Reading :: Post-Capitalist Society

Post-Capitalist Society
By Peter F. Drucker

When I blogged Drucker's The Concept of the Corporation recently, David Ronfeldt commented that his favorite book was Post-Capitalist Society. So I picked it up on my next library run. It was riveting. Written nearly 50 years after The Concept of the Corporation, this book looks back on everything that had happened since - starting with the GI Bill of Rights, which Drucker says "signaled the shift to the knowledge society" (p.3). In this new society, the nation-state is only one, not the only unit of political integration (p.4) (cf. Castells). And the knowledge society is post-capitalist - not Marxist, as so many had assumed (p.4), but not capitalist either. The decisive factor of production is not capital, not land, not labor, but knowledge (p.6). And in this post-capitalist society, traditional work has shrunk to only a sixth or an eighth of the workforce; "the classes of the post-capitalist society are knowledge workers and service workers" (p.6).

Drucker's argument here is interesting and in some places quite daring, and frankly, reading it just before Florida's The Rise of the Creative Class made the latter book look thin and pedestrian. Drucker argues strongly that knowledge is now, and will be, the basic economic resource; value is created via productivity and innovation. The leading social groups will be knowledge workers, "who know how to allocate knowledge to productive use," and "practically all of these knowledge people will be employed in organizations" (p.8). So "the economic challenge of the post-capitalist society will therefore be the productivity of knowledge work and the knowledge worker" but "the social challenge of the post-capitalist society will, however, be the dignity of the second class in post-capitalist society: the service workers" (p.8). Service workers will constitute a majority, he says, but will lag because they will have trouble increasing their productivity.

Drucker argues further that post-capitalist polity will involve nation-states networking with internal, external, and transnational entities; they will continue to be powerful players, but they will no longer be the only players (p.11).

Let's get back to the transition from capitalism to the knowledge society. Drucker argues that knowledge went from being a private to a public good almost overnight. Up to the 1700s, abstract knowledge was distinguished from techne, or skill - which, divorced from general principles, could only be learned via apprenticeship (p.27). But around 1700, knowledge became a public good, described by what until then could have been considered an oxymoron: technology, techne + logy, skill + organized, purposeful knowledge (pp.27-28). and we get the Industrial Revolution, in which knowledge was applied to tools, processes, and products (p.19).

But soon - relatively speaking - knowledge was applied not just to tools, processes, and products, but also to work itself - yielding the Productivity Revolution (p.32), in which individuals became more productive. Drucker argues that until Taylor, no one thought that work could yield more except by working longer or harder (p.34). But under Taylorism, workers could become more productive by applying knowledge to their work. Drucker argues that Taylor has been grievously misquoted and that the majority of the benefits of Taylorism flowed to the workers (p.34). Taylor also argued that authority in the plant must be based on superior knowledge, not on ownership of the plant (p.36). Taylorism, Drucker argues, was what transformed unskilled sharecroppers into skilled shipbuilders in 60-90 days, enabling it to build a new fleet for World War II far, far faster than the Germans had anticipated (p.36).

Taylorism, of course, also led to the death of lifelong employment and the advent of lifelong learning (p.37). After WWII, Drucker argues, "Taylor-based training became the one truly effective engine of economic development" (p.37). And as people became more productive, they became middle class. "This explains the total failure of Marxism," Drucker says confidently (p.39).

At the same time, Taylor-based training and its yields in productivity have meant that fewer and fewer people are involved in "making or moving things": when Taylor began, 90% of workers did this sort of work, but "by 2010 they will form no more than one tenth" of the workforce (p.40). So "from now on, what matters is the productivity of non-manual workers. And that requires applying knowledge to knowledge" (p.40). This third transformation is called the Management Revolution. It involves "supplying knowledge to find out how existing knowledge can best be applied to produce results" (i.e., management), but "knowledge is now also being applied systematically and purposefully to define what new knowledge is needed, whether it is feasible, and what has to be done to make knowledge effective. It is being applied, in other words, to systematic innovation" (p.42).

So now we get to organizations. Organizations, Drucker argues, must weld together "knowledges" (or specializations of knowledge) into "a single, unified knowledge" (p.50). This is the reason for organization and its task, Drucker says (p.50). Organizations concentrate on a single task; diversification destroys performance capacity (p.53). "Organization is a tool. As with any tool, the more specialized its given task, the greater its performance capacity" (p.53). Yet "results in an organization are always pretty far away from what each member contributes" (p.55). So, to ensure that people understand how their work contributes to the organization, an organization's "task and mission [must] be crystal clear. Results need to be defined clearly and unambiguously - and, if at all possible, measurably" (p.55). Indeed, that's vital, since in knowledge work organizations, the critical competition is for "its most essential resource: qualified, knowledgeable, dedicated people" (p.56). And given that resource, management's "job in the knowledge organization is not to command: it is to direct" (p.57).

