Peter Drucker and the Sickness of Government

An article at CATO Institute has turned me onto an article written by Peter Drucker back in the 1960s, about the problems of government being too big and unwieldy.

First, who is Peter Drucker?  He is the economic genius on concepts like “Total Quality Management” and “Management by Wandering Around”.  He attempted to teach his concepts to the American auto companies in the late 1950s and 1960s, but was ignored by the behemoths that had no real competition. He then took his concepts to Japan, which was only creating rice burners.  Thanks to Peter Drucker, in less than a decade, Japan went from cheap cars and toys, to the best quality one could find anywhere. It led to Chrysler’s bankruptcy in the early 1980s, and forced Ford and GM to infuse quality into their companies.  Every great company in the world today has been influenced by Peter Drucker.

In his article, Drucker discusses not only American government, but attempts by other governments to try and defeat economic malaise and recession, regulate economies, etc.  And in almost every instance, government has botched things. Government can do two things well, according to Peter Drucker: wage war and inflate currency.

I’ll let you read Drucker’s article and the CATO article for the points they make, but I wanted to note how amazing Drucker’s comments are today in 2013.  The things that concerned him 50 years ago are still true today.  When he noted, “who really believes that the War on Poverty will vanquish poverty in cities?”, we must admit that LBJ’s war is a failure.  There are more people on Food Stamps today than at any other time in history.

Fifty years ago, Drucker stated that the Tsar’s secret police “did not  go in for the security investigations we now take for granted.”  Here we are at an even more precarious place with the NSA stealing information from Google, Germany’s Prime Minister Angela Merkel, and even the Papal elections!

And if Drucker was critical of the national healthcare of Great Britain (he was), imagine what he must think about the monstrosity we call Obamacare!  Just how will it make lives better, when it has begun by making millions of lives worse?  How about the unfunded mandates in Medicare and Medicaid, which will only get worse as more people are moved onto those programs?  If you think the current $17 Trillion deficit is huge, well you ain’t seen nothing yet!

Though we plow billions into the Dept of Education (founded by Jimmy Carter), the ability of students to read and do arithmetic has not improved any in over 30 years.  Can we just do what we were doing three decades ago and stop spending the wasted money, as it hasn’t made a difference?

The only solution to most of our problems is to get our people off the welfare hog’s teat, and back to caring for themselves and others in their own communities.  Then, we must slash federal government down by 2/3 or more.  Education, welfare, and most other issues can be handled better on the state and local levels, as they were for the first half of this nation’s existence.

As noted by CATO, while they look at it from a freedom perspective, Drucker looked at the economic side of it.  And big government cannot do what it consistently tries to claim it can.  The Soviets could not do it.  The Communist Chinese had to move to a capitalist system with more freedom.  Some European nations are moving away from their form of socialism and towards private enterprise.  Greece, Ireland, Spain, Italy, Portugal and other nations are struggling with bankruptcy from their big government experiments.  Now, we see the United States falling from its perch as the #1 nation on earth, because of big government.

Sad that even from the Drucker’s perspective from 50 years ago, we still cannot break free from the government candy store, which is not only rotting our teeth, but rotting our souls as well.

12 thoughts on “Peter Drucker and the Sickness of Government

  1. Interesting. This reminds me of an article recently in the Harvard Business Review Blog Network by Umair Haque called “This Isn’t Capitalism — It’s Growthism, and It’s Bad for Us.” http://blogs.hbr.org/2013/10/this-isnt-capitalism-its-growthism-and-its-bad-for-us/

    The point of Haque’s article is that all this growth, spending, consumerism, materialism, soaring corporate profits, celebrity CEOs, and the rest of it isn’t addressing the most basic needs of a prosperous society – education, eliminating poverty, energy, healthcare, community, food, happiness – which all seem to be stagnate or declining. Looks to be along the same lines as Drucker.

  2. Thanks Bryce for the link. Yes, we focus more on where the stock market is going, rather than where real growth is.
    We focus on whether people have IPhones, rather than on whether they have food on the table.
    Obamacare is not about delivering healthcare to the masses, but to create more government jobs and loyalty to a big government. George W Bush’s attempt at Medicare Part D, Prescriptions, was an attempt at buying votes on unfunded promises. All of this at the expense of our grandchildren, who will be paying for the Baby Boomers’ lavish crimes for decades to come.

  3. Both Drucker and Haque (linked by Bryce) are correct, although their messages seem, on the surface, a bit different.

    The reason we have “growthism” instead of capitalism is because of crony capitalism, which is the mixing of government and business. So, the Fed (a government-created banking cartel) gives money to the connected crony capitalists (the big banks), and they all get rich, but the middle class do not, and the poor continue to have their faces grinded. So our economy seems to be doing well because the big banks make money and the stock market goes up. But this growth is not based on real things, it is based on money-printing, which must end at some point, and the end will be ugly indeed.

    The solution is to get rid of the Fed and to stop bailing out the big banks and other companies. Allow a truly free market, which will help the poor and the middle class.

    Will this happen anytime soon? I doubt it. But we need to understand the source of the problem is not the “free market,” because there is no free market. When there was (in the 19th century, for example), the middle class and the poor benefitted most of all, with incredible increases in standards of living. With our crony capitalist system, it is the very rich who benefit most of all.

    It is also worth pointing out that the few areas where we do have a relatively free market (computers, phones, the internet, Lasik surgery), we create products that are useful and people make a good living. This is true growth, not “growthism.” So hopefully we can free up some more markets and set some people free.

  4. “Will this happen anytime soon? I doubt it. But we need to understand the source of the problem is not the “free market,” because there is no free market. When there was (in the 19th century, for example), the middle class and the poor benefitted most of all, with incredible increases in standards of living. With our crony capitalist system, it is the very rich who benefit most of all.”

