessons from the World Economy

Transnationalism, Regionalism, and Tribalism

What do you want to be remembered for?


Peter Drucker Sets Us Straight (it hasn’t been a recession but a transformation and the structure of the economy)

Plain text versions: from The Essential Drucker and from Managing in a Time of Great Change





economic content

More economic landscape vistas


Clues for the 21st century brainroadS ahead

They’re in the news almost everyday


We can only work on and with the things on our mental radar.

In a world constantly moving toward unimagined futures
the topic of this page — that becomes a tremendous challenge.

There are conscious time-usage and time-investment decisions to be made.


The ideas on this page are a crucial part of a foundation for future directed decisions.

TomorrowS are not going to be an extrapolation of yesterday and its ideaS.

You might want to harvest some of these ideas to your radar list for later calendarization — working something out in time.





main content begins


No century in human history has experienced so many social transformations and such radical ones as the twentieth century.

They, I submit, shall turn out to be the most significant events of this our century, and shall be its lasting legacy.

In the developed free-market countries—only one-fifth of the earth’s population, but the model for the rest—work and work-force, society and polity are all, in the last decade of this century, qualitatively and quantitatively different both from those of the first years of this century and from anything ever experienced before in human history: different in their configurations, in their processes, in their problems, and in their structures.


Far smaller and far slower social changes in earlier periods triggered violent intellectual and spiritual crises, rebellions, and civil wars.

The extreme social transformations of this century have hardly caused any stir.

They proceeded with a minimum of friction, with a minimum of upheavals, and indeed with altogether a minimum of attention from scholars, politicians, the press, and the public.

To be sure, this century of ours may well have been the cruelest and most violent century in human history, with its world wars and civil wars, its mass torturers, ethnic cleansings, and genocides.

But all these killings, all these horrors inflicted on the human race by this century’s Weltbeglucker (refers to those who establish paradise on earth by killing off nonconformists, dissidents, resisters, and innocent bystanders, whether Jews, the bourgeoisie, kulaks, or intellectuals—an untranslatable German term, alas) hindsight clearly shows, were just that: senseless killings, senseless horrors.

Hitler, Stalin, and Mao, the three evil geniuses of this century, destroyed.

But they created nothing.

Indeed, if this century proves anything, it is the futility of politics.

Even the most dogmatic believer in historical determinism would have a hard time explaining the social transformations of this century as caused by the headline-making political events, or explaining the headline-making political events as caused by the social transformations.

But it is the social transformations, running like ocean currents deep below the hurricane-tormented surface of the sea, that have had the lasting, indeed the permanent, effect.

Theyrather than all the violence of the political surfacehave transformed the society and the economy, the community, the polity we live in.

(main brainroad continues after the next two sidebars)




Autonomous institutions
that function and perform
are the alternative to TYRANNY


The End of Economic Man: The Origins of Totalitarianism


A revolution in every generation is not the answer




… “Power has to be used.

It is a reality.

If the decent and idealistic toss power in the gutter, the guttersnipes pick it up — the antidote.

If the able and educated refuse to exercise power responsibly, irresponsible and incompetent people take over the seats of the mighty and the levers of power.

Power not being used for social purposes passes to people who use it for their own ends.

At best it is taken over by the careerists who are led by their own timidity into becoming arbitrary, autocratic, and bureaucratic.” — PFD


How To Guarantee Nonperformance


What Results Should You Expect? — A Users’ Guide to MBO


Conditions for survival



main content continues from above


I. The Social Structure and Its Transformations

Jump to the next major idea?

Before World War I, the largest single group in every country were farmers.

They were then no longer the population everywhere, as they had been since the dawn of history and as they had still been in every country at the end of the Napoleonic Wars, a hundred years earlier.

But except in England and Belgium, farmers were still a near majority in every developed country—in Germany, in France, in Japan, in the United States—and, of course, in all developing and Third World countries too.


Eighty years ago, at the eve of World War I, it was considered axiomatic that developed countries—North America being the only exception—would increasingly become unable to feed themselves and would increasingly have to rely on food imports from non-industrial, non-developed areas.

England and Belgium had already become massive food importers.

Germany, Holland, and Switzerland were barely breaking even in their food accounts.

And the fear of becoming dependent on food imports was emerging in Meiji Japan, after 1890, as a keynote of Japanese politics, as the justification for Japan’s annexing food-surplus territories like Taiwan and Korea, and as the psychological force behind Japan’s nascent imperialism.


Today, only Japan, among major, developed, free-market countries is a heavy importer of food.

(Unnecessarily so—its weakness as a food producer is largely the result of an obsolete rice-subsidy policy that prevents the country from developing a modern, productive agriculture.)

All other developed free-market countries have become surplus food producers despite burgeoning urban populations.

In all these countries food production is today many times what it was eighty years ago—in the United States, eight to ten times as much.


But in all developed free-market countriesincluding Japanfarmers today are at most 5 percent of the population and the workforce, that is, one-tenth of what they were eighty years ago.

Actually, productive farmers are less than half of the total farm population, or no more than 2 percent of the workforce.

And these agricultural producers are not “farmers” in any sense of the word; they are “agribusinesses” and constitute arguably the most capital intensive, most technology-intensive, and most information-intensive industry around.

Traditional farmers are close to extinction, even in Japan.

And those still around have become a protected species kept alive only by enormous subsidies.


The second-largest group in population and workforce in every developed country around 1900 were live-in servants.

They were considered as much a “law of nature” as farmers were.

The British census of 1910 defined “lower middle class” as a household employing fewer than three servants.

And while farmers as a proportion of population and workforce had been steadily shrinking throughout the nineteenth century, the numbers of domestic servants, both absolutely and as a percentage, were steadily growing right up to World War I.

(And nowhere faster than in the United States, with its enormous influx of immigrants.

With free land largely gone by 1900, a job as domestic servant was, for many newcomers, the only work available.)

Eighty years later, live-in domestic servants in developed countries have become practically extinct.

Few people born since the Second World War, that is, few people under fifty, have even seen any except on the stage or in old movies.


Farmers and domestic servants were not only the largest social groups, they were the oldest social groups, too.

Together they were, through the ages, the foundation of economy and society, the foundation altogether of “civilization.”

Servants, whether slaves, indentured servants, or hired hands, actually antedate farmers by several millennia.

The patriarchs of the Old Testament were still nomadic pastoralists, rather than settled farmers.

But they had large numbers of servants of all kinds.


Big cities are nothing new.

Nineveh and Babylon were very big cities, and so were the capital of the Han emperor in China two hundred years before Christ and the Rome of the Caesars.

But these big cities were islets in a rural sea.

This was still largely true for the social world of 1900, despite the visibility and glamour of a Paris, a London, a New York, a Boston, a Tokyo.

It was then still generally accepted, as it had been in the Hellas of Hesiod’s Erga kai Hemera (Works and Days) written in the eighth century B.C., or in the Rome of Virgil’s Georgics, written in the first century B.C., that cities are “parasites” and farmers the “real nation.”

The technology of the society of 1900 was already much closer to that of the year 2000 than to that of 1800.

It had steamships, railroads, quite a few automobiles, and, by 1903, the airplane.

It had electricity, telephone, wireless telegraphy, and the first movies.

But socially 1900 was still closer to 1800 and indeed to antiquity than to us, that is, to 1994.

It was still organized around farmers and domestic servants, both still largely living the life their ancestors had lived at the time of Hesiod and Virgil, doing the same work and with very much the same tools.

In the developed society of 2000, farmers are little but nostalgia, and domestic servants are not even that.


Yet these enormous transformations in all free-market developed countries were accomplished without civil war, and, in fact, in almost total silence.

Only now that their farm population has shrunk to near zero do the totally urban French loudly assert that theirs should be a “rural country” with a “rural civilization.”

The Rise and Fall of the Blue-Collar Worker

One reason, indeed the main reason, why the transformation caused so little stir was that by 1900 a new class, the blue-collar worker in manufacturing industry—Marx’s “proletarian”—had become socially dominant.

Farmers—and not only in Kansas—were loudly adjured to “raise more hell and less corn,” but not even the farmers paid much attention.

Domestic servants were clearly the most exploited class around.

But when people before World War I talked or wrote about the “social question,” they meant blue-collar industrial workers.

These workers were still a fairly small minority of population and workforce—right up to World War I at most an eighth or a sixth of the total—and still vastly outnumbered by the traditional “lower” classes of farmers and domestic servants.

But early twentieth century society was obsessed with blue-collar workers, fixated on them, bewitched by them.


Farmers and domestic servants were everywhere.

But as a “class,” they were invisible.

Domestic servants lived and worked in small and isolated groups of two or three, inside individual homes or on individual farms.

And farmers too were dispersed.

Above all, these traditional lower classes were not organized.

Indeed, they could not be organized.

Slaves employed in mining or in producing goods had revolted frequently in the ancient world—though always unsuccessfully.

But there is no record of a single demonstration or of a single protest march of domestic servants anyplace and at any time.

There were peasant revolts galore no place more frequently than in Tokugawa Japan from 1700 on, or in imperial China, also beginning in 1700.

But except for two Chinese revolts in the nineteenth century—the Taiping Rebellion in mid-century and the Boxer Rebellion at the century’s end, both of which lasted for years and came close to destroying the regime—all peasant rebellions in history have fizzled out after a few bloody weeks.

Peasants, history shows, are very hard to organize and do not stay organized—which was the reason why they earned Marx’s contempt.


The new class, the blue-collar workers in manufacturing industry, were extremely visible.

This is what made them a “class.”

They lived perforce in dense population clusters and in cities—in St.-Denis outside Paris, in Berlin’s Wedding and Vienna’s Ottakring, in the textile towns of Lancashire, the steel towns of America’s Monongahela Valley, and in Japan’s Kobe.

And they soon proved eminently organizable, with the first strikes occurring almost as soon as there were factory workers.

Charles Dickens’s harrowing tale of a murderous labor conflict at a cotton textile mill, Hard Times, was published in 1854, only six years after Marx and Engels wrote The Communist Manifesto.


By 1900 it had become quite clear that industrial blue-collar workers would not become the majority as Marx had predicted only a few decades earlier.

They therefore would not overwhelm the capitalists by their sheer numbers.

Yet the most influential radical writer of the period before World War I, the French ex-Marxist and revolutionary syndicalist Georges Sorel, found widespread acceptance for his 1906 thesis that the proletarians would overturn the existing order and take power by their organization and in and through the violence of the general strike.

It was not only Lenin who made Sorel’s thesis the foundation of his revision of Marxism and built around it his strategy in 1917 and 1918; both Mussolini and Hitler—and Mao, ten years later—equally built their strategies on Sorel’s thesis.

Mao’s “power grows out of the barrel of a gun” is almost a straight quote from Sorel.

The blue-collar worker became the “social question” of 1900 because he was the first “lower class” in history that could be organized and stay organized.


No class in history has ever risen faster than the blue-collar worker.

And no class in history has ever fallen faster.

Jump to the next major idea?

In 1883, the year of Marx’s death, “proletarians” were still a minority of industrial workers.

The majority were then skilled workers employed in small craft shops each containing twenty or thirty workers at most.

Of the antiheroes of the nineteenth century’s best “proletarian” novel, The Princess Casamassima, by Henry James—published in 1886, only three years after Marx’s death (and surely only Henry James could have given such a title to a story of working-class terrorists!)—one is a highly skilled bookbinder, the other one an equally skilled pharmacist.

Similarly, the protagonists of Gerhart Hauptmann’s
Die Weber (The Weavers)—written in 1892 and the only successful “proletarian” play (its author eventually received the Nobel Prize for Literature for it) are skilled men still working in their homes rather than in a factory.


By 1900, industrial worker had become synonymous with machine operator in a factory employing hundreds, if not thousands, of people.

These factory workers were indeed Marx’s proletarians, without social position, without political power, without economic or purchasing power.


Popular myth has it that Henry Ford’s 1907 Model T was so cheap that workers could afford it.

But at $750 its price was equal to more than three times the entire annual income of an American machine operator—seventy or eighty cents was a good daily wage.

Yet American machine operators were then already the world’s most highly paid industrial workers.


The workers of 1900—and even of 1913—had no pension; no paid vacation; no overtime pay; no extra pay for Sunday or night work; no health insurance (except in Germany); no unemployment compensation; no job security whatever.

One of the earliest laws to limit working hours for adult males enacted in Austria in 1884—set the working day at eleven hours, six days a week.

Industrial workers, in 1913—the last year before World War Ieverywhere worked a minimum of three thousand hours a year.

Their unions were still officially proscribed or at best barely tolerated.

But the workers had shown their capacity to be organized.

They had shown their capacity to act as a “class.”


In the 1950s, industrial blue-collar workers had become the largest single group in every developed country, including the Communist ones, though they were an actual majority only during war times.

They had become eminently respectable.

In all developed free-market countries they had economically become “middle class.”

In the United States, in fact—and soon in non-Communist Europe, too—unionized industrial workers in mass-production industry (which then was dominant everywhere) had attained and sometimes even exceeded near-upper-class income levels, with annual incomes including benefits reaching $50,000—and with automobile industry (e.g., at Ford) exceeding $100,000.

They had extensive job security; pensions; long, paid vacations; comprehensive unemployment insurance or “lifetime employment.”

Above all, they had achieved political power.

It was not only in Britain that the labor unions were considered to be the “real government,” with greater power than prime minister and Parliament.

In the United States, too, and equally in Germany, France, and Italy, the labor unions had emerged as the country’s most powerful and best-organized political forces.

And in Japan they had come very close, in the 1948 Toyota and the 1954 Nissan strikes, to overturning the “system” and to taking over power themselves.


In 1990, however, both the blue-collar worker and his union were in total and irreversible retreat.

They had become marginal in numbers.

Whereas blue-collar workers who made or moved things had accounted for two-fifths of the American workforce in the 1950s, they accounted for less than one fifth of the workforce in the early 1990s—that is, for no more than they had accounted for in 1900, when their meteoric rise had begun.

In the other developed free-market countries the decline was slower at first; but after 1980 it began to accelerate everywhere.

By the year 2000 or 2010, in every developed free-market country, blue-collar industrial workers will account for no more than one-tenth or, at most, one-eighth of the workforce.

Union power has been going down equally fast.

Where in the 1950s and 1960s the Coal Miners’ Union in the United Kingdom broke prime ministers as if they were matchwood, Margaret Thatcher, in the 1980s, won election after election by being openly contemptuous of organized labor and by whittling down its political power and its privileges.

The blue-collar worker in manufacturing industry and his union are going the way of the farmer


Unlike domestic servants, blue-collar workers will not disappear—no more than producers on the land have disappeared or will disappear.

But just as the traditional small “farmer” has become a recipient of subsidies rather than a “producer,” so will the traditional blue-collar worker largely become an auxiliary force.

His place is already being taken by a “technologist,” that is, by people who work both with their hands and their theoretical knowledge.

(Examples are computer technicians or paramedical technicians such as X-ray technicians, physical therapists, medical-lab technicians, pulmonary technicians, and so on, who have been the fastest-growing group in the U.S. labor force since 1980.)


From information to knowledge-based organization


And instead of a “class,” that is, a coherent, recognizable, defined, and self-conscious group, the blue-collar worker in manufacturing industry may soon be just another “pressure group.”


Chroniclers of the rise of the industrial worker tend to highlight the violent episodes—the clashes between strikers and police especially, such as America’s Pullman Strike.

The reason is probably that the theoreticians and propagandists of socialism, anarchism, and communism—beginning with Marx and down to Herbert Marcuse in the 1960s—incessantly wrote and talked of “revolution” and “violence.”

Actually, the rise of the industrial worker was remarkably nonviolent.

The enormous violences of this century—the world wars, civil wars, genocides, ethnic cleansings, and so on—were all violences from above rather than violences from below; and they were unconnected with the transformations of society, whether the shrinking of the number of farmers, the disappearance of the domestic servant, or the rise of the industrial worker.

In fact, no one anymore even tries to explain these great convulsions with “the crisis of capitalism,” as was standard Marxist rhetoric only thirty years ago.


Contrary to Marxist and syndicalist predictions, the rise of the industrial worker did not destabilize society.

On the contrary, it emerges as the century’s most stabilizing social development.

