When 2008 Feels Like 1968
It's been a bummer of a summer, hasn't it?
At the gas station the other night, I found myself staring in disbelief—as I have for weeks—while the numbers on the pump kept spiraling higher and higher. The total: $67.83 to fill my Passat. I hopped back in my car and flipped on the radio, figuring a little music might take my mind off the lightness of my wallet, but the news came on instead: Fannie Mae (FNM) and Freddie Mac (FRE) were reeling. Nervous depositors had stormed IndyMac Bancorp, looking to pull their money. General Motors (GM) was poised for another round of cuts.
Sigh. You don't have to be much of a sourpuss to feel like things are falling apart these days—much of it the result of terrible management across a wide range of institutions. We've been undermined by corrupt mortgage brokers and bankers, lax financial regulators, myopic auto executives, and visionless politicians. Lord knows, there is plenty of blame to go around.
Yet it's worth considering that these problems—the mortgage crisis, $4-plus gasoline, the ongoing struggles of an American icon like GM—reflect more than deep failure. They also say a lot about our future: "the future," as Peter Drucker put it, "that has already happened."
Looked at this way, we may be mired less in the Summer of Our Discontent than we are still coming to grips with what Drucker called The Age of Discontinuity.
It was 40 years ago when Drucker used that phrase as the title of his 10th book. It foretold an era, then just dawning, that promised to bring "a period of change—in technology and in economic policy, in industry structures and in economic theory, in the knowledge needed to govern and to manage."
This time of transformation—which we remain in the middle of—stands in stark contrast to the one that came before it. During the previous period, which Drucker marked from the end of World War I to the mid-1960s, trends in production and income across the globe had been altered so slightly that a "Rip Van Winkle economist" who fell asleep in 1914 and woke up 50 years later would have been stunned to discover how much had stayed on track. Fewer major modifications in the economic landscape occurred during this span, Drucker said, than at any time in the preceding 300 years.
"Every single area that is today a major industrial power was already well along the road to industrial leadership in 1913," he explained. "No major new industrial country has joined the club since." Similarly, "most industrial technology" in the 1960s was merely "an extension and modification of the inventions and technologies" that had blossomed during the half-century after the Civil War.
But all this calm, all this stability, Drucker knew, was about to end. "The foundations," he wrote, "have shifted under our feet."
Among the most profound changes Drucker saw unfolding was the move away from a traditional "international economy"—one characterized by individual nations acting as disparate units, each with "its own economic values and preferences, its own markets, and its own largely self-contained information." What had suddenly emerged in its place, he said, was a true "world economy" in which "the differences no longer lie in what people have or want, but in how much of the same things they have and can afford to buy."
We see aspects of this playing out now at the gasoline pump. Although speculation and manipulation may have had some hand in the recent runup in prices, it's escalating petroleum demand by developing countries that will keep them high. The International Energy Agency tells us that China and India are on pace to import a combined 19 million barrels of oil a day by 2030, up from about 5 million in 2006. Nevertheless, we have no concrete national energy policy to deal with the pressure this will invariably put on supplies.
Season of Gloom?
Meanwhile, the mortgage meltdown—which continues to be felt not only in the U.S. but also in Europe and Asia—underscores the world's interconnectedness, as well as our failure to adequately manage the system. "There is greater need…to regulate the global international financial markets," Joseph Stiglitz, a Columbia University professor and former chief economist of the World Bank, told a conference in Frankfurt earlier this year. "But we have neither the institutions, nor the mindsets, with which to do this effectively and democratically." We are still acting as if this were 1968, not 2008.
As for GM, its plans to accelerate the closure of some truck and SUV factories and shed thousands more blue-collar jobs is, in the largest sense, a sign of another monumental change that Drucker explored in The Age of Discontinuity: "On the eve of World War II," he wrote, "semiskilled machine operators, the men on the assembly line, were the center of the American workforce. Today the center is the knowledge worker, the man or woman who applies to productive work ideas, concepts, and information rather than manual skill or brawn."
This is all the more true now, of course. Once again, though, we're not behaving accordingly. Between 1940 and 2000, the proportion of those 25 years and older in the U.S. with at least a college diploma swelled from less than 5% to more than 25%. But in the last few years, the Peter G. Peterson Institute for International Economics has shown, this growth has stagnated. What's more, the U.S. is set to experience a decline in the number of workers holding master's, professional, and doctoral degrees. Is this really how we want to prepare ourselves to succeed in a knowledge-based economy?
It has been a full four decades since The Age of Discontinuity appeared. We better start absorbing its lessons, lest the summer turn into a season of gloom that never ends.