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

by Ernst F. Schumacher

First, that workplaces have to be created in the areas where the people are living now, and not primarily in metropolitan areas into which they tend to migrate.

Second, that these workplaces must be, on average, cheap enough so that they can be created in large numbers without this calling for an unattainable level of capital formation and imports.

Third, that the production methods employed must be relatively simple, so that the demands for high skills are minimised, not only in the production process itself but also in matters of organisation, r...

Fourth, that production should be mainly from local materials and mainly for local use. These four requirements can be met only if there is a ‘regional’ approach to development and, second, if there is a conscious effort to develop and apply what might be called an ‘interm...

It is therefore fallacious to treat capital/output ratios as technological facts, when they are so largely dependent on quite other factors.

What the poor need most of all is simple things – building materials, clothing, household goods, agricultural implements – and a better return for their agricultural products. They also most urgently need in many places: trees, water, and crop storage facilities.

‘The catalogue issued by the European or United States exporter of machinery is still the prime source of technical assistance’6 and the institutional arrangements for dispensing aid are generally such that there is an unsurmountable bias in favour of large-scale projects on the level of the most modern technology. If we could turn official and popular interest away from the grandiose projects and to the real needs of the poor, the battle could be won.

Professor Gadgil, director of the Gokhale Institute of Politics and Economics at Poona, has outlined three possible approaches to the development of intermediate technology, as follows: ‘One approach may be to start with existing techniques in traditional industry and to utilise knowledge of advanced techniques to transform them suitably. Transformation implies retaining some elements in existing equipment, skills and procedures . . . This process of improvement of traditional technology is extremely important, particularly for that part of the transition in which a holding operation for preventing added

technological unemployment appears necessary . . . ‘Another approach would be to start from the end of the most advanced technology and to adapt and adjust so as to meet the requirements of the intermediate . . . In some cases, the process would also involve adjustment to special local circumstances such as type of fuel or power available. ‘A third approach may be to conduct experimentation and research in a direct effort to establish intermediate technology. However, for this to be fruitfully undertaken it would be necessary to define, for the scientist and technician, the limiting economic circumstances. These are chiefly the scale of operations aimed at and the relative costs of capital and labour and the scale of their inputs – possible or desirable. Such direct effort

at establishing intermediate technology would undoubtedly be conducted against the background of knowledge of advanced technology in the field. However, it could cover a much wider range of possibilities than th...

This means that three tremendous gulfs separate the former from the latter: 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. The first problem of development aid is how to bridge these three gulfs. A great effort of imagination, study, and compassion is needed to do so.

Once we see the task of aid as primarily one of supplying relevant knowledge, experience, know-how, etc. – that is to say, intellectual rather than material goods – it is clear that the present organisation of the overseas development effort is far from adequate. This is natural as long as the main task is seen as one of making funds available for a variety of needs and projects proposed by the recipient country, the availability of the knowledge factor being more or less taken for granted.

The beginning of wisdom is the admission of one’s own lack of knowledge. As long as we think we know, when in fact we do not, we shall continue to go to the poor and demonstrate to them all the marvellous things they could do if they were already rich. This has been the main failure of aid to date.

Success cannot be obtained by some form of magic produced by scientists, technicians, or economic planners. It can come only through a process of growth involving the education, organisation, and discipline of the whole population. Anything less than this must end in failure.

Economic development is primarily a question of getting more work done. For this, there are four essential conditions. First, there must be motivation; second, there must be some know-how; third, there must be some capital; and fourth, there must be an outlet: additional output requires additional markets.

If it is now being increasingly understood that this technological choice is of absolutely pivotal importance, how can we get from stage two to stage three, namely from just giving lip service to actually doing work? To my knowledge this work is being done systematically only by one organisation, the Intermediate Technology Development Group (ITDG).

Everything sounds very difficult and in a sense it is very difficult if it is done for the people, instead of by the people.

Full predictability (in principle) exists only in the absence of human freedom, i.e. in ‘sub-human’ nature. The limitations

of predictability are purely limitations of knowledge and technique. Relative predictability exists with regard to the behaviour pattern of very large numbers of people doing ‘normal’ things (routine). Relatively full predictability exists with regard to human actions controlled by a plan which eliminates freedom, e.g. railway timetable. Individual decisions by individuals are in principle unpredictable.

The fundamental task is to achieve smallness within large organisation. Once a large organisation has come into being, it normally goes through alternating phases of centralising and decentralising, like swings of a pendulum. Whenever one encounters such opposites, each of them with persuasive arguments in its favour, it is worth looking into the depth of the problem for something more than compromise, more than a half-and-half solution. Maybe what we really need is not either-or but the-one-and-the-other-at-the-same-time.

This very familiar problem pervades the whole of real life, although it is highly unpopular with people who spend most of their time on laboratory problems from which all extraneous factors have been carefully eliminated. For whatever we do in real life, we must try to do justice to a situation which includes all so-called extraneous factors. And we always have to face the simultaneous requirement for order and freedom.

Centralisation is mainly an idea of order; decentralisation, one of freedom. The man of order is typically the accountant

and generally the administrator; while the man of creative freedom is the entrepreneur. Order requires intelligence and is conducive to efficiency; while freedom calls for, and opens the door to, intuition and leads to innovation.

Principle of the Middle Axiom

Neither the soft method of government by exhortation nor the tough method of government by instruction meets the requirements of the case. What is required is something in between, a middle axiom, an order from above which is yet not quite an order.

The best formulation of the necessary interplay of theory and practice, that I know of, comes from Mao Tse-tung. Go to the practical people, he says, and learn from them: then synthesise their experience into principles and theories; and then return to the practical people and call upon them to put these principles and methods into practice so as to solve their problems and achieve freedom and happiness.2

They will not recover, and nationalisation will not fulfil its function, unless they recover their vision. What is at stake is not economics but culture; not the standard of living but the quality of life.

Socialists should insist on using the nationalised industries not simply to out-capitalise the capitalists – an attempt in which they may or may not succeed – but to evolve a more democratic and dignified system of industrial administration, a more humane employment of machinery, and a more intelligent utilisation of the fruits of human ingenuity and effort. If they can do that, they have the future in their hands. If they cannot, they have nothing to offer that is worthy of the sweat of free-born men.

‘For it is not private ownership, but private ownership divorced from work, which is corrupting to the principle of industry; and the idea of some socialists that private property in land or capital is necessarily mischievous is a piece of scholastic pedantry as absurd as that of those conservatives who would invest all property with some kind of mysterious sanctity.’