Small is Beautiful by E.F. Schumacher

Posted On April 01, 2017 , 12:00 AM Contador HarrisonBook Reviews Periscope

Front cover of my library's  aged copy of the book
Front cover of my library’s aged copy of the book

Small is Beautiful is the first book that I have read whose economic models are based on Burma, present day Myanmar. At the beginning i wasn’t certain what could have been achieved by using Southeast Asian nation metrics which was under military dictatorship when this book was published in 1973. But while reading, it became clear the author thought deeply about ecological economics where the allocation of available resources among alternative desirable ends within and between generations. Ecological economics in terms of possible contribution to a vision of a sustainable and desirable future and the need for cognitive skills to identify, to critically analyse and formulate a whole systems approach to ecosystem and economic system structure and function and at the same time advocating for improved skills to evaluate and design policy tools based on ecological economic principles. Look, that was in 1973 when nationalists across the world had lost their voice to liberals who advocated for unsustainable economic models that have not only brought back nationalism, it has also delivered inequality. Small is Beautiful opponents claim it is likes of Schumacher who are mad and economic illiterates to boot. According to such characters, growth, they claim, is the only way for countries to reach their full economic potential and prosperity. This conveniently ignores debate that there is hardly anything we aren’t running out of from food, water to everything. Then there is air and water pollution, habitat and wildlife loss, inadequate cultural, educational, health and sporting facilities, and increasing crime rates. In the case of third world countries, government need to determine the desirable population level for a country so that each member of the society can enjoy.

First page of the book
First page of Small is Beautiful
Introduction is by Theodore Roszak, an American academic at the time
Part 1 of the book focuses on The Modern World

Its thinkable to question as to whether the industrialisation was a success in western world or not depends to a large extent upon ethnocentric assumptions concerned about how effective models were. This assumption, however, is problematic simply because different countries position in the global economy are distinct.In the book Schumacher writes that “education can help us only if it produces ‘whole men’. The truly education man is not a man who knows a bit of everything, not even the man who knows all the details of all subjects if such a thing were possible: the ‘whole man’, in fact, may have little detailed knowledge of facts and theories, he may treasure the Encyclopedia Britannica because ‘she knows and he needn’t’, but he will be truly in touch with the centre. He will not be in doubt about his basic convictions, about his view on the meaning and purpose of his life. He may not be able to explain these matters in words, but the conduct of his life will show a certain sureness of touch which stems from his inner clarity.” In his own words, “an industrial system which uses forty per cent of the world’s primary resources to supply less than six per cent of the world’s population could be called efficient only if it obtained strikingly successful results in terms of human happiness, well-being, culture, peace, and harmony. I do not need to dwell on the fact that the American system fails to do this, or that there are not the slightest prospects that it could do so if only it achieved a higher rate of growth of production, associated, as it must be, with an even greater call upon the world’s finite resources.”“When I first began to travel the world, visiting rich and poor countries alike, I was tempted to formulate the first law of economics as follows: ‘the amount of real leisure a society enjoys tends to be in inverse proportion to the amount of labour-saving machinery it employs. However, the evidence is strongly in the other direction. If you go from easy-going England to, say, Germany or the United States, you find that people there live under much more stain than here. And if you move to a country like Burma, which is very near to the bottom of the league table of industrial progress, you find that people have an enormous amount of leisure really to enjoy themselves. Of course, as there is so much less labour-saving machinery to help them, the ‘accomplish’ much less than we do,; but that is a different point. The fact remains that the burden of living rests much more lightly on their shoulders than on ours,” Schumacher says.