It explains why the disappearance of farmer and domestic servant produced no social crises.


The “enclosures” in seventeenth- and eighteenth-century England, which drove farmers off the land, were quite limited locally; but they produced serious and often very violent reactions.

They also were widely noticed and hotly discussed—by writers, poets, politicians, and the public, one example being Oliver Goldsmith’s great 1770 poem “The Deserted Village,” perhaps the best-known and most-quoted poem in the England of 1800.

Similarly, the early-nineteenth century Bauernlegen in East Prussia, in which tenant farmers were pushed off the land to make way for large-scale agriculture, had profound political and cultural reverberations.

But the far more massive “flight from the land” that began in the closing decades of the nineteenth century and has continued unabated has gone almost unnoticed except by statisticians.

The equally massive “flight from service” that began after World War I, even the statisticians have barely noticed.



Both the flight from the land and the flight from service were voluntary.

Farmers and maids were not “pushed off” or “displaced.”

They went into industrial employment as fast as they could.

Industrial jobs required no skills they did not already possess, and no additional knowledge.

On the contrary farmers on the whole had a good deal more skill than was required to be a machine operator in the mass-production plant—and so had many domestic servants.

To be sure, industrial work paid poorly until World War I.

But it paid better than farming or household work.

Industrial workers, until 1913—and until World War II in some countries, such as Japan—worked long hours.

But they worked shorter hours than farmers and domestic servants.

What’s more, they worked specified hours; the rest of the day was their own, which was true of neither work on the farm nor of work as a servant in a household.


The history books record the squalor of early industry, the poverty of the industrial workers, and the exploitation of them.

They did indeed work in squalor and live in poverty, and they were indeed exploited.

But they lived better than they would either on a farm or in an employer’s household, and they were treated better.

Up to Poverty

Proof of this is that infant mortality dropped as soon as farmers and domestic servants moved into industrial work in the factory.

Historically, cities never reproduced themselves.

They depended for their perpetuation on a constant influx of people from the countryside.

This was still true in the mid-nineteenth century.

But with the spread of factory employment, the city became the center of population growth.

In part this was the result of the new public health measures: provision of clean water; collection and treatment of wastes; quarantine and inoculation against epidemics.

These measures—and they were effective mostly in the citycounteracted, or at least contained, the hazards of crowding that had made the traditional city the breeding ground for pestilence.

But the largest single factor in the exponential drop in infant mortality as industrialization spread was surely the improvement in living conditions brought about by the advent of the factorybetter housing, better nutrition, lighter workloads, and fewer accidents.

The drop in infant mortality—and with it the explosive growth in populationcorrelates with only one development: industrialization.

The early factory was indeed the “satanic mill” of William Blake’s great poem.

But the countryside was not the “Green and Pleasant Land” of which Blake sang; it was (I have said so before) a picturesque but even more satanic slum.


For farmer and domestic servant, industrial work was an opportunity.

It was in fact the first opportunity in social history to substantially better oneself without having to emigrate.

In the developed, free-market countries, every generation in the last 100 or 150 years could expect to do substantially better than the generation preceding it (this is no longer true).

The main reason was that farmers and domestic servants could and did become industrial workers.


Because industrial workers were concentrated in groups, that is, because they worked in a large factory rather than in a small shop or in their homes, there could be systematic work on their productivity.

Beginning in 1881—two years before Marx’s death—the systematic study of work, tasks, and tools has raised the productivity of the manual making and moving of things by 3 to 4 percent, compounded each year, for a total fifty fold increase in output per worker over a hundred years.

On this — the productivity gains — rest all the economic and social gains during that time.

And contrary to what “everybody knew” in the nineteenth century—not only Marx but all the “conservatives” as well, such as J. P. Morgan, Bismarck, and Disraeli
practically all these gains have accrued to the blue-collar worker, half of the gains in the form of sharply reduced working hours (with the cuts ranging from 40 percent in Japan to 50 percent in Germany), half of them in the form of a twenty-five-fold increase in the real wages of blue-collar workers making or moving things.


There were thus very good reasons why the rise of blue-collar workers was peaceful rather than violent, let alone “revolutionary.”

But what explains that the
fall of the blue-collar worker has been equally peaceful and almost entirely free of social protest, of upheaval, of serious dislocation, at least in the USA?

The Rise of the Knowledge Worker

The rise of the “class” succeeding the industrial blue-collar worker is not an opportunity to him.

It is a challenge.

The newly emerging dominant group is “knowledge workers.”

The very term was unknown forty years ago—I first coined it in a 1959 book (The Landmarks of Tomorrow).

By the end of this century, knowledge workers will amount to a third or more of the workforce in the United States, that is to as large a proportion as industrial blue-collar workers ever were, except in wartime.

The majority of knowledge workers will be paid at least as well as blue-collar workers ever were or better.

And the new jobs offer much greater opportunities to the individual.


But—and it is a big but the new jobs require, in the great majority, qualifications the blue-collar worker does not possess and is poorly equipped to acquire.

The new jobs require a good deal of formal education and the ability to acquire and to apply theoretical and analytical knowledge.

They require a different approach to work and a different mind-set.

Above all they require a habit of continuous learning.

Learning to do (perform) not just answer test questions

Larger view


Farmers, domestic servants, machine operators have learned everything they need for their life’s work and jobs after a fairly short apprenticeship—a year or two for farmers and domestic servants, a few weeks for machine operators.


But knowledge work—and a good deal of service work, such as direct selling—is not experience-based, as all manual work has always been.

It is learning-based.

Access to it requires formal education, or at least formal training.

Industrial work as a machine operator was, in its work characteristics, still traditional work.

Knowledge work and most of services work, in their work characteristics, are nontraditional.

Displaced industrial workers thus cannot simply move into knowledge work or services work the way displaced farmers and displaced domestic workers moved into industrial work.

At the very least they have to make a major change in their basic attitudes, values, and beliefs.


Those who want to live a fulfilling life—who want to feel as if there is some purpose in their being on this earth—will have to learn to manage themselves.

They will have to accept the fact that it is their own responsibility to find meaningful work that builds on their strengths and values.

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In the United States the industrial workforce has shrunk faster and further in the closing decades of this century than in any other developed country.

At the same time, industrial production has grown faster than in any other developed country, excepting only Japan.

Jump to the next major idea?

The shift aggravated America’s oldest and least tractable problem: the position of the Blacks.

In the forty years since World War II, the economic position of the Negro in America improved faster than that of any group in American social history—or in the social history of any country.

Three-fifths of America’s Blacks rose into middle-class incomes—before World War II the figure was one-twentieth.

But half of that group rose into middle-class incomes and not into middle-class jobs.

Since World War II, more and more Blacks have moved into blue-collar, unionized mass-production industry, that is, into jobs paying middle-class and upper-middle-class wages while requiring neither education nor skill.

These are precisely the jobs, however, that are disappearing the fastest.

What is amazing is not that so many Blacks did not acquire an education but that so many did.

For the economically rational thing to do for a young Black in America from 1945 to 1980 was
not to stay in school and to learn.

It was to leave school as early as possible and to get one of the plentiful mass-production jobs.

As a result, the fall of the industrial worker hits America’s Blacks disproportionately hard—quantitatively, but qualitatively even more.

It denigrates what has been the most potent role model in the Black community in America: the well-paid industrial worker with high job security, full health insurance, and a guaranteed retirement pension—yet possessing neither skill nor much education.


That half of that group of newly middle-class Blacks advanced because they used the opportunities education offers and successfully moved into knowledge work, does not, it seems, compensate for the loss of the opportunity blue-collar industrial work offered uneducated Blacks.

Black youngsters aged ten or eleven in the inner city could and did identify with the cousin who, only seven or eight years older, had a well-paying job in the automobile plant.

They could not easily identify with cousins who were dentists, accountants, lawyers—which meant that they were twenty years older and had sat in schools for at least sixteen years.

And thus the fall of the industrial blue-collar worker has been a traumatic shock for the Black community in America.

It explains in large measure not only the growing defeatism, despair, and rage of inner-city Blacks.

It explains their growing alienation from, and rage against, their achieving brothers and sisters, that is, the large and growing number of Blacks who are moving into the new “middle class,” as knowledge workers.


But, of course, the Blacks are a small minority of the population and workforce in the United States.

For the restWhites but also Latinos and Asians—the fall of the industrial blue-collar worker has caused amazingly little disruption and nothing that could be called an upheaval.

Even in communities that were totally dependent on one or two mass production plants that have gone out of business or have cut employment by two-thirds—steel cities in western Pennsylvania or eastern Ohio, for instance, or automobile cities like Flint, Michigan—unemployment rates for adult, non-Black men and women fell within a few short years to levels barely higher than the U.S. average.

And that means to levels barely higher than the U.S. “full-employment” rate.

Yet there has been no radicalization of America’s blue-collar workers.


The only explanation is that for the non-Black, blue-collar community the development came as no surprise, however unwelcome, painful, and threatening to individual worker and individual family.

Psychologically—in terms of values perhaps, rather than in terms of emotions—America’s industrial blue-collar workers must have been prepared to accept as right and proper the shift to jobs that require formal education and that pay for knowledge rather than for manual work, whether skilled or unskilled.


One possible factor may be the GI Bill of Rights after World War II, which by offering a college education to every returning American veteran established advanced education as the “norm” and everything less as “substandard.”

Another factor may have been the draft the United States introduced in World War II and maintained for thirty-five years afterwards, as a result of which the great majority of American male adults born between 1920 and 1950—and that means the majority of American adults alive today—served in the military for several years where they were forced to acquire a high school education if they did not already have one.

But whatever the explanation, in the United States the shift to knowledge work from blue-collar manual work making and moving things has largely been accepted (except in the Black community) as appropriate or, at least, as inevitable.


In the United States the shift, by 1990 or so, had largely been accomplished.

But so far only in the United States.

In the other developed free-market countries, in western and northern Europe and in Japan, it is just beginning in the 1990s.

It is, however, certain to proceed rapidly in these countries from now on, and perhaps to proceed there faster than it originally did in the United States.

Will it then also proceed, as it did by and large in the United States, with a minimum of social upheaval, of social dislocation, of social unrest?

Or will the American development turn out to be another example of “American exceptionalism” (as has so much of American social history and especially of American labor history)?

In Japan, the superiority of formal education and of the formally educated person is generally accepted so that the fall of the industrial worker—still a fairly recent class in Japan and outnumbering farmers and domestic servants only since well after World War II—may well be accepted as appropriate as it has been in the United States, and perhaps even more so.

But what about industrialized Europe—the United Kingdom, Germany, France, Belgium, northern Italy, and so on, where there has been a “working-class culture” and a “self-respecting working class” for well over a century, and where, despite all evidence to the contrary, the belief is still deeply ingrained that industrial, blue-collar work, rather than knowledge, is the creator of all wealth?

Will Europe react the way the American Black has reacted?

This surely is a key question, the answer to which will largely determine the social as well as the economic future of the developed free-market countries of Europe.

And the answer will be given within the next decade or so.


The fall of the industrial blue-collar worker in the developed, free-market countries will also have major impacts outside of the developed world.

It means that developing countries can no longer expect to base their development on their comparative labor advantage, that is, on cheap industrial labor.


It is widely believed, especially, of course, by labor union officials, that the fall of the blue-collar industrial worker in the developed countries was largely, if not entirely, caused by moving production “offshore” to countries of abundant supply of unskilled labor and low wage.

But this is not true.


There was something to the belief thirty years ago, that is, before 1965 or 1970.

Japan, Taiwan, and, later on, South Korea did indeed (as explained in some detail in my 1993 book
Post-Capitalist Society) gain their initial advantage in the world market by combining America’s invention of training for full productivity almost overnight with wage costs that were still those of a pre-industrial country.

They thereby created a workforce that had the productivity and quality of a developed country and the labor costs of a developing one.

But this worked only for some twenty or thirty years.

It has not worked at all since 1970 or 1975.

Trade lessons from the world economy and Drucker sets us straight

In the 1990s, only an insignificant percentage of manufactured goods imported into the United States is based on low labor costs.

While total imports in 1990 accounted for about 12 percent of American gross national product, imports into the United States from countries with wage costs that are significantly lower than U.S. wage costs accounted for less than 3 percentand only half of those, that is, only 1 or 1 1/2 percent of the gross domestic product, were imports of manufactured products.

(See Robert Lawrence and Mark Slaughter, International Trade and American Wages in the 1980s Brookings Institute paper on economic activity, 1993).

Of the decline in American blue-collar industrial employment from some 30 or 35 percent to 15 to 18 percent of the workforce, practically nothing can therefore be blamed on moving work to low-wage countries.

The main competition for American manufacturing industry—in automobiles, for instance, in steel, in machine tools—has come from countries such as Japan or Germany, where wage costs have long been equal to U.S. wage costs, if not higher than them.

The comparative advantage that now counts is in the application of knowledge—for example, in Japan’s total quality management, lean manufacturing, just-in-time delivery, and price-based costing, or in the customer service of the medium-sized German or Swiss engineering company.

This means, however, that
developing countries can no longer expect to base their development on low wages.

They, too, must learn to base it on applying knowledge just at the time when most of them (e.g., China, India, and most of Latin America, let alone Black Africa) will have to find jobs for millions of uneducated and unskilled young people qualified for little except yesterday’s blue-collar industrial jobs.


But for the developed countries, too, the shift poses major social challenge.

Blue-collar workers are manual workers, as were farmers and domestic servants.

They still “earn their bread by the sweat of their brow.”

Marx proclaimed that blue-collar industrial workers were something totally new and totally different.

Yes, they worked in a factory.

But otherwise they were traditional workers.

Most earlier workers were similarly not independent but dependent—as hired hands and landless laborers on the land; as domestic servants whether free or unfree; as apprentices and journeymen in the craftsman’s shop.

That the blue-collar industrial worker did not own “the tools of production” (as Marx asserted) was also not new.

Even tenant farmers did not, let alone the far more numerous hired hands.

Nor did domestic servants or the craftsmen’s apprentices and journeymen.

Despite the factory, industrial society was still, essentially, a traditional society in its basic social relationships of production.


But the emerging society, the one based on knowledge and knowledge worker, is not.

It is the first society in which ordinary, common people and that means most people do not earn their daily bread by the sweat of their brow.

It is the first society in which “honest work” does not mean a callused hand.

It is also the first society in which everybody does not the same work, as was the case when the huge majority were farmers or were, as seemed likely only forty or thirty years ago, going to be machine operators.


This is far more than a social change.

It is a change in the human condition.

What it means—what the values are of this society, what its commitments are, what its problems are
we do not know.

But we do know that they will be different.

We do know that the twenty-first century will be different—as regards politics and society, but above all, as regards humans.


The world that exists at the present time is of necessity
the creation of an earlier period. And tomorrow
is being made today, irrevocably in most cases.


Clues for the road ahead: time usage and time investments or vice-versa

The management revolution: Supplying knowledge to find out how existing knowledge can best be applied to produce results is, in effect, what we mean by management. continue


II.    The Emerging Knowledge Society

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What do these issues, these challenges mean for me & … — an alternative

What actions are suggested by the concepts and information in this section? continue

Dense reading accompanied by thinking broad and detailed is needed in creating an effective action approach

Realities ::: The outer limit of your concern?




Work life foundations

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Knowledge workers will not be the majority in the knowledge society, but in many countries, if not most developed countries, they will be the largest single group in the population and the workforce.

And even if outnumbered by other groups, knowledge workers will be the group that gives the emerging knowledge society its character, its leadership, its social profile.

They may not be the ruling class of the knowledge society, but they already are its leading class.

And in their characteristics, their social position, their values, and their expectations, they differ fundamentally from any group in history that has ever occupied the leading, let alone the dominant, position.



larger composite view ↑ ::: Economic & content and structure ::: Adoption rates: one & two


In the first place, the knowledge worker gains access to work, job, and social position through formal education.


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star Reality check — post-capitalist exec. interview star


Their liberal education, in other words,
does not enable them to understand reality,
let alone to master it
continue and here

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A great deal of knowledge work will require high manual skill and substantial work with one’s hands.

An extreme example is neurosurgery.

The neurosurgeon’s performance capacity rests on formal education and theoretical knowledge.


