BOOKS BY PETER F. DRUCKER The Age of Discontinuity The Effective Executive Managing for Results Landmarks of Tomorrow The Practice of Management The New Society Big Business The Future of Industrial Man The End of Economic Man PETER F. DRUCKER The Age of Discontinuity Guidelines to our Changing Society HEINEMANN : LONDON William Heinemann Ltd LONDON MELBOURNE TORONTO JOHANNESBURG AUCKLAND First published 1969 by William Heinemann Ltd Copyright © 1968,1969 by Peter F. Drucker Reprinted 1969 (twice) Reprinted 1970 434 90395 7 Printed in Great Britain by Cox & Wyman Ltd, London, Fakenham and Reading Preface IN GUERRLILA COUNTRY a hand-car, light and expendable, rides ahead of the big, lumbering freight train to detonate whatever ex- plosives might have been placed on the track. This book is such a 'hand-car'. For the future is, of course, always 'guerrilla country' in which the unsuspected and apparently insignificant derails the massive and seemingly invincible trends of today. Or, to change the metaphor, this book may be looked at as an 'early-warning system', reporting discontinuities which, while still below the visible horizon, are already changing the structure and meaning of economy, polity, and society. These discontinuities, rather than the massive momentum of the ap- parent trends, are likely to mould and shape our tomorrow, the closing decades of the twentieth century. These discontinuities are, so to speak, our 'recent future' - both already accomplished fact and challenge to come. Major discontinuities exist in four areas. (1) Genuinely new technologies are upon us. They are almost certain to create new major industries and brand-new major businesses, and to render obsolete at the same time existing major industries and big businesses. The growth industries of the last half-century derived from the scientific discoveries of the mid- and late-nineteenth century. The growth industries of the last decades of the twentieth century are likely to emerge from the knowledge discoveries of the first fifty and sixty years of this century: quantum physics, the understanding of atomic and molecular structure, biochemistry, psychology, symbolic logic. The coming decades in technology are more likely to resemble the closing decades of the last century, in which a major industry based on new technology surfaced every few years, than they will resemble the technological and industrial continuity of the last fifty years. (2) We face major changes in the world's economy. In economic policies and theories, we still act as if we live in an 'international' viii The Age of Discontinuity economy, in which separate nations are the units, dealing with each other primarily through international trade and fundamentally as different from one another in their economy as they are different from one another in language or laws or cultural tradition. But imperceptibly there has emerged a world economy in which common information generates the same economic appetites, aspirations, and demands - cutting across national boundaries and languages and largely disre- garding political ideologies as well. The world has become, in other words, one market, one global shopping centre. Yet this world economy almost entirely lacks economic institutions; the only - though impor- tant - exception is the multi-national corporation. We are also totally without economic policy and economic theory for a world economy. It is not yet a viable economy. The failure of new major economies to join the ranks of 'advanced' and 'developed' nations has created a fissure between rich - and largely white, and poor - and largely coloured, nations that may swallow up both. The next decades must see drastic change. Either we learn how to restore the capacity for development that the nineteenth century possessed in such ample measure - under conditions for development that are quite different; or the twentieth century will make true, as Mao and Castro expect, the prophesy of class war which to have sidetracked was the proudest achievement of the generation before World War I. Only the war now would be between races rather than classes. (3) The political matrix of social and economic life is changing fast. Today's society and polity are pluralistic. Every single social task of importance today is entrusted to a large institution organized for perpetuity and run by managers. Where the assumptions that govern what we expect and see are still those of the individualistic society of eighteenth-century liberal theory, the reality that governs our behaviour is that of organized, indeed over-organized, power-con- centrations. Yet we are also approaching a turning point in this trend. Every- where there is rapid disenchantment with the biggest and fastest-grow- ing of these institutions, modern government, as well as cynicism regarding its ability to perform. We are becoming equally critical of the other organized institutions; revolt is occurring simultaneously in the Catholic Church and the big universities. The young everywhere are, indeed, rejecting all institutions with equal hostility. We have created a new socio-political reality without so far under- standing it; without, indeed, thinking much about it. This new pluralist Preface ix society of institutions poses political, philosophical, and spiritual chal- lenges that go far beyond this book (or the author's competence). (4) But the most important of the changes is the last one. Know- ledge, during the last few decades, has become