Productivity was well analysed on this section
I bowed down to his dissection of conventional economy
One has to read this book to appreciate Schumacher’s thinking including to what he calls Buddhist economics

In my view, industrialisation programme have proven less successful in terms of how extensive and ubiquitous the transformation was. Analysing Schumacher’s argument, its very clear industrialisation was built upon the fact that the terminology itself is built upon a, nomenclature, based on a particular notion of modernisation. Schumacher’s perspective is based on Gandhian and Buddhist concepts of scale where the appropriate scale for a business or a job is the scale that an individual can understand and enjoy. As a result, Schumacher runs directly against the “bigger is better” philosophy of mainstream economics that argues in favour of increasing scale until marginal costs begin to rise hence giving birth to industrialisation. Further, Schumacher goes against the idea that profits are the only goal. One can’t help but agree that Schumacher’s ideas are more sensible than those that pursue profits at all costs when it comes to environmental economics. Am equally concerned with the management of the negative consequences of human actions leading to environmental problems including air pollution, deterioration in land and water quality, toxic substances, solid waste, and climate change, just, perhaps like he was while publishing his book 44 years ago. Valuation of the environment to enable evaluation of projects  when there are environmental impacts is an important component of environmental economics. Schumacher’s acknowledgement of the value of natural capital as the input to all economic production is incredible. The writer notes “that any activity which fails to recognise a self-limiting principle is of the devil. In our work with the developing countries we are at least forced to recognise the limitations of poverty, and this work can therefore be a wholesome school for all of us in which, while genuinely trying to help others, we may also gain knowledge and experience how to help ourselves.” He adds that “it takes a good deal of courage to say ‘no’ to the fashions and fascinations of the age and to question the presuppositions of a civilisation which appears destined to conquer the whole world; the requisite strength can be derived only from deep convictions. If it were derived from nothing more than fear of the future, it would be likely to disappear at the decisive moment.Time alone will not be the healer, of our economic development problems. On the contrary, the dual economy for rich and poor, unless consciously counteracted, produces what I have called a, process of mutual poisoning, whereby successful industrial development in the cities destroys the economic structure of the hinterland, and the hinterland takes its revenge by mass migration into the cities, poisoning them and making them utterly unmanageable.”

Resources were well covered in Part II
Proper use of the land is something that Schumacher advocates
He rightly predicted nuclear energy would be a disaster and we all know what happened in Fukushima and Chernobyl, many years after this book was published

Until this is recognised the environment will be continued to be degraded. The author argues against the conventional economic principles that economic growth and development of technology will hold the solutions to all our problems.  Schumacher also argues for more decentralised control of large enterprises, a form of nationalisation that can successfully compete with conventional profit-driven businesses but with the welfare of employees and the commonwealth in mind. Conventional economics argues that economic growth will alleviate global problems of unemployment and poverty. But continued growth is only leading to an increasing gap between the rich and poor as a result of profit-minded businesses overwhelming small-scale local business enterprises. Schumacher argues the use of intermediate technology in third world nations will better assure that economic aid is able to reach those most in need. Schumacher points out, this strategy not only shrinks the numbers of poor helped but often focuses on the use of complex technology from the west that requires little labor to implement. As a result, Schumacher calls for a shift in activity from capital to labor based enterprises to counteract unemployment and poverty. He also argues that it is incorrect to assume that improvements in technology will be able to solve problems of the present sometime in the future.In recent years we have seen that new technologies have only created more environmental concerns rather than eliminate those existing. A prime example of this is the development of nuclear energy as a replacement for diminishing fossil fuels. Although nuclear energy could fulfil many of electricity demands it would likewise create more pollution and hazardous waste than either oil or coal. And wow, we all know what happened to Fukushima in Japan and Chernobyl in USSR present day Ukraine. His prophecy on nuclear energy has undoubtedly been proved.

Part III attention is on Third World
Development is the cliche our politicians tell us everyday but the author had a different view
Even as he published this book in 1973, unemployment in India was still a teething challenge but hopefully current PM Narendra Modi will improve the situation.