Absence of manual skill disqualifies for work as a neurosurgeon, but manual skill alone, no matter how advanced, will never enable anyone to be a neurosurgeon.

The formal education that is required for knowledge work is education that can only be acquired in and through formal schooling.

It cannot be acquired through apprenticeship.


In the amount and kind of formal knowledge required, knowledge work will vary tremendously from one occupation to the next.

Some will have fairly low requirements, others will require the kind of knowledge the neurosurgeon has to possess.

But even if the knowledge itself is quite primitive, it is knowledge that only formal education can provide.

Filing is hardly advanced knowledge work.

But it is based on a knowledge of the alphabet—or in Japan on a knowledge of Chinese ideograms—which can be acquired only in and through systematic learning, that is, in and through formal schooling.


The first implication of this is that education will become THE center of the knowledge society, and schooling its key institution.

What knowledge is required for everybody?

What mix of knowledges is required for everybody?

What is “quality” in learning and teaching?

All these will, of necessity, become central concerns of the knowledge society, and central political issues.

In fact, it may not be too fanciful to anticipate that the acquisition and distribution of formal knowledge will come to occupy the place in the politics of the knowledge society that acquisition and distribution of property and income have occupied in the two or three centuries that we have come to call the Age of Capitalism.


See “School and Education as Society’s Center” and
“The Competitive Knowledge Economy” further down the page


Paradoxically, this may not necessarily mean that the school as we know it will become more important.

For in the knowledge society clearly more and more of knowledge, and especially of advanced knowledge, will be acquired well past the age of formal schooling, and increasingly, perhaps, in and through educational processes that do not center on the traditional school—for example, systematic continuing education offered at the place of employment.

But at the same time, there is very little doubt that the performance of the schools and the basic values of the schools will increasingly become of concern to society as a whole, rather than be considered “professional” matters that can safely be left to the “educator.”


We can also predict with high probability that we will redefine what it means to be an “educated person.”

Traditionally, and especially during the last two hundred or three hundred years, at least in the West (and since about that time in Japan, as well), an educated person was somebody who shared a common stock of formal knowledge—someone who had what the Germans called an Allgemein Bildung (a general education) and the English (and following them, the nineteenth-century Americans) called a “liberal education.”

Increasingly, an “educated person” will be somebody who has learned how to learn and who throughout his or her lifetime continues learning, and especially learning in and through formal education.


There are obvious dangers to this.

Such a society can easily degenerate into one in which the emphasis is on formal degrees rather than on performance capacity.

It can easily degenerate into one of totally sterile, Confucian-type mandarins—a danger to which the American university, particularly, is singularly susceptible.

It can, on the other hand, also fall prey to overvaluing immediately usable, “practical” knowledge, and underrate the importance of fundamentals, and of wisdom altogether.


This society in which knowledge workers dominate is in danger of a new “class conflict: the conflict between the large minority of knowledge workers and the majority of people who will make their living through traditional ways, either by manual work, whether skilled or unskilled, or by services work, whether skilled or unskilled.

The productivity of knowledge work—still abysmally low—will predictably become the economic challenge of the knowledge society.

On it will depend the competitive position of every single country, every single industry, every single institution within society.

The productivity of the non-knowledge services worker will increasingly become the social challenge of the knowledge society.

On it will depend the ability of the knowledge society to give decent incomes, and with them dignity and status, to non-knowledge people.


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Unless we can learn how to increase the productivity of knowledge workers and service workers, and increase it fast, the developed countries will face economic stagnation and severe social tension. more

To improve the productivity of knowledge workers will in fact require drastic changes in the structure of the organizations of post-capitalist society, and in the structure of society itself. more


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Knowledge: Its Economics and Its Productivity

The productivity of knowledge is going to be the determining factor in the competitive position of a company, an industry, an entire country.

No country, industry, or company has any “natural” advantage or disadvantage.

The only advantage it can possess is the ability to exploit universally available knowledge.

The only thing that increasingly will matter in national as in international economics is management’s performance in making knowledge productive.

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No society in history has faced these challenges.

But equally new are the opportunities of the knowledge society.

In the knowledge society, for the first time in history, access to leadership is open to all.

Equally, access to the acquisition of knowledge will no longer be dependent on obtaining a prescribed education at any given age.

Learning will become the tool of the individual—available to him or her at any point in life—if only because so much of skill and knowledge can be acquired by means of the new learning technologies.


larger composite view ↑ ::: Economic & content and structure ::: Adoption rates: one & two

Another implication is that the performance of an individual, an organization, an industry, a country, in acquiring and applying knowledge will increasingly become the key competitive factor—for career and earnings opportunities of the individuals; for the performance, perhaps even the survival, of the individual organization; for an industry; and for a country.

The knowledge society will inevitably become far more competitive than any society we have yet knownfor the simple reason that with knowledge being universally accessible, there are no excuses for nonperformance.

There will be no “poor” countries.

There will only be ignorant countries.

And the same will be true for individual companies, individual industries, and individual organizations of any kind.

It will be true for the individual, too.

In fact, developed societies have already become infinitely more competitive for the individual than were the societies of the early twentieth century—let alone earlier societies, those of the nineteenth or eighteenth centuries.

Then, most people had no opportunity to rise out of the “class” into which they were born, with most individuals following their fathers in their work and in their station in life.


I have been speaking of knowledge.

But the proper term is knowledgeS.

For the knowledge of the knowledge society is fundamentally different from what was considered knowledge in earlier societies, and in fact, from what is still widely considered knowledge.

The knowledge of the German Allgemein Bildung or of the Anglo-American liberal education had little to do with one’s life’s work.

It focused on the person and the person’s development rather than on any application—and often even prided itself on having no utility whatever.

In the knowledge society, however, knowledge basically exists only in application.


And knowledge in application is, by definition, highly specialized—which was the reason why Plato’s Socrates, twenty-five hundred years ago, refused to accept it as knowledge and considered it mere techné, that is, mere skill.


Some knowledge work requires a fairly limited amount of knowledge—examples are some paramedical technologists, such as the X-ray technologist, the technologist in the clinical laboratory, or the pulmonary technologist.

Other knowledge work requires far more advanced theoretical knowledge: for example, most of the knowledge work required in business, whether in market research; in product planning; in designing manufacturing systems; in advertising and promotion; in purchasing.

In some areas the knowledge base is vast indeed, as in neurosurgery and in a good many areas of management, such as managing a major hospital, a big and complex university, or a multinational enterprise.


Whatever the base, knowledge in application is specialized.

It is always specific, and therefore, not applicable to anything else.

Nothing the X-ray technician needs to know can be applied to market research, for instance, or to teaching medieval history.

Allocating one’s life
Nobody is going to do it for you


The central workforce in the knowledge society will, therefore, consist of highly specialized people.

In fact, it is a mistake to speak of “generalists.”

Those whom we refer to by that term will increasingly be those who have learned how to acquire additional specialties and especially to acquire rapidly the specialized knowledge needed for them to move from one kind of work or job to another, such as from being a market researcher to being in general management, or from being a nurse in the hospital to being a hospital administrator.

But “generalists” in the sense in which we used to talk of them are becoming dilettantes rather than educated people.


This too is new.

Historically, workers were generalists.

They did whatever had to be done—on the farm, in the household, in the craftsman’s shop.

This was also true of the industrial worker.

Manufacturing industry only expanded and became dominant when it learned to take the specialized skill out of the work, that is, when it converted the skilled craftsmen of preindustrial times into the semiskilled or unskilled machine operator of the nineteenth and twentieth centuries.


But knowledge workers, whether their knowledge is primitive or advanced, whether they possess a little of it or a great deal, will, by definition, be specialized.

Knowledge in application is effective only when it is specialized.

Indeed, it is more effective the more highly specialized it is.

This goes for the technicians, such as the person who services a computer, an X-ray machine, or the engine of a fighter plane.*

(*See The Five Pillars of TQM: How to Make Total Quality Management Work for You, by General Bill Creech, former commanding general of the U.S. Tactical Air Force (New York: Truman Talley Books/Dutton, 1994), which brilliantly recounts the conversion of a skill-based organization, that is, the U. S.Tactical Air Force, into a knowledge-based organization.)

But it equally applies to work that requires the most advanced knowledge, whether research into genetics or astrophysics or putting on the first performance of a new opera.

The Individual In Entrepreneurial Society

As said before, the shift from knowledge to knowledgeS offers tremendous opportunities to the individual.

It makes possible a “career” as a knowledge worker.

But it equally presents a great many new problems and challenges.

It demands for the first time in history that people with knowledge take responsibility for making themselves understood by people who do not have the same knowledge base.

It requires that people learn—and preferably early—how to assimilate into their own work-specialized knowledges from other areas and other disciplines.



Those who want to live a fulfilling life—who want to feel as if there is some purpose in their being on this earth—will have to learn to manage themselves.

They will have to accept the fact that it is their own responsibility to find meaningful work that builds on their strengths and values.

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This is particularly important, as innovation in any one knowledge area tends to originate outside the area itself.

This is true in respect to products and processes—where, in sharp contrast to the way it was in the nineteenth and early twentieth centuries, innovations now tend to arise outside the industry or process itself.

It is true just as much in scientific knowledge and in scholarship.

The new approaches to the study of history have, for instance, come out of economics, psychology, and archaeology—all disciplines which historians never considered relevant to their field and to which historical research had rarely before been exposed.

The Individual In Entrepreneurial Society

How Knowledges Work

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What do these issues, these challenges mean for me & … — an alternative

What actions are suggested by the concepts and information in this section? continue

Dense reading accompanied by thinking broad and detailed is needed in creating an effective action approach

Realities ::: The outer limit of your concern?



main brainroad continues ↓


That knowledge in the knowledge society has to be highly specialized to be productive implies two new requirements:

1.  Knowledge workers work in teams.

2.  Knowledge workers have to have access to an organization. If not employees they, at least, have to be affiliated with an organization.

There is a great deal of talk these days about “teams” and “teamwork.”

Most of it starts out with the wrong assumption, namely, that we never before worked in teams.

Actually, people have always worked in teams—very few people ever could work effectively by themselves.

The farmer had to have a wife, and the farmwife had to have a husband.

The two worked as a team.

And both worked as a team with their employees, the hired hands.

The craftsman also had to have a wife, with whom he worked as a team—he took care of the craft work, she took care of the customers, the apprentices, and the business altogether.

And both worked as a team with journeymen and apprentices.

The present discussion also assumes as self-evident that there is only one kind of team.

Actually there are quite a few.*

(*On this see the discussion in my book Post-Capitalist Society (New York HarperCollins, 1993), especially pages 85-90.)

But until now the emphasis has been on the individual worker and not on the team.

With knowledge work being the more effective the more specialized it is, teams become the actual work unit rather than the individual himself.


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Post-capitalist executive interview

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But the team that is being touted now as the team—I call it the “jazz-combo” team—is only one kind of team.

Jazz-combo teamwork is actually the most difficult kind to master: it is the team that requires the longest time to gain performance capacity.


We will have to learn to use different kinds of teams for different purposes.

We will have to learn to understand teamsand this is something to which, so far, very little attention has been paid.

The understanding of the performance capacities of different kinds of teams, their strengths, their limitations, the trade-offs between various kinds of teamsthese considerations will increasingly become central concerns in the management of people.


The individual knowledge worker will also have to learn something that today practically no one has learned: how to switch from one kind of team to another; how to integrate himself or herself into teams; what to expect of a team; and, in turn, what to contribute to a team.


The ability to diagnose what kind of team a certain kind of knowledge work requires for full effectiveness, and the ability, then, to organize such a team and integrate oneself into it, will increasingly become a requirement for effectiveness as a knowledge worker.

So far, it is not taught or learned anyplace (except in a few research labs).

So far, very few executives in any kind of organization even realize that it is their job, to a large extent, to decide what kind of team is needed for a given situation, how to organize it, and how to make it effective.

We are not even in the very early stages of work on teams, their characteristics, their specifications, their performance characteristics, and their appraisal.


Equally important is the second implication of the fact that knowledge workers are, of necessity, specialists: the need for them to work as members of an organization.

It is only the organization that can provide the basic continuity that knowledge workers need to be effective.

It is only the organization that can convert the specialized knowledge of the knowledge worker into performance.


By itself, specialized knowledge yields no performance.

The surgeon is not effective unless there is a diagnosis, which, by and large, is not the surgeon’s task and not even within the surgeon’s competence.

Market researchers, by themselves, produce only data.

To convert the data into information, let alone to make them effective in knowledge action, requires marketing people, sales people, production people, service people.

As a loner in his or her own research and writing, the historian can be very effective.

But to produce the education of students, a great many other specialists have to contribute—people whose specialty may be literature, or mathematics, or other areas of history.

And this requires that the specialist have access to an organization.


This access may be as a consultant.

It may be as a provider of specialized services.

But for the majority of knowledge workers it will be as employees of an organization—full-time or part-time—whether a government agency, a hospital, a university, a business, a labor union, any of hundreds of others.

In the knowledge society, it is not the individual who performs.

The individual is a cost center rather than a performance center.

It is the organization that performs.

The individual physician may have a great deal of knowledge.

But the physician is impotent without the knowledge provided by a host of scientific disciplines, including physics, chemistry, genetics, and so on.

The physician is impotent without the test results produced by a host of diagnosticians, running imaging machines, whether X-ray or ultrasound; making and interpreting blood tests; administering brain scans; and so on.

And the physician is impotent without the services of the hospital, which administers intravenous solutions and care for the critically sick patients, and which also provides the physical and/or psychiatric rehabilitation without which there is no full recovery.

To provide any of these services, whether the electrocardiogram, the analysis of the blood samples, the magnetic resonance imaging, or the exercises of the physical therapist, physicians need access to the organization of the hospital, that is, to a highly structured enterprise, organized to operate in perpetuity.

The Employee Society

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What do these issues, these challenges mean for me & … — an alternative

What actions are suggested by the concepts and information in this section? continue

Dense reading accompanied by thinking broad and detailed is needed in creating an effective action approach

Realities ::: The outer limit of your concern?



main brainroad continues ↓


The knowledge society is an employee society.

Traditional society, that is, society before the rise of the manufacturing enterprise and the blue-collar manufacturing worker, was not a society of independents.

Thomas Jefferson’s society of independent small farmers, each being the owner of his own family farm and farming it without any help except for that of his wife and his children, was never much more than fantasy.

Most people in history were dependents.

But they did not work for an organization.

They were working for an owner, as slaves, as serfs, as hired hands on the farm; as journeymen and apprentices in the craftsman’s shops; as shop assistants and salespeople for a merchant; as domestic servants, free or unfree; and so on.

They worked for a “master.”

When blue-collar work in manufacturing first arose, they still worked for a “master.”


In Dickens’s great 1854 novel Hard Times, the workers worked for an “owner.”

They did not work for the “factory.”

Only late in the nineteenth century did the factory rather than the owner become the employer.

And only in the twentieth century did the corporation, rather than the factory, then become the employer.

Only in this century has the “master” been replaced by a “boss,” who, himself, ninety-nine times out of a hundred, is an employee and has a boss himself.


Knowledge workers will be both “employees” who have a “boss” and “bosses” who have “employees.”

Organizations were not known to yesterday’s social science, and are, by and large, not yet known to today’s social science.

The great German sociologist Ferdinand Tönnies (1855-1936), in his 1888 book “Gemeinschaft und Gesellschaft” (Community and Society), classified the known forms of human organization as being either “community,” which is “organic,” and “fate”; or “society,” which is a “structure” and very largely under social control.

He never talked of “organization.”

Nor did any of the other sociologists of the nineteenth or early twentieth centuries.

But organization is neither community nor society, although it partakes of some characteristics of each.

Membership in an organization is not “fate.”

It is always freely chosen.

One joins a company or a government agency or the teaching staff of a university.

One is not born into it.

And one can always leave—traditional communities one could only emigrate from.

It is not society, either, especially as it does not embrace the totality of its members.

The director of market research in a company is also a member of half a dozen other organizations.

She may belong to a church, to a tennis club, and may well spend especially if an American—five hours a week as a volunteer for a local nonprofit organization, for example as a leader of a Girl Scout troop.

