Insights of Peter Drucker

I already commented on the passing of Peter Drucker last week. Steve Forbes had a terrific tribute to PD in the WSJ. Here are some salient excerpts:

What helped make Mr. Drucker so insightful was a profound understanding of economics, an understanding that still eludes most economists today. Not for him was the notion of "macroeconomics," of seeing the economy as something of a machine that can achieve steady, stable growth. To him, traditional economic notions of "equilibrium" or Keynesian ideas of "aggregate demand" were nonsense. Innovation, constant change, and turmoil were the true constants of a progressing economy.


As Mr. Drucker wrote over two decades ago, "The economy is forever going to change and is biological rather than mechanistic in nature. The innovator is the true subject of economics. Entrepreneurs that move resources from old and obsolescent to new and more productive employments are the very essence of economics and certainly of a modern economy. Innovation makes obsolete yesterday's capital earnings and capital investment. The more an economy progresses the more capital formation -- profits -- will it therefore need." These two men saw profits as a moral imperative, a genuine "cost" in the cost of staying in business because "Nothing is predictable except that today's profitable business will become tomorrow's white elephant."


He brooked no nonsense about some of the topics that obsess Chicken Little today. Outsourcing? He told Fortune in 2002 that "We import two to three times as many jobs as we export. Wage costs are of primary importance for very few industries. The industries that are losing jobs out of the U.S. are the more backward industries." He never tired of pointing out the huge advantage the U.S. has over Europe and Japan and other countries with American workers' flexibility, not only for changing jobs but physically moving from one area to another to pursue opportunities.