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Thursday, December 01, 2005

Kruman on Drucker and the Age of Discontinuity & Anxiety

Krugman column from Monday about Drucker, GM/Delphi, and the breakdown of the American postwar social order:

Age of Anxiety

Published: November 28, 2005

The opening grafs:

"Many eulogies were published following the recent death of Peter Drucker, the great management theorist. I was surprised, however, that few of these eulogies mentioned his book "The Age of Discontinuity," a prophetic work that speaks directly to today's business headlines and economic anxieties.

Mr. Drucker wrote "The Age of Discontinuity" in the late 1960's, a time when most people assumed that the big corporations of the day, companies like General Motors and U.S. Steel, would dominate the economy for the foreseeable future. He argued that this assumption was
all wrong."

and later:

"Many of the corporate giants of the 1960's, companies whose pre-eminence seemed permanent, have fallen on hard times, their places in the business hierarchy taken by new players. General Motors is only the most famous example.

So what? Meet the new boss, same as the old boss: why does it matter if the list of leading corporations turns over every couple of decades, as long as the total number of jobs continues to grow?

The answer is the reason Mr. Drucker's old book is so relevant to today's headlines: corporations can't provide their workers with economic security if the companies' own future is highly insecure.

American workers at big companies used to think they had made a deal. They would be loyal to their employers, and the companies in turn would be loyal to them, guaranteeing job security, health care and a dignified retirement.

Such deals were, in a real sense, the basis of America's postwar social order. We like to think of ourselves as rugged individualists, not like those coddled Europeans with their oversized welfare states. But as Jacob Hacker of Yale points out in his book "The Divided Welfare State," if you add in corporate spending on health care and pensions - spending that is both regulated by the government and subsidized by tax breaks - we actually have a welfare state that's
about as large relative to our economy as those of other advanced countries.

The resulting system is imperfect: those who don't work for companies with good benefits are, in effect, second-class citizens.

And in closing:

"Regular readers of this column know what I think we should do: instead of trying to provide economic security through the back door, via tax breaks designed to encourage corporations to provide health care and pensions, we should provide it through the front door,
starting with national health insurance. You may disagree. But one thing is clear: Mr. Drucker's age of discontinuity is also an age of anxiety, in which workers can no longer count on loyalty from their employers."

I haven't read anything by Drucker. Sounds like "The Age of Discontinuity" would be a good one to choose.

Some places will suffer from these discontinuities more than others. It was interesting being back in Michigan last weekend, seeing the pervasiveness of that fading industry. We pass a GM "Malleable Iron" plant on the way from the highway into Anj's parents' place, one of their friends works for Delphi, ...

Here is one of those many eulogies to Drucker:

Peter Drucker
The one management thinker every educated person should read
(From The Economist print edition) Nov 17th 2005

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