Small Is Beautiful: Economics as if People Mattered

by Ernst F. Schumacher

it is a matter of two ways of life existing side by side in such a manner that even the humblest member of the one disposes of a daily income which is a high multiple of the income accruing to even the hardest working member of the other. The social and political tensions arising from the dual economy are too obvious to require description.

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 in- visible? Or if we do not entirely overlook them, we tend to treat them just as we treat material things

we tend to think of development, not in terms of evolution, but in terms of creation.

utmost

s...

Until recently, the development experts rarely referred to the dual economy and its twin evils of mass unemployment and mass migration into cities.

hinterland,

Kingsley Davies

predict cities of twenty, forty, and even sixty million in- habitants, a prospect of 'immiseration' for multitudes of people that beggars the imagination,

stultifies

scantiest

The problem may therefore be stated quite simply thus: what can be done to bring health to economic life outside the big cities, in the small towns and villages which still contain - in most cases - eighty to ninety per cent of the total population?

An unemployed man is a desperate man and he is practically forced into migration. This is another justification for the assertion that the provision of work opportunities is the primary need and should be the primary objective of economic planning. Without it, the drift of people into the large cities cannot be mitigated, let alone halted.

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, raw material supply, financing, marketing, and so forth. Fourth, that production should be mainly from local materials and mainly for local use.

In this matter it is not possible to give hard and fast definitions. Much depends on geography and local circumstances. A few thousand people, no doubt, would be too few to constitute a 'district' for economic development; but a few hundred thousand people, even if fairly widely scattered, may well deserve to be treated as such. The whole of Switzerland has less than six million inhabitants: yet it is divided into more than twenty 'cantons', each of which is a kind of development district, with the result that there is a fairly even spread of population and of industry and no tendency towards the formation of excessive concentrations.

It is obvious that this 'regional' or 'district' approach has no chance of success unless it is based on the employment of a suit- able technology.

In every 'developing country' one can find industrial estates set up in rural areas, where high-grade modern equipment is standing idle most of the time because of a lack of organisation finance, raw material sup- plies, transport, marketing facilities, and the like. There are then complaints and recriminations: but they do not alter the fact that a lot of scarce capital resources - normally imports paid from scarce foreign exchange - are virtually wasted.

If it is then argued that developing countries should give preference to 'labour-intensive' rather than 'capital-intensive' industries, no intelligent action can follow, be cause the choice of industry, in practice, will be determined by quite other, much more powerful criteria, such as raw material base, markets, entrepreneurial interest, etc.

economic development in poverty stricken areas can be fruitful only on the basis of what I have called 'intermediate technology'. In the end, intermediate technology will be 'labour-intensive' and will lend itself to use in small-scale establishments. But neither 'labour- intensity' nor 'small-scale' implies 'intermediate technology',

indigenous

The amount of available capital is given. Now, you may concentrate it on a small number of highly capitalised workplaces, or you may spread it thinly over a large number of cheap workplaces. If you do the latter, you obtain less total output than if you do the former: you therefore fail to achieve the quickest possible rate of economic growth.

'If we can employ only a limited number of people in wage labour, then let us employ them in the most productive way, so that they make the biggest possible contribution to the national output, because that will also give the quickest rate of economic growth. You should not go deliberately out of your way to reduce productivity in order to reduce the amount of capital per worker. This seems to me nonsense because you may find that by increasing capital per worker tenfold you increase the output per worker twenty fold. There is no question from every point of view of the superiority of the latest and more capitalistic technologies.''

erronueus concept

the dynamic approach to development. which treats the choice of appropriate, intermediate technologies as the central issue, opens up avenues of constructive action, which the static, econometric approach totally fails to recognise.

hinges

surmise.

What the poor need most of all is simple things - budding 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. Most agricultural populations would be helped immensely if they could themselves do the first stages of processing their products. All these are ideal fields for intermediate technology.

"package plants" for ammonia production,

'The catalogue issued by the European or United States exporter of machinery is still the prime source of technical assistance" and the institutional arrangements for dispensing aid are generally such that there is an insurmountable bias in favour of large-scale projects on the level of the most modern technology.

Professor Gadgil, director of the Gokhale Institute of Politics and Economics at Poona,

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

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 inter- mediate technology.

world poverty is primarily a problem of two million villages, and thus a problem of two thousand million villagers. The solution cannot be found in the cities of the Door countries. Unless life in the hinterland can be made tolerable, the problem of world poverty is in- soluble and will inevitably get worse.

Aid can be considered successful only if it helps to mobilise the labour-power of the masses in the receiving country and raises productivity without 'saving' labour. The common criterion of success, namely the growth of GNP, is utterly misleading and, in fact, must of necessity lead to phenomena which can only be de- scribed as neocolonialism.

blemish.

derisory.

For Pounds 100 you may be able to equip one man with certain means Of production; but for the same money you may well be able to teach a hundred men to equip themselves.

disbursement

The function of communications

The function of information brokerage

The function of 'feed-back',

The function of creating and co-ordinating 'sub-structures'.

The all- pervading disease of the modern world is the total imbalance between city and countryside, an imbalance in terms of wealth. power, culture, attraction, and hope.

There is no answer to the evils of mass unemployment and mass migration into cities, unless the whole level of rural life can be raised, and this requires the development of an agro-industrial culture, so that each district. each community, can offer a colourful variety of occupations to its members.

amelioration,

trifle.

ferret

foundry

sisal,

extolled.

if you can get new purchasing power into a rural community by way of a public works programme financed from outside, see to it that the fullest possible use is made of the 'multiplier effect'.