Joe’s Journal: The Three Dimensions of the Corporation
“An important task for top management in the next society’s corporation will be to balance the three dimensions of the corporation: as an economic organization, as a human organization and as an increasingly important social organization. Each of the three models of the corporation developed in the past half-century stressed one of these dimensions and subordinated the other two. The German model of the ‘social market economy’ put the emphasis on the social dimension; the Japanese one, on the human dimension; and the American one, on the economic dimension.
None of the three is adequate on its own.”
–Peter F. Drucker
The free market clearly produces the best chance for improving the overall economic lot of the world’s population, but it is imperfect. It stimulates innovation and leads to the almost miraculous coordination of the efforts of producer, distributor and consumer. Yet the resulting distribution of income is often intolerable, as is the case today in the United States where the economic dimension reigns supreme.
Unfortunately, government regulation beyond what is necessary to level the economic playing field among participants is not the answer. And government redistribution of income often results in lower, rather than higher, levels of income because of its adverse effects on incentives to work.
What Peter Drucker proposed was a system of management wherein the public good becomes a guideline for economic activity and wherein developing the human being intellectually and morally is seen as a result area. In other words, Drucker did try to integrate all three dimensions—the economic, social and human—into his management teachings.
[EXPAND More] We are engaged in developing management practices that yield a tolerable or bearable society, not a utopian one. In the process, however, we ought to encourage our organizations to develop people so that they are always employable. And we should seek to provide a social safety net that helps individuals in tough times without killing the incentives to be productive and contribute to society.
It is hard for me to see how raising taxes on billionaires will diminish incentives, but it is also hard for me to see a federal income tax system wherein only 50 percent of wage earners pay federal taxes. We want to avoid both the tyranny of the majority and the tyranny of the minority. I am afraid this goes beyond economics and gets into the area of social justice. And since life is so short, I think it is better to err on the side of social justice while avoiding gross negligence in government expenditures. That too is a matter of management.