Small is Beautiful: the New Economics

by frankbeswick

Elwin Schumacher, a quiet but intellectually potent economist,revolutionized thought and proposed an economics linked to ethics and commitment to the environment.

It is unfair to single out any one person as the founder of environmental concern, for as industrial filth and waste began to amass, wise, sensitive and percipient minds rose in protest, but often they were dismissed as unrealistic dreamers. But in the 1950s Elwin Schumacher began to develop his economic theories that were founded on the view that the environment is not a mine to be plundered by capricious humans in the pursuit of economic growth and that ethics were not mere red tape that were a dispensable burden upon industry, but that all three should be thoroughly integrated with each other if humans were to survive. He expressed his thought in his seminal work, Small is Beautiful:a study of economics as if people mattered.

Picture by Peter-Facebook

Gandhi, Keynes and Peace.

Schumacher, writing in Chapter 2 of Small is Beautiful, speaks approvingly of Gandhi's disparaging comment that people tend to dream systems so perfect that no one will need to be good. Gandhi was, of course, thinking of the Marxist delusion that in a perfectly communist world, after classes have been eliminated, no one would ever do wrong. We have all heard this delusion. Whenever someone has done wrong we sometimes used to  hear the comment that it is society that is to blame for the crimes of the individual.Sometimes it might be, but that is simplistic, for humans are moral agents with free will. But of course, Marxist thought dispenses with free will, as does scientific determinism. But Marxism is not the only culprit, for Schumacher, following Gandhi, feared that scientific rationality and technical competence were increasingly being seen as substitutes for  individual virtues.

He then proceeded to warn us of the dangers posed by the ideas of the great economist Lord Keynes, who argued  that at some time in the future when all are rich we will be able to value ends above means and prefer the good to the useful, but that this halcyon time is not yet and that for the sake of  economic advancement we must pretend that fair is foul and foul is fair.Our gods must be avarice, usury and precaution, for they alone can lead us out of the tunnel of  economic necessity into the daylight.  

Schumacher is scathing about this perversion of values purveyed by Keynes, and indeed by capitalism, for he observes that if riches were the source of virtue, the rich would be virtuous and the poor full of vice, but that this is patently untrue, for the rich can be quite obnoxious, as we know, and the delusion that they might be virtuous had they a little more money should be consigned to the dustbin of failed dreams and excuses [my words not Schumacher's.] 

Instead Schumacher points out that the qualities that are advanced by economists such as Keynes are a threat to peace, for they are the driving forces for violence. The thinking behind his view is that enormous riches for all are not possible in this world, and that if we attempt to motivate the poor by dreams of riches and encourage avarice, we inevitably result in violence.

He goes on to point out that economics alone is insufficient, for it should be seen as a component in a wider theory of political economy. He makes the case that if we concentrate on a purely economic goal such as growth, we must inevitably fail, as finite systems cannot endure or sustain infinite, endless growth. For this reason he is adamant that economics should be seen in the framework of a meat-economics that integrates the discipline with ethics and ecology, and that without this meta-economic perspective economics becomes dangerous and damaging to society and the planet.  In this view economics has to be a fundamentally ethical activity that links in to the overall purpose of human life. In support of this case he wrote a chapter called Buddhist Economics, in which he fed the world-view of Buddhism into economic thinking to see what would result, but he pointed out that you could do this with any of the great religions, and at times in his works he speaks approvingly of the teachings of various popes on economic matters. 


Fundamental Assumptions

While liking some of what Marx says, Dr Schumacher is critical of the Marxist theory of value, in which value is created by the labour that goes into the making of a product. While not decrying the value of labour, he observes that there is a value that is deeper than human activity,for labour is using what Schumacher calls the natural capital of the Earth,its wood, coal, oil, water and so on. Here the most fundamental  value lies. For this reason he is equally critical of the capitalist theory of value, that all value is supplied by the market in which products are sold, for the value of the world's resources transcends the vagaries of mere markets.We are looking here at an ecological theory of value. 

The Austrian economist, who had fled to the UK in the 1930s as a refugee from Hitler, compared the world's natural resource to the capital of a business, pointing out that successful businesses sustain and enhance their capital and live off the interest. He saw that rather  than doing this humans were consuming the capital provided by the Earth's natural resources and that this was therefore running out. It was Schumacher's thinking that gave a much needed boost to the growing ecological, green movement, and his thought is central to Green thinking.

Let us take an example that only  arose in the last year or two. Britain has discovered vast resources of  a valuable form of potassium under the North York Moors. Potassium is an essential plant nutrient used in fertilizers, and it is in short supply in the world, the deficiency forming a limiting factor in agricultural production, and we have five hundred years supply of it in that  mine. Mine it? We have to,Schumacher would agree,but he would say that the use of this superb resource must go hand in hand with strategies to to minimize the use of the resource and recycle potassium used in agriculture. The way to do this is composting and waste recycling.This way the natural capital of the Earth is maintained. 

