Mass Production: The Concept of the Corporation Chapt 2

“Things are cheap, people are expensive.” That is a key element o Drucker’s argument here. I learned that phrase when I worked for Oldsmobile, a company that no longer exists. It was supposed to make you remember not to substitute human labor for things.

Drucker is actually going a step further than that. He is close to arguing that systems engineering is the dominant field of the corporation. He sees four key elements into a company. (And here, he is talking about a manufacturing company.)

The first element is to divide any good into a collection of interchangeable parts.

The second element is the reduction of the manufacturing process into a series of single steps.

The third element is the design of a plant that integrates the individual manufacturing steps.

The last is the ability to train and prepare workers to operate that plant.

Since all of those element depend on people, they become the central part of the organization and hence, the expensive aspect.

Academics: The Concept of the Corporation Chapt 1

Drucker does not talk about people who care only about the wealfare of the corporation and nothing about the aspirations of society or the needs of a stable society. These people would only consider how you would keep a company operating at all costs. I suppose that they are called academics.

Analytics Structure: The Concept of the Corporation Chapt 1

Drucker has established a fairly complicated structure for analysis. Like so many arguments in academe, the fight will not be over story but over the structure that contains the story. He posits three levels of analysis:

1. The workings of the corporation as an independent organization;

2. The extent to which corporations fulfill the needs and aspirations of society;

3. The extent to which they fill the requirements to sustain a stable society.

He further argues that none of the three levels is dominant, that no one can solve a problem on one level and leave the other two untouched. It is a political philosophy he calls Harmony.

He rapidly dismisses Idealism, which is concerned only with the problems of level 2, how we care for members of society and the opportunity each member of society may possess. He is equally hard on Pragmatism, which is only concerned about producing the greatest goods for the least cost. Both he claims lead to totalitarianism. It is easiest to understand those claims if you have read his two prior books.

Good for GM: The Concept of the Corporation Chapt 1

At this point, Drucker knows nothing about the classic quote from Charlie Wilson. That quote comes from a Senate hearing on January 15, 1953. Wilson, then President of General, is being questioned by senators about his fitness to be Secretary of Defense in the Eisenhower Administration. A Republican senator from new Jersey asked Wilson if he could make a decision that would be beneficial to the U.S. but harmful to GM. “Yes, sir,” said Wilson, “I could. I cannot conceive of one because for years I thought what was good for our country was good for General Motors, and vice versa.”

This quote soon gests twisted into the phrase “What is good for General Motors is good for the nation. At this point, GM is the nation’s largest defense contractor. Drucker also argues that it best represents the leading corporations of America. That is why it is a good subject for his book. Better than Bell Teleophone. Better than Dupont.

Veblen & Universities: The Concept of the Corporation Chapt 1

Again, Drucker is putting the corporation in the context of national security. He quotes, though he does not really make the argument, that we may come to see the world wars as a response to the rise of the corporation. He also argues that the only other large institutions that have appeared in the years between 1900 and 1946 , the labor union and the government agency, are responses to the rise of the corporation. He fails to mention the university but that is connected as well. I can recall a colleague who made that argument in a seminar a few years ago, quoting Veblen in his defense. When another colleague argued that it shouldn’t be that we, the original speaker replied, perhaps it shouldn’t but it is.

Determinative: The Concept of the Corporation Chapt 1

If you didn’t understand it the first two times, perhaps you will get it the third. Drucker argues that he is studying big business not because it dominates the economy of 1946 but because it is determinative, because it is the leader and sets the standards for economic behavior. Again, for the third time in three books, he refers to the example of Victorian gentleman. They were not a majority in their society but they were a majority of the leaders and most social classes wanted their leaders, the leaders of industry say, to behave like gentlemen. In a similar way, we want our businesses to have the same standards, the same efficiency, the same strategic control as large corporations. Finally his sense of decisiveness is starting to make sense.

Free Enterprise: The Concept of the Corporation Chapt 1

Drucker’s definition of Free Enterprise is pretty straightforward. It has four elements:

Governments set the rules of the economy but usually don’t participate by running businesses

Governments can operate natural monopolies or operations needed for national security;

Productive Resources owned privately;

Corporations competing in Markets and Market forces determine business decisions.

