Business guru Peter Drucker provides an incisive analysis of the major world transformation taking place, from the Age of Capitalism to the Knowledge Society, and examines the radical affects it will have on society, politics, and business now and in the coming years. This searching and incisive analysis of the major world transformation now taking place shows how it will affect society,economics, business, and politics and explains how we are movingfrom a society based on capital, land, and labor to a society whoseprimary source is knowIedge and whose key structure is theorganization.

From Capitalism to Knowledge Society

Within one hundred fifty years, from 1750 to 1900, capitalism and technology conquered the globe and created a world civilization. Neither capitalism nor technical innovation werenew; both had been common, recurrent phenomenathroughout the ages, in West and East alike. What was brand new was their speed of diffusion and their global reach across cultures, classes, and geography. And it was this speed and scope thatconverted capitalism into "Capitalism" and into a system,and technical advances into the "Industrial Revolution."

This transformation was driven by a radical change in the meaning of knowledge. In both West and East, knowledge had always been seen as applying to being. Then, almost overnight, it came to be applied to doing. It became a resource and a utility. Knowledge had always been a private good. Almost overnight it became a public good.

For a hundred years - during the first phase - knowledge was applied to tools, processes, products. This created the Industrial Revolution. But it also created what Karl Marx (1818-1883) called "alienation," new classes and class war, and with themCommunism. In its second phase, beginning around 1880 and culminating around the end of World War 11, knowledge in its new meaning came to be applied to work. This ushered in the Productivity Revolution, which in seventy-five years converted the proletarian into a middle-class bourgeois with near-upper-class income. The Productivity Revolution thus defeated class war and Communism.

The last phase began after World War 11. Today, knowledge is being applied to knowledge itself This is the Management Revolution. Knowledge is now fast becoming the sole factor of production, sidelining both capital and labor. It may be premature (and certainly would be presumptuous) to call ours a "knowledge society"; so far, we have only a knowledge economy. But our society is surely "post-capitalist."

Capitalism, in one form or another, has occurred and reoccurred many times throughout the ages, in the East as well as in the West. And there have been numerous earlier periods of rapid technical invention and innovation - again in the East as well as the West-many of them producing technical changes fully as radical as any in the late eighteenth or early nineteenth centuries. What is unprecedented and unique about the developments of the last two hundred fifty years is their speed and scope. Instead of being one element in society, as all earlier capitalism had been, Capitalism - with a capital C - became society. Instead of being confined, as always before, to a narrow locality, Capitalism-again with a capital C - took over all of Western and Northern Europe in a mere one hundred years, from 1750 to 1850. Then, within another fifty years, it took over the entire inhabited world.

All earlier capitalism had been confined to small, narrow groups in society. Nobles, landowners, the military, peasants, professionals, craftsmen, even laborers, were almost untouched by it. Capitalism with a capital C soon permeated and transformed all groups in society wherever it spread.

From earliest times in the Old World, new tools, new processes, new materials, new crops, new techniques-what we now call "technology" - diffused swiftly.

Few modern inventions, for instance, spread as fast as a thirteenth-century one: eyeglasses. Derived from the optical experiments of an English Franciscan friar, Roger Bacon (d. 1292 or 1294), around 1270, reading glasses for the elderly were in use at the papal court of Avignon by 1290, at the Sultan's court in Cairo by 1300, and at the court of the Mongol emperor of China no later than 13 10. Only the sewing machine and the telephone, fastest-spreading of all nineteenth-century inventions, moved as swiftly.

But earlier technological change almost without exception remained confined to one craft or one application. It took another two hundred years-until the early 1500s-before Bacon's invention had its second application: eyeglasses to correct nearsightedness. The potter's wheel was in full use in the Mediterranean by 1500 B.C.; pots for cooking, and for storing water and food, were available in every household. Yet the principle underlying the potter's wheel was not applied until A.D. 1000 to women's work: spinning.

Similarly, the redesign of the windmill around the year 800, which converted it from the toy it had been in antiquity into a true machine (and a fully "automated" one at that), was not applied to ships for more than three hundred years, after 1100. Until then, ships used oars; if wind was used at all to propel them, it was as an auxiliary power, and then only if it blew in the right direction. The sail that drives a ship works exactly the same way as the sail that drives the windmill, and the need for a sail that would enable a ship to sail cross-wind and against the wind had been known for a long time. The windmill was redesigned in Northern France or in the Low Countries, both regions thoroughly familiar with ships and navigation. Yet it did not occur to anyone for several hundred years to apply something invented to pump water and to grind corn - for use on land - to use offshore.

The inventions of the Industrial Revolution, however, were immediately applied across the board, and across all conceivable crafts and industries. They were immediately seen as technology .

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Excerpted from Post-Capitalist Society by Peter F. Drucker Copyright © 2003 by Peter F. Drucker
Excerpted by permission. All rights reserved. No part of this excerpt may be reproduced or reprinted without permission in writing from the publisher.