Managing in the Next Society 5

Part III The Changing World Economy
Chapter 11 The Rise of the Great Institutions
Chapter 12 The Global Economy and the Nation-State
Chapter 13 ...

Drucker argues that a society needs the social sector, separate from the government and the businesses. The idea from GOP that we need no government (derived from an extreme emphasis of Adam Smith's economic philosophy - Y Pan) is turned down by Drucker. Government is good doing something, but not good in something else. Government's intervention should be in the national scale. Businesses also are good in something, i.e. competing in the market, but have no interest in dealing with local community problems. Government's effective positioning and businesses' market interests leave a blank spot in the society between the two. That is why we do need the third sector, non government and non businesses organizations.

The great institutions of civil society deal with community problems such as tutoring students, establishing nurse association, educating farmers in isolated areas, etc. They can adapt and experiment with local communities in which the government can do nothing effectively. Businesses whatsoever have no interest and capacity in solving this kind of problems. Since these social organizations have no economic bottom line, they indeed need more effective management, a clear mission, and result orientation.

Far before, since the Industrial Revolution, nation-states were speculated to reach their end by some. They argued that the power of economic exchanges is far too great as opposed to the nation-states. The facts, however, show that the nation-states, although actually challenged by the dynamic, chaotic nature of the market, stay in existence until today. Let alone wars and other political conflicts between countries, when there are conflicting interests between nation states and economic rationality, nation-states always have won the battles. Based on the facts discussed above, Drucker believes that nation-states will survive in globalization and information revolution age.

Indeed, the development of globalization and the global financial system put nation-states, including the US, in a fierce environment. Money creation has been partially, probably lion share, out of government's control. Since the 19th century, banks and other financial institutions have been creating money through credits. Moreover, the floating exchange rate regime introduced a few decades ago put nation-states even in a more unfriendly situation. Still, however, they show their resilience.

When wars become total wars and are introduced as a continuation policy of nation states' other means (economic and politic) and since global and multinational organizations have to transform into transnational ones, the need of another level of regulations world-wide emerges. The US stubbornness to enforce its unique practices to others is not wise. Drucker suggests that the world must have supranational organizations, like Red Cross, which in turn are to define and enforce rules between nations in peace and war times.