Post-Capitalist Society

Peter Drucker

• Publisher: Routledge
• Year: 2012
• ISBN:
  9781136008733
• Edition: 1
• Topic: Business
• Subtopic: Business General
• Index: Business

"The basic economic resource - 'the means of production', to use the economist's term - is no longer capital, nor natural resources, nor 'labour'. it is an will be knowledge."
With penetrating insight Peter Drucker describes the changes that are affecting politics, business and society itself. It is vital that we are aware of and understand these changes in order to benefit from the opportunities that the future has to offer.

Part One Society

1 From capitalism to knowledge society

DOI: 10.4324/9780080938257-1

Within 150 years, from 1750 to 1900, capitalism and technology conquered the globe and created a world civilization. Neither capitalism nor technical innovations were new; both had been common, recurrent phenomena throughout the ages, both in West and East. What was brand new was their speed of diffusion and their global reach across cultures, classes and geography. And it was this, their speed and scope, that converted capitalism into ‘Capitalism’ and into a ‘system’. It converted technical advances into the ‘Industrial Revolution’.

This transformation was driven by a radical change in the meaning of knowledge. In both West and East knowledge had always been seen as applying to being. Almost overnight, it came to be applied to doing. It became a resource and a utility. Knowledge had always been a private good. Almost overnight it became a public good.

For a hundred years – in the first phase – knowledge was applied to tools, processes, products. This created the Industrial Revolution. But it also created what Marx called ‘alienation’ and new classes and class war, and with it Communism. In its second phase, beginning around 1880 and culminating around World War II, knowledge in its new meaning came to be applied to work. This ushered in the Productivity Reυolution which in 75 years converted the proletarian into a middle-class bourgeois with near-upper-class income. The Productivity Revolution thus defeated class war and Communism. The last phase began after World War II. Knowledge is being applied to knowledge itself. This is the Management Reυolution. Knowledge is now fast becoming the one factor of production, sidelining both capital and labour. It may be premature (and certainly would be presumptuous) to call ours a ‘knowledge society’ – so far we only have a knowledge economy. But our society is surely ‘post-capitalist’.

Capitalism, in one form or another, has occurred and recurred many times throughout the ages, and in the Orient as well as in the West. And there have been many earlier periods of rapid technical invention and innovation, again in the Orient as well as in the West, many of them producing technical changes fully as radical as any in the late eighteenth or early nineteenth centuries.* What is unprecedented and unique about the developments of the last 250 years is their speed and scope. Instead of being one element in society as all earlier capitalism had been, Capitalism – with a capital C – became society. Instead of being confined, as always before, to a narrow locality, Capitalism – again with a capital C – took over all of Western and Northern Europe, in a short 100 years from 1750 to 1850. Then within another 50 years it took over the entire inhabited world.

* The best discussion of capitalism as a recurrent and fairly frequent phenomenon are two books by the great French economic historian, Fernand Braudel: The Mediterranean (2 vols) (first published in France in 1949; English translation New York: Harper & Row, 1972); and Civilization & Capitalism (3 vols) (first published in France in 1979, English translation New York: Harper & Row, 1981). The best discussions of earlier ‘industrial revolutions’ are Medieυal Technology and Social Change by Lynn White Jr (Oxford University Press, 1962); The Medieυal Machine; The Industrial Reυolution of the Middle Ages by Jean Gimpel (first published in France in 1975; English translation New York: Holt Rinehart & Winston, 1976); and the monumental Science & Ciυilization in China by the British biochemist, orientalist and historian Joseph Needham (Cambridge University Press), publication of which began in 1954 with half of the planned 25 parts yet to appear. What Needham has published so far has, however, already completely changed our knowledge of early technology. For earlier ‘industrial revolutions’ see also my book Technology Management & Society (London: Heinemann, 1973), especially Chapter 3, 7 and 11.

All earlier capitalism had been confined to small narrow groups in society. Nobles, land-owners and the military, peasants, professionals, craftsmen, even labourers, were almost untouched by it. Capitalism with a capital C soon permeated and transformed all groups in society wherever it spread.

From earliest times in the Old War new tools, new processes, new materials, new crops, new techniques – what we now call ‘technology’ – diffused swiftly.

Few modern inventions, for instance, spread as fast as a thirteenth-century one; eyeglasses. Derived from the optical experiments of an English Franciscan friar, Roger Bacon (died 1292 or 1294) around 1270, reading glasses for the elderly were in use at the Papal Court of Avignon by 1290, at the Sultan’s Court in Cairo by 1300 and at the Court of the Mongol Emperor of China no later than 1310. Only the sewing machine and the telephone, fastest-spreading of all nineteenth-century inventions, moved as quickly.