Organizations, in other words, are not true collectives.

They are tools, that is, a means to an end.


There have been earlier organizations.

The professional military as it arose after the seventeenth century was an “organization”; it was neither a society nor a community.

The modern university, as it emerged after the foundation of the University of Berlin in 1809, was an organization.

Faculty members freely joined and could always leave.

The same can be said for the civil service as it arose in the eighteenth century, first in France, then in the rest of the Continent, and finally in late nineteenth century in Great Britain and Meiji Japan (though in the United States not until 1933 or World War II).

But these earlier organizations were still seen as exceptions.

The first “organization” in the modern sense, the first that was seen as being prototypical rather than exceptional, was surely the modern business enterprise as it emerged after 1870—which is the reason why, to this day, most people think of “management,” that is, of the organization’s specific organ, as being “business management.”


With the emergence of the knowledge society, society has become a society of organizations.

Most of us work in and for an organization, are dependent for our effectiveness and equally for our living on access to an organization, whether as an organization’s employee or as provider of services to an organization—as a lawyer, for instance, or a freight forwarder.

And more and more of these supporting services to organizations are, themselves, organized as organizations.

The first law firm was organized in the United States a little over a century ago—until then lawyers practiced as individuals.

In Europe there were no law firms to speak of until after World War II.

Today, the practice of law is increasingly done in larger and larger partnerships.

But that is also true, especially in the United States, of the practice of medicine.

The knowledge society is a society of organizations in which practically every single social task is being performed in and through an organization.

See the chapter on society of organizations in Post-Capitalist Society . The organization of the post-capitalist society of organizations is a destabilizer. It must be organized for constant change.

What Is an Employee?

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Dense reading accompanied by thinking broad and detailed is needed in creating an effective action approach

Realities ::: The outer limit of your concern?



main brainroad continues ↓


Most knowledge workers will spend most if not all of their working life as “employees.”

But the meaning of the term is different from what it has been traditionally—and not only in English but in German, Spanish, and Japanese as well.


Individually, knowledge workers are dependent on the job.

They receive a wage or salary.

They are being hired and can be fired.

Legally, each is an “employee.”

But collectively, they are the only “capitalists”; increasingly, through their pension funds and through their other savings (e.g., in the United States through mutual funds), the employees own the means of production.

In traditional economics (and by no means only in Marxist economics), there is a sharp distinction between the “wage fund”—all of which went into consumption—and the “capital fund.”

And most social theory of industrial society is based, one way or another, on the relationship between the two, whether in conflict or in necessary and beneficial cooperation and balance.

In the knowledge society, the two merge.

The pension fund is “deferred wage” and, as such, wage fund.

But it is also increasingly the main source of capital, if not the only source of capital, for the knowledge society.


Equally important, and perhaps more important, is that in the knowledge society the employees, that is, knowledge workers, again own the tools of production.

Marx’s great insight was the realization that the factory worker does not and cannot own the tools of production and, therefore, has to be “alienated.”

There was no way, Marx pointed out, for the worker to own the steam engine and to be able to take the steam engine with himself when moving from one job to another.

The capitalist had to own the steam engine and had to control it.

Increasingly, the true investment in the knowledge society is not in machines and tools.

It is in the knowledge of the knowledge worker.

Without it, the machines, no matter how advanced and sophisticated, are unproductive.


The market researcher needs a computer.

But increasingly this is the researcher’s own personal computer, and a cheap tool the market researcher takes along wherever he or she goes (a.k.a. mobility).

And the true “capital equipment” of market research is the knowledge of markets, of statistics, and of the application of market research to business strategy, which is lodged between the researchers’ ears and is their exclusive and inalienable property.

The surgeon needs the operating room of the hospital and all of its expensive capital equipment.

But the surgeon’s true capital investment are the twelve or fifteen years of training and the resulting knowledge which the surgeon takes from one hospital to the next.

Without that knowledge, the hospital’s expensive operating rooms are so much waste and scrap.


This is true whether the knowledge worker commands advanced knowledge, like the surgeon, or simple and fairly elementary knowledge, like the junior accountant.

In either case, it is the knowledge investment that determines whether the employee is productive or not, rather than the tools, machines, and capital the organization furnishes.

The industrial worker needed the capitalist infinitely more than the capitalist needed the industrial worker—the basis for Marx’s assertion that there would always be a surplus of industrial workers, and an “industrial reserve army” that would make sure that wages could not possibly rise above the subsistence level (probably Marx’s more egregious error).

In the knowledge society the most probable assumption—and certainly the assumption on which all organizations have to conduct their affairsis that they need the knowledge worker far more than the knowledge worker needs them.

It is the organization’s job to market its knowledge jobs so as to obtain knowledge workers in adequate quantity and superior quality.

The relationship increasingly is one of interdependence with the knowledge worker having to learn what the organization needs, but with the organization also having to learn what the knowledge worker needs, requires, and expects.


Because its work is based on knowledge, the knowledge organization is altogether not one of superiors and subordinates.*

(*On this see again the book by General Bill Creech cited above, which makes it clear that even a military organization like the Tactical Air Force becomes a collegial organization when it becomes a knowledge organizationdespite all military rank and protocol.

The colonel commanding a maintenance unit is a colleague of the sergeant doing the maintenance work.

He is accountable for the sergeant’s work, but is not the sergeant’s superior.)

The prototype is the symphony orchestra.

The first violin may be the most important instrument in the orchestra.

But the first violinist is not the “superior” of the harp player.

He is a colleague.

And the harp part is the harp player’s part and not delegated to her by either the conductor or the first violinist.


There was endless debate in the Middle Ages about the hierarchy of knowledges, with philosophy claiming to be the “queen” of the knowledges.

We long ago gave up that moot argument.

There is no higher knowledge and no lower knowledge.

When the patient’s complaint is an ingrown toenail, the podiatrist’s knowledge controls, and not that of the brain surgeon—even though the brain surgeon represents many more years of training and gets a much larger fee.

Conversely, if an executive is posted to a foreign country, the knowledge he or she needs, and in a hurry, is the fairly low skill of acquiring fluency in a foreign language—a language that every native of that country has mastered by age two and without any great investment.

The knowledge of the knowledge society, precisely because it is knowledge only when applied in action, derives its rank and standing from the situation and not from its knowledge content.

What is knowledge, in other words, in one situation, such as the knowledge of Korean for the American executive posted to Seoul, is only information, and not very relevant information at that, when the same executive a few years later has to think through his company’s market strategy for Korea.

This, too, is new.

Knowledges were always seen as fixed stars, so to speak, each occupying its own position in the universe of knowledge.

In the knowledge society, knowledges are tools and, as such, dependent for their importance and position on the task to be performed.


One additional conclusion: Because the knowledge society perforce has to be a society of organizations, its central and distinctive organ is management.

The management revolution: Supplying knowledge to find out how existing knowledge can best be applied to produce results is, in effect, what we mean by management. continue


When we first began to talk of management, the term meant “business management”—since large-scale business was the first of the new organizations to become visible.

But we have learned this last half-century that management is the distinctive organ of all organizations.

All of them require management—whether they use the term or not.

All managers do the same things whatever the business of their organization.

All of them have to bring people—each of them possessing a different knowledge—together for joint performance.

All of them have to make human strengths productive in performance and human weaknesses irrelevant.

All of them have to think through what are “results” in the organization—and have then to define objectives.

All of them are responsible to think through what I call the “theory of the business,” that is, the assumptions on which the organization bases its performance and actions, and equally, the assumptions which organizations make to decide what things not to do.

All of them require an organ that thinks through strategies, that is, the means through which the goals of the organization become performance.

All of them have to define the values of the organization, its system of rewards and punishments, and with its spirit and its culture.

In all of them, managers need both the knowledge of management as work and discipline, and the knowledge and understanding of the organization itself, its purposes, its values, its environment and markets, its core competencies.

The manager and the moron

Management and the World's Work

Management as a practice is very old.

The most successful executive in all history was surely that Egyptian who, 4700 years or more ago, first conceived the pyramid
without any precedent—designed it and built it, and did so in record time.

Unlike any other work of man built at that time that first pyramid still stands.

But as a discipline, management is barely fifty years old.

It was first dimly perceived around the time of World War I.

It did not emerge until World War II, and then primarily in the United States.

Since then, it has been the fastest-growing new function, and its study the fastest-growing new discipline.

No function in history has emerged as fast as management and managers have in the last fifty to sixty years, and surely none has had such worldwide sweep in such a short period.


Management, in most business schools, is still taught as a bundle of techniques, such as the technique of budgeting.

To be sure, management, like any other work, has its own tools and its own techniques.

But just as the essence of medicine is not the urinalysis, important though it is, the essence of management is not techniques and procedures.

The essence of management is to make knowledgeS productive.

Management, in other words, is a social function.

And in its practice, management is truly a “liberal art.”

Drucker’s Lost Art of Management: Peter Drucker’s Timeless Vision for Building Effective Organizations

The Social Sector

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Realities ::: The outer limit of your concern?



main brainroad continues ↓


The old communities—family, village, parish, and so on—have all but disappeared in the knowledge society.

Their place has largely been taken by the new unit of social integration: the organization.

Where community membership was seen as fate, organization membership is voluntary.

Where community claimed the entire person, organization is a means to a person’s ends, a tool.

For two hundred years, a hot debate has been raging, especially in the West: are communities “organic” or are they simply extensions of the person?

Nobody would claim that the new organization is “organic.”

It is clearly an artifact, a creation of Man, a social technology.


But who, then, does the social tasks?

Two hundred years ago social tasks were being done in all societies by a local community—primarily, of course, by the family.

Very few, if any, of these tasks are being done by the old communities anymore.

Nor would they be capable of doing them, considering that they no longer have control of their members or even a firm hold over them.

People no longer stay where they were born, neither in terms of geography, nor in terms of social position and status.

By definition, a knowledge society is a society of mobility.

And all the social functions of the old communities, whether performed well or poorly (and most were performed very poorly, indeed), presupposed that the individual and the family would stay put.

“The family is where they have to take you in,” said a nineteenth-century adage; and community, to repeat, was fate.

To leave the community meant becoming an outcast, perhaps even an outlaw.

But the essence of a knowledge society is mobility in terms of where one lives, mobility in terms of what one does, mobility in terms of one’s affiliation.


This very mobility means that in the knowledge society, social challenges and social tasks multiply.

People no longer have “roots.”

People no longer have a “neighborhood” that controls where they live, what they do, and indeed, what their “problems” are allowed to be.

The knowledge society, by definition, is a competitive society; with knowledge accessible to everyone, everyone is expected to place himself or herself, to improve himself or herself, and to have aspirations.

It is a society in which many more people than ever before can be successful.

But it is therefore, by definition, also a society in which many more people than ever before can fail, or at least can come in second.

And if only because the application of knowledge to work has made developed societies so much richer than any earlier society could even dream of becoming, the failures, whether poverty or alcoholism, battered women or juvenile delinquents, are seen as failures of society.

In traditional society they were taken for granted.

In the knowledge society they are an affront, not just to the sense of justice, but equally to the competence of society and its self-respect.

knowledge technology

Knowledge technology


Who then, in the knowledge society, takes care of the social tasks?

We can no longer ignore them.

But traditional community is incapable of tackling them.


Two answers have emerged in this century—a majority answer and a dissenting opinion.

Both have been proven to be the wrong answers.*

(*For the discussion in this section, see also Part Three of my 1993 book Post-Capitalist Society (New York: HarperCollins), especially Chapter 6, “From Nation State to Mega-State,” and Chapter 9, “Citizenship Through the Social Sector.”)


The majority answer goes back more than a hundred years, to the 1880s, when Bismarck’s Germany took the first faltering steps toward the welfare state.

The answer: the problems of the social sector can, should, and must be solved by government.

It is still probably the answer that most people accept, especially in the developed countries of the West—even though most people probably no longer fully believe it.

But it has been totally disproven.

Modern government, especially since World War II, has become a huge welfare bureaucracy everyplace.

And the bulk of the budget in every developed country today is devoted to “entitlements,” that is, to payments for all kinds of social services.

And yet, in every developed country, society is becoming sicker rather than healthier, and social problems are multiplying.

Government has a big role to play in social tasks—the role of policy maker, of standard setter, and, to a substantial extent, the role of paymaster.

But as the agency to run social services, it has proven itself almost totally incompetent—and we now know why.

How To Guarantee Nonperformance

What Results Should You Expect? — A Users’ Guide to MBO

Conditions for survival


The second dissenting opinion was first formulated by me in my 1942 book The Future of Industrial Man.

I argued then that the new organization—and fifty years ago that meant the large business enterprise—would have to be the community in which the individual would find status and function, with the plant community, I argued, becoming the place in and through which the social tasks would be organized.

In Japan (though quite independently and without any debt to me) the large employer—government agency or business—has indeed increasingly attempted to become a “community” for its employees.

Lifetime employment” is only one affirmation of this.

Company housing, company health plans, company vacations, and so on, all emphasize for the Japanese employee that the employer, and especially the big corporation, is the community and the successor to yesterday’s village and to yesterday’s family.

But this, too, has not worked.


There is need indeed, especially in the West, to bring the employee increasingly into the government of the plant community.

What is now called “empowerment” is very similar to the things I talked about more than fifty years ago.

But it does not create a community.

And it does not create the structure through which the social tasks of the knowledge society can be tackled.

In fact, practically all these tasks, whether providing education or health care; addressing the anomies and diseases of a developed and, especially, of a rich society, such as alcohol and drug abuse; or tackling the problems of incompetence and irresponsibility such as those of the “underclass” in the American city—all lie outside the employing institution.


The employing institution is, and will remain, an “organization.”

The relationship between it and the individual is not that of “membership” in a “community,” that is, an unbreakable, two-way bond.

Even in Japan, lifetime employment has proven not to be tenable except, perhaps, for government employees (as it is in the West, as well).


We may need more employment security than the United States traditionally offers.

But in no society, in an increasingly competitive world economy, can the employing institution, whether a business, a university, or a hospital, become a cocoon of security.

To survive, it needs employment flexibility.

But increasingly, also, knowledge workers, and especially people of advanced knowledge, see the organization as the tool for the accomplishment of their own purposes and, therefore, resent—increasingly even in Japan—any attempt to subject them to the organization as a community, that is, to the control of the organization; to the demand of the organization that they commit themselves to lifetime membership; and to the demand that they subordinate their own aspirations to the goals and values of the organization.

The young knowledge people in Japan still sing the company song.

They still expect the company to provide them job security.

However, not only do they refuse, increasingly, to sacrifice their family life to the company, but they increasingly are as ready as their Western counterparts to change jobs if there is a better one available.

For blue-collar workers in Japan who are employed by a major business corporation, a change in jobs is still exceedingly painful.

If possible at all, it imposes a huge penalty in terms of income and social standing.

But the turnover rate among young engineers in the 1990s in big Japanese corporations is rapidly approaching the turnover rate of Western companies and in some areas actually exceeds it.


This is inevitable because the possessor of knowledge, as said before, owns his “tools of production” and has the freedom to move to wherever opportunities for effectiveness, for accomplishment, and for advancement seem greatest.


The right answer to the question “Who takes care of the social challenges of the knowledge society?” is thus neither “the government” nor “the employing organization.”

It is a separate and new social sector.


It is less than fifty years, I believe, since we first talked in the United States of the “two sectors” of a modern society: the “public sector,” that is, government, and the “private sector,” that is, business.

In the last twenty years the United States has begun to talk of a “third sector,” the “nonprofit sector”: the organizations that take care of the social challenges of a modern society.


In the United States, with its tradition of independent and competitive churches, such a sector has always existed.

Even now, churches are the largest single part of the social sector in the United States, accounting for almost half of the money given to nonprofit, charitable institutions, and for somewhat less than half of the time given to nonprofit volunteer work by individuals.

But the nonchurch part of the social sector has been the growth sector in the United States.

In the 1990s, about one million organizations were registered in the United States as nonprofit or charitable organizations doing social sector work.

The overwhelming majority of these, some 70 percent, have come into existence in the last thirty years.

And most are community services concerned with what goes on this earth rather than with the Kingdom of Heaven.

Quite a few of the new organizations are, of course, religious in their orientation.

