Small is Beautiful

By E.F Schumacher

Small is Beautiful was published in 1973 at a time when people were starting to wake up to the long-term consequences of environmental pollution and fossil fuel consumption. Today, we know even more about the long-term effects of pollution on the natural world, so Schumacher’s central argument about the need to conserve and protect the environment rings even truer in the modern context. The book was well received upon publication and is now regarded as one of the foundational texts of the modern environmental movement. Interestingly, Schumacher’s central thesis was taken by David Cameron as an inspiration for the Big Society initiative– a programme of social and civic empowerment policies favoured by the Tories at the start of the coalition government in 2010. The book should, however, not be solely judged by such an ill-fated association.

The book interweaves numerous themes to present an analysis of the mistaken assumptions that modern economics presupposes, namely that it would be better to measure economic progress by the way economic activity impacts people and the natural world and not products. Schumacher argues that small-scale activity directed in the right places can be more impactful than large-scale interventions directed at the wrong places. His goal is to organise relations between people and nature to create an economics of peace and permanence.

There are reasons to be pessimistic about reading the book today. For one thing many of the existential global challenges that Schumacher refers to have only gotten worse since the 1970’s. But there is still optimism to be found in the vision that he sets forth of a world that is governed by our more noble ambitions. It is an insightful and beautifully written book that asserts the need for us to reimagine how we relate to ourselves and the natural world.

Seeds of the Environmental movement

Nowhere has Schumacher’s central message had more influence than within the modern environmental movement. He makes an impassioned plea for us to consider the impact of consumerism and capitalist production on the natural world. He places the blame for environmental degradation squarely on the fact that we have not solved the problem of production as we do not adequately distinguish between income and capital. Modern economics regards expropriation of natural resources as income which can be used easily and freely to generate profits. We tend to treat the environment as an infinite resource when it should rightly be regarded it as irreplaceable capital. Once we get through the natural world we do not have another one and so preservation and conservation of natural resources should be valued highly. Yet this principle is not embedded in our current economic systems. To the same extent that previous generations have suffered for our benefit, soon future generations will bear the consequences for what we have done today.

Schumacher is concerned about the supply of fossil fuels and this leads him to speculate about the imminence of oil shortages. He wrote the book at the time of the OPEC crisis in which the twelve members of the Organization of Petroleum Exporting Countries placed an embargo on oil exports into the United States. There are points at which Schumacher appears alarmist in his assertions of impending doom, but the issue of fossil fuel production is still hugely relevant today. A large part of the present economic crisis in Venezuela is being driven by historic difficulties in extracting oil from once-lucrative reserves. Disconcertingly BP estimated in 2014 that oil global oil reserves will last for another 53 years. It is clear that we will need to both change our behaviour and increase consumption of renewable energy sources.

Schumacher, however, is not convinced by the potential of renewable energy sources like nuclear power. Although a Financial Times review back in 2011 strangely refers to him an “advocate of nuclear energy.” On this point Schumacher seems to have been quite clear:

The continuation of scientific advance in the direction of ever-increasing violence, culminating in nuclear fission and moving on to nuclear fusion, is a prospect of terror threatening the abolition of man.”

He is deeply worried about the processes for safely storing nuclear waste materials and the risk for contamination of the natural environment. He identifies the terrifying implications of what nuclear power means for mankind, and he is prescient in identifying some of the issues with domestic nuclear reactors far before the devastating events in Chernobyl and Fukushima.

Compassionate Economics

Schumacher takes aim at many of the core concepts in modern economics. He highlights how the western liberal tradition is almost completely divorced from an understanding of what is best for human beings. Modern economics is modelled on the empirical sciences, but Schumacher contends that the complexity of human psychology makes empiricism an insufficient tool. He instead argues for a conception of economics that seeks to achieve peace and permeance.

One of the key claims in the book is that modern economics has crucial design flaws which incentivise people to behave with greed and self-interest. Economic success is judged by how profitable an activity is and not by whether it will benefit human society. If success is tied to how much profit something will make economic activity can be undertaken which causes short-term benefits, in terms of profits, but causes long-term harm, such as environmental destruction. Modern economics is also fixated on the notion of limitless growth. Even when GNP continues to rise, ordinary people don’t always experience the benefits.

