Schumacher's Small Is Beautiful

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E.F. Schumacher's Small Is Beautiful

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Small Is Beautiful: Economics as If People Mattered

E. F. Schumacher

Small Is Beautiful (1973) has been praised by so many that another book review would be gilding the lily somewhat. Instead, what I have provided is more than a book review; it is an interaction with the text. This presentation follows the book very closely. It is a summary of his ideas; ones that could transform our world. The book is subtitled Economics As If People Mattered and it is the most prescient and wise book on sustainability out there.  

Part One: The Modern World

One - The Problem of Production

Schumacher begins the book by making a foundational statement: "One of the most fateful errors of our age is the belief that 'the problem of production' has been solved." What he means by that is that modern humans consider themselves apart from nature, set up against it to dominate it and exploit it through production. Humans have come to believe that they have unlimited power, nourished by scientific and technological advances. But, he says, this is an illusion.

A businessman would not consider a firm to have solved its problems of production and to have achieved viability if he saw that it was rapidly consuming its capital. How, then, could we overlook this vital fact when it comes to that very big firm, the economy of Spaceship Earth and, in particular. the economies of its rich passengers?

He uses fossil fuels as an example. The problem is that fossil fuels are being treated as an income item instead of as a capital item. If it were treated as capital, there would be considerable effort to conserve it and towards building up a fund towards it's eventual replacement. But it is being squandered as fast as possible by this misunderstanding of its nature. But fossil fuels are just an example of a wider problem.

Fossil fuels are merely a part of the 'natural capital' which we steadfastly insist on treating as expendable, as if it were income, and by no means the most' important part. If we squander our fossil fuels, we threaten civilization; but if we squander the capital represented by living nature around us, we threaten life itself.

He notes that people are waking up to this reality, but notes that the problem is quite advanced. He says that people have been living on the capital of nature for quite some time now. Plus, there has ben a qualitative jump lately. Scientists have been compounding substances (think Agent Orange, Monsanto's Roundup, and Monsanto in general) against which nature is defenceless.  We thought these compounds and GM products were our greatest successes until we began to realize just how much of nature's capital stock is being depleted. Other 'successes', he warned presciently before Chernobyl and Fukushima, like the nuclear industry would turn out to be poisonous beyond our wildest imaginations. The storage problem of nuclear waste is still not, and will never be, solved. Our greatest successes have contributed to our greatest problem; the depletion of nature's capital. And for what? He points out that GDP does not measure the substance of humans, and that this has been devaluated by our progress. Schumacher notes that the modern industrial system consumes the very base on which it has been erected. To summarize so far, he notes:

To use the language of the economist, it lives on irreplaceable capital which it cheerfully treats as income. I specified three categories of such capital: fossil fuels, the tolerance margins of nature, and the human substance.

Two - Peace and Permanence

Schumacher summarizes the universal modern philosophy he opposes as follows: 

First: that universal prosperity is possible;

Second: that its attainment is possible on the basis of the materialist philosophy of 'enrich yourselves';

Third: that this is the road to peace.

Sure.

He then proceeds to take this philosophy to task. His first question is, "Is there enough to go around?" Consider the economists, the powerful, and their paid-for politicians, who all clamour for continued economic growth. Are they ever going to say, that's enough now? Well, perhaps, says Schumacher, this philosophy can be made to work if everyone only has 'more." And he investigates this proposition using the example of fuel - oil. He comes to the sad conclusion the even just 'more' will not work over the long term. Economic growth, which viewed from the point of view of economics, physics, chemistry and technology, has no discernible limit, must necessarily run into decisive bottlenecks when viewed from the point of view of the environmental sciences. 

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. Already, the environment is trying to tell us that certain stresses are be coming excessive. As one problem is being 'solved', ten new problems arise as a result of the first 'solution'. As Professor Barry Commoner emphasises, the new problems are not the consequences of incidental failure but of technological success.

Schumacher states that, one can question the philosophy of unlimited economic growth, from a material perspective on two grounds: one, the availability of resources, and two, the capacity of the environment to cope with this scale of interference. It can also be questioned on non-material grounds. "If human vices: such as greed and envy are systematically cultivated, the inevitable result is nothing less than a collapse of intelligence." His prescience shines through when he states that the modern notion that the grave social ills which beset rich societies can be solved if only we get a really able government, is naive. He could be talking about the west today. Look at what we have wrought when successive governments have simply tried to make "faster use of science and technology or a more radical use of the penal system." 

He says that what we need most desperately is wisdom: knowledge of spiritual and moral truth. And the central insight of wisdom is permanence, what we now call sustainability. "Nothing makes economic sense unless its continuance for a long time can be projected without running into absurdities." He quotes Gandhi, who said that earth provides enough for every man's need, but not for every man's greed. 

Wisdom demands a new orientation of science and technology towards the organic. the gentle, the non-violent, the elegant and beautiful. Peace, as has often been said, is indivisible - how then could peace be built on a foundation of reckless science and violent technology?