But even of these, few are “churches.”

They are “parachurches” engaged in a specific social task, for example, rehabilitation of alcohol and drug addicts, the rehabilitation of criminals, or the education of young children.

Even within the church segment of the social sector, the organizations that have shown the capacity to grow are radically new.

They are the fast-growing “pastoral” churches, which focus on the spiritual needs of individuals, and especially, of educated knowledge workers, and which then put the spiritual energies of their members to work on the social challenges and social problems of the community and especially, of course, of the urban community.


We still talk of these organizations as “nonprofits.”

But this is a legal term.

It means nothing except that under American law these organizations do not pay taxes.

Whether they are organized as “nonprofit” or not is actually irrelevant to their function and behavior.

Many American hospitals since 1960 or 1970 have become “for-profits” and are organized in what legally are business corporations.

They function exactly the same way as traditional “nonprofit” hospitals.

What matters is thus not the legal basis.

What matters is that the social sector institutions have a different purpose.

Government demands compliance.

It makes rules and enforces them.

Business expects to be paid; it supplies.

The social sector institutions aim at changing the human being.

The “product” of the school is the student who has learned something.

The “product” of the hospital is a cured patient.

The “product” of the church is a church-goer whose life is being changed.

The task of the social sector organizations is to create human health.


Increasingly, these organizations of the social sector serve a second and equally important purpose.

They create citizenship.

Modern society and modern polity have become so big and complex that citizenship, that is, responsible participation, is no longer possible.

All we can do as citizens is to vote once every few years and to pay taxes all the time.


As a volunteer in the social sector institution, the individual can again make a difference — mentioned in 15+ sections of The Essential Drucker.

In the United States, where there has been a volunteer tradition all along, because of the old independence of the churches, almost every other adult in the 1990s worked at least three—and often five—hours a week as a volunteer in a social sector organization.

Only in Britain is there something like this tradition, although on a very much lower basis (in part because the welfare state is far more embracing, but in much larger part because of the tradition of an established church that is paid for by the state and run as a civil service).

Outside of the English-speaking countries, there is not much volunteer tradition.

In fact, the modern state in Europe and Japan has been openly hostile to anything that smacks of volunteerism—most so in France and Japan.

It is ancien régime and fundamentally suspected of being subversive.


But even in these countries—Japan is perhaps the main example—things are changing.

For the knowledge society needs the social sector, and the social sector needs the volunteer.

But knowledge workers also need a sphere in which they can act as citizens, that is, a sphere in which they create a community.

Organization does not give it to them.


Nothing has been disproven faster than the concept of the “organization man,” which was almost generally accepted forty years ago.

In fact, the more satisfying one’s knowledge work is, the more one needs a separate sphere of community activity.

The volunteer who works in an American church as a counselor to young marrieds; who works in a local school with learning-impeded children as a tutor; who works with normal children as a scout leader—and there are thousands of such volunteer activities—creates a sphere of personal achievement but also a community in which people sharing their values work together for a common good.


Beware of the mis-managed organizations


Many social sector organizations will become partners with government—as is the case in a great many “privatizations,” where for instance a city pays for street cleaning and an outside contractor then does the work.

In American education, predictably, within the next twenty years there will be more and more government-paid “vouchers,” which enable parents to put their children into a variety of different schools, some public and tax-supported, some private and largely dependent on the income from the parents’ vouchers.

These social sector organizations, while partners with government, also clearly compete with government.

The relationship between the two has yet to be worked out—and there is practically no precedent for it.

(Or, rather, the one precedent we have, the relationship between a government agency, for example the Department of Defense of the United States, and independent defense contractors shows that the relationship is complicated and requires both interdependence and mutual trust, and profound mutual distrust and constant guerrilla warfare.)


But equally what is “performance” for social sector organizations, and especially for those which, being “nonprofit” and “charitable,” do not have the discipline of a financial “bottom line,” has yet to be worked out.

(On this, see my 1992 book Managing the NonProfit Organization [New York: HarperCollins]).

That social sector organizations need management, we know.

But what management precisely means for the social sector organization is just beginning to be studied.

In many ways we are, in respect to the management of the nonprofit organization, pretty much where we were fifty or sixty years ago in respect to the management of the business enterprise—and the work at that time was only beginning.


But one thing is already clear.

The knowledge society has to be a society of three sectors: a public sector, that is, government; a private sector, that is, business; and a social sector.

And it is also, I submit, becoming increasingly clear that it is in and through the social sector that a modern developed society can again create responsible and achieving citizenship, can again give individuals—and especially knowledge people—a sphere in which they can make a difference in society, and a sphere in which they re-create community.

Related thoughts


Citizenship through the social sector

Transnationalism, Regionalism, and Tribalism

Managing the Non-Profit Organization

Managing Service Institutions in the Society of Organizations and Entrepreneurship in the Public-Service Institution in Management, Revised Edition

III.  Knowledge Economy and Knowledge Polity


The emergence of knowledge society and of the society of organizations has profound political implications:


·          it creates a new center of policy


·          it totally changes economic policy


·          it challenges the capacity of government to function


School and Education as Society’s Center


What do these issues, these challenges mean for me & … — an alternative

What actions are suggested by the concepts and information in this section? continue

Dense reading accompanied by thinking broad and detailed is needed in creating an effective action approach

Realities ::: The outer limit of your concern?



Drucker: The Man Who Invented the Corporate Society

Moving Beyond Capitalism?


We need to measure knowledge workers’ productivity ::: American health care :::
Greatest e-commerce impact ::: Higher education and health care :::
In the developed countries, with the exception of the U.S. ,
the number of young people is already going down sharply :::
New approaches to information continue


main brainroad continues ↓


Knowledge has become the key resource—for a nation’s military strength as well as for a nation’s economic strength.

And it is knowledge that can be acquired only in a formal process, that is, through schooling.


About technology

The responsibility-based organization


Knowledge as THE key resource is fundamentally different from any of the traditional key resources, that is, from land and labor, and even from capital.

It is not tied to any country.

It is transnational.

It is portable.

It can be created everywhere, fast, and cheaply.

Finally, it is, by definition, changing.

Knowledge always makes itself obsolete within a short period of time.

The one thing that is predictable about a competitive advantage based on knowledge—whether the advantage be that of a country, of an industry, of an institution (whether a business or a university), or of an individual—is that the advantage will soon be challenged, and probably by a total newcomer.


Victims of success


For that reason alone the acquisition of knowledge, that is, learning, can no longer stop at any age.

“Life-long learning”—the now-fashionable term—may be hyperbole; a good many people stop learning when they stop working and retire.

But continuous learning during one’s working life will increasingly be a requirement for any knowledge worker.

The Bomber Mafia: A Dream, a Temptation, and the Longest Night of the Second World War


The school can no longer be content to be a place that takes care of juveniles not old enough to work.

It will increasingly be the partner of (highly performing and effective) adults (new job requirements) as well as the partner of their employing organizations through the tides of history. … ↓


sidebar ↓

There are #discontinuities ahead ↑ ↓

evidence wall and timeline larger


The individual in entrepreneurial society



The educational revolution

The educated person

How to make the schools accountable

Knowledge and technology


The productivity of knowledge

The productivity challenge

Management Challenges for the 21st Century


main brainroad continues ↓


… And in respect to their employees, organizations, in turn—business and government agencies—social sector nonprofits in respect to their volunteers will increasingly have to become both partners with the schools and themselves teaching and learning institutions.

But also schools and education are bound to become central political issues.

Of course, every existing educational system expresses basic political and social values (on this see the discussion “Education as Social Purpose” in my 1989 book The New Realities).

But neither the content nor the quality nor the productivity and yield of schools and schooling were major
public issues in earlier times.

They were concerns primarily of the educator.

Now, increasingly, they will become political issues—in the United States we are already moving there, and quite fast.

The Competitive Knowledge Economy

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Dense reading accompanied by thinking broad and detailed is needed in creating an effective action approach

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main brainroad continues ↓


That knowledge has become THE key resource means that there is a world economy.

It means that the world economy rather than the national economy, controls.

Every country, every industry, and every business will be in an increasingly competitive environment.

Every country, every industry, and every business will, in its decisions, have to take into serious consideration its competitive standing in the world economy and the competitiveness of its knowledge competencies.


That knowledge creates a world economy, and a highly competitive one, already underlay the transformation of the world economy after World War II.

The rise of Japan was based on applying knowledge, primarily management and training as it had been developed by the Americans during World War II.

The process began no earlier than 1950 or 1952.

But by 1960 it had created a Japanese economy capable of attacking the world’s leading manufacturing companies on their own ground.

And Korea, a few years later, trod the same path.


It is no longer possible to do what the Japanese and the Koreans did.

Low manufacturing wages, even combined with high productivity, no longer give enough of a competitive advantage to build a major economy on.

But the same process applied to advanced knowledge—whether in engineering, in marketing, or in research—can lead to very much the same results, and in fairly short time.


At least this is what Singapore’s experience indicates.

In 1965, when the city seceded from Malaysia and became independent, it was still dependent on the unskilled manual labor of dockworkers.

A dozen years later it had pushed itself into the world economy as an exporter of low-skill manufactured goods made with cheap but well-trained labor.

But Singapore at the same time heavily promoted and financed advanced education.

The Singapore of 1994 is no longer a low-wage producer.

It has become producer and exporter of high-value added and highly engineered products—pharmaceuticals, electronics, computers, telecommunication equipment, optics—turned out by well-educated young knowledge people.

In fact, within less than fifteen years Singapore has even acquired the capacity to design such knowledge-intensive products.


And now the Singaporeans are using this recently acquired knowledge competence to become the leaders in mainland China’s new “capitalism”—as bankers, industrialists, and mass merchants.


Politics and policies still center in domestic issues in every single country.

Few, if any, politicians, journalists or civil servants look beyond the boundaries of their own country when a new measure is being discussed, whether taxes, regulations of business, or social spending.

Even in West Germany—Europe’s most export-conscious and export dependent major country—almost no one even asked in 1990 what the government’s unbridled spending in the East would do to the country’s competitiveness.

The ECONOMIC challenge

This will no longer do.

Every country and every industry will have to learn that the first question is not, “Is this desirable?”

The first question is, “What will be the impact on the country’s (or the industry’s) competitive position in the world economy?

We need to develop in politics something similar to the environmental impact statement, which, in the United States, is now required for any political action: we need a “competitive impact statement.”

The impact on one’s competitive position in the world economy should not be the main, let alone the only, factor in a decision.

But to make a decision without considering it has become irresponsible.


Altogether, the fact that knowledge has become the key resource means that the standing of a country in the world economy will increasingly determine its domestic prosperity.*

(*On this see my article “Trade Lessons from the World Economy,” in the January-February 1995 issue of Foreign Affairs. Also see below)

Since 1950, the ability to improve a country’s position in the world economy has been the main, and indeed, perhaps, the sole, determinant of economic performance in the domestic economy.

Domestic economic policies have been practically irrelevant, both for better and, very largely, even for worse (with the single exception of governmental policies creating inflation, which very rapidly both undermine a country’s competitive standing in the world economy and its domestic stability and ability to grow).

sidebars ↓

In less than 150 years, management has transformed the social and economic fabric of the world’s developed countries … Management and the World's Work


Certain it is that in politics we have already shifted from the four hundred years of the sovereign nation-state to a pluralism in which the nation-state will be one rather than the only unit of political integration. … It will be one component — though still a key component — in what I call the “post-capitalist polity,” a system in which transnational, regional, nation-state, and local, even tribal, structures compete and co-exist. continue


The more transnational the world becomes, the more tribal it will also be continue

An individual’s prosperity depends on their actions being in harmony with the world economy. They can’t depend on their employer to look out for them. They have to learn to manage themselves.

The “primacy of foreign affairs” is an old political precept going back in European politics to the seventeenth century.

Since World War II, it has also been accepted in American politics—though only grudgingly so, and as “temporary emergency.”

It always meant that military security had to be given priority over domestic policies — and in all likelihood this will continue, Cold War or no Cold War.

But the “primacy of foreign affairs” is now acquiring a different dimension.

It asserts that a country’s competitive position in the world economy — and equally that of an industry or an organization — has to be the first consideration in its domestic policies and its strategies.

This is just as true for a country that is only marginally involved in the world economy — should there still be such a one as it is for a business that is only marginally involved in the world economy, or for a university that sees itself as totally domestic.

Knowledge knows no boundaries.

There is no “domestic knowledge” and no “international knowledge.”

There is only knowledge.

And with knowledge becoming the key resource, there is only a world economy, even though the individual organization in its daily activities operates within a national, regional, or even a local setting.

How Can Government Function?

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What do these issues, these challenges mean for me & … — an alternative

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Dense reading accompanied by thinking broad and detailed is needed in creating an effective action approach

Realities ::: The outer limit of your concern?



main brainroad continues ↓


The emergence of the society of organizations altogether challenges the function of government.

All social tasks in the society of organizations are increasingly being done by individual organizations, each created for one, and only one, social task, whether education, health care, or street cleaning.

Transnationalism, Regionalism, and Tribalism

From Analysis to Perception — The New Worldview

Society, therefore, is rapidly becoming pluralist.

Yet our social and political theories still assume a society in which there are no power centers except government.

To destroy or at least to render impotent all other power centers was, in fact, the thrust of Western history and Western politics for five hundred years, from the fourteenth century on.

It culminated in the eighteenth and nineteenth centuries when (except in the United States) such original institutions as still survived—for example, the universities or the established churches—all became organs of the state, with their functionaries becoming civil servants.

But then, immediately beginning in the mid-nineteenth century, new centers arose—the first one, the modern business enterprise, emerged around 1870.

And since then one new organization after another has come into being.

“Corporations once built to last like pyramids
are now more like tents.

Tomorrow they’re gone or in turmoil.”


This is not a new “Feudalism.”

Feudalism meant “public power in private hands.”*

* The phrase is that of the American medievalist J. R. Strayer ( 1904-1987).

Whether land-owning aristocracy or abbeys or free cities or trading companies like the English East India Company, these traditional bodies wanted to be governments.

Within their sphere they indeed wanted to be sovereign.

They demanded control of jurisdiction over their members.

They aimed at having their own coinage.

They tried to regulate trade and commerce within their boundaries

And in many cases they formed and ran their own armies.


The new institutions of the society of organizations have no interest in “public power.”

They do not want to be governments.

But they demand—and, indeed, need—autonomy with respect to their function.

Even at the extreme of Stalinism the managers of major industrial enterprises were largely masters within their enterprise, and the individual industry was largely autonomous.

So was the university and the research lab, let alone the military.


In the pluralism of yesterday, the feudalism of Europe’s Middle Ages, or of Edo Japan in the seventeenth and eighteenth centuries, all pluralist organizations, whether a feudal baron in the England of the War of the Roses or the daimyo—the local lord—in Edo Japan, tried to be in control of whatever went on in their community.

At least they tried to prevent anybody else from having control of any community concern or community institution within their domain.


But in the society of organizations, each of the new institutions is concerned only with its own purpose and mission.

It does not claim power over anything else.

But it also does not assume responsibility for anything else.

Who then is concerned with the common good?


This has always been a central problem of pluralism.

No earlier pluralism solved it.

The problem is coming back now, but in a different guise.

So far it has been seen as imposing limits on these institutions, that is, forbidding them to do things in the pursuit of their own mission, function, and interest, which encroach upon the public domain or violate public policy.

The laws against discrimination—by race, sex, age, education, health, and so on—which have proliferated in the United States in the last forty years all forbid socially undesirable behavior.

But we are increasingly raising the question of the “social responsibility” of these institutions: “What do these institutions have to do—in addition to discharging their own functions—to advance the public good?

This, however—though nobody seems to realize it—is a demand to return to the old pluralism, the pluralism of feudalism.

It is a demand that “private hands assume public power.”


That this could seriously threaten the functioning of the new organizations the example of the school in the United States makes abundantly clear.

One of the major reasons for the steady decline in its capacity to do its own job, that is, to teach children elementary knowledge skills, is surely that, beginning in the 1950s, the United States has made the school increasingly the carrier of all kinds of social policies, beginning with the elimination of racial discrimination, the elimination of discrimination against all other kinds of “minorities,” against the “handicapped,” and so on.