But earlier technological change, almost without exception, remained confined to one craft or one application. It took another 200 years – until the early 1500s – before Bacon’s invention had its second application: eyeglasses to correct nearsightedness. The potter’s wheel was in full use in the Mediterranean by 1500 bc. Pots to cook, and to store water and food, were used in every household. Yet the principle underlying the potter’s wheel was not applied until ad 1000 to women’s work – spinning.

Similarly, the redesign of the windmill around the year ad 800 which converted it from the toy it had been in Antiquity into a true machine – and a fully ‘automated’ one at that – was not applied to ships for more than 300 years, that is, until after 1100. Until then, ships were oared; if wind was used at all to propel them, it was an auxiliary and only if it blew in the right direction. The sail to drive a ship works in exactly the same way as the sail that drives the windmill. The need for a sail that would enable a ship to sail cross-wind and against the wind had been known for a long time. The windmill was redesigned in Northern France or in the Low Countries, that is, in regions thoroughly familiar with ships and navigation. Yet it did not occur to anyone for several hundred years to apply something invented to pump water and to grind corn, that is, for use on land, to use offshore.

The inventions of the Industrial Revolution, however, were immediately applied across the board, and across all conceivable crafts and industries. They were immediately seen as technology.

James Watt’s (1736-1819) redesign of the steam engine between 1765 and 1776 made it into a cost-effective provider of power. Watt himself throughout his own productive life focused on one use only: to pump water out of a mine – the use for which the steam engine had first been designed by Newcomen in the early years of the eighteenth century. But one of England’s leading iron masters immediately saw that the redesigned steam engine could also be used to blow air into a blast furnace and bid for the second engine Watt had built. And Watt’s partner, Matthew Boulton (1728–1809), right away promoted the steam engine as a provider of power for all kinds of industrial processes, especially, of course, for the then largest of all manufacturing industries, textiles. Thirty-five years later, an American, Robert Fulton (1765–1815), floated the first steamship on New York’s Hudson River. Another 20 years later the steam engine was put on wheels and the locomotive was born. And by 1840 – at the latest by 1850 – the steam engine had transformed every single manufacturing process – from glass making to printing. It had transformed long-distance transportation on land and sea, and it was beginning to transform farming. By then, it had penetrated almost the entire world – with Tibet, Nepal and the interior of tropical Africa the only exceptions.

The nineteenth century believed – and most people still do – that the Industrial Revolution was the first time a change in the ‘mode of production’ (to use Karl Marx’s term) changed social structure and created new classes, the capitalist and the proletarian. But this belief too is not valid. Between ad 700 and 1000 two brand-new classes were created in Europe by technological change: the feudal knight and the urban craftsman. The knight was created by the invention of the stirrup – an invention coming out of Central Asia around the year AD 700; the craftsman by the redesign of water wheel and windmill into true machines which, for the first time, used inanimate forces – water and wind – as motive power rather than human muscle as Antiquity had done.

The stirrup made it possible to fight on horseback; without it a rider wielding a lance, sword or heavy bow would immediately have been thrown off the horse by the force of Newton’s Second Law: ‘To every action there is a reaction.’ For several hundred years the knight was an invincible ‘fighting machine’. But this machine had to be supported by a ‘military-agricultural complex’ – something quite new in history. Germans until this century called it a Rittergut, a knight’s estate endowed with legal status and with economic and political privileges, and containing at least 50 peasant families or 200 people to produce the food needed to support the fighting machine: the knight, his squire, his three horses and his twelve to fifteen grooms. The stirrup, in other words, created feudalism.

The craftsman of Antiquity had been a slave. The craftsman of the first ‘machine age’, the craftsman of Europe’s Middle Ages, became the urban ruling class, the ‘burgher’, who then created Europe’s unique city, and both the Gothic and the Renaissance.

The technical innovations – stirrup, water wheel and windmill – travelled throughout the entire Old World, and fast. But the classes of the earlier industrial revolution remained European phenomena on the whole. Only Japan evolved around ad 1100 proud and independent craftsmen who enjoyed high esteem and, until 1600, considerable power. But while the Japanese adopted the stirrup for riding they continued to fight on foot. The rulers in rural Japan were the commanders of foot soldiers – the daimyo. They levied taxes on the peasantry but had no feudal estates. In China, in India, in the world of Islam, the new technologies had no social impact whatever. Craftsmen in China remained serfs without social status. The military did not become land-owners but remained, as in Europe’s Antiquity, professional mercenaries. Even in Europe the social changes generated by this early industrial revolution took almost 400 years to have a full effect.

By contrast, the social transformation of society brought about by Capitalism and Industrial Revolution took less than a hundred years to become fully effective in Western Europe. In 1750 capitalists and proletarians were still marginal groups. In fact, proletarians in the nineteenth-century meaning of the term (that is, factory workers) hardly existed at all. By 1850 capitalists and proletarians were the dynamic classes of Western Europe, and were on the offensive. They rapidly became the dominant classes wherever capitalism and modern technology penetrated. In Japan the transformation took less than 30 years, from the Meiji Restoration in 1867 to the war with China in 1894. It took not much longer in Shanghai and Hong Kong, Calcutta and Bombay, or in the Tsar’s Russia.

