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Title
Peter F. Drucker symposia and question and answer session on free enterprise, capitalism vs. communism, income and savings, consumption vs. investment, transfer payments, and diplomatic relations
Creator
Peter F. Drucker
Bob Hawkins
Contributor
William May
Dale E. Zand
Date Created and/or Issued
1981-04-22
Publication Information
The Drucker Institute
Contributing Institution
Claremont Colleges Library
Collection
Drucker Archives
Rights Information
For permission to use this item, contact The Drucker Institute, https://www.drucker.institute/about/drucker-archives/
Description
Bob Hawkins, vice-dean of NYU’s graduate business school, begins the discussion describing the agenda of the symposia, when breaks will be available, and a brief biographical sketch of Peter F. Drucker and Robert Bartley. The topic for the morning’s discussion is free enterprise and the conditions necessary for its survival. Drucker begins by explaining that the first topic is really an attempt to look at major issues of policy, and issues which cannot be solved by governmental policy. Communism is dead, he says, and the question is, thus, can an empire be held together by brute force? Drucker answers in the negative, citing Poland and China as examples to justify his claim. As opposed to other areas of the world, those in the West will have to grapple with the consequences of success, which are often more difficult than those of failure because there is pressure not to “rock the boat” after success. Drucker then relates how societies in developed countries have become employee societies in which, fundamentally, the overwhelming majority gets their livelihood as well as their social recognition and personal achievements through an organization and membership in it as an employee. Moreover, the only access for the overwhelming majority of people to an organization is through the pension fund, and the organization job has become the main property right for the person. Cementing success into an organization’s structure poses a problem--power must be cemented into the organizational structure, or government, unions, or both will move in and preempt it. Benefits, Drucker goes on to stress, need to be issued by the beneficiaries, and not by the employers. When benefits are administered, they are very difficult to make flexible, and when employees are brought into the management of benefits, it is very easy and results in the incredible increase of the effect of benefits. Most of the growth in the labor force has not been in the public sector or large companies, but in small and medium-sized businesses, and Drucker predicts that this is where new power relationships will be forged if only because that is where non-blue collar workers increasingly are. Closely related to these issues is an economic one, and all economic policies in all developed countries have been based on the idea that as the income of a worker goes up, his/her savings will go up disproportionately. The result of this trend, according to John Maynard Keynes, is that the capitalist will become unnecessary, but Drucker argues that this has not happened. Savings rates have been proven, at least, unreliable by events, and savings rates have remained largely the same in Western developed countries. This phenomenon has tremendous consequences because it essentially vitiates the basic economic premise of the welfare state, which goes back to before the First World War. The problem amounts, then, to one of capital formation--how can a nation make sure of sufficient capital formation in the midst of rapid economic and technological change when more than eighty percent goes into the labor fund, and what remains is inadequate. Tax policies have much to do with it, but not too much, and Drucker states that Western developed nations will be forced to shift economic policy from emphasis on consumption to emphasis on investment. Keynes, Drucker argues, understood that problem and solved it by the invention of the multiplier, according to which consumption would automatically force business to invest. The multiplier, however, never worked, and Drucker states that nations will, instead, have to shift to investment as a focus of economic policy, with a full investment budget, rather than a full employment budget. The full investment budget is necessary because the full employment budget assumes the multiplier in which consumption leads directly to investment, which is false. Drucker notes, however, that this will take a long time before it gets to government, but he strongly recommends any large business to start out with the needed capital. Markets should always be considered first, he says, before one looks at capital, and investment needs must be planned for increasingly. Last, Drucker raises the question of how, in a business, one is to balance the two needs--that is, capital vs. the jobs of tomorrow. Drucker closes his portion of the session asserting that the great achievement of the last hundred years is our ability to have transfer payments--our ability to take care of those that cannot take care of themselves. This ability, he contends, is the