Whether we have actually made any progress in assuaging social ills is highly debatable; so far the school has not proven a particularly effective tool for social reform.

But making the school the organ of social policies has, without any doubt, severely impaired its capacity to do its own job.


The new pluralism has the old problem of pluralism, namely, who takes care of the common good when the dominant institutions of society are single-purpose institutions?

It has a new problem: how to maintain the performance capacity of the new institutions and yet maintain the cohesion of society?

This makes doubly important the emergence of a strong and functioning social sector.

It is an additional reason why the social sector will increasingly be crucial to the performance, if not to the cohesion, of the knowledge society.


The first new organization to arise, a hundred and twenty-five years ago, was the business enterprise.

It was only natural, therefore, that the problem of the emerging society of organizations was first seen as the relationship of “government and business.”

It was also natural that the new “interests” were first seen as “economic interests.”


The first attempt to come to grips with the politics of the emerging society of organizations aimed, therefore, at making economic interests serve the political process.

The first to tackle this was an American, Mark Hanna, the restorer of the Republican Party in the 1890s and, in many ways, the founding father of twentieth-century American politics.

His definition of politics as being a dynamic disequilibrium between the major economic interests—farmers, business, labor—remained the foundation of American politics until World War II.

In fact, Franklin D. Roosevelt restored the Democratic Party by reformulating Hanna.

And the basic political statement of this philosophy is the title of the most influential political book written during the New Deal years—in 1936—Politics: Who Gets What, When, How, by Harold D. Laswell.


Mark Hanna, in 1896, knew very well that there are plenty of concerns other than economic concerns.

And yet it was obvious to him—as it was to Franklin D. Roosevelt, forty years later—that the economic interests had to be used to mitigate all the others.

This is still the assumption underlying most analyses of American politics—and, in fact, of politics in all developed countries.

But it is no longer a tenable assumption.

Underlying the Mark Hanna formula of the “economic interests” is the view of the land, labor, and capital as the “resources.”

But knowledge, the new resource for economic performance, is not in itself economic.


It cannot be bought or sold.

The fruits of knowledge, such as the income from a patent, can be bought or sold.

The knowledge that went into the patent cannot be conveyed at any price.

No matter how much a medical student is willing to pay a neurosurgeon, the neurosurgeon cannot sell to him—and surely cannot convey to him—the knowledge that is the foundation for the neurosurgeon’s performance and for the neurosurgeon’s income.

The acquisition of knowledge has a cost, as has the acquisition of anything.

But the acquisition of knowledge has no price.


Economic interests can therefore no longer integrate all other concerns and interests.

As soon as knowledge became the key economic resource, the integration of the interestsand with it the integration of the pluralism of a modern polity—began to fall apart.

Increasingly, noneconomic interests are becoming the new pluralism, the “special interests,” the “single-cause” organizations, and so on.

Increasingly, politics is not about “who gets what, when, how” but about values, each of them considered to be an absolute.

Politics is about “the right to life” of the embryo in the womb as against the right of a woman to control her own body and to abort an embryo.

It is about the environment.

It is about gaining equality for groups alleged to be oppressed and discriminated against.

None of these issues is economic.

All are fundamentally moral.


Economic interests can be compromised, which is the great strength of basing politics on economic interests.

“Half a loaf is still bread” is a meaningful saying.

But “half a baby,” in the biblical story of the judgment of Solomon, is not half a child.

Half a baby is a corpse and a chunk of meat.

There IS no compromise possible.

To an environmentalist “half an endangered species” is an extinct species.


This greatly aggravates the crisis of modern government.

Newspapers and commentators still tend to report in economic terms what goes on in Washington, in London, in Bonn, or in Tokyo.

But more and more of the lobbyists who determine governmental laws and governmental actions no longer are lobbyists for economic interests.

They lobby for and against measures they—and their paymasters—see as moral, spiritual, cultural.

And each of these new moral concerns, each represented by a new organization, claims to stand for an absolute.

Dividing their loaf is not compromise.

It is treason.


There is thus in the society of organizations no single integrating force that pulls individual organizations in society and community into coalition.

The traditional partiesperhaps the most successful political creations of the nineteenth century—no longer can integrate divergent groups and divergent points of view into a common pursuit of power.

Rather, they become battlefields between groups, each of them fighting for absolute victory and not content with anything but total surrender of the enemy.


This raises the question how government can be made to function again.

In countries with a tradition of a strong independent bureaucracy, notably Japan, Germany, and France, the civil service still tries to hold government together.

But even in these countries the cohesion of government is increasingly being weakened by the special interests and, above all, by the noneconomic, the moral, special interests.


Since Machiavelli, almost five hundred years ago, political science has primarily concerned itself with power.

Machiavelli—and political scientists and politicians since him—took it for granted that government can function once it has power.

Now, increasingly, the questions to be tackled will be:

What are the functions that government and only government can discharge, and that government must discharge?” and

How can government be organized so that it can discharge these functions in a society of organizations?


Have you read Part II — The Emerging Knowledge Society (above)?




Conclusion: The Priority Tasks—The Need for Social and Political Innovations

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What do these issues, these challenges mean for me & … — an alternative

What actions are suggested by the concepts and information in this section? continue

Dense reading accompanied by thinking broad and detailed is needed in creating an effective action approach

Realities ::: The outer limit of your concern?



main brainroad continues ↓


The twenty-first century will surely be one of continuing social, economic, and political turmoil and challenge, at least in its early decades.

The Age of Social Transformations is not over yet.

And the challenges looming ahead may be more serious and more daunting still than those posed by the social transformations that have already happened, the social transformations of the twentieth century.


Yet we will not even have a chance to resolve these new and looming problems of tomorrow unless we first address the challenges posed by the developments that are already accomplished facts, the developments reported in the earlier sections of this essay.


They are the priority tasks.

For only if they are tackled can we, in the developed, democratic, free-market countries hope to have the social cohesion, the functioning economy, and the governmental capacity needed to tackle the new challenges.

The first order of business—for sociologists, political scientists, and economists; for educators; for business executives; politicians and nonprofit leaders; and for people in all walks of life, as parents, as employees, as citizens—is to work on these priority tasks for few of which we so far have a precedent, let alone tested solutions.


In sum, these priority tasks are as follows:


·          We will have to think through education—its purpose, its values, its content.

We will have to learn to define the
quality of education and the productivity of education, to measure both and to manage both.


·          We need systematic work on the quality of knowledge and the productivity of knowledge—neither even defined so far.

On those two, the performance capacity, and perhaps even the survival, of any organization in the knowledge society, will increasingly come to depend.

But so will also the performance capacity, and perhaps even the survival, of any individual in the knowledge society.

And what
responsibility does knowledge have?

What are the responsibilities of the knowledge individual, and especially of people of high—and therefore highly specialized—knowledge?


·          Increasingly, the policy of any country—and especially of any developed country—will have to give primacy to the country’s competitive position in an increasingly competitive world economy.

Any proposed domestic policy needs to be shaped so as to improve the country’s competitive position in the world economy or, at the least, so as to minimize adverse impacts on it.

The same holds true for policies and strategies of any institution within a nation, whether a local government, a business, a university, or a hospital.


·          We need to develop an economic theory appropriate to the primacy of a world economy in which knowledge has become the key economic resource and the dominant—and perhaps even the only—source of comparative advantage.


·          We are beginning to understand the new integrating mechanism: organization.

But we still have to think through how to balance two apparently contradictory requirements.

Organizations must competently perform the
one social function for the sake of which they exist—the school to teach; the hospital to cure the sick; the business to produce goods; services and the capital to provide for the risks of the future.

They can do so only if they single-mindedly concentrate on their own specialized mission.

But there is also the need of society for these organizations to take social responsibility, that is, to
work on the problems and challenges of the community.

Together these organizations are the community.

The emergence of a strong, independent, performing
social sector—neither public sector, that is, government, nor private sector, that is, business—is thus a central need of the society of organizations.

But by itself it is not enough: the organization of both the public and the private sector must share in the work.


·          The function of government and its functioning will increasingly become central to political thought and political action.

The “megastate” in which this century indulged has not performed, either in its totalitarian or in its democratic version.

It has not delivered on a single one of its promises.

government by countervailing lobbyists is neither particularly effective—in fact, it is paralysis—nor particularly attractive.

Yet effective government has never been needed more than in this highly competitive and fast-changing world of ours in which the dangers created by the pollution of the physical environment are matched only by the dangers of worldwide armaments pollution.




And we do not have even the beginnings of political theory or the political institutions needed for effective government in the knowledge-based society of organizations.

If the twentieth century was one of social transformations, the twenty-first century needs to be one of social and political innovations.





The essay above is part of the Society section in The Essential Drucker. The other essays in the Society section are:

bbx The Coming of Entrepreneurial Society

bbx Citizenship through the Social Sector

bbx From Analysis to Perception – The New Worldview




More thoughtscape horizons for a complex, evolving world


bbx Luther, Machiavelli, and the Salmon
(beyond the Information Revolution)

bbx The First Technological Revolution and Its Lessons

bbx Peter Drucker Sets Us Straight

bbx Post-Capitalist Society

bbx Management Challenges for the 21st Century

bbx Managing in the Next Society

bbx The Definitive Drucker






Large view of image above

What do these issues, these challenges mean for …
::: an alternative

Note the fog and reflection ↓

challenger thinking

Challenge thinking


Thinking canvases


Larger view of the harvesting and implementing image above


Larger view of the action system image on the right above

The Six Thinking Hats



Larger view of the PISCO-TEC image above


Looking beyond yesterday(S)
(an action entry point for individuals)




Executive Effectiveness

“Men of high effectiveness are conspicuous by their absence in executive jobs.

High intelligence is common enough among executives.

Imagination is far from rare.

The level of knowledge tends to be high.

But there seems to be little correlation between a man’s effectiveness and his intelligence, his imagination, or his knowledge.

Brilliant men are often strikingly ineffectual; they fail to realize that the brilliant insight is not by itself achievement.

They never have learned that insights become effectiveness only through hard systematic work.

Conversely, in every organization there are some highly effective plodders.

While others rush around in the frenzy and busyness which very bright people so often confuse with ‘creativity,’ the plodder puts one foot in front of the other and gets there first, like the tortoise in the old fable.”

“Follow effective action with quiet reflection.

From the quiet reflection will come even more effective action.” — Peter Drucker

“The last twenty years have been very unsettling.

Executives really don’t understand the world they live in” — PFD Forbes




Creating Tomorrow’s Society Of Citizens

Your commitment to self-assessment is a commitment to developing yourself and your organization as a leader.

You will expand your vision by listening to your customers, by encouraging constructive dissent, by looking at the sweeping transformation taking place in society.

You have vital judgments ahead: whether to change the mission, whether to abandon programs that have outlived their usefulness and concentrate resources elsewhere, how to match opportunities with your competence and commitment, how you will build community and change lives.

Self-assessment is the first action requirement of leadership: the constant re-sharpening, constant refocusing, never being really satisfied.

And the time to do this is when you are successful.

If you wait until things start to go down, then it’s very difficult.

We are creating tomorrow’s society of citizens through the social sector, through your nonprofit organization.

And in that society, everybody is a leader, everybody is responsible, everybody acts.

Therefore, mission and leadership are not just things to read about, to listen to; they are things to do something about.

Self-assessment can and should convert good intentions and knowledge into effective action — not next year but tomorrow morning.




Refining the Mission Statement

Every three to five years you should look at the mission again to decide whether it needs to be refocused

▪ because the demographics of your customers have changed,

▪ because you should abandon something that produces no results or needs resources beyond the organization’s competencies, or

▪ because the objective has been accomplished.

You must think through priorities.

That’s easy to say, but to act on it is very hard because doing so always involves

▪ abandoning things that may look attractive, or

▪ giving up programs that people both inside and outside the organization are strongly encouraging you to keep.

But if you don’t concentrate your institution’s resources, you are not going to get results.

This may be the ultimate test of leadership: the ability to think through the priority decision and to make it stick




The importance of financial measurements and financial results

Similarly, I have always emphasized in my writing, in my teaching, and in my consulting the importance of financial measurements and financial results.

Indeed, most businesses do not earn enough.

What they consider profits are, in effect, true costs.

One of my central theses for almost forty years has been that one cannot even speak of a profit unless one has earned the true cost of capital.

And, in most cases, the cost of capital is far higher than what businesses, especially American businesses, tend to consider as “record profits.”

I have also always maintained—often to the scandal of liberal readers—that the first social responsibility of a business is to produce an adequate surplus.

Without a surplus, it steals from the commonwealth and deprives society and the economy of the capital needed to provide jobs for tomorrow.

Further, for more years than I care to remember, I have maintained that there is no virtue in being nonprofit and that, indeed, any activity that could produce a profit and does not do so is antisocial.

Professional schools are my favorite example.

There was a time when such activities were so marginal that their being subsidized by society could be justified.

Today, they constitute such a large sector that they have to contribute to the capital formation of an economy in which capital to finance tomorrow’s jobs may well be the central economic requirement, and even a survival need.





… “But now the traditional axiom that an enterprise should aim for maximum integration has become almost entirely invalidated.

One reason is that the knowledge needed for any activity has become highly specialized.

It is therefore increasingly expensive, and also increasingly difficult, to maintain enough critical mass for every major task within an enterprise.

And because knowledge rapidly deteriorates unless it is used constantly, maintaining within an organization an activity that is used only intermittently guarantees incompetence” — Peter Drucker




Trade Lessons from the World Economy


There are opinions galore about international trade policy, especially for the United States.

All are argued with passion but rarely with much evidence.

The world economy has actually been growing faster for forty years than at any time since the eighteenth-century “Commercial Revolution,” which created both the first modern economies and the discipline of economics.

And though all developed economies have been stagnant and in recession these last few years, the world economy is still expanding at a good clip.

But no one asks, What are the facts?

What do they teach us?

What are the lessons, above all, for domestic economic policy?


There are important lessons in four areas: the structure of the world economy; the changed meaning of trade and investment; the relationship between world economy and domestic economy; and trade policy.

In each of these areas the lessons are quite different from what practically everybody believes and asserts, whether “free trader,” “managed trader,” or “protectionist.”


Twenty years ago no one talked of the “world economy.”

The term then was “international trade.”

The change in term—and everybody now talks of the world economy—bespeaks a profound change in economic reality.

Twenty or thirty years ago the economy outside the borders of a nation—and especially outside the borders of a middle-sized or large nation—could still be seen as different, as separate, as something that could be safely ignored in dealing with the domestic economy and in domestic economic policy.

That, as the evidence makes unambiguously clear, is sheer delusion today—but it is still very much the basic position of economists, of politicians, and of the public at large, especially in the United States.


The “international economy” traditionally had two parts: foreign trade and foreign investment.

The world economy also has two parts—but they are different from those of international trade.

The first part consists of flows of money and information; the second, trade-investment, rapidly merging into one transaction, and actually only different dimensions of the same phenomenon, namely, the new integrating force of the world economy, cross-border alliances.

While both of these segments are growing fast, money and information flows are growing the fastest.

They deserve to be looked at first.


The center of the world money flows, the London Interbank Market handles more money in one day than would be needed in many months—perhaps an entire year—to finance the “real economy” of international trade and international investment.

Similarly, the trades during one day on the main currency markets—London, New York, Zurich, and Tokyo—exceed by several orders of magnitude what would be needed to finance the international transactions of the real economy.


The information flows—conferences, meetings, and seminars; telecommunications, whether by telephone, teleconference, fax, electronic mail; computer transmissions; software; magazines and books; movies and videos; and many other communications by new (and largely electronic) technologies—may already exceed money flows in the fees, royalties, and profits they generate.

They are also probably growing faster than any category of transactions ever grew before in economic history.


Transnational money flows can be seen as the successor to what bankers call “portfolio investments,” that is, investments made for the sake of (usually short-term) financial income such as dividends or interest.

But today’s money flows are not only vastly larger than portfolio investments ever were, they are almost totally autonomous and uncontrollable by any national agency or in large measure by any national policy.

Above all their economic impact is different.

The money flows of traditional portfolio investment were the stabilizers of the international economy.