Capitalism and the Industrial Revolution – because of their speed and of their scope – created a world civilization.*

* The best history of this development is Prometheus Unbound by the Harvard historian David S. Landes (Cambridge University Press, 1969).

The new meaning of knowledge

Unlike those ‘terrible simplifiers’, the nineteenth-century ideologues such as Hegel and Marx, we now know that major historical events rarely have just one cause and just one explanation. They typically result from the convergence of a good many separate and independent developments.

One example of how history works is the genesis of the computer. Its earliest root is the binary system, that is, the realization of a seventeenth-century mathematician-philosopher, the German Gottfried Leibnitz (1646–1716), that all numbers can be represented by just two: 0 and 1. The second root is the discovery of a nineteenth-century English inventor, Charles Babbage (1792–1871), that toothed wheels (that is, mechanics) could represent the arithmetic functions: addition, subtraction, multiplication and division – the discovery of a genuine ‘computing machine’. Then in the early years of this century, two English logicians Alfred North Whitehead (1861–1947) and Bertrand Russell (1872–1970), in their Principia Mathematica, showed that any concept if presented in rigorously logical form can be expressed mathematically. From this discovery an Austro-American, Otto Neurath (flourished 1915–1930), working as statistician for the US War Production Board of World War I, derived ‘data’, that is, the idea, then brand-new and heretical, that all information from any area, whether anatomy or astronomy, economics, history, or zoology, is exactly the same when quantified, and can be treated and presented the same way (the idea, by the way, that also underlies modern statistics). A little earlier, just before World War I, an American, Lee de Forest (1873–1961), invented the audion tube to convert electronic impulses into sound waves, thus making possible the broadcasting of speech and music. Twenty years later it occurred to engineers working at a medium-sized punch-card manufacturer called IBM that the audion tube could be used to switch electronically from 0 to 1 and back again. If any of these elements had been missing there would have been no computer. And no one can say which of these was the element. With all of them in place, however, the computer became virtually inevitable. It was then pure accident, however, that it became an American development – the accident of World War II which made the American military willing to spend enormous sums on developing (quite unsuccessfully, by the way, until well after World War II) machines to calculate at high speed the position of fast-moving aircraft overhead and of fast-moving enemy ships. Otherwise the computer would probably have become a British development. Indeed, an English company, the food producer and restaurant owner J. Lyons & Co., in the 1940s actually developed the first computer for commercial purpose that really worked, the ‘Leo’– Lyons just couldn’t raise the money to compete with the Pentagon and had to abandon its working and successful (and very much cheaper) machine.

Similarly, many separate developments – most of them probably quite unconnected with each other – went into making capitalism into Capitalism and technical advance into the Industrial Revolution. The best-known theory – that Capitalism was the child of the ‘Protestant Ethic’ – expounded in the opening years of this century by the German sociologist Max Weber (1864–1920) – has, however, been largely discredited. There just is not enough evidence for it. There is only a little more evidence to support Karl Marx’s earlier thesis that the steam engine, the new prime mover, required such enormous capital investment that craftsmen could no longer finance their ‘means of production’, and had to cede control to the capitalist. There is one critical element, however, without which well-known phenomena, i.e. capitalism and technical advance, could not possibly have turned into a social and worldwide pandemic. It is the radical change in the meaning of knowledge that occurred in Europe around the year 1700, or shortly thereafter.*

* This change is explored in some depth in my 1961 essay: The Technological Revolution; Notes on the Relationship of Technology, Science and Culture’, reprinted in my 1973 essay volume Technology, Management and Society (London: Heinemann) and in my 1992 essay volume The Ecological Vision (New Brunswick, NJ: Transaction Publishers).

There are as many theories as to what we can know and how we can know it as there have been metaphysicians from Plato in 400 bc to Ludwig Wittgenstein (1889–1951) and Karl Popper (1902– ) in our days. But since Plato’s days there have only been two theories in the West – and since somewhat the same time, two theories in the East – regarding the meaning and function of knowledge. Plato’s spokesman, the wise Socrates, holds that the only function of knowledge is self-knowledge, that is, the intellectual, moral and spiritual growth of the person. His ablest opponent, the brilliant and learned Protagoras, holds, however, that the purpose of knowledge is to make the holder effective by enabling him to know what to say and how to say it. For Protagoras knowledge meant logic, ...

Table of contents

• Cover Page
• Half Title Page
• Series Page
• Title Page
• Copyright Page
• Table of Contents
• Acknowledgements
• Introduction: the transformation
• Part One Society
• Part Two Polity
• Part Three Knowledge
• Index