Schumacher argues that efforts to promote economic growth and gross national product as the principal indicator of success say nothing about how such policies actually impact people’s lives. Modern economics has been built with a preference towards measuring the quantity of things, with much less appreciation for the quality of things. What Schumacher therefore proposes is an attempt to reconceptualise the notion of economic success by leaving behind concepts these concepts. Instead, Schumacher examines how an economic system may be structured if it were to promote human happiness rather than profitability.

“I suggest that the foundations of peace cannot be laid by universal prosperity, in the modern sense, because such prosperity, if attainable at all, is attainable only by cultivating such drives of human nature as greed and envy, which destroy intelligence, happiness and serenity and thereby the peacefulness of man.”

Schumacher’s remedy is for us to focus more on smaller organisations which often achieve more relative to their size than big organisations. Although he recognises that sometimes large organisations may be necessary, he dislikes the overwhelming trend towards “gigantism” in political and social life. He outlines a convincing case for why a “smaller” approach would be preferable when it comes to international development initiatives. International aid programmes leave poorer countries in a state of permanent indebtedness to richer countries, and this represents what he sees as a new form of colonialism. He describes factories operating in the developing world to export to rich countries which use advanced western technology and require little manpower to operate. This arrangement does little to ameliorate the general levels of unemployment in developing countries and leaves their economies completely reliant on the resources, equipment and expertise of the rich countries.

Here Schumacher advocates for what he terms “intermediate technology.” These are technologies that can be incorporated in the developing world more easily than advanced western technologies. It does not work to impose western solutions onto societies that have not developed the infrastructure and expertise to use them. Schumacher equally sees how education can be a more productive way to help people rather than purely administering financial support. Schumacher sees the problem of global poverty as one that should be solved by imparting knowledge locally about the ways in which communities can develop skills and expertise. He is pessimistic about the status of poverty throughout the world but on this account too much has changed since Schumacher wrote the book. Hans Rosling’s recent book “Factfulness” shows that in the last twenty years the proportion of the world living in extreme poverty has more than halved. There is clearly still much more to do, but it is hopeful to consider that many of the problems that Schumacher outlines are perhaps not as intractable as might be assumed.

“The crucial task of this decade, therefore, is to make the development effort appropriate, and thereby more effective so that it will reach down to the heartland of world poverty, two million villages.”

A vision for the future

In addition to outlining the deficiencies of the contemporary economics, Schumacher offers his own prescription for how society and economics could be better structured. He is interested in promoting systems that allow for the achievement and expression of human creativity, and promote better relationships between human beings.

He is interested in bringing democracy into the workplace and making managers more accountable to workers and society. He develops a concept of organisational management in which hierarchies are not naturally self-justifying. They need to be continually challenged and their power needs to be checked by workers. Transparency needs to be maintained across all levels of decision making. He is fundamentally against the notion of centralisation where power is compressed into a limited core and held to limited forms of accountability.

He is naturally sceptical about the extent to which modern methods of prediction, such as economic forecasts, can truly predict the future. He is also equally unconvinced by the power of technology and computers to derive wisdom. Computers he argues are not capable of judgment to the same extent that human beings are. Yet, today we see technology advancing to the extent that machine learning may produce machines that can handle complex cognitive processes. We have problems in the way in which we conceive of the future. Machines can’t do this yet, but artificial intelligence offers up new possibilities. He argues that computers can’t make judgments, but with machine learning, we are approaching a space in which they will soon be able to.

He also enters a spirited defence of the notion of nationalised industry. In his model, however, industries would still be opened up to private investment but each share of private equity would be issued along with a state share. We have becomes used to the notion of fully privatised industries, but the model that Schumacher proposes is a kind of middle way between full privatisation and full nationalisation.
Small is Beautiful is a captivating book in its boldness and insight. Clearly, we still live with many of the issues that Schumacher outlined today, and in many respects, they have proceeded to get worse since the 1970’s. There is still a great degree of concern about the damage that we are doing to the environment, and the presence of large and unaccountable national and international institutions remains unchanged. But there is still a great deal that can be learnt from this book. It presents a balanced and cogent argument with a sense of compassion and appreciation of the world. We are truly living in disruptive times, but we would do well to reflect on some of these ideas and endeavour to create something great and small.

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