They flowed from countries of low short-term returns—because of low interest rates, overvalued stock prices, or overvalued currency—into countries of higher short-term returns, thus restoring equilibrium.

And they reacted to a country’s financial policy or economic condition.

Today’s world money flows have become the great destabilizers.

They force a country into “crash” programs—into raising interest rates to astronomical levels, for instance, which throttle business activity, or into devaluing a currency overnight way below its trade parity or its purchasing-power parity, thus generating inflationary pressures.

And today’s money flows are not driven, by and large, by the expectation of greater income but by the expectation of immediate speculative profits.

They are a pathological phenomenon bespeaking the fact that neither fixed foreign-exchange rates nor flexible foreign-exchange rates really work, though they are the only two known systems so far.

Because money flows are a symptom, it is futile for governments to try to restrict them, for instance by taxing money-flow profits; the trading just moves elsewhere.

They are a fever, to be sure; but they are not the disease.

All that can be done—and it needs to be included in the specifications for an effective trade policy—is to build resistance into the economy against the impacts of money flows.


In contrast to money flows, the economic impacts of information flows are benign.

Few things, in fact, so stimulate economic growth as rapid development of information, whether telecommunications, computer data, computer networks, or access (however distorted) to the outside world provided by the entertainment media.

In the United States, information flows and the goods needed to carry them have become the largest single source of foreign-currency income.

But just as we do not view the medieval cathedral as an economic phenomenon—although it was for several centuries Europe’s biggest economic activity next to farming, and its biggest nonmilitary employer—information flows are primarily a social phenomenon.

Their impacts are primarily cultural and social.

Economic factors, such as high costs, are a restraint on information flows rather than motivators.

Yet information flows are an increasingly dominant factor in the world economy.


The first lesson of the world economy is thus that the two most significant phenomena—money flows and information flows—do not fit into any theory or policy we have.

They are not even “transnational”; they are outside altogether, and “nonnational.”


For practically everybody, international trade means merchandise trade, that is, imports and exports of manufactured goods, farm products, and raw materials such as petroleum, iron ore, copper, and timber.

And merchandise trade is what the newspaper reports on every month.

But increasingly, international trade is services trade—little reported and largely unnoticed.

But even merchandise trade is no longer what practically everybody, including economists and policy makers, assumes it to be.

Increasingly it is not a “transaction” that is a sale or a purchase of individual goods.

Increasingly it is a “relationship”—either structural trade or institutional trade—in which the individual transaction is only a “shipment” and an accounting entry.

And both services trade and relationship trade behave differently from transactional merchandise trade.


As everybody knows, the United States has a large and intractable trade deficit.

Actually, though, U.S. trade is more or less in balance and may actually yield a small surplus.

The trade deficit that is daily bewailed by our newspapers, our businessmen and economists, our government officials, and our politicians is a deficit in merchandise trade (caused primarily by ha] our appalling waste of petroleum and [b] the steady decline in both the volume of and the world market prices for U.S. farm exports).

The United States has, however, a very large surplus in services trade.

It is being generated by financial services and retailing; by higher education and Hollywood; by tourism; by hospital companies; by royalties on books, software, and videos; by consulting firms; by fees and royalties on technology; and by a host of other businesses and professions.

According to the official figures—published only every three months and then in a little-read government bulletin—the U.S. services surplus amounts to two-thirds of the merchandise trade deficit.

But as is acknowledged even by the government statisticians who collect the figures, U.S. services exports are grossly underreported.

They may be some 50 percent higher than the official statistics tell us—and services exports are still growing fast.


The United States has the largest single share of the world’s services trade, followed by the United Kingdom, with Japan at the bottom of the list among developed countries.

But in every developed country, services trade is growing as fast as merchandise trade, and probably a good deal faster.

Within ten years it may equal, if not exceed, merchandise trade, at least for highly advanced countries.


Only one major component of services trade is at all susceptible to the “factors” that govern international trade according to trade theory and trade policy: tourism.

It responds immediately to foreign-exchange fluctuations and, sluggishly, to change in labor costs.

The rest—some two-thirds or more—is impervious to such changes.

Most services trade involves exporting and importing knowledge.


More and more merchandise trade is, however, also becoming impervious to short-term (and even to long-term) changes in the traditional economic factors.

In structural trade the decision regarding where manufacturing will be done is being made when the product is first designed.

For a new automobile model, such major parts as engines, transmissions, electronics, and body panels will be produced by plants—some owned by the automobile manufacturer, many more by suppliers—in a dozen different countries, countries such as the United States, Mexico, Canada, Belgium, Japan, and Germany.

Final assembly will also be done in plants located in four or five countries.

And until the model is redesigned in ten years, the plants and the countries specified in the original design are “locked in.”

There will be change only in the event of a major catastrophe, such as war or a fire that destroys a plant.


The big Irish plant of the Swiss pharmaceutical company equally does not “sell.”

It ships chemical intermediates to the company’s finished-product plants in nineteen countries on both sides of the Atlantic, charging a “transfer price” that is pure accounting convention and has as much to do with taxes as with production costs.

Markets and knowledge are very important in structural-trade decisions; labor costs, capital costs, and foreign-exchange rates are restraints rather than determinants.


But there is also “institutional” trade.

When a manufacturer builds a new plant or when a discounter opens a new superstore, it will, nine times out of ten, use for it the machines, tools, equipment, and supplies it has been working with in its existing facilities, is familiar with, and knows it can rely on.

It will buy them from the firms that supply its existing plants or stores.

This holds true whether the new plant or the new store are in the firm’s home country or abroad.

It holds true whether the company is an American one building a plant in Spain, a German one building a superstore in the United States, or a Japanese one acquiring and reequipping a plant in Shanghai.

And as in structural trade the traditional “factors of production” are largely irrelevant to it.


But that institutional trade, and structural trade as well, do not behave according to the accepted rules is far less important than that neither is “foreign trade”—except legally—even when it is trade across national boundary lines.

To the individual business, it makes absolutely no difference whether the stuff comes from its own home country or whether it comes from a plant or supplier in what is legally a foreign country.

This is increasingly as true for shipments from outside suppliers as’ for intracompany shipments.

For the individual business—the automobile manufacturer, the pharmaceutical company, the discount retailer—these are transactions within its own “system”


Both structural and institutional trade have grown explosively these last thirty years as business after business has gone multinational.

We have no reliable figures.

Estimates range from one-third of total U.S. merchandise trade (probably an understatement) to two-thirds (almost certainly too high).

Whenever I have been able to get the figures, I have found structural and institutional trade to be 40 to 50 percent of a company’s total export and import volume—for big companies and mid-sized ones alike.

Traditional transactional merchandise trade is still larger, I am sure.

But the relationship trade is growing faster.

Traditional transactional merchandise trade may be no more than a third of a developed country’s trade by now.

Two-thirds are either services trade or relationship-based merchandise trade—both behaving quite differently.


Similarly, “investment”—the other area in the traditional model of the international economy—is now becoming something markedly different.

Portfolio investment, as has been discussed, has mutated into money flows, which aren’t investment at all.

But now “direct investment”—investment abroad to start a new business or to acquire an existing one—is also beginning to change, and fast.

For a long time in the postwar years, direct investment seemed impervious to change.

The multinational of 1970—the carrier of direct investment—looked little different from the multinational of 1913 (and the multinationals of 1913 controlled as much of the world’s manufacturing as multinationals now control and far more of its banking and insurance).

Traditional direct investment is still growing; in fact, since the mid-eighties, direct investment in the United States—by Europeans, Japanese, Canadians, Mexicans—has grown explosively.

But the action is rapidly shifting to “alliances”: joint ventures, partnerships, knowledge agreements, “outsourcing.”

And in alliances, investment is secondary, if there is any at all.

One example is the recent alliance between American-based Intel, the leading-edge microchip designer, and Sharp, a major Japanese electronics manufacturer.

Intel will share with the Japanese the design of a very advanced microchip; the Japanese in turn will make the chip and share the product with Intel.

One contributes technical competence, the other one production competence.

There are alliances between scores of university research labs and businesses—pharmaceutical firms, electronics firms, engineering firms, computer firms, and food processors.

There are alliances in which organizations outsource support activities: a great many American hospitals now let outside, independent suppliers do their maintenance, housekeeping, billing, collections, and data processing and increasingly let them run the labs, physical therapy, and the diagnostic centers.

And so, increasingly, do hospitals in the United Kingdom and in Japan.

Computer makers now outsource the data processing for their own business to contractors like Electronic Data Systems, the company Ross Perot built and sold to General Motors.

The same computer manufacturers are everywhere entering alliances with small, independent software designs.

Commercial banks are entering alliances with producers and managers of mutual funds.

And small and medium-sized colleges are entering alliances with one another to do the paperwork jointly.


In some of these alliances there is substantial capital investment, as was the case in the 1960s and 1970s joint ventures between Japanese and American companies entered into to produce in Japan and for the Japanese market American-designed goods.

But even then the basis of the alliance was not capital but complementary knowledge: technical and manufacturing knowledge supplied by the Americans, marketing knowledge and management supplied by the Japanese.

Increasingly, whatever investment there is is symbolic rather than substantial—a small minority share in each other’s business to signify the bond between the partners.

In more and more alliances there is no financial relationship at all between the partners—there is apparently none between Intel and Sharp.

And there has never been any investment relationship in the oldest and most successful alliances around, the ones forged by the English retailer Marks & Spencer in the early 1930s with a host of manufacturers of textiles, clothing, and footwear (and later with manufacturers of specialty foods as well)—alliances that the Japanese copied after 1950 for their keiretsu.

Marks & Spencer and the manufacturer in these alliances jointly develop the products, with the manufacture committed to making them only for Marks & Spencer and Marks & Spencer committed to buying them only from that manufacturer.


How many such alliances exist now nobody knows.

In some cases they are not even embodied in a contract but an quite informal.

Increasingly, however, alliances are becoming the dominant form of economic integration in the world economy.

Some major companies—Toshiba, the Japanese electronics giant, or Corning Glass, the world’s leading make of high-engineered glass—may each have more than a hundred alliances all over the world.

Integration in the European Union is proceeding far more through alliances than through mergers and acquisitions, especially among the middle-size companies that dominate most European economies.

As in structural and institutional trade, businesses make little distinction between domestic and foreign partners in their alliances.

An alliance creates a systems relationship, a family relationship in which it does not matter that one partner speaks Japanese, another English, and the third German a Finnish.

And while alliances increasingly generate both trade and investment, they are based on neither.

They pool knowledge.


Economic theory and economic policy know that developing economies are greatly affected by their relationship to the world economy.

Economists talk of “export-led development” and “foreign-investment-led development.”

But for developed countries, and especially for middle-sized and large developed countries, economic theory and economic policy postulate that the domestic economy alone matters.

The autonomy of the domestic economy and its position as the locus of policy making is an axiom for economists, policy makers, and the public at large.


But as the preceding discussion should have made clear, the distinction between domestic and international economy has ceased to be economic reality—however much it remains political, social, cultural, and psychological reality.

The one unambiguous lesson of the last forty years is that increased participation in the world economy has become the key to domestic economic growth and prosperity.

There is a one-to-one correlation between a country’s domestic economic performance in the forty years since 1950 and its participation in the world economy.

The two major countries that have grown the fastest in the world economy, Japan and Korea, are also the two countries in which the domestic economy has grown the fastest.

The same correlation applies to the two European countries that have done best in the world economy in the last forty years: West Germany and Sweden.

The countries that have retreated in the world economy—notably the United Kingdom—are also the countries that have done consistently worst domestically.

In the two major countries that have maintained their participation rate in the world economy within a fairly narrow range—the United States and France—the domestic economy has put in an average performance, neither doing exceptionally well nor suffering persistent malaise and crisis like the United Kingdom.


The same correlation holds true for major segments within a developed economy.

In the United States, for instance, services have tremendously increased their world-economy participation in the last fifteen years—finance is one example, higher education and information are others.

These are also the segments that have grown the most in the domestic economy.

In manufacturing, the industries that have significantly increased their world-market participation—through exports, through investments abroad, through alliances—for example, telecommunications, pharmaceuticals, software, movies, are also the industries that have grown the most in the domestic market.

American agriculture, which has consistently shrunk in terms of world-economy participation, has been in continual depression and crisis, masked only by ever-growing subsidies.


Conversely, there is no correlation at all between domestic economic performance and policies to stimulate the domestic economy.

It is easy, the record shows, for a government to do harm to its domestic economy.

All it has to do is to drive up the inflation rate—examples are the damage Lyndon Johnson’s inflationary policies did to the U.S. economy (which has not yet fully recovered twenty-five years later) and the damage which consistently pro-inflationary policies have done to the economy of Italy.

But there is not the slightest evidence that any government policy to stimulate the economy has impact, whether that policy be Keynesian, monetarist, supply-side, or neoclassic.

Contrary to what economists confidently promised forty years ago, business cycles have not been abolished.

They still operate pretty much the way they have been operating for the past hundred and fifty years.

No country has so far been able to escape them.

But whenever in a business downturn a government policy to stimulate the economy actually coincided with cyclical recovery (as has happened only very, very rarely), it was by pure coincidence.

No one policy shows more such coincidences than any other.

And no policy that worked in a given country in Recession A showed any results whatever when tried again in the same country in Recession B or Recession C. The evidence not only suggests that government policies to stimulate the economy short-term are ineffectual, it suggests something far more surprising: they are largely irrelevant.

Government, the evidence shows clearly, cannot control the “economic weather.”


But the one-to-one correlation between domestic economy and participation in the world economy—over long periods and over a wide range of different phenomena, including widely different economies with different structures, different fiscal and tax policies, and even different forms of participation in the world economy—shows convincingly that participation in the world economy has become the controlling factor in the domestic economy of a developed country.

Two examples: That the U.S. economy in 1990-92 did not slip into a deep recession (let alone a real depression), and that unemployment rates for adults, both men and women, never became as high as they had been in earlier post-World War II recessions (and actually stayed low by any historical standard), resulted entirely from the increase in world-market participation on the part of both U.S. manufacturing and U.S. services, with a sharp increase, for instance, of manufacturing exports.

And, similarly, that Japan has so far—as of the end of 1993—not slid into a profound recession with unemployment figures at European levels, that is, around 8 to 10 percent (hovering instead below 3 percent), is clearly the result of Japan’s manufacturing industry sharply increasing its exports, and especially institutional exports, to mainland Asia.


The world economy has thus become the engine of growth, prosperity, and employment for every developed country.

Every developed economy has become world-economy led.



We can now address the question, What works and what does not work in the world economy?

The debate today is largely between advocates of “mandated trade,” Japan-style, and conventional free traders.

But both are wrong, and the evidence is crystal clear.

Mandated trade means government picking “winners” and pushing them.

But not one industry picked by MITT (the Japanese Ministry of Trade and Industry) has turned out to be a real winner.

MITT’s efforts in the sixties and seventies were concentrated on aluminum, other nonferrous metals, aircraft, and aerospace, and none has gotten anywhere.

In the late seventies and eighties MITT switched to high technology, sponsoring such industries as biomedicine, pharmaceuticals, mainframe computers, telecommunications—but also international brokerage and international commercial banking—again without great success in the world markets.

The Japanese industries which have become the world-beaters either have been bitterly opposed by MITT, as were SONY in its early days and the automobile industry well into the 1970s, or have been ignored by MITT until after they had succeeded by their own efforts.

The Japanese policy to create consortia in which major companies work together to produce new technology—for example, in supercomputers or biogenetics—has had only very limited results.


The reasons are clear, at least in hindsight.

First, picking winners requires a fortune teller.

MITT picked—and had to pick—what was successful at the time in the then more advanced countries, especially the United States.

It did not pick—and could not have picked—what would be successful in an unknown future.

Thus MITT pushed mainframe computers in the early seventies, just before the totally unexpected debut of the PC, that is, just before the mainframe plateaued.

Secondly, MITT picked what had been successful in other countries.

But that means it picked industries that fit other countries’ competencies.

It did not pick—and could not have picked—what turned out to fit Japan’s competencies, namely, the extraordinary ability to miniaturize.

One reason was that the existence of this competence was well hidden and unknown even to the Japanese.

Another reason was that no one, inside Japan or outside, realized its importance before the advent of the microchip.

