Drucker and free market capitalism

Drucker and free market capitalism​

by Chetan Parikh


In a classic “The Daily Drucker", there are some statements of Peter Drucker that need to be remembered today.

1. “The Conscience of Society

“Religion cannot accept any society without abandoning its true Kingdom.”

The End of Economic Man reached the conclusion that the churches could not, after all, furnish the basis for European society and Euro­pean politics. They had to fail, though not for the reasons for which the contemporaries tended to ignore them. Religion could indeed offer an an­swer to the despair of the individual and to his existential agony. But, it could not offer an answer to the despair of the masses. I am afraid that this conclusion still holds today. Western Man-indeed today Man alto­gether-is not ready to renounce this world. Indeed he still looks for secu­lar salvation, if he expects salvation at all. And churches, especially Christian churches, can (and should) preach a "social gospel." But they cannot (and should not) substitute politics for Grace, and social science for Redemption. Religion, the critic of any society, cannot accept any society or even any social program, without abandoning its true Kingdom, that of a Soul alone with its God. Therein lies both the strength of the churches as the conscience of society and their incurable weakness as political and so­cial forces of society.

- The end of Economic Man​

2. Capitalism Justified

“Capitalism as a social order and as a creed is the expression of the belief in economic progress as leading toward the freedom and equality of the individual in the free and equal society.”

Capitalism expects the free and equal society to result from the en­thronement of private profit as supreme ruler of social behavior. Cap­italism did not, of course, invent the "profit motive." Profit has always been one of the main motivating forces of the individual and will always be - re­gardless of the social order in which one lives. But the capitalist creed was the first and only social creed that valued the profit motive positively as the means by which the ideal free and equal society would be automatically re­alized. All previous creeds had regarded the profit motive as socially de­structive, or at least neutral.

Capitalism has, therefore, to endow the economic sphere with inde­pendence and autonomy, which means that economic activities must not be subjected to non-economic considerations, but must rank higher. All so­cial energies have to be concentrated upon the promotion of economic ends, because economic progress carries the promise of the social millen­nium. This is capitalism: and without this social end it has neither sense nor justification.

- The end of Economic Man”​

3. Moving Beyond Capitalism

“I believe it is socially and morally unforgivable when managers reap huge profits for themselves but fire workers.”

I am for the free market. Even though it doesn't work too well, nothing else works at all. But I have serious reservations about capitalism as a sys­tem because it idolizes economics as the be-all and end-all of life. It is one ­dimensional. For example, I have often advised managers that a 20-1 salary ratio between senior executives and rank-and-file white-collar workers is the limit beyond which they cannot go if they don't want resentment and falling morale to hit their companies.

Today, I believe it is socially and morally unforgivable when managers reap huge profits for themselves but fire workers. As societies, we will pay a heavy price for the contempt this generates among middle managers and workers. In short, whole dimensions of what it means to be a human being and treated as one are not incorporated into the economic calculus of cap­italism. For such a myopic system to dominate other aspects of life is not good for any society.

- Managing in the Next Society”​

4. The Efficiency of the Profit Motive

“The profit motive alone gives fulfillment through power over things.”

The only relevant and meaningful question is whether the profit motive is the socially most efficient one of the available directions in which the drive for power can be channeled. But we can say that of the channels available and known to us, the profit motive has a very high, if not the high­est, social efficiency. All the other known forms in which the lust for power can be expressed offer satisfaction by giving the ambitious man direct power and domination over his fellow men. The profit motive alone gives fulfillment through power over things.

- Concept of the Corporation”

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Drucker and free market capitalism​

by Chetan Parikh


In a classic “The Daily Drucker", there are some statements of Peter Drucker that need to be remembered today.

1. “The Conscience of Society

“Religion cannot accept any society without abandoning its true Kingdom.”

The End of Economic Man reached the conclusion that the churches could not, after all, furnish the basis for European society and Euro­pean politics. They had to fail, though not for the reasons for which the contemporaries tended to ignore them. Religion could indeed offer an an­swer to the despair of the individual and to his existential agony. But, it could not offer an answer to the despair of the masses. I am afraid that this conclusion still holds today. Western Man-indeed today Man alto­gether-is not ready to renounce this world. Indeed he still looks for secu­lar salvation, if he expects salvation at all. And churches, especially Christian churches, can (and should) preach a "social gospel." But they cannot (and should not) substitute politics for Grace, and social science for Redemption. Religion, the critic of any society, cannot accept any society or even any social program, without abandoning its true Kingdom, that of a Soul alone with its God. Therein lies both the strength of the churches as the conscience of society and their incurable weakness as political and so­cial forces of society.

- The end of Economic Man​

2. Capitalism Justified

“Capitalism as a social order and as a creed is the expression of the belief in economic progress as leading toward the freedom and equality of the individual in the free and equal society.”

Capitalism expects the free and equal society to result from the en­thronement of private profit as supreme ruler of social behavior. Cap­italism did not, of course, invent the "profit motive." Profit has always been one of the main motivating forces of the individual and will always be - re­gardless of the social order in which one lives. But the capitalist creed was the first and only social creed that valued the profit motive positively as the means by which the ideal free and equal society would be automatically re­alized. All previous creeds had regarded the profit motive as socially de­structive, or at least neutral.

Capitalism has, therefore, to endow the economic sphere with inde­pendence and autonomy, which means that economic activities must not be subjected to non-economic considerations, but must rank higher. All so­cial energies have to be concentrated upon the promotion of economic ends, because economic progress carries the promise of the social millen­nium. This is capitalism: and without this social end it has neither sense nor justification.

- The end of Economic Man”​

3. Moving Beyond Capitalism

“I believe it is socially and morally unforgivable when managers reap huge profits for themselves but fire workers.”

I am for the free market. Even though it doesn't work too well, nothing else works at all. But I have serious reservations about capitalism as a sys­tem because it idolizes economics as the be-all and end-all of life. It is one ­dimensional. For example, I have often advised managers that a 20-1 salary ratio between senior executives and rank-and-file white-collar workers is the limit beyond which they cannot go if they don't want resentment and falling morale to hit their companies.

Today, I believe it is socially and morally unforgivable when managers reap huge profits for themselves but fire workers. As societies, we will pay a heavy price for the contempt this generates among middle managers and workers. In short, whole dimensions of what it means to be a human being and treated as one are not incorporated into the economic calculus of cap­italism. For such a myopic system to dominate other aspects of life is not good for any society.

- Managing in the Next Society”​

4. The Efficiency of the Profit Motive

“The profit motive alone gives fulfillment through power over things.”

The only relevant and meaningful question is whether the profit motive is the socially most efficient one of the available directions in which the drive for power can be channeled. But we can say that of the channels available and known to us, the profit motive has a very high, if not the high­est, social efficiency. All the other known forms in which the lust for power can be expressed offer satisfaction by giving the ambitious man direct power and domination over his fellow men. The profit motive alone gives fulfillment through power over things.

- Concept of the Corporation”​

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