One central assumption in modern U.S. politics is the essential value of free markets. Even politicians who want to tax the rich and help the poor tend to frame the policies as minor tweaks to the free market economy. Meanwhile, corporate leaders argue that they have a moral obligation to pursue shareholder profits.

But, as Daniel Immerwahr explains, back in the 1940s, when the post-war economic system was taking shape, many popular figures in American political thought agreed that “free markets” were a fiction.

In particular, Immerwahr points to Peter Drucker, an iconic management theorist. Drucker eventually became a major influence on Jack Welch and Bill Gates, and Newt Gingrich cited him as one of the most important thinkers of the twentieth century. But in the wake of the Great Depression, Drucker was part of a broad intellectual movement that deeply questioned the idea of an economic order based on self-interested individuals.

Among Drucker’s contemporaries was economist-turned-sociologist Talcott Parsons, who argued that acquisitiveness was “a peculiar institutional structure which has grown up in the Western world” rather than a universal trait. Anthropologists, including Margaret Mead and Melville Herskovits, argued that most economies did not obey “laws” based on competition and individual self-interest.

Drucker brought these ideas together in a series of books including 1939’s The End of Economic Man. Immerwahr writes that “he regarded the commodification of land, labor, and money as a fiction, necessary for the functioning of the market but requiring a sort of willful blindness to the social realities that stood behind each of the three ‘commodities.’’’ Drucker’s own work in London’s financial world had taught him that even bankers and investors had to be constrained—through elaborate but informal rules—from operating in a completely self-interested way. Rather than supply and demand, longstanding conventions and an implicit respect for human relationships governed firms’ behavior.

“It was a badge of statesmanship in the market to be known for putting the functioning of the market above one’s own economic interest,” he wrote.

When Drucker moved from academia to the corporate world, he shifted his writing toward championing private enterprise. But that change didn’t reflect a whole new ideology. Ironically, it was Karl Polanyi, a renowned critic of market ideology and a friend of Drucker’s, who changed his thinking. Polanyi argued that true subsumption of human work, nature, and social relations to economic markets would create such massive destruction—in forms like starvation and dismembering of communities—that people always instinctively fought back.

Based on that premise, Immerwahr writes, Drucker reasoned that “anti-market critics, including Polanyi himself, were attacking a straw man. There was no such thing as a self-regulating market, so there was no need to argue about whether it was good or bad.”

After the war, Drucker set out to push corporations into the service of an ethical, regulated, full-employment economy.  Given his belief that corporations weren’t bound by any firm “laws” of supply and demand, he saw them as potential moral actors. It was only decades later that some of his disciples, like Welch and Gingrich, once again began sculpting public policy around an insistence that corporations must pursue profit at all costs.

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Journal of the History of Ideas, Vol. 70, No. 3 (Jul., 2009), pp. 445-466
University of Pennsylvania Press