Unlike older institutions,

the organization of the post-capitalist society of organizations is a destabilizer. Because its function is to put knowledge to work - on tools, processes, and products; on work; on knowledge itself - it must be organized for constant change. It must be organized for innovation ... It must be organized for systematic abandonment of the established, the customary, the familiar, the comfortable - whether products, services, and processes, human and social relationships, skills, or organizations themselves. It is the very nature of knowledge that it changes fast and that today's certainties will be tomorrow's uncertainties. (p.57).

So "every organization of today has to build into its very structure the management of change" (p.59). That includes "organized abandonment of everything it does"; "the ability to create the new" (p.59); the ability to exploit its own successes by developing new applications (p.60).

Drucker adds that "post-capitalist society has to be decentralized. Its organizations must be able to make fast decisions, based on closeness to performance, closeness to the market, closeness to technology, closeness to the changes in society, environment, and demographics, all of which must be seen and utilized as opportunities for innovation." And he continues: "Organizations in the post-capitalist society thus constantly upset, disorganize, and destabilize the community" (p.60).

Drucker believes in the organization: "Knowledge workers can work only because there is an organization for them to work in. In that respect, they are dependent. But at the same time, they own the 'means of production,' that is, their knowledge" (p.64). Whereas workers own the means of production, "Somebody else, the organization, has the tools of production" (p.66).

Enough about organization; Drucker moves to labor and capital. He's frustrated that while Japan and the US were both seeing manufacturing gains and manufacturing job losses, the US interpreted this change as a bad thing - the US saw manufacturing jobs as an asset, while in Japan they were seen as a liability. Productivity is the proper measure, Drucker argues (p.70). (Imagine what his reaction to the recent GM and Chrysler bankruptcies would be.) Capital is another matter; he argues that the only real capitalists left are those who manage the vast pension funds - and he foresees our current situation, warning that "no safeguards at all exist against the most serious danger: the looting for political purposes of the pension funds of government employees" (p.75). That danger is critical because of the lengthening of life expectancy (p.76)

On to productivity of knowledge work. Drucker argues that the productivity of knowledge and service work is critical, but it may actually be going down rather than up (p.83). So how to improve it? Drucker argues that teamwork has to be reorganized to better address the type of work it accomplishes: for repetitive tasks with well-known rules, it should resemble baseball - just as modern mass production did (p.87). For crisis teams, the work should be orchestrated and rehearsed, but flexible enough to address contingencies, like soccer. And for a well-calibrated team that faces unpredictable challenges, the team should be small (7-9 people, max), with preferred rather than fixed positions and fluid adjustment to each others' weaknesses, like a tennis doubles team (pp.87-88). Drucker states that although "most work in large American companies was organized on the baseball team model," information technologies are aiding the development of the other two models (p.89).

Drucker argues here that "Workers must be required to take responsibility for their own productivity, and to exercise control over it" (p.92). (I immediately thought of GTD here.) And "productivity in knowledge work and service work demands that we build continuous learning into the job and into the organization"; he advocates that people learn by teaching others how to do their jobs (p.92).

In chapter 5, Drucker argues that organizations must be responsibility-based (p.97). Information has transformed organizations, and in knowledge work, the organization in increasingly composed of "specialists, each of which knows more about his or her own specialty than anybody else in the organization." In such organizations, superiors may not know the jobs of their subordinates; they can't "appraise what the specialist actually contributes" (p.107). So management must shift from command to information; all members of the organization must "take responsibility for that organization's objectives, contribution, and, indeed, for its behavior as well" (p.108). Subordinates give way to associates (p.108).

Drucker moves on in Chapter 6 to the "Megastate," where he argues that we have reached "the age of the post-sovereign state" (p.113). I'll skip this chapter except to say that Drucker's not a fan of the megastate, the heavy-spending, heavy-taxing state that provides an increasing number of services and takes on an increasing amount of debt. Its one success, he says, has been to avoid World War III (p.140). Indeed, as he argues in Chapter 7, the sovereign nation-state is threatened by internationalism, regionalism, and increasingly within its borders by tribalism (p.152). What we need, he says, is a third sector between [correction 2009.08.04: David Ronfeldt suggests in the comments that the correct expression is not "between" but "alongside and in addition to"] the public sector of government and the private sector of enterprise: the social sector. The megastate, he says, has all but destroyed citizenship; a social sector could revive it (p.171). He sees hope for a social sector in the large number of volunteers searching for community (p.176) and the many opportunities for growing leaders in churches and nonprofits (p.177).

Okay, let's wrap it up. I have more sticky notes, but you get the gist of this very long review. The book reads the way you might expect: a senior scholar (84 at the time) reflects back over the many decades of his work and draws lessons. He doesn't get much into citations or spend much time reflecting on his opposition; he's more interested in getting out his broad vision of what has happened and what he believes needs to happen. For those reasons, I imagine that reading Drucker will rub some people the wrong way. But I found the book to be exciting, even though I don't agree with all of it (and will probably argue against some points in a later article). This is smart work, showing an innovative point of view, proposing some startling solutions. I don't expect Drucker's policy recommendations to be folded into either political party's platform anytime soon, and perhaps for that reason, I can enjoy reading about them.

All in all, definitely a book to pick up.