the central capital, the cost centre and the crucial resource of the economy. This changes labour forces and work; teaching and learning; and the meaning of knowledge and its politics. But it also raises the problem of the responsibilities of the new men of power, the men of knowledge. * * * Yet neither economics nor technology, neither political structure nor knowledge and education, is the theme of this book. The unifying common theme is the discontinuities that even a cursory glance at reality reveals. They are very different, perhaps, from what the fore- casts predict. But they are even more different from what most of us still perceive as 'today'. Every single one of the views which this book records will be familiar. Yet the social landscape that emerges when they are put to- gether into one picture bears little resemblance to what all of us still see when we look around us. Or, to change the metaphor, we, the actors, still believe we are playing Ibsen or Bernard Shaw - while it is the 'Theatre of the Absurd' in which we actually appear (and on TV rather than 'live' on Broadway). * * * It is high fashion today to predict 'The Year 2000'. We suddenly realize that we are closer to this milestone than we are to that fateful year 1933, when both Hitler and Roosevelt came to power. And yet anyone middle-aged today still experiences 1933 as 'current events'. I envy the courage of the seers who tell us what 2000 may look like; but I have no desire to emulate them. I remember too well what the future looked like in 1933. No forecaster could then have imagined our reality of 1969. Nor could anyone, a generation earlier in 1900, have anticipated or forecast the realities of 1933. All we can ever predict is continuity which extends yesterday's trends into tomorrow. What has already happened is the only thing we can project and the only thing that can be quantified. But these con- tinuing trends, however important, are only one dimension of the future, only one aspect of reality. The most accurate quantitative projection never predicts the truly χ The Age of Discontinuity important: the meaning of the facts and figures in the context of a different tomorrow. It would have been highly optimistic in 1950, less than twenty years ago, to predict that the United States could in this century reduce poverty to where fewer than one-tenth of white families and fewer than one-third of Negro families live below the 'poverty threshold'. Yet we had achieved this by 1966. Even in 1959, in the closing years of the Eisenhower Administration, it would have been considered almost Utopian to predict a reduction within one decade of almost half in the number of families in poverty, from more than 8 million to fewer than 5 million - the concrete achievement of the sixties. Yet during this period the income level that defines 'poverty' was sharply raised. The correct figures could perhaps have been forecast; but what today, only ten years later, controls America's mood and shapes its policies - not to mention its picture of itself - would have been quite unpredictable to any statistical, projective method: there has been a change in the meaning, the quality, the perception of our experience. In 1959 the accent was all on our affluence. In 1969 it is all on the poor. This book tries to look at these other dimensions, at the qualitative and the structural, the perceptions, the meaning and the values, the opportunities and the priorities. It is limited in its subject matter to the social scene. But there it takes a broad view, looking at economics and politics, at social issues, at technology and at the universe of learning and knowledge. Only incidentally does it concern itself, however, with those great realms of individual experience, the arts and man's spiritual life. This book does not project trends; it examines discontinuities. It does not forecast tomorrow; it looks at today. It does not ask: 'What will tomorrow look like?' It asks instead: 'What do we have to tackle today to make tomorrow?' PETER F. DRUCKER Montclair, New Jersey 1. The End of Continuity ISio ONE KNOWNI G only the economic facts and figures of 1968 and of 1913 - and ignorant both of the years in between and of anything but economic figures - would even suspect the cataclysmic events of this century such as two world wars, the Russian and Chinese Revolu- tions, or the Hitler Régime. They seem to have left no trace in the statistics. The tremendous economic expansion throughout the in- dustrial world in the last two decades has by and large only made up for the three decades of stagnation between the two World Wars. And the expansion has in the main been confined to nations that were already 'advanced' industrial nations by 1913 - or were at least rapidly advancing. Our time, all of us would agree, is a time of momentous changes - in politics and in science, in world view and in mores, in the arts and in warfare. But in the one area where most people think the changes have been the greatest, the last half-century has in reality been a period of amazing and almost unparalleled continuity: the economy. The economic expansion of the last twenty years has been very fast, but it has been carried largely by industries that were already 'big business' before World War I. It has been based on technologies that were firmly established by 1913 to exploit inventions made in the half- century before. Technologically the last fifty years have been the fulfil- ment of the promises bequeathed to