(Second one, about natural monopolies, seems less elegant than the others as it seems a pragmatic statement that acknowledges the state of affairs rather than states a basic principle of the economy.)

Cold War: The Concept of the Corporation Chapt 1

So by nature, businessmen are Cold Warriors.

This is one of those chapters that flips the work on its head. It defines “free enterprise” in the process, but I will get to that later. I have often heard the argument that “Free Trade Prevents War” and have generally assumed that someone derived that idea from the nature of capitalism or their desire to promote capitalism. I had never thought that someone would start with that point and then derive the principles of free economy from it, but Drucker does so.

His title for this chapters “Capitalism in one Country” is a direct mockery of Stalin’s policy of “Socialism in one country.” Stalin’s theory, proclaimed in 1924, was that the Russian leadership could no longer assume that that the socialist revolution would would spread naturally to the other countries of the world. Therefore, the leadership of the Soviet Union had to establish socialism in the USSR and use the power of the state to help spread it. “Formerly, the victory of the revolution in one country was considered impossible,” explained Stalin in his lectures on Lenin, “on the assumption that it would require the combined action of the proletarians of all or at least of a majority of the advanced countries to achieve victory over the bourgeoisie. Now this point of view no longer fits in with the facts.”


So Drucker starts with the conflict between Capitalism and Communism, with the idealogical stand off that will eventually be called the Cold War. “Thus to make our free-enterprise system function—as the basis of domestic strength and unity and as a model for others, “ he argues, “is the most important and the most immediate contribution Americans can make to international peace.”

Peace. We form large corporations because we want Peace.

Starting New: The Concept of the Corporation

This book follows directly from End of Industrial Man. He began researching it in 1943, just after completing the former book. General Motors gave him access to the company and the records for 18 months, roughly until the end of 1944. During this time, the company was working as a large supplier for the war and was starting to think about how it would operate in the post-war economy. So we have Drucker thinking about the free operation of business with a company that was not operating in a fully free economy nor had it done so since the start of the New Deal.

At this point, businessmen were quite concerned about the kind of economy that would emerge at the end of the war. So is the book an analysis of a freely operating company, as Drucker’s question suggests, or is it Drucker positing the kind of business world that he hopes will emerge?

Introduction: The Concept of the Corporation

New book. New start. New set of problems. This is, of course, the foundation of Drucker’s later work, though it clearly builds upon his earlier work. “What are the task and the contribution of business enterprise in a free society and an expanding industrial economy?” he asks in the forward. In working through these ideas, he will be looking at freedom of decision, freedom of movement for capital, freedom of business.

He starts by arguing, in a slightly disingenuous way, that the book is only a sketch but that he would rather publish a sketch than wait to finish the complete task before putting things into print. He tells a story about China, which is an odd choice. He describes China as a mysterious place, though the characterization is far from completely true. China was not yet closed by the Communist revolution and Life magazine was covering it. Pearl Buck and been writing about the country for 15 years and had Won the Nobel Prize for her work in 1938, 8 years before this work. The Good Earth was a best seller in its time.
Furthermore, the 1920s had seen a rapid growth of business and the corporation. The stories of the corporations from that era were well known.

Drucker seems to be saying that he will be talking about a world that we know something about and yet need to explore further. Yet his very specific in his example. He was talking about a scholar that was writing a book in 1900 and had yet to publish it. I suppose that such detail suggests that the book was a real project by a real author. As China had changed much between 1900 and 1946, so Drucker is suggesting that business is changing fast. So we begin.

The Unsocial Plant: The Future of Industrial Man, Chapter 9 pt 5

“The central fact in the social crisis of our time is that the industrial plan has become the basic social unit but that it is not yet a social institution.”

And here we end the Future of Industrial Man. I am going to take a little break and start on the Concept of the Corporation, which will start to consider this question. It is April, which is a cruel month for an academic.

Social Policy and Industry: The Future of Industrial Man, Chapter 9 pt 4

“Such policy must center on industry. The fact that in total war the individual in industry has an important social function and a clear and unambiguous social status must be used to build a permanent functioning social organization.”

This quote returns to a theme that gets lost in the book. Social status is important. Social authority is important. How does a good society impart those things. The failure of fascism, capitalism and socialism is all related to this issue.