Schumacher says, we need methods and equipment which are

- cheap enough so that they are accessible to virtually everyone:

- suitable for small-scale application; and

- compatible with man's need for creativity.

Our present science and technology, meshed with our economic system, is geared to provide the opposite of all three. The scale of the work ahead to change this towards systems imbued with wisdom is daunting. Schumacher again quotes Gandhi's spiritual principles behind his successes, 

 'There must be recognition of the existence of the soul apart from the body, and of its permanent nature, and this recognition must amount to a living faith; and, in the last resort, nonviolence does not avail those who do not possess a living faith in the God of Love.'

Three - The Role of Economics

Schumacher notes the importance of economic thought in modern society: "If an activity has been branded as uneconomic, its right to existence is not merely questioned but energetically denied." In economics something is uneconomic when it fails to earn an adequate profit in terms of money. He underlines the fact that this kind of thinking means that an activity can be economic although "it plays hell with the environment, and that a competing activity, if at some cost it protects and conserves the environment, will be uneconomic." He notes something crucial: it is inherent in the methodology of economics to ignore human dependence on the natural world. "In a sense, the market is the institutionalization of individualism and non-responsibility. Neither buyer nor seller is responsible for anything but himself."

Every science is fine within it's proper limits, but economics fails to realize that it is derived from what Schumacher calls 'meta-economics'. Because economics is so powerful, given that it related to the human drives of greed and envy, it is imperative for economists to understand and respect meta-economics. He says that meta-economics relates to the study of humans and the study of their environment. Economics has failed dismally at understanding either and takes no account of them. Therefore, Schumacher turns to meta-economics and asks what would economics look like if one abandons western materialism and chooses Buddhism as the basis of meta-economics. He points out that the choice of Buddhism is incidental; one may as well have chosen any of the world's enduring religions. I do suspect though, that choosing Buddhism makes things easier; it carries far less historical baggage than the theistic religions. 

Four - Buddhist Economics

Schumacher notes that one of the Buddha's teachings was 'right livelihood', which would form the basis of Buddhist economics. In this kind of economics, the function of work is at least threefold: to give people a chance to utilise and develop their faculties; to enable them to overcome their egocentredness by joining with other people in a common task; and to bring forth the goods and services needed for a becoming existence. This has a myriad consequences. One of them is that work and leisure are complementary parts of the same living process and cannot be separated without destroying the joy of work and the bliss of leisure. Another is that to organize work into boring, nerve-racking, meaningless ways is criminal. Therefore, in Buddhist economics there are therefore two types of mechanization: "one that enhances a man's skill and power and one that turns the work of man over to a mechanical slave, leaving man in a position of having to serve the slave." Schumacher says this about work:

Buddhist economics must be very different from the economics of modem materialism, since the Buddhist sees the essence of civilisation not in a multiplication of wants but in the purification of human character. Character, at the same time, is formed primarily by a man's work. And work, properly conducted in conditions of human dignity and freedom, blesses those who do it and equally their products.

Materialist economics is mainly interested in goods, whereas Buddhist economics is mainly interested in liberation. It doesn't oppose wealth, what it opposed is attachment to wealth, not the enjoyment of things but the craving for them. Materialist economists think that annual consumption is the measurement; more is better than less. A Buddhist economist would say consumption is merely one measure of well-being: "since consumption is merely a means to human well-being the aim should be to obtain the maximum of well-being with the minimum of consumption."  Materialist economists try to maximise human satisfaction by the optimal pattern of consumption, while a Buddhist economist tries to maximise consumption by the optimal pattern of productive effort. Maximizing consumption takes a great deal more effort and resources. This leads to a great deal of stress, which is a feature of western societies. 

The optimal pattern of consumption, producing a high degree of human satisfaction by means of a relatively low rate of consumption, allows people to live without great pressure and strain and to fulfil the primary injunction of Buddhist teaching: 'Cease to do evil; try to do good.'

All of this means that Buddhist economics would prefer local resources and consider huge transportation costs as inefficient. Same with great commuting distances. Buddhist economists, as opposed to materialist ones, would pay great attention to the difference between renewable and non-renewable resources. "Non-renewable goods must be used only if they are indispensable, and then only with the greatest care and the most meticulous concern for conservation." Schumacher deplores the heedless rush with which emerging economies are growing, without concern for moral and spiritual values.

For it is not a question of choosing between 'modern growth' and 'traditional stagnation'. It is a question of finding the right path of development, the Middle Way between materialist heedlessness and traditionalist immobility, in short, of finding 'Right Livelihood'.

