Book: Age of Discontinuity

This briefing document summarizes the main themes and important ideas presented in the provided excerpts from Peter F. Drucker's "The Age of Discontinuity." Written in the late 1960s and early 1970s (with a new introduction in 1978), the book identifies and analyzes major discontinuities that Drucker believed would reshape the world economy, society, and polity in the closing decades of the 20th century. These excerpts highlight the shift towards a global economy, the changing nature of technology and innovation, the rise of new power centers beyond the nation-state, and the need for new approaches in economic theory and government.

Main Themes and Important Ideas:

1. The Emergence of a World Economy:

• Drucker argues that the traditional concept of an "international" economy, where nations are separate units trading with each other, is being replaced by a true "world economy." This new economy is characterized by common information leading to similar economic desires and demands across national borders, largely disregarding political ideologies.
• "But imperceptibly there has emerged a world economy in which common information generates the same economic appetites, aspirations, and demandscutting across national boundaries and languages and largely disregarding political ideologies as well. The world has become, in other words, one market, one global shopping center." (Page xxviii)
• He notes the lack of adequate economic institutions and policies to understand and manage this world economy, with the multinational corporation being a notable exception.
• "Yet this world economy almost entirely lacks economic institutions; the onlythough importantexception is the multinational corporation. And we are totally without economic policy and economic theory for a world economy." (Page xxviii)
• The rise of "production sharing," exemplified by the hand-held calculator and European textiles processed in North Africa or Asia, further blurs traditional notions of imports and exports, challenging existing economic theory and policy.
• "That this production sharing goes counter to all traditional concepts of exporting or importing is obvious. What, for instance, is the hand-held calculatoran "import" into the United States, or the form in which U.S.-made electronic semi-conductors go to the world market, that is, an "export''?" (Page xxii)
• This global economic reality makes national monetary sovereignty largely an illusion, as all countries must adjust their policies to their international economic position.

2. The Changing Nature of Technology and Innovation:

• Drucker contrasts the period of technological and industrial continuity in the mid-20th century with the preceding era (ending with WWI) that produced a burst of fundamental inventions. He predicts a return to a period of rapid technological change, similar to the late 19th century, with new major industries emerging.
• "The coming decades in technology are more likely to resemble the closing decades of the last century, in which a major industry based on new technology surfaced every few years, than they will resemble the technological and industrial continuity of the past fifty years." (Page xxviii)
• He emphasizes that in new technologies, the traditional separation between the "universe of matter and the universe of the mind" is being overcome, with implications beyond the economic sphere, such as the need to bridge the gap between the "two cultures" of science and humanities.
• "In these new technologies the split between the universe of matter and the universe of the mindthe split introduced into Western thought by Descartes 300 years agois being overcome." (Page 39)
• Innovation in this new era will be less about single inventions and more about "new perception" – putting existing things together in novel ways, as exemplified by Henry Ford's mass production.
• "What he contributed were mass production, the mass market, the profitability of the very cheap, and so on. Perceptions have greater impact, as a rule, economically, socially, and culturally, than have many "new" things or even "new" ideas." (Page 48)
• He also highlights the importance of "marketing" in a broader sense – understanding the customer's needs and the ultimate purpose of the business, rather than just focusing on selling existing products.

3. The Rise of Pluralistic Institutions and the Changing Role of Government:

• Drucker observes a significant "scaling-up" in the size and scope of various institutions (government, corporations, universities, etc.) since the early 20th century.
• He argues that society is increasingly becoming a "pluralism of institutions," a "galaxy of suns rather than one big center surrounded by moons." These institutions are autonomous, have their own functions, objectives, and rationales, limiting the "master" role of government.
• "Government looks like the most powerful of these institutionsit is certainly the one that spends the most. But each of the others discharges a function that is essential to society and has to be discharged in its own right. Each has its own autonomous management. Each has its own job to do and therefore its own objectives, its own values, and its own rationale. If government is still the "lord," it can no longer be the "master." (Page 175)
• Consequently, Drucker suggests that for government to be effective, it may need to "decentralize" to these other institutions, doing less to achieve more, acting as a "coordinator," "chairman," or "leader" rather than a direct controller.
• He introduces the concept of "reprivatization," where tasks that flowed to government in the past (when the family unit was the primary social institution) are now turned over to these new, non-governmental organizations. Government's role would shift towards decision-making, vision-setting, and structuring political objectives in ways that align with the capabilities of these autonomous institutions.
• "Government would start out by asking the question: "How do these institutions work and what can they do?" It would then ask: "How can political and social objectives be formulated and organized in such a manner as to become opportunities for performance for these institutions?"" (Page 234)

4. Discontinuities in Economic Theory and Policy:

• Drucker critiques traditional economic theory for its focus on the "macroeconomy" of the nation-state and its neglect of the "microeconomy" of producers, consumers, and markets, as well as the emerging world economy.
• "Economists speak of their theory as one of the "macroeconomy." This, however, not only fails to take in the true "macroeconomy," that is, the world economy, it also leaves out the economic areas where actual costs are incurred and actual results are achievedthe "microeconomy" of producer, consumer, and market." (Page 160)
• He points to the inadequacy of the existing international monetary system and the demonetization of gold, highlighting the need for a "nonnational" system managed by technical economic considerations rather than political powers.
• "The world monetary system we need would not require any political power. It would not be "supernational." But it would have to be "nonnational.'' It would have to take control of the world money and credit supply out of the hands of political powers and make it into a technical function to be decided by technical, that is, by purely economic, considerations." (Page 88)
• Drucker emphasizes the need for an economic theory that starts with the world economy as its basis and then explains the domestic economy within that context.
• "Adam Smith explained the international economy for his day. There is urgent need now for an economic theory that starts out with the world economy and then explains the domestic economy as part of the world economy." (Page 156)

5. The Importance of Population Dynamics and Social Change:

• While acknowledged as not being the primary focus of the original book, Drucker notes in his 1978 introduction that population dynamics are an important development that further underscores the significance of the identified discontinuities.
• He highlights the emergence of a "universal appetite for small luxuries," which signify individual economic independence and control, acting as a psychological necessity even for those with limited means.
• "A universal appetite for small luxuries has emerged. They signify a little economic independence, a little control over economic destiny. They are a badge of freedom." (Page 79)
• The rise of global communication through media like movies, radio, TV, and eventually satellites, creates a "community of information" where the whole world knows how everyone else lives, leading to shared economic expectations and behaviors.
• "The whole world, in other words, has become one economy in its expectations, in its responses, and in its behavior. This is new in human history." (Page 80)

Conclusion:

These excerpts from "The Age of Discontinuity" reveal Drucker's insightful analysis of the fundamental shifts occurring in the late 20th century. He argues that the world was moving beyond traditional frameworks in economics, technology, governance, and social structures. His emphasis on the rise of a global economy, the transformative power of "new perception" in innovation, the emergence of pluralistic institutions, and the need for revised economic thinking provides a powerful framework for understanding the challenges and opportunities of a rapidly changing world. The book serves as an "early-warning system," highlighting discontinuities that would shape the future, urging leaders and thinkers to move beyond established assumptions and embrace new realities.

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