Present War and Post-War: The Future of Industrial Man, Chapter 9 pt 3

“The facts, institutions and beliefs of this, our present war society will be the foundation of our post-war peace society.” This is both a positive and a negative statement for Drucker. Certainly he appreciated the camaraderie, the sacrifice the hard work elicited by the war. But he also know that the war economy was a planned economy. He wanted little to do with such thing.

Lack of Plan?: The Future of Industrial Man, Chapter 9 pt 2

The critics claim that Drucker didn’t provide a plan to build the post war society. That is largely true, though a conservative such as Drucker really doesn’t want to provide such a plan. “The sum total of all this,” he writes, “ is that we have the engineering rules which we must follow in our architecture in order to build the kind of house we desire.” (195)

When he wrote this book, he could see that war production was at its height and might not have an easy way to return to a civilian economy. He also knew that the Depression had been a poor business economy. With no recent model to choose, and a powerful liberal leadership, he was hoping to find a new model.

Prospects: The Future of Industrial Man, Chapter 9 pt 1

Well, this is the end of the run and none too soon. There are ideas in this book that are going to be important but they are presented in ways that make it difficult to connect them with the information age. I see the following issues are relevant to the bigger project:

1. Drucker trained the managers of the information age;
2. Drucker is concerned with planning and centralized economies;
3. Drucker is concerned about the social unit of the new society;
4. Like so many other businessmen, he is worried that the economy will not return to the same
place it was before the depression;
5. That the post-war world will be led by the U.S. (I suppose he is not anticipation the Cold War.)
Those will be our issues and our starting points.

Review: "A Subjective Thesis": The Future of Industrial Man,

“A subjective thesis.”

Heavens, academics can be so arrogant. Drucker’s book “serves to remind political scientists and economists that without the study of fundamentals it is impossible to understand and evaluate detail.” Overall, it is a positive review, though the reviewer, Waldemark Gurian, wants to push Drucker towards a different sent of ideas. “A certain obscureness would have been avoided if Drucker had used the term ‘Common Good’ instead of ‘Freedom.” Common Good should be the aim of all regimes and societies.”

In spite of all this Gurian respects Drucker. “It would be unjust to compare the learning of Peter Drucker with that of” Joseph Schumpter. Drucker “has a much better understanding of political and social realities than the economist of Harvard.”

In the end, is the issue of industrial society just too small a topic for these academics?

Review: "Industrial Cities": The Future of Industrial Man

One of the members of my doctoral committee joined the University of Washington in the 1930s and perhaps he knew this review, Thomas I Cook. Seattle is an odd bear of a city. The only urban area shut down by an industrial strike. The Wobblies. The Industrial Workers of the World. When I was there, the Anarchist party still had a visible presence in the city. And, of course, in 1999, protesters shut down the WTO negotiations that were being held in the city.

Dr. Cook is clearly more impressed in the political sphere than the industrial sphere. “Indeed, one is tempted to suggest that the modern democratic state has as its essential task the rendering responsible of the industrial organization,” he argues. “provided that the state is conceived as community organized rather than government all-powerful, there is less danger in the extension of its powers than in Mr. Drucker’s own scheme.”

Seattle is, of course, an industrial city. In 1943, it was connected to the rest of the country by only a few steel rails that crossed the mountains and deserts. Probably not the place where these ideas would meet a favorable reaction.

Political Science Quarterly

Review: Faint Praise: The Future of Industrial Man

It is a review of faint praise and little foresight
The reviewer is J. H. Landman of City College, New York. Provocative, he says. Stimulating. Still, you sense he is not particularly fond of the book. “His marshaling of facts to prove this economic evolution results frequently in a distortion of history.”

The oddest conclusion in this book is the claim that Drucker thinks that the future society will be organized around either a medieval craft guild or a contemporary Factory Soviet. The reviewer makes this point while acknowledging that the west possesses a “technological society operated by engineers, chemists, and skilled mechanics in behalf of finance capitalists, while the economic goods are inequitably distributed.”

