An Outbreak of Bitterness and Contempt for the Super-Corporate Chieftains

>> Thursday, May 22, 2008

I happened to read this article for the quote on education, listed at the bottom of this post, but found the quote regarding the super rich to be quite prescient. The article is from 1997.

From the late Peter Drucker:

"In the next economic downturn there will be an outbreak of bitterness and contempt for the super-corporate chieftains who pay themselves millions. In every major economic downturn in U.S. history the 'villains' have been the 'heroes' during the preceding boom.

"In the 1880s the American public fawned on the 'tycoons' the way we now fawn on the superrich. In the depression of the 1890s they became what we now call the 'robber barons.'

"In the 1920s the popular press fawned on Wall Street speculators," says Drucker. He's referring to the way the public hung on every word from Charles Mitchell and groveled for hints from Jesse Livermore. J.P. Morgan was almost a god. In the Depression all these people became Roosevelt's "malefactors of great wealth."

It disgusts Drucker that some of the media glorify people who get huge bonuses after laying off thousands of workers. "Few top executives," he says, "can even imagine the hatred, contempt and fury that has been created—not primarily among blue-collar workers who never had an exalted opinion of the 'bosses'—but among their middle management and professional people.

"I don't know what form it will take, but the envy developing from their enormous wealth will cause trouble."

Here's a Drucker prediction that will shake those of you who sit with gains from index funds and big blue chips: Giant companies, many of the outfits that dominate the S&P 500, are in for trouble. They will no longer be able to attract the best and the brightest for their management ranks.

"Most of my former students are bored working for large companies," Drucker says, "and they switch to medium-size and small companies after a few years. The only reason they take jobs at large companies is they're the only ones recruiting on campus.
Another problem with these giant companies, in Drucker's view: They think of themselves as multinational, but they really are not. "Many have autonomous foreign subsidiaries rather than central direction," says Drucker. "Few have integrated currency management. Being global and diversified don't mix," he says.

"Thirty years from now the big university campuses will be relics. Universities won't survive. It's as large a change as when we first got the printed book.

"Do you realize that the cost of higher education has risen as fast as the cost of health care? And for the middle-class family, college education for their children is as much of a necessity as is medical care—without it the kids have no future.

"Such totally uncontrollable expenditures, without any visible improvement in either the content or the quality of education, means that the system is rapidly becoming untenable. Higher education is in deep crisis."

Crisis means that things will get either much better or much worse. Things will get much different, Drucker says.

"It took more than 200 years (1440 to the late 1600s) for the printed book to create the modern school. It won't take nearly that long for the big change.

"High school graduates should work for at least five years before going on to college," he recommends. "Then it will be more than a prolongation of adolescence."


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