Five - A Question of Size

This whole chapter is a treatise on the futility of giantism. Materialist economics prize economies of scale and a great deal of time, energy, and resources are spent on mergers and growth in order to achieve it. Schumacher disagrees. He says humans need two seemingly opposed things: freedom and order. "We need the freedom of lots and lots of small, autonomous units, and, at the same time, the orderliness of large-scale, possibly global, unity and co-ordination." In action, small autonomous units work best, but in the world of ideas, the larger the thinking the better, especially around ecology. He says there is no one-size-fits-all solution, yet moderns have made an idolatry of giantism. Therefor it is vital to insist on the virtues of smallness. The idolatry of giantism has caused mass transportation and communication. These, he says, have had an enormous effect on people, namely mobility of labour: it has made them 'footloose.' "Millions of people start moving about, deserting the rural areas and the smaller towns to follow the city lights, to go to the big city, causing a pathological growth." One of the effects of these mass migrations is that it makes all social structures less stable and it is a fount of many of modern societies' ills. 

In the poor countries, again most severely in the largest ones, it produces mass migration into cities, mass unemployment, and, as vitality is drained out of the rural areas, the threat of famine. The result is a 'dual society' without any inner cohesion, subject to a maximum of political instability.

And nobody knows what to do about them. Materialist economics is all about scale, and can only produce development in massive cities with no regards for the human social costs of the process. We have to learn to think in different ways and then learn to teach that to everyone else. Schumacher says people can only be themselves in small units. Economics must learn to develop structures that can deal with lots of semi-autonomous small units. 

Part Two: Resources

Six - The Greatest Resource, Education

"If western civilisation is in a state of permanent crisis, it is not far-fetched to suggest that there may be something wrong with its education." Schumacher notes that our education is good at transmitting know-how, but what is needed is for it to be good also at transmitting ideas about values. And not as dogma, that is worse than useless, but as instruments with which to look at the world. 

The way in which we experience and interpret the world obviously depends very much indeed on the kind of ideas that fill our minds. If they are mainly small, weak, superficial, and incoherent, life will appear insipid, uninteresting, petty and chaotic.

One's mind must be able to bring to the world a set of powerful ideas, otherwise the world will sam strange and chaotic. The despair we find in western societies is not due to a lack of know-how but a lack of coherent ideas about value with which to engage in the world and make decisions. But what are the leading ideas of the times? Those derived from the 19th century. And it there lies the source of much of our problems. Schumacher identifies 6 main themes:

1. There is the idea of evolution - that higher forms continually develop out of lower forms, as a kind of natural and automatic process. The last hundred years or so have seen the systematic application of this idea to all aspects of reality without exception.

2. There is the idea of competition, natural selection, and the survival of the fittest, which purports to explain the natural and automatic process of evolution and development.

3. There is the idea that all the higher manifestations of human life. such as religion, philosophy, art, etc. - what Marx calls 'the phantasmagorias in the brains of men' - are nothing but 'necessary supplements of the material life process', a super- structure erected to disguise and promote economic interests, the whole of human history being the history of class struggles.

4. In competition with the Marxist interpretation of all higher manifestations of human life, there is, fourthly, the Freudian interpretation which reduces them to the dark stirrings of a subconscious mind and explains them mainly as the results of unfulfilled incest-wishes during child-hood and early adolescence.

5. There is the general idea of relativism, denying all absolutes, dissolving all norms and standards, leading to the total undermining of the idea of truth in pragmatism, and affecting even mathematics, which has been defined by Bertrand Russell as 'the subject in which we never know what we are talking about, or whether what we say is true'.

6. Finally there is the triumphant idea of positivism, that valid knowledge can be attained only through the methods of the natural sciences and hence  that no knowledge is genuine unless it is based on generally observable facts. Positivism, in other words, is solely interested in 'know-how' and denies the possibility of objective knowledge about meaning and purpose of any kind. 

So there you have it. It is with this set of ideas that people are educated and with which they set out to face the world. It is no wonder that the rich world is filled with so much depression and angst. None of this is to say one needs to return to patriarchal theistic religion. However. Schumacher points out that relativism and positivism are purely metaphysical philosophies that ironically deny the validity of all other metaphysics, including their own! What these 6 ideas have in common, he points out, is this:

They all assert that what had previously been taken to be something of a higher order is really 'nothing but' a more subtle manifestation of the 'lower' - unless, indeed, the very distinction between higher and lower is denied. Thus man, like the rest of the universe, is really nothing but an accidental collocation of atoms. The difference between a man and a stone is little more than a deceptive appearance. Man's highest cultural achievements are nothing but disguised economic greed or the outflow of sexual frustrations. In any case, it is meaningless to say that man should aim at the 'higher' rather than the 'lower' because no intelligible meaning can be attached to purely subjective notions like 'higher' or 'lower', while the word 'should' is just a sign of authoritarian megalomania.

This set of ideas that dominate humanities today, and which claimed to do away with metaphysics, are in Schumacher's words "themselves a bad, vicious, life-destroying type of metaphysics." Metaphysics and ethics, it turns out, cannot be thought away; what we ended up with underpinning western civilization was "bad metaphysics and appalling ethics." It is not so much the specialization of modern education that is bad, but the lack of depth and the lack of metaphysical awareness. Schumacher says that 

Economics is being taught without any awareness of the view of human nature that underlies present-day economic theory. In fact, many economists are themselves unaware of the fact that such a view is implicit in their teaching and that nearly all their theories would have to change if that view changed.

