The Disintegrating Corporation
Peter Drucker tells us that the corporation is disintegrating. Drucker is a widely-consulted management expert, possibly the brainiest in the world. Since disintegrating corporations will be of great interest to Quakers, in the next section I quote key paragraphs a recent article of his article. In the next one following, I will comment on the relationship of Drucker's thesis to Quaker values. Finally, I will ask readers to express yourselves on the likely future.
Quoting from Peter Drucker's survey article in The Economist (11/3/01), entitled "The Next Society," with my comments interspersed:
Because other sectors have grown even more, however, the relative contribution of agriculture in rich countries has dwindled, and the farm population is down to a tiny proportion of the total. In short, we produce much, much more food with only a tiny fraction of the farmers we had a century ago.
As in agriculture, we now produce as much, or more, manufactured goods as before, but with a smaller number of workers.
It is the organizations bringing knowledge workers together that possess fluid boundaries. Knowledge workers form new organizations, or they flow from one to another or offer their services to many at a time.
Think of a multinational corporation as a jigsaw puzzle, with divisions and departments as pieces, and a hierarchy with management on top, responsible to stockholders. Now break the puzzle apart, and combine it with pieces from other corporate puzzles. These are the "alliances, joint ventures, minority stakes, and know-how agreements" of which Drucker speaks. These groupings will produce health care, education, computer software, web pages, and other knowledge-based products that become the greatest part of people's consumption. Who will own the producing groups? More and more, it will be the knowledge workers, who may however have obtained funds from outside investors, some of whom will also become owners.
What should be the response of Quakers?
I believe Drucker is right. So, if al Qaeda does not destroy our society (and I don't think it will), Friends must adapt our vision of economic society and the multinational corporation. Many Friends have negative sentiments toward the multinational corporation. Although MNCs have committed heinous acts in the past, trying to overthrow governments, nevertheless most of them behave like decent citizens, pay their taxes, do not bribe governments, pay their workers more than they could earn elsewhere, and provide more social services health, education, housing than the workers could otherwise receive. (This was explained in TQE #23, section 3). Atrocious though their situation is, even the maquiladoras on the Mexico-US border pay higher wages than their workers could earn elsewhere (the workers are free to go elsewhere in Mexico if that were not so).
Little or none of this would have happened except in a society of flexibility, where individuals have freedom of choice over their employment, and in which companies decide what to produce, whom to hire or contract, and what technology to use. Inventors have free rein to invent, and innovators to select new forms of organization. In most less developed countries, one cannot start a new enterprise, or modify an old one substantially, without a zillion government permissions and probably more bribes than one can afford. Creative ideas stem from below they do not belong to government and only when they are allowed to emerge does development occur. The stodgy state enterprises of China, India, most African countries, and Latin America are more the subject of power struggles than they are conducive to innovation. This, I believe, is the principal reason for underdevelopment in these regions, in contrast with the freedom-allowing (well, mostly) societies of northwestern Europe, Japan, North America, and Oceania.
Perhaps you are alarmed by the number of mergers you hear about, such as Enron and Dynegy. Every business wants to be a monopoly, and we must be careful about allowing this. However, many mergers are last-resort operations by companies such as Enron, that have suffered great losses. Many are proposed in order to lower costs and prices through more efficient combinations of management. How do we tell the difference between "good" and "bad" mergers? Only by studying them separately and not jumping to ideological conclusions.
Whatever you think about multinational corporations whatever your concept may be all that is changing. So, what will happen?
First, regulation may be more difficult. Steve Williams (Bethesda MD Meeting) writes: "My own sense is that the more mobile resources are workers, capital the harder it is for government to impose regulation that doesn't yield benefits equal to its costs or taxation that exceeds the value of the government services provided in return." Steve's comment implies that "good regulation," whose benefits exceed its costs, will still be possible, but excessive regulation may not. I think this is difficult to forecast, but I hope it will be so. What do you think?
Second, will the world now be divided in two: between wealthy knowledge workers (the new capitalists) and the poverty-stricken left-outs? Or will there be new opportunities for all, and will the wealth spill down (that's more than trickle down) from the knowledge workers to the rest? On the other hand, will more opportunities open up for the underclass, so that they too may become knowledge workers (as Drucker predicts)? Will uneducated people become social outcasts?
Yours in friendship,
A Quotation on the WTO
"On some propositions, economists are nearly unanimous: Trade promotes economic growth. Growth reduces poverty. The agreement reached last week among the more than 140 trade ministers gathered in Doha, Qatar [for the WTO meeting], is good for rich countries, perhaps even better for poor countries and surprisingly protective of the environment."
