Twenty years ago, on December 19, 1991, Peter Drucker’s essay, “It Profits Us to Strengthen Nonprofits,” was published in the Wall Street Journal. Although Drucker’s opinion piece was written a generation ago, his advice is more applicable today than when the first President Bush was in the White House.
Drucker begins his essay with a statement that could be taken from today’s headline, “Federal, state and local governments will have to retrench sharply, no matter who is in office. Moreover, government has proved incompetent at solving social problems. Virtually every success we have scored has been achieved by nonprofits.”
In today’s supercharged political environment, Drucker’s prescription would be called “radical,” “kooky,” “unrealistic,” and of course one of the oldest canards there is, “racist.” These criticisms against Drucker, who created the “science” of management, would be off base, because Drucker was not an “ideologue,” by any stretch of the imagination, but a problem solver.
In his essay, he describes why government bureaucracies fail to solve social problems, while “a well-managed nonprofit gets at least twice the bang out of each buck that a government agency does.”
So why haven’t our elected officials embraced Drucker’s advice? The simple answer is that they love the welfare state for its own sake; they want to tax and spend to show the public how “philanthropic” they are; and they don’t trust the people to step up to the plate to address social issues in their communities.
Economic and financial reality is causing the welfare state—and that include corporate welfare as well—to implode, not just in America but especially in Europe.
Drucker concludes his essay with the following observation. “In my 1969 book “the Age of Discontinuity” I first proposed “privatization,” only to have every reviewer tell me that it would never happen. Now, of course, privatization is widely seen as the cure for modern economies mismanaged by socialist bureaucracies. We now need to learn that ‘nonprofitization’ may for modern societies be the way of mismanagement by welfare bureaucracies.”
Twenty years ago Peter Drucker diagnosed the problem facing the country and offered a solution that would have prevented most of the ills facing America today. Ignoring Drucker’s advice in the 21st century will lead to a financial crisis that will dwarf the 2008 housing meltdown. Our elected officials apparently are unwilling to embrace Drucker’s prescription because their love of power is greater than helping people in a humane and financially sustainable way.
Murray Sabrin is professor of finance at Ramapo College and blogs at MurraySabrin.com