Fortunately, says Schumacher, the heart is often more intelligent than the mind and refuses to accept these 6 ideas completely. "So the man is saved from despair, but landed in confusion." In order to lift the confusion, we should learn to accept metaphysical ideas that are pretty much the opposite of these 6 leading ideas of our time. That is not to say that one rejects evolution. Of course not. But it does mean that the bad metaphysics with which the struggle for the acceptance of evolution has left us can now be safely discarded. No one is bringing back paternalistic theism or creationism or any such thinking. So what are these metaphysical ideas?

The first is the re-acceptance (without theism) of levels of being in the universe. 

It is only when we can see the world as a ladder, and when we can see man's position on the ladder, that we can recognise a meaningful task for man's life on earth. Maybe it is man's task - or simply, if you like, man's happiness - to attain a higher degree of realisation of his potentialities, a higher level of being or 'grade of significance' than that which comes to him 'naturally': we cannot even study this possibility except by re- cognising the existence of a hierarchical structure.

As soon as we accept the existence of 'levels of being', we understand why the findings of physics - as Einstein recognised - have no philosophical implications. Schumacher further developed this concept in a remarkable book called A Guide for the Perplexed (1977). 

The second new idea is the acceptance of opposites. Schumacher states that it is the nature of our human thinking to think in opposites, ones that cannot be resolved at that level of thought. He presents the example of the opposites of freedom and discipline in education. There's no one formula that can capture this, but countless parents and teachers do it everyday. "They do it by bringing into the situation a force that belongs to a higher level where opposites are transcended - the power of love."

The true problems of living - in politics, economics, education, marriage, etc. - are always problems of overcoming or reconciling opposites. They are divergent problems and have no solution in the ordinary sense of the word. They demand of man not merely the employment of his reasoning powers but the commitment of his whole personality.

The third new idea is that of ethics. The 19th century thinking encapsulated by the 6 idea noted above meant the diminished acceptance of the existence of levels of being and the idea that some things are higher than others. "This has has meant the destruction of ethics which is based on the distinction of good and evil, claiming that good is higher than evil." The result has been confusion. Schumacher asks what is the guiding image that young people have before them when the leading intellectuals claim that everything is relevant and ethics is  treated with cynicism? The task of our generation is one of metaphysical reconstruction, using the age-old ideas in new formulation.

Seven - The Proper Use of Land

Schumacher provides this quote: "One man has given a brief outline of history by saying that 'civilized man has marched across the face of the earth and left a desert in his footprints.'" This has been one of the prime reason for the collapse of successive civilizations, necessitating the need to always move along. He notes that the questions posed by the "proper use of land" are metaphysical in nature and not technological. They belong to a higher order of thinking. 

One of the most important tasks for any society is to distinguish between ends and means-to-ends, and to have some sort of cohesive view and agreement about this. Is the land merely a means of production or is it something more, something that is an end in itself? And when I say 'land', I include the creatures upon it.

Land and its creatures are factors of production - means-to-ends, but this is their secondary nature. Before everything else, they are ends-in-themselves. Schumacher says they are meta-economic, "and it is therefore rationally justifiable to say, as a statement of fact, that they are in a certain sense sacred." This is where we run headlong into materialistic economics, which refuses to recognize anything as sacred because it cannot imagine that there are meta-economic facts that precede and should determine it. Schumacher notes that he can treat his car any way he likes, for it is human-made, but he cannot treat a cow the same way (as is down in industrial farming), for they are different levels of being, something that modern economics is incapable of understanding. The main danger to the soil, he says, is modern human determination to treat agriculture the same as industry; it is the prime danger to agriculture and civilization. We poison the earth, we poison ourselves. Again the fact that agriculture, which deals with living processes, is different from industry is a metaphysical, a meta-economic fact. 

Real life consists of the tensions produced by the incompatibility of opposites, each of which is needed, and just as life would be meaningless without death, so agriculture would be meaningless without industry. It remains true, however, that agriculture is primary, whereas industry is secondary, which means that human life can continue without industry, whereas it cannot continue without agriculture. Human life at the level of civilization, however, demands the balance of the two principles, and this balance is ineluctably destroyed when people fail to appreciate the essential difference between agriculture and industry - a difference as great as that between life and death - and attempt to treat agriculture as just another industry.

The materialist economist view sees agriculture as 'essentially directed towards food production'. However, says Schumacher, a metaphysical perspective sees agriculture as having to fulfil at least three tasks:

- to keep man in touch with living nature, of which he is and remains a highly vulnerable part;

- to humanise and ennoble man's wider habitat; and

- to bring forth the foodstuffs and other materials which are needed for a

becoming life.