Schumacher also pointed out that while the Earth has a evolved a natural capacity to recycle toxins, two problems are occurring. One is that man-made chemicals are disposable by nature as easily as naturally occurring chemicals are, as we have seen with DDT and possibly, more recently Glyphosate weedkiller.Also  the Earth's natural defences are being overwhelmed by the mass of waste chemicals and waste in general poured into and onto it. For Schumacher minimization of chemical pollution and recycling was absolutely necessary. His thought inspired many green efforts against pollution. 

Thirdly, Schumacher realized that human problems could often be linked to the kind of poisonous economics practised in our world. While not subscribing to the delusion that humans were not responsible for their actions, as I pointed out earlier, but he was aware that  social alienation, drug addiction and many diseases of industrial societies were attributable to the kind of economics were practising. The problems of  the diseases of opulence among some and of poverty among others are signs of a an economic system that is fundamentally disordered, in his view.

Schumacher's Economic Order

He liked Gandhi and he quoted popes with approval. Having come late in life to Roman Catholicism, he became aware of the social teaching of the Catholic Church and approved of it. In Schumacher's view, people's well being is the bench mark of economic advancement. Gross National Product is worthless if it does not benefit humans. He quotes Gandhi's statement that "Every machine that helps every individual has a place" the implication being that robotics that replace or demean people have no place in Schumacher's view of the world and that there should be no place for machines that concentrate power into few hands and reduce ordinary people to mere machine minders. 

Work,in Schumacher's view, should be spiritually and emotionally life-enhancing, and there is no place for harsh capitalist situations in which workers are treated as expendable tools. He cites Pope Pius XI's observation that work was decreed by providence for the good of human souls and should never be a tool by which humans are corrupted and degraded. Schumacher goes on to say that while he has not the opportunity to develop a full philosophy of labour, there needs to be a proper philosophy of  work, for work and the family are the foundations of human society. This is a view of labour that sets work in the overall context of human well being and dignity.

For Schumacher systems in which the few dominate the many are immoral and socially destructive. So large scale capitalist enterprise along with socialist nationalisation are both dehumanising, though there may have to be some cases in which large scale systems are necessary. However, small scale businesses are preferable. The costs of setting up in business should be low [though it is impossible to see how many engineering firms could be established at low  cost.] Similarly many Britons want our railways re-nationalized after the less than successful privatisation a few years ago.

However, for followers of Schumacher Distributism, a system favoured by the British writers Chesterton and Belloc, is preferable. This is large scale, small capitalism, in which free individuals sell their services, a system in which there are many capitalists rather than few. It is self-employment on a massive scale. This sets him up against the socialists, who have often thought that the social ideal is that  everyone becomes a state employee, the ultimate in wage slavery. In Distributism there are no wage slaves. In this view freedom and justice go hand in hand and are compatible, rather than in Socialism, where individual freedom is regarded as an impediment to the state's creation of a just society, and in capitalism, where economic freedom is liberation from at least some moral restraints upon the behaviour of employers. 

For Schumacher's followers co-operatives are the ideal form of collective enterprise, for in them all workers, be they managers or shop floor workers, are equal owners of the business and the bloated wages for Chief Executives, which are causing so much resentment in the UK at the moment, would be a thing of the past. 

Key to Schumacher's thought is the concept of wisdom. For him mere cleverness is not enough, for cleverness alone does not see the overall view. Wisdom is knowing the good and being committed to it, and without scientific, technical or any other form of cleverness is valueless, for it takes you in the wrong direction. 

One of his key concepts was Intermediate Technology. This is between high tech, which is inaccessible to the many, and low  tech, which cannot cure poverty. Between the two is Intermediate Technology, which uses local materials and local skills in the hands of empowered local people to enable people to solve their own problems. It is proving a great success in the developing world.  

In conclusion I, along with other members of the broad Green movement, see Schumacher as one of our heroes and  regard him as a light guiding the world to a  better future. 

Updated: 05/11/2017, frankbeswick
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frankbeswick on 07/13/2017

The first railways were privately owned, but in the late 1940s Britain's left wing government took them into state ownership. This was called nationalization. In the 1980s Britain's right wing government sold them back to private companies, keeping only the tracks in state ownership. This was called privatization, and it was done because of an ideological preference for private ownership.

The issue of profitability is complex, for some lines make much money, but others do not. We have had chronic industrial troubles in some companies because the company is trying to cut staff and the staff say that the cuts jeopardize public safety. There was an issue when Richard Branson lost the franchise for the West Coast main line, while the public so valued stability that they objected and Branson won it back.

But in general the British public would like the railways to be returned to state ownership, for they remember the time when under state ownership services were cheaper. Nowadays our British railways are more expensive yet less efficient than the railways in Europe are.

DerdriuMarriner on 07/13/2017

FrankBeswick, What is the difference between nationalized and privatized railways that the former looks preferable and the latter sounds unprofitable and unsatisfactory?

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