    Absolutely. And it is also important to point out that the Fed’s coercive zero-rate interest policy is destroying the income potential of our senior citizens, many of whom have sizable investments in bonds and other low-risk, income-producing assets (including CDs and savings accounts). Fifteen years ago, the rate of return on these were anywhere from 5% to 8%. Now, they are barely 1% for the good ones, and that’s below the inflation rate.

    So it’s not just the poor and middle-class who are being squeezed and fleeced, but it’s our huge senior population, most of whom have saved their entire lives only to see their savings lose value due to the Fed’s machinations.

    This is real, serious stuff folks.

  5. I would like to address some of Haque’s ideas with a slightly different spin, in line with Drucker’s point. So, in the United States, do we need “education?” Yes, definitely. Does this need to be “government education?” Definitely not. The United States is spending more on education than ever in history, yet our results are down. Why is this? Could it be we are 1)wasting money and 2)educating our students incorrectly?

    The solution: allow experimentation. Home schooling. Charter schools. Vouchers for private schools. The problem is that when vapid people talk about “concentrating on education,” they inevitably mean extracting money from some people who do not want to pay it to give to teacher unions and layers of administrators. Spending more money on what is not working is not “helping education.” It is usually doing the opposite.

    This is especially apt in Colorado, where I live. Our schools are at a tipping point, and the election here on Tuesday was a huge victory for people who 1)oppose giving more money to unions and administrators and 2)allowing greater experimentation with education. Those districts that have rejected the teachers’ unions are showing huge improvements in test scores and better results for their kids. My kids go to a charter school that was, inevitably, opposed by the unions, yet my kids are getting a great education. Why can’t every kid in the U.S. get the same education? Because government gets in the way by supporting sclerotic teachers’ unions at the expense of the kids.

    So, don’t fall for the trick of saying “we need more education” if the idea of education is simply to give more money to the people who made the schools fail in the first place.

    The same principle applies to health care, the environment and other areas of our society.

  6. Thanks for the link, RAM.

    I am amazed by the quality conservative literature that has been repressed by the liberal education wing. I am grateful to those who point out thought provoking articles.

  7. As Drucker notes, it just means bigger government. While Geoff said here that it is a form of corporatism, the less nice term would be “fascism.” Government, unions and corporations in bed with one another, in order to make themselves bigger and more powerful.

    Federal laws pick winners and losers. When Chrysler went belly up and the Feds stepped in, the unions were the big winners, while stock holders were left out. When the government “bailed out” the nation after the housing bubble collapse, the banks grew enormously bigger, while foreclosures are still running at a break-neck pace for the poor homeowners caught up in the charade that government would be on their side.

    As I’ve noted, Obamacare does not improve anyone’s healthcare in any significant ways. It does not make it cheaper, etc. Instead, it makes government bigger, and in bed with the insurance companies.

    Economically, it puts us on a downward spiral. Soon China will be the number one nation on earth, simply because they didn’t fall into the trap we are in – where government must provide everything. They learned from the collapse of the Soviets, freeing up their economy, loosening up various restrictions, and allowing some freedom to peek in through the shutters.

  8. I don’t think we realize how dependent every aspect of our economy is on the bubble cycle. You think lasik surgery, computers, Iphones etc would be possible without the inflated bubble cycle?

    Not a chance. Most people are in debt. The only reason they can continue to consume both beyond their means and beyond their debt is because fat cats are able to offer credit. The only reason they can do that? The federal Reserve induced bubble cycle

    We may like to point the finger elsewhere, but if you carry a balance, have a car payment, have a house payment, there is a very strong possibility you are part of the problem. Hey, if you work for a company that sells to people like this your paycheck (and mine) is dependent on others making poor financial choices. Since there are millions of others just like that you can’t sustain that kind of unsustainablity without the collusion of the federal reserve and the banks to keep the cash flowing.

    The only way out is collapse, but that’s not really a good alternative to keeping the bubble cycle running longer in the USA than the rest of the world.

  9. And I know someone might root for collapse as a kid of take your medicine or better now than later. We’ll 30years ago maybe… But then we were dealing with communism. And that’s the key.

    The alternative is not reckless spending vs collapse in a vacuum. If our financial markets really collapses and we had tens of millions more out of work with no functioning system to keep the markets running smoothly (I’m not just talking stocks here) what would the worldwide situation look like? I’m thinking 1939…but only we start the war with atom bombs and end somewhere else.

    So we take the devil we know as opposed to the apocalypse we suspect and fear is likely if we can’t keep the music playing just a little longer.

  10. Chris, there are other options. For example, we could gradually wean ourselves off the pig and bubble cycle.

    Imainge doing so over a period of 2 or 3 decades. The gradual decrease in government and Federal Reserve size would be absorbed by other entities in society (businesses, states, communities, etc).

    BTW, I think you meant to say “1929″ for the Great Depression.

    The reality is, eventually you run out of bubbles to burst, and then comes a giant crisis with no fixable solution except bankruptcy and turmoil. The closer you get to the edge of the cliff, the more radical the solutions are forced to be.

    Pres Hinckley gave a talk in Gen Conf several years ago about a tree he planted in his yard. Years went by, and one day he noticed that the branches were growing very crooked. He tried using a winch to force the bad branch back into the spot it should be, but could not move it (being large). The only solution was to cut off the offending limb. He then pulled out a string to show the audience and said that if he had worked on it when it was still young and tender, all it would have taken was a small string to steer it in the right direction. However, the time for the string was far gone, and the only solution was a severe action.

    This is where our nation is approaching. If Congress does not do some strong changes and branch cutting now, the problems will soon uproot the entire tree, and we’ll have to start over.

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