"I do not believe that a civilisation which recognises only the third of these tasks, and which pursues it with such ruthlessness and violence that the other two tasks are not merely neglected but systematically counteracted, has any chance of long-term survival."

Eight - Resources for Industry

This is a chapter one may safely skip as it contains numerous technical calculations based on assumptions from 1973. The majority of the chapter is concerned with energy as the primary consideration in industry. Schumacher calculated that peak oil would arrive in the 80s. He was off by 30 years, but correct in the thrust of the argument.

Nine - Nuclear Energy - Salvation or Damnation?

I refuse to waste a breath of argument with people who hold that nuclear energy is anything but an unmitigated disaster. The evidence of human inability to manage this most dangerous of all human activity is so overwhelming that its continued existence is only due to human greed and metaphysical blindness. Schumacher builds the case, in the face of the early optimism of his era, about nuclear energy of its disastrous consequence with evidentiary precision such that one cannot but despair of human evil. If you have any doubts at all about nuclear energy, read chapter nine carefully. And remember, he wrote before Three Mile Island, Chernobyl, Fukushima, and countless studies of radioactive toxicity. Just think about it, is any venture worth it if the collective insurance industry of the world refuses to touch it? Here is how Schumacher concludes:

No degree of prosperity could justify the accumulation of large amounts of highly toxic substances which nobody knows how to make 'safe' and which remain an incalculable danger to the whole of creation for historical or even geological ages. To do such a thing is a transgression against life itself, a transgression infinitely more serious than any crime ever perpetrated by man. The idea that a civilisation could sustain itself on the basis of such a transgression is an ethical, spiritual, and metaphysical monstrosity. It means conducting the economic affairs of man as if people really did not matter at all.

No cooperation with evil.

Ten - Technology With a Human Face

This chapter is a presentation of the need for changing how we create and apply technology. Schumacher notes that the modern world has been shaped by its metaphysics, which has shaped its education, which in turn has shaped its science and technology. And the world is in crisis in part because of its technology, which becomes more inhuman by the day. 

For example, there is a great difference between the laws of nature and the laws of technology. Nature is characterized by the principle of self-limiting growth. "As a result, the system of nature, of which man is a part, tends to be self- balancing, self-adjusting, self-cleansing. Technology knows no such boundaries and is not self-regulating. As a result, Schumacher says our modern world as shaped by our present technology is immersed in 3 crises simultaneously:

First, human nature revolts against inhuman technological, organizational, and political patterns, which it experiences as suffocating and debilitating; 

second, the living environment which supports human life aches and groans and gives signs of partial breakdown; and, 

third, it is clear to anyone fully knowledgeable in the subject matter that the inroads being made into the world's non-renewable resources, particularly those of fossil fuels, are such that serious bottlenecks and virtual exhaustion loom ahead in the quite foreseeable future.

What is technology good for? Well, it lightens some workloads while increasing others. It is very disruptive. Schumacher worries that what our technology seems to be most good at is  reducing or even eliminating skilful, productive work of human hands in touch with real materials of one kind or another. Think of most physically productive, creative work, such as making clothes or furniture, cooking from scratch, any guild work, or farming. In advanced industrial societies such work is rare now and it is difficult to make a living. Our technology has vastly reduced the employment of actual producers. 

Schumacher says the result has been that "the prestige carried by people in modern industrial society varies in inverse proportion to their closeness to actual production." Our reality is that "virtually all real production has been turned into an inhuman chore which does not enrich a man but empties him."  Modern technology has deprived humans of the work we enjoy most: productive, creative work, and has multiplied immensely work of a kind that only relates to production incidentally. Karl Marx wasn't right about much, but he was right about this: "They want production to be limited to useful things, but they forget that the production of too many useful things results in too many useless people." Schumacher says it is time we take stock of the direction into which our technology is developing.

The number of people who believe that our technology is developing on the wrong track is growing. Such people are not against 'growth' but care about the quality of growth. It is a matter of what should grow and what should recede and do we have the right balance based on sound principles. Schumacher says it is important for ordinary people to take sides. To leave it to the 'experts' is to leave to those in 'charge' of the stampede. He is hopeful that change is possible because ordinary people generally take a more humanistic view than do the experts. He closes with this:

Man is small, and, therefore, small is beautiful. To go for gigantism is to go for self-destruction. And what is the cost of a reorientation? We might remind ourselves that to calculate the cost of survival is perverse. No doubt, a price has to be paid for anything worth while: to redirect technology so that it serves man instead of destroying him requires primarily an effort of the imagination and an abandonment of fear.

