End of Economic Man Revisited

InvestorEducation / Resources & ReviewsJul 25, 2012 - 12:11 PM GMT

By: Christopher_Quigley

In 1939 Peter F. Drucker wrote "The End of Economic Man: The Origins of
Totalitarianism". Its publication caused a sensation. When Winston Churchill
became prime minister of Great Britain he gave the order to include the book
in the kit issued to every graduate of a British Officer's Candidate School. A
year previously Churchill had reviewed the publication. It impressed him
because he realized that something fundamental had happened in the world with the rise of
Fascisms and he wished his officers to understand what they were fighting in Hitler's
Germany and Mussolini's Italy.


"In 1939 fascist totalitarianism had assumed the proportions of a world revolution. It had
become the only effective political force in Europe, and had reduced democracy to impotent
defense internally and externally..... The reasons why all resistance to the fascist menace
has proved unavailing is that we do not know what we fight.....The masses joined fascism
not because they believe it its promises, which takes the place of a positive creed, BUT
BECAUSE THEY COULD NOT BELIEVE IN THEM..... Fascism is the result of the collapse
of Europe's spiritual and social order..... At first glance it might appear that the "science" of
economics has never been more dominant than just now and that, therefore, the belief in
the society of Economic Man could never have been stronger. Nation after nation has
entrusted the management of its affairs to the trained economist. He is in demand as
business executive and as a business leader, as lecturer and as radio commentator. But
this superficial appearance is deceptive. We have installed the economist in a last
desperate effort to save the society of Economic Man, just as the eighteenth century
installed the philosopher - the rationalist, enlightened, historically trained scholar - on its
shaky thrones. And like the Philosopher-Kings in the eighteenth century, the Economic-
Prime Minister in the twentieth century has failed..... It is not that the standard of knowledge
of the economist has deteriorated. It is the belief in the desirability and in the necessity of
the sovereignty and autonomy of the economic sphere that is disappearing; and with the
belief, the reality.
The masses have realized that the exercise of free economic activity will not and cannot
lead to the establishment of the free and equal society..... He can no longer explain or
understand his existence as rationally correlated and co-ordinated to the world in which he
lives; nor can he co-ordinate the world and the social reality to his existence. The function
of the individual in society has become entirely irrational and senseless. Man is isolated
within a tremendous machine, the purpose and meaning of which he does not accept and
cannot translate into terms of his experience. SOCIETY CEASES TO BE A COMMUNITY
Of INDIVIDUALS BOUND TOGETHER BY A COMMON PURPOSE, and becomes a
chaotic hubbub of purposeless isolated nomads..... The threats of sudden permanent
unemployment, of being thrown on the industrial scrap heap in one's prime or even before
one has started to work. Against these forces the individual finds himself as helpless,
isolated and atomized as against the forces of machine war..... ECONOMIC PROGRESS
NO LONGER APPEARS TO THEM AS THE SUPREME MEANS TO A SUPREME
GOAL..... The Western democracies have to realize that totalitarian fascism cannot be
overcome by socialism, by capitalist democracy, or by a combination of both. It can only be
overcome by a new noneconomic concept of a free and equal society. "
So wrote Peter Drucker in the simple eight chapters to "The End of Economic Man". What
was valid in 1939 is more valid even now in 2012. Despite the experience of a horrendous
world war the lessons expounded by the author have been forgotten or ignored.
Accordingly, I believe that the European economic order is once again on the cusp of a
similar disaster. Extreme thinking you might say, but not so I fear.
What were the essential conceptual elements presented in "The End of Economic Man"
which have been ignored? Let me summarize:
1. Economics is not a "science" as such; rather it is a social concept. For example, as
enunciated by Drucker, the whole scientific system of classical economics collapsed when
Henry Ford started out to obtain a monopoly by cheaper prices and larger production in
blissful ignorance of the "economic law" according to which monopolies reduce production
and raise prices. The failures in the "science" of economics have not been solved but
rather buried. The implication is that the basis upon which the western financial system is
structured upon is very fragile.
2. When economics fail the key social implication for society is the alienation of the
masses.
4. Alienation has political consequences and those who identify and exploit this alienation
will attain power. Ostensibly the purpose of this power is to counteract the breakdown of
historic social, economic and political structures.
5. The nature of "modern" society is built upon a common solidarity of fairness and the
equality before the law. When this fairness and equality fail throughout a society it is a sign
that a new totalitarian phase may be nearing. This totalitarianism replaces freedom with
imposition and order with organization.
6. Totalitarianism ends when its supporting society has become so dysfunctional that hope
is replaced by despair and its supporting society collapses like a "rotten egg" to a morally
and economically superior social force and order.
7. History repeats itself through ignorance and hubris. It is the duty of the intelligentsia in
any society to fight this tendency and so bring that society to a new plain of universal
peaceful development rather than stagnate then disintegrate into parochially competitive
and warring factions.
Parallels in Europe Today
Those of us currently living in Europe today look on with horror at the disaster that is the
Euro project. When we see how the power elites are allowing countries like Greece
collapse for "economic" reasons we are appalled. We sense Europe is falling into a new
"totalitarian" trap warned of by Drucker. Germany, the only remaining power in Europe, is
allowing "inhuman policies" destroy human society. The specter of "lifetime unemployment"
faces the youth of Portugal, Cyprus, Greece, Ireland, Spain and Italy. Hundreds of
thousands of French are fleeing France to live and work in London. Economically Europe is
utterly dysfunctional yet policy is not altered and "insane" austerity the only game in town.
The parallel to 1939 is astonishing. Then "crazy" economic decisions created the
"zeitgeist" for the collapse of Europe. In Ireland listening to the news as it unfolds day to
day it appears as if European nations are all sleep walking, in tandem, into a quagmire of
social collapse. Institutions are being allowed fail. State assets are being sold off to favored
associates for a song. Guilty bank executives are allowed stay free with impunity. Banks
rates are fixed so allowing derivative players make billions. Running businesses for mom
and pop operators has become a "non-economic" bureaucratic night-mare. Hope is leading
to despair. This for Drucker was the "canary in the coal mine". This trend cannot be allowed
continue. When will our statesmen "wake up".