real meaning of affluence. While every society has to make sure it increases its strength, it has first to look after the living before it can take care of the dead. Today, Drucker states, there is a problem, increasingly, of the limit--at what point do transfer payments impede the capacity of the economy to form capital, to tolerate or initiate change, and to motivate the producers? At what point do they become dangerous to a healthy economy and society? Tax revolt, Drucker states, is a sign that transfer payments have become dangerous, and revolt is increasingly present in Western economies. The elimination of the proletarian will potentially arise as a problem of success in Western society. The proletarian has, instead, been replaced with the proprietor of today. It is no longer a question of how much the wage fund has to increase in the name of justice and equity, but what is the minimum, let alone the optimum, for the capital fund, so that the wage earners have a future. Finally, the question emerges of what is the limit of conscience of a society taking care of those who cannot take care of themselves out of the surplus of those that produce. Drucker notes that the problem with Western democratic capitalism, as opposed to communism, is that it has succeeded. Joseph Schumpeter, according to Drucker, has been proven both right and wrong in his pessimism concerning capitalism’s advancement in 1946. Capitalism’s problems, however, have ultimately been postponed rather than tackled. Robert Bartley begins his session stating how he is an optimist by nature, and is more optimistic today than he has been in the last fifteen years. He goes on to identify the three threats to the survival of free enterprise, namely, the military problem of external aggression; a moral collapse, or collapse of will, internally; and, last, the economic crisis. On the topic of external aggression, Bartley discusses that America has a determined adversary in the Soviet Union. Over the period of the Soviet Union’s growth, the U.S. has let its deterrent posture erode, with the danger that there is going to be a Falkland Islands crisis. Bartley then states that there has emerged a broad consensus that more should be done among Americans. There is currently a debate, Bartley highlights, concerning whether there will be some kind of implosion in the Soviet economy, and Bartley imparts his consistent optimism in the ability of the U.S. to deter Soviet military threats to the United States. He goes on to talk about Schumpeter’s predictions, understanding that, while there is some truth to his calculations, he thinks changes in capitalism will ultimately be to its benefit, and that there is a growing recognition of the moral legitimacy of our society. In terms of the third threat, Bartley contends that we were hooked on inflation, and the fact that the current recession is an adjustment to a non-inflationary environment accounts for the unevenness of the recession--that it hits some industries more than others. The debate centering on tax cuts should be whether or not to advance the third year of tax cuts, rather than postpone it. Hartley notes that he shares Drucker’s concerns about deficits, and stresses that the real problem is to get a cap on the spending side--a task, principally, for government. He remains optimistic about the possibility of getting all of these threats under control, and asserts that, by the end of the 1980s, people will be looking back and wondering why they were so pessimistic. Drucker and Bartley then engage in a question and answer session, and Bartley is called upon to address more of Drucker’s points, including Drucker’s forecast of a perpetual capital shortage and the role of the entrepreneur and capitalist, and the lack of that role presently, while Drucker is called upon to address Bartley’s view of the world and how politicians’ manipulation of economic policy will produce acceptable solutions to the problems of success that Drucker mentioned.
Type
sound
Format
mp3
Identifier
dac02526
http://ccdl.claremont.edu/cdm/ref/collection/dac/id/8060
Language
English
Subject
Drucker, Peter F. (Peter Ferdinand), 1909-2005
New York University
New York University. Graduate School of Business Administration
Free enterprise
Capitalism
Communism
Communist countries
Poland
China
Pension funds
Pension trusts
Pensions
Organizational change
Organization
Organizational effectiveness
Government ownership
Unions, Trade
Small business
White collar workers
Saving and investment
Keynes, John Maynard, 1883-1946
Capitalists and financiers
Developed countries
Welfare state
Welfare economics
World War I
Labor
Labor force
Labor unions
Labor productivity
Multiplier (Economics)
Consumption (Economics)
Investments
Markets
Taxation
Taxes
Proletariat
Transfer payments
Surplus (Economics)
Schumpeter, Joseph A., 1883-1950
Soviet Union
Falkland Islands
Bartley, Robert L
Diplomacy
Symposia
Western civilization
Benefits, Employee
Medium-sized businesses
Capital formation
Source
Original recording, April 22, 1981; Drucker Archives; Box 68
Relation
Drucker Archives - https://ccdl.claremont.edu/digital/collection/dac

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