Part Three: The Third World

Eleven - Development

Nowadays we call the third world the developing world. Schumacher notes the great failures of the engagement of the rich world with the developing world. And naturally he looks to first principles for the reasons. He notes that our scientist have shown that evolution is how the world has developed; massive amounts of minute adaptations over long periods of time. Yet with development we tend towards central planning:

Could it be that the relative failure of aid, or at least our disappointment with the effectiveness of aid, has something to do with our materialist philosophy which makes us liable to overlook the most important preconditions of success, which are generally invisible? Or if we do not entirely overlook them, we tend to treat them just as we treat material things - things that can be planned and scheduled and purchased with money according to some all- comprehensive development plan. In other words, we tend to think of development, not in terms of evolution, but in terms of creation.

When developers tackle poverty they tend to look first to the material factors - lack of natural wealth, capital, infrastructure, etc. But the immaterial factors are vastly more important, especially these 3 factors: deficiencies in education, organization, and discipline. Schumacher notes that after the devastation of the Second World War, those countries with a high level of these 3 factors all produced economic miracles. So development is a matter of the removal of these obstacles. But this is why development cannot be an act of creation; education requires evolutionary growth, so does organization and discipline, none of them are able to 'jump' forward. Development work must be aimed at speeding this evolution. To focus on the material factors is simply to enrich those already rich. He notes that if new economic development is introduced which depends on special education, special organization, special discipline, it will remain a foreign body in a society incapable of assimilating it. 

Twelve - Social and Economic Problems Calling for the Development of Intermediate Technology

Schumacher summarized his thought on the technology aspect of development as follows (Nowadays we speak of appropriate technology):

1. The 'dual economy' in the developing countries will remain for the foreseeable future. The modern sector will not be able to absorb the whole.

2. If the non-modern sector is not made the object of special development efforts, it will continue to disintegrate; this disintegration will continue to manifest itself in mass unemployment and mass migration into the metropolitan areas; and this will poison economic life in the modern sector as well.

3. 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.

4. Action programmes on a national and supranational basis are needed to develop intermediate technologies suitable for the promotion of full employment in developing countries.

Thirteen - Two Million Villages

Schumacher begins this chapter with a prescient statement. He says that development requires a conscious and determined shift of emphasis from goods to people. Indeed, without such a shift the results of aid will become increasingly destructive. It is much easier to deal with goods - it has no mind and raises no communication problems.

There are three communication gulfs between development workers and the rural poor: "the gulf between rich and poor; the gulf between educated and uneducated; and the gulf between city-men and country-folk, which includes that between industry and agriculture." Poor people cannot suddenly adapt to the ways and methods of rich city people. Plus there a many features of the rich world that are questionable in themselves. 

The life, work, and happiness of all societies depend on certain 'psychological structures' which are infinitely precious and highly vulnerable. Social cohesion, co-operation, mutual respect and above all self-respect, courage in the face of adversity, and the ability to bear hardship - all this and much else disintegrates and disappears when these 'psychological structures' are gravely damaged.

That means that the methods must be adapted to the people. 

For Schumacher, the heart of world poverty lies in what he calls "two million villages." Development only in the cities lures great migrations from rural areas to the cities, where economic development occurs, but the accompanying social ills dwarfs the economic gains. Instead, development must make rural life feasible. 

The problem presents an enormous intellectual challenge. The aid-givers - rich, educated, town-based - know how to do things in 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?

Schumacher says the best gift is intellectual - the gift of useful (!) knowledge. He notes that without some genuine effort and sacrifice among the recipients, there is no gift. Receiving material things requires no intellectual effort and helps minimally. Give a person a fish goes the saying, and you help him a little bit. Teach him how to fish and you help him for a lifetime. But then he is still dependent on you for replacement parts. Teach him how to make fishing tackle and you've made him self-reliant. 

We have to be careful to understand clearly the nature of the problem and where our own knowledge is too long and too short. Schumacher says this:

If the job is, for instance, to assemble an effective guide to methods and materials for low-cost building in tropical countries, and, with the aid of such a guide, to train local builders in developing countries in the appropriate technologies and methodologies, there is no doubt we can do this, or - to say the least - that we can immediately take the steps which will enable us to do this in two or three years' time. Similarly, if we clearly understand that one of the basic needs in many developing countries is water, and that millions of villagers would benefit enormously from the availability of systematic knowledge on low-cost, self-help methods of water-storage, protection, transport, and so on - if this is clearly understood and brought into focus, there is no doubt that we have the ability and resources to assemble, organise and communicate the required information.

Fourteen - The Problem of Unemployment in India

A talk to the India Development Group in London

This chapter is an application to the rural poor of 1970s India of appropriate technology as described above. 

Part Four : Organisation and Ownership

Fifteen - A Machine to Foretell the Future?

This chapter consists of a technical discussion of the knowability of future events, the nature of forecasting, and the feasibility of development plans. Schumacher voices his doubts, in 1973, of the usefulness of computers to economics, given our inherent human confusion about assumptions. He concludes as follows:

If I hold a rather negative opinion about the usefulness of 'automation' in matters of economic forecasting and the like, I do not underestimate the value of electronic computers and similar apparatus for other tasks, like solving mathematical problems or programming production runs. These latter tasks belong to the exact sciences or their applications. Their subject matter is non-human, or perhaps I should say, sub-human. Their very exactitude is a sign of the absence of human freedom, the absence of choice, responsibility and dignity. 