Here is how Peter Drucker ended his introduction to the 2004 reprint of his classic. I believe
its message has never been more pertinent given the above. Let those of us who are
aware take its implications on board and act accordingly:
"The totalitarian response, this book shows, does not solve anything. On the contrary, the
problems are only made much worse, and the world made more nightmarish. To be sure,
this world of ours - like probably all societies before - is insane. But paranoia is not the cure
for an insane world. On the contrary, what is needed to make life bearable in an insane
world is sanity. Maturity, to use a much abused word, does not consist of trying to make the
universe rational. That attempt, the attempt of the nineteenth century, will probably always
end in frustration. Maturity does, however, not consist either of trying to outdo the
irrationality of the universe. It requires that we make our own behavior rational - and this
alone gives us the chance at a decent and a meaningful society."
Reference: "The End of Economic Man"
Peter F. Drucker
By Christopher M. Quigley
B.Sc., M.M.I.I. Grad., M.A.
http://www.wealthbuilder.ie
Mr. Quigley was born in 1958 in Dublin, Ireland. He holds a Bachelor Degree in Accounting
and Management from Trinity College Dublin and is a graduate of the Marketing Institute of
Ireland. He commenced investing in the stock market in 1989 in Belmont, California where
he lived for 6 years. He has developed the Wealthbuilder investment and trading course
over the last two decades as a result of research, study and experience. This system
marries fundamental analysis with technical analysis and focuses on momentum, value and
pension strategies.
Since 2007 Mr. Quigley has written over 80 articles which have been published on popular
web sites based in California, New York, London and Dublin.
Mr. Quigley is now lives in Dublin, Ireland and Tampa Bay, Florida.
2012 Copyright Christopher M. Quigley - All Rights Reserved
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