Michael Weinstein, New York Times, 11/20/01; for details, see TQE #28.
Note: As an economist, I agree on our near-unanimity. Jack
Readers' Comments:Note: Please send comments on this or any TQE, at any time. Selected comments will be appended to the appropriate letter as they are received. Please indicate in the subject line the number of the Letter to which you refer! The email address is tqe-comment followed by @quaker.org. All published letters will be edited for spelling, grammar, clarity, and brevity. Please mention your home meeting, church, synagogue (or ...), and where you live.
This "new" way of thinking about knowledge workers is already happening in the mental health field where HMOs and other insurance companies are contracting with smaller groups and individual professionals to actually do the work on site. This may be one sector to look at for one type of history of the emergence of this type of organization. So far, for me as a therapist who does not want to be the enterpreneur organizing the system, it has been frustrating, resulting in more paperwork (even if it is online) and a pay freeze from the companies involved. At the same time, my referral sources have changed from medical doctors to insurance companies. All of it is in flux. To me, the ability of a company to handle massive quantites of information and to disseminate information quickly and efficiently has given the insurance companies more control than is useful to consumer and provider. But even that is still in flux. We are definitely in the midst of this change that Peter Drucker is talking about, and have been in flux for about 20 years. So at the moment it seems that corporations in my workplace are still able to look at the bottom line and dictate a lot, for better or worse. And the key word here is ... for the moment. Questions that still need to be answered include: How do the individual knowledge workers organize to deal with the larger corporation? What are alternatives to anti-trust laws for the independent knowledge worker? How do the independent knowledge workers gain power to influence lawmaking decisions during the transitions? These are the kinds of things my sector has been dealing with to date. Thanks for the Drucker information.
Barb Seidel, Gwynedd (PA) Meeting.
A most thought-provoking letter, with a long view ahead. Thanks!
Roger Conant, Mt. Toby Meeting, Leverett (MA).
Thanks so much for your comments on Drucker's article. I have been reading his books with admiration for years.
Janet Minshall, Anneewakee Creek Friends Worship Group, Douglasvillle (GA).
You didn't say quite why the corporation is disintegrating. Ronald Coase showed that a corporation exists to reduce transaction costs.* If you need to keep a machine busy all day long, you need a reliable source of labor to operate the machine. It has been much cheaper to hire a worker for a year at a time. As the nature of production (in the U.S.) has changed to require more skill of employees and less capital invested in machines, people can be hired and fired as they are needed. That's the pessimistic view. A more optimistic view of this trend is for people to view themselves as an independent business, with a varying set of customers. This is the life I live. It's scary sometimes, but rewarding as well, and nobody tells me I can't take ten days off to go to the FGC gathering.
Russ Nelson, St. Lawrence Valley (NY) Friends Meeting.
A recent conference that I attended emphasized that the number of liberalized telecom markets in Africa, and the number mobile providers, has jumped tremendously in the last few years. In 1995, only 7% of African countries had competitive mobile markets. Now more than 50% do, and the number of mobile operators, continent-wide, has gone from 33 to 100. The trends show no sign of slowing, either. Excellent news all around.
Geoffrey Williams, Bethesda (MD) Friends Meeting.
Steve Williams's comment implies that "good regulation," whose benefits exceed its costs, will still be possible, but excessive regulation may not. I think this is difficult to forecast, but I hope it will be so.
The problem may be that good regulation isn't possible. Much of the opposition to multinationals centres around their avoiding regulation. Some of the treaties threaten to make it difficult to regulate; a company's preferences seem to override local law. If a company can escape to where it can poison the atmosphere, pay wages less than minimum at home, and so forth, it can use this as a lever to overcome environmental regulation and decrease wages where it is.
Jim Caughran, Toronto (Ontario, Canada) Monthly Meeting.
It is hard to imagine Drucker's scenerio happening in our corporate controlled society, and yet I do see small signs of it beginning to happen here in Boulder and Denver. Perhaps the recession will move it along. Since corporations control our government and most of our judicial system , if it happens, it will take some time, and over-regulation (strangulation) will be an ever present danger. Some regulation would certainly be necessary.
You ask about the spread between the haves and have nots in such a world. It would seem that the current wide spread between the two will grow greater until every child receives a good education. Since we continue to talk about the education problem instead of correcting it, it seems to me it would take a good many years to narrow the gap if it could happen at all.
Lorna Knowlton Quaker at Heart Boulder, Co.
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