As soon as human freedom enters, we are in an entirely different world where there is great danger in any proliferation of mechanical devices. The tendencies which attempt to obliterate the distinction should be resisted with the utmost determination. Great damage to human dignity has resulted from the misguided attempt of the social sciences to adopt and imitate the methods of the natural sciences. Economics, and even more so applied economics, is not an exact science: it is in fact, or ought to be, something much greater: a branch of wisdom.

In his urgent attempt to obtain reliable knowledge about his essentially indeterminate future, the modern man of action may surround himself by ever-growing armies of forecasters, by ever-growing mountains of factual data to be digested by ever more wonderful mechanical contrivances: I fear that the result is little more than a huge game of make-believe and an ever more marvellous vindication of Parkinson's Law. (Work expands so as to fill the time available for its completion.)

The best decisions will still be based on the judgments of mature non-electronic brains possessed by men who have looked steadily and calmly at the situation and seen it whole. 'Stop, look, and listen' is a better motto than 'Look it up in the forecasts'.

Sixteen - Towards a Theory of Large-Scale Organisation

Schumacher notes that, while most economists praise large-scale organizations, most sociologists and psychologists warn of its inherent dangers. There are dangers to the individual through dehumanizing, as well as to efficiency and productivity through what he calls Parkinsonian bureaucracies (Parkinson's Law states, as we saw above, that work expands so as to fill the time available for its completion.) Yet the large-scale organization is here to stay, so we had better think about how to run them. 

The fundamental task, says Schumacher, is to achieve smallness within large organization.

A large organisation has to strive continuously for the orderliness of order and the disorderliness of creative freedom, And the specific danger inherent in large scale organisation is that its natural bias and tendency favour order, at the expense of creative freedom. 

Schumacher's theory of organizations is composed of 5 principles.

The first principle is that of Subsidiary Function.

A famous formulation is this principle reads as follows: 'It is an injustice and at the same time a grave evil and disturbance of right order to assign to a greater and higher association what lesser and subordinate organisations can do. For every social activity ought of its very nature to furnish help to the members of the body social and never destroy and absorb them.'

The second principle is that of Vindication.

To vindicate means: to defend against reproach or accusation: to prove to be true and valid; to justify; to uphold; so this principle describes very well one of the most important duties of the central authority towards the lower formations. Good government is always government by exception. Except for exceptional cases, the subsidiary unit must be defended against reproach and upheld. This means that the exception must be sufficiently clearly defined, so that the quasi-firm is able to know without doubt whether or not it is performing satisfactorily.

The third principle is that of Identification.

Schumacher insists that subsidiary units should have, not only a statement of profit and loss, but also a balance sheet.

A unit's success should lead to greater freedom and financial scope for the unit, while failure - in the form of losses - should lead to restriction and disability. One wants to reinforce success and discriminate against failure. The balance sheet describes the economic substance as augmented or diminished by current results. This enables all concerned to follow the effect of operations on substance. Profits and losses are carried forward and not wiped out. Therefore, every quasi-firm should have its separate balance sheet, in which profits can appear as loans to the centre and losses as loans from the centre. This is a matter of great psychological importance.

The fourth principle is that of Motivation.

The health of a large organisation depends to an extraordinary extent on its ability to do justice to the Principle of Motivation. Any organisational structure that is conceived without regard to this fundamental truth is unlikely to succeed.

The fifth principle is that of the Middle Axiom.

It is very difficult for senior management to establish a happy balance between the opposite needs of every organization, namely order and freedom. It requires creative thinking and persistence.

This is real life, full of antinomies and bigger than logic. Without order, planning, predictability, central control, accountancy, instructions to the underlines, obedience, discipline - without these, nothing fruitful can happen, because everything disintegrates. And yet - without the magnanimity of disorder, the happy abandon, the entrepreneurship venturing into the unknown and incalculable, without the risk and the gamble, the creative imagination rushing in where bureaucratic angels fear to tread - without this, life is a mockery and a disgrace.

Seventeen - Socialism

Schumacher was no dogmatic; he was ever the practical centrist, as can be seen from the following:

As mentioned before, the whole crux of economic life - and indeed of life in general - is that it constantly requires the living reconciliation of opposites which, in strict logic, are irreconcilable. In macro-economics (the management of whole societies) it is necessary always to have both planning and freedom - not by way of a weak and lifeless compromise, but by a free recognition of the legitimacy of and need for both. Equally in micro- economics (the management of individual enterprises): on the one hand it is essential that there should be full managerial responsibility and authority; yet it is equally essential that there should be a democratic and free participation of the workers in management decisions, Again, it is not a question of mitigating the opposition of these two needs by some halfhearted compromise that satisfies neither of them, but to recognize them both. The exclusive concentration on one of the opposites - say, on planning, produces Stalinism; while the exclusive concentration on the other produces chaos. The normal answer to either is a swing of the pendulum to the other extreme. Yet the normal answer is not the only possible answer. A generous and magnanimous intellectual effort - the opposite of nagging, malevolent criticism - can enable a society, at least for a period, to find a middle way that reconciles the opposites without degrading them both. 