Author is very critical about aid to third world countries and writes that the “poor can be helped to help themselves, but only by making available to them a technology that recognises the economic boundaries and limitations of poverty, an intermediate technology.That the aid-givers who rich, educationed, town-based know how to do things their own way, but do they know how to assist self-help among two million villages, among two thousand million villagers, poor, uneducated, country-based? They know how to do a few big things in big towns; but do they know how to do thousands of small things in rural areas? They know how to do things with lots of capital, but do they know how to do them with lots of labour, initially untrained labour at that?” he concludes.Schumacher also laments about education saying, “what sort of an education is one that prevents us from thinking of things ready to be done immediately? What makes us think we need electricity, cement, and steel before we can do anything at all? If we can recover the sense that it is the most natural thing for every person born into this world to use his hands in a productive way and that it is not beyond the wit of man to make this possible, then I think the problem of unemployment will disappear and we shall soon be asking ourselves how we can get all the work done that needs to be done.”The author notes the “real strength of the theory of private enterprise read modern capitalism, lies in this ruthless simplification, which fits so admirably also into the mental patterns created by the phenomenal successes of science. The strength of science, too, derives from a ‘reduction’ of reality to one or the other of its many aspects, primarily the reduction of quality to quantity. But just as the powerful concentration of nineteenth-century science on the mechanical aspects of reality had to be abandoned because their was too much of reality that simply did not fit, so the powerful concentration of business life on the aspect of ‘profits’ has had to be modified because it failed to do justice to the real needs of man.”Schumacher’s couldn’t resist a on page 254 to discuss socialism as an alternative to capitalism, a system that uses the potential of human talent to build a truly fair and democratic society according to him. Author believes society would have an economy that is democratically planned to provide for the needs of everyone.It is hard to imagine how such a system is possible and realistic, especially since attempts to set up socialism like in Russia and Cuba have failed. However, Schumacher’s socialism’s scientific analysis of politics and the economy provides the only real explanation of the problems. In my view, understanding capitalism shows us what can be done to make a difference to change the society we live in. It outlines how capitalism can be replaced with a fairer and more logical system.This author gives a very broad overview of how capitalism works, what socialism is, and how it would be set up. It also briefly answers some of the most common questions raised about socialism.

Socialism wasn’t left behind as well
Epilogue was more spiritual than scientific

In his conclusion, Schumacher is of the view economic growth and new technology are often the culprit rather than the solution to environmental woes. Schumacher finishes with an example of one business, Scott Bader Co. Ltd. that has proven that you can be both a successful business and socially responsible. The Bader family’s commitment to “a philosophy which attempts to fit industry to human needs” has defied the profit first principle and given more freedom and business shares to its employees.If his ideas had displaced mainstream economics, we would be living in a very different world today. Schumacher was certainly at the time of writing this book aware that he was fighting an uphill battle, but his comprehensive overview never veered from good economics which free market believers like me appreciates. Schumacher does not hope that people will just “do the right thing” and that makes him pays attention to incentives and how they can be changed to accomplish his goals.The sub title of the book sums it all by saying, A study of economics as if people mattered. Yet this is no desert dry treatise crammed with numbers and figures, usually beloved of economists.Rather it is imbued with hard nosed, real world compassion. “If … nothing is left for fathers to teach their sons, or for the sons to accept from their fathers, family life collapses. The life, work, and happiness of all societies depend on certain ‘psychological structures’ which are infinitely precious and highly vulnerable. A man is destroyed by the inner conviction of uselessness. No amount of economic growth can compensate for such losses …” But E.F. Schumacher was not your tie-dyed style of greenie, he was, after all, Economic Adviser to the British Coal Board for twenty years. Yet he developed an understanding of the world so very different to his peers. “An attitude to life which seeks fulfilment in the single-minded pursuit of wealth, in short, materialism does not fit into this world, because it contains within itself no limiting principle, while the environment in which it is placed is strictly limited.” Read this absolute classic to learn how Schumacher developed his notion of Intermediate Technology, as an appropriate mid-point between grinding poverty and decadent affluence. Small is beautiful is a book that explores the possibilities for change in financial, social and environmental aspects of the business realm. It was my pleasure reading a focus on the philosophical arguments for change by the author who wrote this book many years before I was born. This in my view could have been the book that gave birth to economic reasoning for sustainability and corporate responsibility that we see today. His extensive discussion on resources like land, education, energy and technology to the Third World analysing deeply about the similarities and differences between economic systems in “our world” and a poor village as well as organisation and ownership structures and how their incentives don’t serve the interest of man and society was incredibly and compellingly fascinating. “Small Is Beautiful” has forever changed the way I think about conventional economics.

Back cover of my copy, hope to keep it for decades to come