Small Is Beautiful: A Study of Economics as if People Mattered (Vintage classics)

by Ernst F. Schumacher

‘natural capital’

The substance of man cannot be measured by Gross National Product.

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.

To talk about the future is useful only if it leads to action now.

To give only three preliminary examples: in agriculture and horticulture, we can interest ourselves in the perfection of production methods which are biologically sound, build up soil fertility, and produce health, beauty and permanence.

The exclusion of wisdom from economics, science, and technology was something which we could perhaps get away with for a little while, as long as we were relatively unsuccessful; but now that we have become very successful, the problem of spiritual and moral truth moves into the central position.

The cultivation and expansion of needs is the antithesis of wisdom.

That is to say, if such a man can normally earn, say, $5,000 a year, the average cost of establishing his workplace should on no account be in excess of $5,000. If the cost is significantly higher, the society in question is likely to run into serious troubles, such as an undue concentration of wealth and power among the privileged few; an increasing problem of ‘drop-outs’ who cannot be integrated into society and constitute an ever-growing threat; ‘structural’ unemployment; maldistribution of the population due to excessive urbanisation; and general frustration and alienation, with soaring crime rates, and so forth.

What becomes of a man if the process of production ‘takes away from work any hint of humanity, making of it a merely mechanical activity’? The worker himself is turned into a perversion of a free being.

the humanisation of work? It is only necessary to assert that something would reduce the ‘standard of living’, and every debate is instantly closed. That soul-destroying, meaningless, mechanical, monotonous, moronic work is an insult to human nature which must necessarily and inevitably produce either escapism or aggression, and that no amount of ‘bread and circuses’ can compensate for the damage done –

What, then, is meta-economics? As economics deals with man in his environment, we may expect that meta-economics consists of two parts – one dealing with man and the other dealing with the environment.

For example, having established by his purely quantitative methods that the Gross National Product of a country has risen by, say, five per cent, the economist-turned-econometrician is unwilling, and generally unable, to face the question of whether this is to be taken as a good thing or a bad thing. He would lose all his certainties if he even entertained such a question: growth of GNP must be a good thing, irrespective of what has grown and who, if anyone, has benefited.

In fact, without going into any further details, it can be said that economics, as currently constituted, fully applies only to manufactures (category 3), but it is being applied without discrimination to all goods and services, because an appreciation of the essential, qualitative differences between the four categories is entirely lacking. These differences may be called meta-economic, inasmuch as they have to be recognised before economic analysis begins.

Hence the ideal from the point of view of the employer is to have output without employees, and the ideal from the point of view of the employee is to have income without employment.

If the ideal with regard to work is to get rid of it, every method that ‘reduces the work load’ is a good thing. The most potent method, short of automation, is the so-called ‘division of labour’ and the classical example is the pin factory eulogised in Adam Smith’s Wealth of Nations.4

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.

The ownership and the consumption of goods is a means to an end, and Buddhist economics is the systematic study of how to attain given ends with the minimum means.

It is easy to see that the effort needed to sustain a way of life which seeks to attain the optimal pattern of consumption is likely to be much smaller than the effort needed to sustain a drive for maximum consumption.

Even today, we are generally told that gigantic organisations are inescapably necessary; but when we look closely we can notice that as soon as great size has been created there is often a strenuous attempt to attain smallness within bigness. The great achievement of Mr Sloan of General Motors was to structure this gigantic firm in such a manner that it became, in fact, a federation of fairly reasonably sized firms.

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.

The factor of footlooseness is, therefore, the more serious, the bigger the country. Its destructive effects can be traced both in the rich and poor countries.

Lord Snow, it will be recalled, talked about ‘The Two Cultures and the Scientific Revolution’ and expressed his concern that ‘the intellectual life of the whole of western society is increasingly being split into two polar groups. . . . At one pole we have the literary intellectuals . . . at the other the scientists.’ He deplores the ‘gulf of mutual incomprehension’ between these two groups and wants it bridged.

Science and engineering produce ‘know-how’; but ‘know-how’ is nothing by itself; it is a means without an end, a mere potentiality, an unfinished sentence. Can education help us to finish the sentence, to turn the potentiality into a reality to the benefit of man?

When people ask for education they normally mean something more than mere training, something more than mere knowledge of facts, and something more than mere diversion. Maybe they cannot themselves formulate precisely what they are looking for; but I think what they are really looking for is ideas that would make the world, and their own lives, intelligible to them.

We know how to do many things, but do we know what to do? Ortega y Gasset put it succinctly: ‘We cannot live on the human level without ideas. Upon them depends what we do. Living is nothing more or less than doing one thing instead of another.’ What, then, is education? It is the transmission of ideas which enable man to choose between one thing and another, or, to quote Ortega again, ‘to live a life which is something above meaningless tragedy or inward disgrace.’