Eighteen - Ownership

The context for this chapter is 70s Britain, where the nationalization of large private companies was in vogue. First, let us see how Schumacher views private ownership:

a. In small-scale enterprise, private ownership is natural, fruitful, and just. 

b. In medium-scale enterprise, private ownership is already to a large extent functionally unnecessary. The idea of 'property' becomes strained, unfruitful, and unjust. If there is only one owner or a small group of owners, there can be, and should be, a voluntary surrender of privilege to the wider group of actual workers - as in the case of Scott Bader & Co Ltd (a worker co-operative). Such an act of generosity may be unlikely when there is a large number of anonymous shareholders, but legislation could pave the way even then.

c. In large-scale enterprise, private ownership is a fiction for the purpose of enabling functionless owners to live parasitically on the labour of others. It is not only unjust but also an irrational element which distorts all relationships within the enterprise.

As we have seen in our age, large-scale private ownership is responsible for the destruction of vast swathes of the environment and society. Schumacher goes on to argue in favour of nationalization, providing guiding principles to prevent it from becoming the same, soulless destroyer of public resources that large-scale private ownership is. In this he was a person of his time while remaining a practical centrist. I think there is sufficient evidence of the fact that nationalized companies end up behaving just as corruptly as their private versions. The solution is not public ownership, but in creative approaches to private ownership and giantism.

Nineteen - New Patterns of Ownership

Schumacher opens this chapter with the underlying rationale for his views on ownership. It is of the utmost importance that anyone who considers ownership take this rationale into account. Much of our societal misfortune stems from private ownership ignoring this reality. The principle is that the role of public expenditure must be accounted for in private profit. Here is how he frames it:

It is not merely a question of public squalor, such as the squalor of many mental homes, of prisons, and of countless other publicly maintained services and institutions; this is the negative side of the problem. The positive side arises where large amounts of public funds have been and are being spent on what is generally called the 'infrastructure', and the benefits go largely to private enterprise free of charge. 

This is well known to anyone who has ever been involved in starting or running an enterprise in a poor society where the 'infrastructure' is insufficiently developed or altogether lacking. He cannot rely on cheap transport and other public services; he may have to provide at his own expense many things which he would obtain free or at small expense in a society with a highly developed infrastructure; he cannot count on being able to recruit trained people: he has to train them himself; and so on. 

All the educational, medical, and research institutions in any society, whether rich or poor, bestow incalculable benefits upon private enterprise - benefits for which private enterprise does not pay directly as a matter of course, but only indirectly by way of taxes, which. as already mentioned, are resisted, resented, campaigned against, and often skilfully avoided. 

It is highly illogical and leads to endless complications and mystifications, that payment for benefits obtained by private enterprise from the 'infrastructure' cannot be exacted by the public authorities by a direct participation in profits but only after the private appropriation of profits has taken place. Private enterprise claims that its profits are being earned by its own efforts, and that a substantial part of them is then taxed away by public authorities. This is not a correct reflection of the truth - generally speaking.

The truth is that a large part of the costs of private enterprise has been borne by the public authorities - because they pay for the infrastructure and that the profits of private enterprise therefore greatly over- state its achievement.

There is no practical way of reflecting the true situation, unless the contribution of public expenditure to the profits of private enterprise is recognised in the structure of ownership of the means of production.

Following this principle, Schumacher discusses a British company that organized itself as a 'commonwealth', what we call a worker co-operative, to show how this type of ownership changes the underlying assumptions governing the enterprise towards the common good. 

Thereafter he makes a detailed case for direct public ownership in large private companies, in order to account for the role of public goods in private profit. This type of ownership would replace income tax for these type of companies.

Epilogue

Schumacher concludes with this summary.

The 'logic of production' is neither the logic of life nor that of society. It is a small and subservient part of both, The destructive forces unleashed by it cannot be brought under control, unless the 'logic of production' itself is brought under control - so that destructive forces cease to be unleashed. It is of little use trying to suppress terrorism if the production of deadly devices continues to be deemed a legitimate employment of man's creative powers.

Nor can the fight against pollution be successful if the patterns of production and consumption continue to be of a scale, a complexity, and a degree of violence which, as is becoming more and more apparent, do not fit into the laws of the universe, to which man is just as much subject as the rest of creation. Equally, the chance of mitigating the rate of resource depletion or of bringing harmony into the relationships between those in possession of wealth and power and those without is non-existent as long as there is no idea anywhere of enough being good and more-than- enough being of evil.

I think he would be pleased at how many people and organizations are using his philosophy today to fight for a better Earth.

gerrit

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