us by our Victorian grandparents rather than the years of revolutionary change the Sunday supplements talk about. Imagine a good economist who fell asleep in July 1914, just before 'the Guns of August' shattered the world of the Victorians. He wakes up now, more than fifty years later, and being a good economist he immediately reaches for the latest economic reports and figures. This Rip van Winkle would be a very surprised man - not because the economy has changed so much - but because it has changed so very 4 The Age of Discontinuity much less than any economist (let alone a good one) would have ex- pected during fifty years. The figures would show that by the mid-sixties all economically advanced countries had, on the whole, reached the levels of production and income they would have attained had the economic trends of the thirty or so years before 1914 continued, basically unchanged, for another fifty years. The one important exception to this might be Russia, where pro- duction and income today are probably well below what the pre-1914 growth rates had promised. We know the reason, of course. It is the political straitjacket into which the Communists forced Russian agriculture just when the technological revolution got going on the farm. As a result Russia, in 1913 one of the world's largest food exporters, now can barely feed her own population. Yet she still keeps nearly half her people on the land - at least twice as many as would be needed had Russian farm productivity been allowed to grow at the rate at which it grew between 1900 and 1913. All other countries that had reached by 1913 what is now called the 'take-off point' in economic development - the United States, Western and Central Europe, and Japan - are today roughly where a long- range projection of the growth trends of the years between 1885 and 1913 would have put them half a century later, that is, today. This is true even of Britain; by 1913 her growth had already slowed to a crawl. Even more amazing: our Rip van Winkle economist would find the economic geography of the world quite unchanged in its structure. Every single area that is today a major industrial power was already well along the road to industrial leadership in 1913. No major new industrial country has joined the club since. Brazil, at least in its central region, may be on the threshold of emergence, but she is not there yet. Otherwise, only areas that are, in effect, extensions of the old industrial regions, such as Canada, Mexico, and Australia, have grown to industrial stature, and mainly as satellite economies at that. In the half-century before 1913, the economic map of the world had been changing as fast and as drastically as the physical map of the world had changed during the age of discovery in the fifteenth and sixteenth centuries. Between 1810 and 1870 both the United States and Germany had surfaced as new, big industrial powers and rapidly forged ahead of the old champion, Great Britain. Twenty years later, Russia, Japan, the present Czechoslovakia, and the present Austria The End of Continuity 5 had soared aloft, with Northern Italy following closely behind. The economic development which seemed so easy and effortless then, even for a non-Western country like Japan, has since World War I become so difficult as to be apparently unattainable. This is not only a funda- mental economic contrast between our era and that of the Victorians and Edwardians; it is also the greatest political threat today - compar- able only to the threat of class war inside industrial society before 1913. Should he turn to industrial structure and technology, our Rip van Winkle economist would find himself equally (and equally unex- pectedly) on familiar ground. Of course, there are hundreds of pro- ducts around that would be unfamiliar to him: electric appliances, TV sets, jet planes, antibiotics, the computer. But in terms of economic structure and growth the load is still being carried by the same industries and largely by the same technologies that carried it in 1913. The main engine of economic growth in the developed countries during the last twenty years has been agriculture. In all these countries (excepting only Russia and her European satellites), pro- ductivity on the farm has been increasing faster than in the manu- facturing industry. Yet the technological revolution in agriculture had begun well before 1913. Most of the 'new' agricultural tech- nology - tractors, fertilizers, improved seeds and breeds - had been around for many years. The 'good' farmer of today has just about reached the productivity and output of the 'model farm' of 1913. Second only to farming as a moving force behind our recent economic expansion, comes steel. World steel capacity has grown five-fold since 1946 with Russia and Japan in the lead. But steel production had become synonymous with economic muscle well before World War I. Almost all the steel mills built since World War II use processes that date back to the 1860s and were already considered obsolescent fifty years ago. The automobile industry - probably number three in the growth parade today - was also well advanced when World War I started. Henry Ford turned out a quarter of a million Model T's in 1913 - more than the Soviet Union has yet produced in any one year. And there is not one feature on any car anywhere today that could not have been found on some commercially available make in 1913. The electrical apparatus, the telephone, and the organic-chemical