What matters is the tool-box of ideas with which, by which, through which, we experience and interpret the world.

Education cannot help us as long as it accords no place to metaphysics. Whether the subjects taught are subjects of science or of the humanities, if the teaching does not lead to a clarification of metaphysics, that is to say, of our fundamental convictions, it cannot educate a man and, consequently, cannot be of real value to society.

Education can help us only if it produces ‘whole men’. The truly educated 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 is possible): the ‘whole man’, in fact, may have little detailed knowledge of facts and theories, he may treasure the Encyclopaedia 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 menacing and purpose of his life.

If he would only allow the light of consciousness to fall on the centre and face the question of his fundamental convictions, he would create order where there is disorder. That would ‘educate’ him, in the sense of leading him out of the darkness of his metaphysical confusion.

How can one reconcile the demands of freedom and discipline in education? Countless mothers and teachers, in fact, do it, but no-one can write down a solution. They do it by bringing into the situation a force that belongs to a higher level where opposites are transcended – the power of love.

Now, the fundamental ‘principle’ of agriculture is that it deals with life, that is to say, with living substances. Its products are the results of processes of life and its means of production is the living soil.

A wider view 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 agree with Mr Herber’s assertion that ‘reconciliation of man with the natural world is no longer merely desirable, it has become a necessity’. And this cannot be achieved by tourism, sightseeing, or other leisure-time activities, but only by changing the structure of agriculture in a direction exactly opposite to that proposed by Dr Mansholt and supported by the experts quoted above: instead of searching for

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.

It would have been better for the furtherance of insight if the MIT team had concentrated its analysis on the one material factor the availability of which is the precondition of all others and which cannot be recycled – energy.

If energy fails, everything fails.

The quantitative orientation is so bereft of qualitative understanding that even the quality of ‘orders of magnitude’ ceases to be appreciated.

It used to be said that OPEC – the Organisation of Petroleum Exporting Countries – would never amount to anything, because Arabs could never agree with each other, let alone with non-Arabs; today it is clear that OPEC is the greatest cartel-monopoly the world has ever seen. It used to be said that the oil exporting countries depended on the oil importing countries just as much as the latter depended on the former; today it is clear that this is based on nothing but wishful thinking, because the need of the oil consumers is so great and their demand so inelastic that the oil exporting countries, acting in unison, can in fact raise their revenues by the simple device of curtailing output.

‘The religion of economics promotes an idolatry of rapid change, unaffected by the elementary truism that a change which is not an unquestionable improvement is a doubtful blessing. The burden of proof is placed on those who take the “ecological viewpoint”: unless they can produce evidence of marked injury to man, the change will proceed.

People whose business it is to judge hazards, the insurance companies, are reluctant to insure nuclear power stations anywhere in the world for third party risk, with the result that special legislation has had to be passed whereby the State accepts big liabilities.2 Yet insured or not, the hazard remains, and such is the thraldom of the religion of economics that the only question that appears to interest either governments or the public is whether ‘it pays’.

Man cannot live without science and technology any more than he can live against nature. What needs the most careful consideration, however, is the direction of scientific research. We cannot leave this to the scientists alone.

fact, one might put the following proposition to students of sociology: ‘The prestige carried by people in modern industrial society varies in inverse proportion to their closeness to actual production.’

Although we are in possession of all requisite knowledge, it still requires a systematic, creative effort to bring this technology into active existence and make it generally visible and available. It is my experience that it is rather more difficult to recapture directness and simplicity than to advance in the direction of ever more sophistication and complexity. Any third-rate engineer or researcher can increase complexity; but it takes a certain flair of real insight to make things simple again.

The case for hope rests on the fact that ordinary people are often able to take a wider view, and a more ‘humanistic’ view, than is normally being taken by experts.

The Soil Association, has been engaged in exploring the vital relationships between soil, plant, animal, and man; has undertaken and assisted relevant research; and has attempted to keep the public informed about developments in these fields.

One of the unhealthy and disruptive tendencies in virtually all the developing countries is the emergence, in an ever more accentuated form, of the ‘dual economy’, in which there are two different patterns as widely separated from each other as two different worlds.

Is there an alternative? That the developing countries cannot do without a modern sector, particularly where they are in direct contact with the rich countries, is hardly open to doubt. What needs to be questioned is the implicit assumption that the modern sector can be expanded to absorb virtually the entire population and that this can be done fairly quickly.

Every country, no matter how devastated, which had a high level of education, organisation, and discipline, produced an ‘economic miracle’. In fact, these were miracles only for people whose attention is focused on the tip of the iceberg. The tip had been smashed to pieces, but the base, which is education, organisation, and discipline, was still there.

It is necessary, therefore, that at least an important part of the development effort should by-pass the big cities and be directly concerned with the creation of an ‘agro-industrial structure’ in the rural and small-town areas.