Also, the Japanese ability to downsize the large American car and to make it small and fuel-efficient was not an asset on the U.S. market until the 1973 and 1979 “oil shocks” made it into one.

And no one could—or would—have predicted the inability of the industry’s world leaders, the American giants, to respond to the Japanese invasion for all of twenty years.

Finally, and most importantly, the world economy has become far too complex for anyone to be able to outguess it or to out-analyze it.

The available data simply do not report such important developments as the growth of services trade, the growth of structural and institutional trade, the growth of alliances.


But as will be argued (and rightly), Japan has performed outstandingly.

This surely cannot be explained as the free traders try to do—that is, it cannot be explained as really being a triumph of conventional free trade.

And we do now know what underlies it, primarily because of a recent (1993) World Bank study entitled The East Asian Miracle.*


In my own research I had reached almost the same conclusions when the World Bank study appeared—but it is far more comprehensive, far more searching, and far more authoritative than any research of mine and will, justly, become the definitive word on the subject.


The World Bank studied eight East Asian “superstars”: Japan, South Korea, Hong Kong, Taiwan, Singapore, Malaysia, Thailand, and Indonesia.

The eight started at very different times, but once they got going, all have shown similar growth in both their domestic economy and in their international economy.

Together they supplied 9 percent of the world’s manufactured goods exports thirty years ago.

Now they supply 21 percent (which means a loss of twelve percentage points primarily by the United Kingdom, the Netherlands and Belgium, the former Soviet Union, and some countries in Latin America).

Thirty years ago, two-fifths of the population in the eight East Asian countries lived below the poverty line; the figure is less than 5 percent today, despite rapid population growth in most of them.

Several of them—Japan, Hong Kong, Singapore, and Taiwan—are now among the world’s richest countries.

The Vanishing East

Yet among the eight there are tremendous differences in culture, history, political systems, and tax policies.

They range from laissez-faire Hong Kong, through interventionist Singapore, to statist Indonesia.


What all eight have in common are two economic policies.

First, they do not try to manage short-term fluctuations in the domestic economy.

They do not try to control the “economic weather.”

In fact, in every case, the economic miracle did not begin until the country had given up the attempt to manage domestic short-term fluctuations.

Each of the eight countries focuses instead on creating the right “economic climate.”

They keep inflation low.

They invest heavily in education and training.

They reward savings and investment and penalize consumption, thus encouraging a high savings rate.


The second economic policy that the eight East Asian Miracles have in common is that they put performance in the world economy ahead of the domestic economy.

In their decisions the first question is always, How will this affect the competitiveness of our industry and its performance in the world economy?

It is not, How will this affect domestic economy and domestic employment?—which is the question that most Western countries focus on, especially the United States and the United Kingdom.

And then the eight actively foster, encourage, promote their successes in the world economy.

Though MITI did not anticipate Japan’s successes, the whole Japanese system is geared to taking a world-market success and running with it—by offering substantial tax benefits to exporters; by making credit readily available for international trade and international investment (where it has been scarce and expensive for domestic business); by deliberately keeping high prices and profits on a protected domestic market to generate cash for investments abroad and for penetrating foreign markets (the popular belief in the “low” profit margins of Japanese companies being pure myth); by reserving special recognition (e. g., the prestigious and highly coveted membership in the executive committee of Keidanren, Japan’s top industrial organization) to the heads of companies that have done particularly well in the world economy; and so on.

Each of the eight countries of the East Asian Miracle does things its own and different way.

But all of them follow the same two basic policies: first, provide the right economic climate at home through stressing the fundamentals of monetary stability, an educated and trained workforce, and a high savings rate; and second, make performance in the world economy the first priority of economic and business policy.


Exactly the same lessons are being taught by the examples of the two countries in the West that—until very recently—showed similar growth: West Germany and Sweden.

These two countries too have very different domestic policies.

But both first created and maintained an economic growth climate, and through the same measures: control of inflation; high investment in education and training; and a high savings rate obtained by high taxes on consumption and fairly low taxes on savings and investment.

And they both have systematically given priority to the world economy in governmental and business decisions.

In both countries, the first question asked is always, How will this affect our world market standing, our world-market competitiveness, our world-market performance?

And the moment these countries got this—when the trade unions a few years back subordinated Germany’s competitive standing to their wage demands, and the Swedes subordinated their industry’s competitive standing to ever-larger welfare spending-the domestic economy of both countries went into stagnation right away.


And one reason why creating the right climate is so important is that it stands as the one and only way to build into a domestic economy resistance to money flows and their shocks.


The last forty years of the world economy yield another lesson as to what works: investment abroad does not “export jobs.”

Instead, it creates jobs at home.

We should have learned this from the U.S. performance in the sixties.

When the American-based multinationals expanded investments rapidly, in Europe, in South America, in Japan, the domestic economy created jobs at a fast rate.

And when in the eighties American multinationals resumed heavy foreign investment—particularly in Europe—domestic employment again expanded fast.

The same is true for Japan, where, as has been said earlier, the jobs created by the rapidly expanding investment in East Asia—with very heavy investment in plants that produce goods for the Japanese home market—has not destroyed jobs but has saved them in large numbers.

It was equally true for Sweden, which, of all industrialized countries, has gone the furthest in investing abroad in manufacturing plants.


The reason is, of course, the institutional trade generated by such investment.

In manufacturing—and in a good many services, such as retailing—investment per worker in the machinery, the tools, and the equipment of a new facility is three to five times annual production.

The employment generated by the institutional trade to get the new facility into production is thus substantially larger for several years to come than the annual output and the annual employment of the new facility.

Most of this institutional trade comes from the home country of the investor; and most of it is produced by high-wage labor.

“Exporting jobs” will thus actually create—at least for the medium term—several jobs in the home country for every one it “exports.”

This explains why the Ford Motor Company, which has aggressively built in Mexico since that country opened itself to foreign investment five or six years ago, is the one U.S. automobile company which has added jobs at home.

It explains why the two Mexican manufacturers—a cement maker and a glass maker—that have aggressively built and bought plants in the United States are among the few major Mexican manufacturers who have added jobs in Mexico these last few years.

So far, however, only the Japanese seem to understand this.

Ten years ago they were panicky about “hollowing out industry,” that is, about exporting to mainland Asia labor-intensive work (for example, in consumer electronics) to supply the Japanese home market.

Today the export of high-value machinery and tools to these Japanese-owned plants on the Asian mainland, that is, institutional trade, has become the biggest contributor to Japan’s export surplus and the mainstay of Japan’s engineering and high-tech employment.


The last forty years also teach that protection rarely protects.

In fact the evidence shows quite clearly that protection in a good many cases hastens the decline of the industry it is intended to protect.


Every developed country massively protects agriculture.

But in the United States some farm products, such as soybeans, fruits, beef, and poultry, are either not subsidized at all or are very much less subsidized than the “traditional” crops, such as corn, cotton, and wheat.

These less-protected products have done a good deal better on the world market—despite intense competition—than have the heavily protected ones.

Farm population in all developed countries has declined steeply since World War II.

But it has declined the most steeply in the two countries in which agriculture is most highly protected and/or subsidized: France and Japan.

It is equally suggestive that the decline in U.S. market share of the American automobile industry dramatically speeded up as soon as it became highly protected in 1980, when the US.government forced the Japanese into “voluntary export restraints.”

That protection breeds complacency, inefficiency, cartels has been known since well before Adam Smith.

But the counterargument has always been that it protects jobs.

The evidence of the last forty years strongly suggests that it does not even do that.

At least it did not do so in agriculture in any developed country.

It did not do so in the U.S. automobile industry or, as the last few years indicate, in the European automobile industry either.

It equally did not protect jobs in the US. steel industry or in the steel industries of Europe or Japan.

Protection no longer protects jobs; it is more likely to hasten their demise.


What the last forty years teach is that free trade is not enough.

We have to go beyond it.


The world economy has become too important for a country not to have a world-economy policy.

Managed trade is delusion of grandeur.

Protectionism can only do harm.

But not to be protectionist is not enough.

What is needed is a deliberate and active, indeed an aggressive policy that gives the external economy, its demands, its opportunities, its dynamics, priority over domestic-policy demands and problems.

For the United States (and for a country like France—as well as most of Latin America), this would mean a radical reversal of decades of traditional policy—it would mean abandoning, in large measure, economic policies that have governed American thinking and American economics ever since 1933, and certainly since 1945.

We still see world-economy demands and world-economy opportunities as “externalities.”

We usually do not even ask, Will this domestic decision hurt American participation, American competitiveness, and American standing in the world economy?

Yet what we really need to ask is, Will this domestic move advance, strengthen, promote American participation in the world economy and American competitiveness?

The answer to this question then determines what are the right domestic economic policy decisions and domestic business decisions.

This, the lessons of the last forty years teach us, is the only economic policy that can work.

It is also—as the last forty years unambiguously teach—the only policy that can rapidly revive a domestic economy mired in turbulence and chronic recession.


Transnationalism, Regionalism, and Tribalism

What do you want to be remembered for?




The following ↓ is a condensed strategic brainscape that can be explored and modified to fit a user’s needs


The concepts and links below ↓ are …

major foundations ↓ for future directed decisionS

aimed at navigating

a world constantly moving toward unimagined futureS


YouTube: The History of the World in Two Hours
— beginning with the industrial revolution ↑ ↓

Management and the World’s Work

↑ In less than 150 years, management ↑ has transformed
the social and economic fabric of the world’s developed countries …


“Your thinking, choices, decisions are determined by
what you have seen edb


Take responsibility for yourself and
don’t depend on any one organization ↑ ↓ (bread-crumb trailS below)

We can only work on the thingS on our mental radar at a point in time

About time The future that has already happened


The economic and social health of our world
depends on
our capacity to navigate unimagined futureS
(and not be prisoners of the past)


The assumption that tomorrow is going to be
an extrapolation of yesterday sabotages the future — an
organization’s, a community’s and a nation’s future.

The assumption ↑ sabotages future generations — your children’s,
your grandchildren’s and your great grandchildren’s — in
spite of what the politicians say …

The vast majority of organization and political power structures
are engaged in this ↑ futile mind-set
while rationalizing the evidence


The future is unpredictable and that means
it ain’t going to be like today
(which was designed & produced yesterday)


The capacity to navigate is governed by what’s between our ears ↑ ↓




When we are involved in doing something ↑

it is extremely difficult to navigate

and very easy to become a prisoner of the past.


We need to maintain a pre-thought ↓

systematic approach to work and work approach

Click on either side of the image below to see a larger view

Harvest to action

Harvesting and implementing Work

based on reality

the non-linearity of time and events

and the unpredictability of the future

with its unimagined natureS. ↓ ↑


(It’s just a matter of time before we can’t get to the future
from where we are presently

Foundations and opportunities ::: larger view


Intelligence and behavior ↑ ↓ ← Niccolò Machiavelli ↑ ↓

Political ecologists believe that the traditional disciplines define fairly narrow and limited tools rather than meaningful and self-contained areas of knowledge, action, and eventscontinue

❡ ❡ ❡

Foundational ↑ Books → The Lessons of History — unfolding realities (The New Pluralism → in Landmarks of Tomorrow ::: in Frontiers of Management ::: How Can Government Function? ::: the need for a political and social theory ::: toward a theory of organizations then un-centralizing plus victims of success) ::: The Essential Drucker — your horizons? ::: Textbook of Wisdom — conceptual vision and imagination tools ::: The Daily Drucker — conceptual breadth ::: Management Cases (Revised Edition) see chapter titles for examples of “named” situations …


What do these ideas, concepts, horizons mean for me? continue



Society of Organizations

“Corporations once built to last like pyramids
are now more like tents.

Tomorrow they’re gone or in turmoil.”


“The failure to understand the nature, function, and
purpose of business enterprise” Chapter 9, Management Revised Edition

“The customer never buys ↑ what you think you sell.
And you don’t know it.

That’s why it’s so difficult to differentiate yourself.” Druckerism


“People in any organization are always attached to the obsolete
the things that should have worked but did not,
the things that once were productive and no longer are.” Druckerism


What Everybody Knows Is Frequently Wrong ::: If You Keep Doing What Worked in the Past You’re Going to Fail ::: Approach Problems with Your Ignorance — Not Your Experience ::: Develop Expertise Outside Your Field to Be an Effective Manager ::: Outstanding Performance Is Inconsistent with Fear of Failure ::: You Must Know Your People to Lead Them ::: People Have No Limits, Even After Failure ::: Base Your Strategy on the #Situation, Not on a Formula — A Class With Drucker: The Lost Lessons of the World's Greatest Management Teacher


Why Peter Drucker Distrusted Facts (HBR blog) and here


Best people working on the wrong things continue


Conditions for survival


Going outside


Making the future — a chance for survival


“For what should America’s new owners, the pension funds,
hold corporate management accountable?” and
“Rather, they maximize the wealth-producing capacity of the enterprise”
Search for the quotes above here


Successful careerS are not planned ↑ here and


What do these issues, these challenges mean for me & … — an alternative


Exploration paths → The memo they don’t want you to see ::: Peter Drucker — top of the food chain ::: Work life foundations (links to Managing Oneself) ::: A century of social transformation ::: Post-capitalist executive interview ::: Allocating your life ::: What executives should remember ::: What makes an effective executive? ::: Innovation ::: Patriotism is not enough → citizenship is needed ::: Drucker’s “Time” and “Toward tomorrowS” books ::: Concepts (a WIP) ::: Site map a.k.a. brainscape, thoughtscape, timescape


Just reading ↑ is not enough, harvesting and action thinking are neededcontinue

Information ↑ is not enough, thinking ↓ is neededfirst then next + critical thinking


Larger view of thinking principles ↑ Text version ↑ :::
Always be constructiveWhat additional thinking is needed?


Initially and absolutely needed: the willingness and capacity to
regularly look outside of current mental involvements continue

bread-crumb trail end




Peter Drucker: Conceptual Resources

The Über Mentor

A political / social ecologist
a different way of seeing and thinking about
the big picture
— lead to his top-of-the-food-chain reputation

drucker business week

about Management (a shock to the system)


“I am not a ‘theoretician’; through my consulting practice I am in daily touch with the concrete opportunities and problems of a fairly large number of institutions, foremost among them businesses but also hospitals, government agencies and public-service institutions such as museums and universities.

And I am working with such institutions on several continents: North America, including Canada and Mexico; Latin America; Europe; Japan and South East Asia.” — PFD




List of his books


Large combined outline of Drucker’s books — useful for topic searching.




High tech is living in the nineteenth century,
the pre-management world.
They believe that people pay for technology.
They have a romance with technology.
But people don't pay for technology:
they pay for what they get out of technology.” —
The Frontiers of Management





“The greatest danger in times of turbulence is not turbulence;

it is to act with yesterday’s logic”. — Peter Drucker



The shift from manual workers
who do as they are being told
either by the task or by the boss —

TO knowledge workers
who have to manage themselves

profoundly challenges social structure


Managing Oneself (PDF) is a REVOLUTION in human affairs.” …

“It also requires an almost 180-degree change in the knowledge workers’ thoughts and actions from what most of us—even of the younger generation—still take for granted as the way to think and the way to act.” …

… “Managing Oneself is based on the very opposite realities:
Workers are likely to outlive organizations (and therefore, employers can’t be depended on for designing your life),

and the knowledge worker has mobility.” ← in a context



More than anything else,

the individual
has to take more responsibility
for himself or herself,
rather than depend on the company.”


“Making a living is no longer enough
‘Work’ has to make a life .” continue

finding and selecting the pieces of the puzzle


The Second Curve




These pages are attention directing tools for navigating a world moving relentlessly toward unimagined futures.



What’s the next effective action on the road ahead




It’s up to you to figure out what to harvest and calendarize
working something out in time (1915, 1940, 1970 … 2040 … the outer limit of your concern)nobody is going to do it for you.

It may be a step forward to actively reject something (rather than just passively ignoring) and then working out a plan for coping with what you’ve rejected.

Your future is between your ears and our future is between our collective ears — it can’t be otherwise.

A site exploration: The memo THEY don't want you to see



To create a site search, go to Google’s site ↓

Type the following in their search box ↓

your search text



What needs doing?





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