Review: the American Academy of Political and Social Science

The Conservative Revolution of 1776: The Future of Industrial Man, Chapter 8

The Conservative Revolution of 1776

There is a lot that interests me in this chapter but little that really encourages me to write. It is largely a discussion of the political economy of 1776 and the ideas that form the foundation for the modern conservative movement. However, one comment at the end of the chapter clearly points to the era that will form the basis for my project. At the end of this chapter Drucker argues that the post-war world will need a new form of society.

“The nineteenth-century separation of political government and social rule,” he writes, “ is almost gone.” He argues that this separation has been weakened “because the institutions of the mercantile society cannot organize the power in the industrial system.” (p182) The question before us is to understand what institutions are to organize the industrial system and what role technology- particularly software – will play in those institutions.

Refined Technique: The Future of Industrial Man, Chapter 8

This is a difficult chapter to connect with software and technology. Drucker does have a nice quote. “Up to the last war – and even beyond it- there was a growing tendency to identify freedom and even free society with refinements in technique.” (p 154)

We live in an era in which the refinement of technique is considered important and hence this comment may be of relevance to us. However, this chapter is largely about how the American revolution of 1776 differs from the French revolution of 1789. He argues, as one might expect, that the 1776 revolution was more important for Europe than for the US and that it was a liberal revolution in the sense that it promoted liberty.

All of this is fine and good but for this project it only resurrects the question that he poses in the first chapter. How did the industrial climate that developed in the years that followed the second world war reflect the principles of that war. From the business literature, we know that the businessmen of 1944 and 1945 were deeply concerned about this question. At the same time, we know that the principles of the war involved massive, coordinated production that demanded substantial records, computation and planning. We also know that the computer provides a means for keeping those records, doing that computation and making those plans.

The Future of Industrial Man, Chapter 7: Section 4

The last part of this chapter traces the ideas of 20th century totalitarianism back to Rousseau. Intellectually, such work is fun. At the same time, it begs the question “So what?” “Why should I care?” Drucker seems to be interested in it as a kind of apostolic succession or diabolic succession I suppose. The ideas are bad because the roots are bad.

Occasionally, I meet someone who has a direct connection to the early days of the computer. At the last meeting of the Computer Society, I discovered that a friend was a grandstudent of Howard Aiken, the 1940s computer pioneer who built the Mark I at Harvard. My colleague had studied with Fred Brooks, the designer of the IBM 360, who was the student of Aiken.

I am astute enough to know that ideas can move from teacher to student but there has to be some freedom of thought from generation to generation, or perhaps a backlash of thought. Certainly we all know the truism that kinds are often like their grandparents because the two generations can find a common enemy in the parents. We also know that system designers are often trying to correct the errors in their last system when they design a new program.

Yet, we like to trace ideas, good and bad, to their roots. Hayeck does some of the same thing in his book on the origins of the social sciences. In that book August Comte is the villain. Comte, of course, spent time in Geneva, a city he shares with Calivin, Voltaire, Piaget, Byron, Mary Shelley and the Geneva Bible. And what is common there?

The Future of Industrial Man, Chapter 7: Section 3

Here Drucker is revisiting the issue of majority rule and rights of minorities. It does not contain a lot of material that is particularly new, though it does remind me that the term “common sense” is not as friendly and simple as it seems to be. We take it to mean “ordinary wisdom”, “understanding the basic facts of the world.” Of course, it you look at the words with even a modicum of attention, you note that is means what it says. It refers to the sensibility that is held in common. The ideas about action and activity on which the majority agree.

Drucker moves from taking about the problems with majority rule with the issue of identifying the best government. “All out theoretical and practical discussion of politics suffers from the fact that arguments about freedom are supported or opposed by arguments about the best government and vice versa.” He is clearly concerned with freedom and acknowledges that a free government may not always be best by all standards.

To connect this to the computing world, I have to return to when I was first working as a programmer for Burroughs Corporation. It was a big company but it was far smaller than IBM. Furthermore, more software was available for the large IBM mainframes. Hence, at many customer sites, you found at least one manager who argued that they needed to dispose of the Burroughs machines and get IBM equipment because everyone had them.

There was a logic to this reasoning. Renting IBM equipment might reduce the problems with your site, give you access to more software and certainly put you in touch with a larger number of programmers training on your machines. The Burroughs machines were far more flexible and easier to use. But there were fewer of them And they weren’t IBM. And so they are gone.

Happy April Fools by the way