In many places in the world today the poor are getting poorer while the rich are getting richer, and the established processes of foreign aid and development planning appear to be unable to overcome this tendency. In fact, they often seem to promote it, for it is always easier to help those who can help themselves than to help the helpless. Nearly all the so-called developing countries have a modern sector where the patterns of living and working are similar to those of the developed countries, but they also have a non-modern sector, accounting for the vast majority of the total population, where the patterns of living and working are not only profoundly unsatisfactory but also in a process of accelerating decay.
— E. F. Schumacher, opening lines of Ch. 12
I first met Fritz Schumacher in 1968 while working in the Science Policy Division of UNESCO. His concept of intermediate technology had become the driving force behind a shift in technological aid to the Third World. In the following decade, intermediate technology centers had sprung up all over the world. Papua New Guinea, Nepal, Ghana, Colombia, and India were only a few of the nations of the third world developing small-scale, low-cost technologies. Water wheels, composting privies, solar pumps, bicycle-driven threshers, and other intermediate hardware filled the gap between the primitive hand tools used by most of the people of the world and the hi-tech, high-cost, complex hardware and infrastructure being foisted on these countries by the ‘development experts’. The industrial countries too caught Fritz’s small-is-beautiful bug.
— Bill Ellis, general co-coordinator of TRANET since 1977, and physicist, in the 25th anniversary book (1999)
“In 1965, a group of us helped Schumacher start the Intermediate Technology Development Group in London. Our starting point was that mass unemployment and rural misery could be overcome only by creating new workplaces in the rural areas – low-cost workplaces that could be created in large numbers, where production methods and associated services were relatively simple, and used local materials for local use.
— George McRobie, former chair of ITDG and the New Economics Foundation, and author of Small is Possible, in the 25th anniversary book (1999)
This chapter is an odd one out in that, as Schumacher explains at the end of Chapter 11, it is a slightly shortened version of a paper prepared in 1965 for a Conference on the Application of Science and Technology to the Development of Latin America, organized by UNESCO in Santiago, Chile.
“At that time, discussions on economic development almost invariably tended to take technology simply as ‘given’, the question was how to transfer the given technology to those not yet in possession of it,” he wrote at the end of the previous chapter.
“The latest was obviously the best, and the idea that it might not serve the urgent needs of developing countries because it failed to fit into the actual conditions and limitations of poverty, was treated with ridicule. However, the paper became the basis on which the Intermediate Technology Development Group was set up in London.”
The chapter is still structured like a report, with an introduction and headings.
What the chapter says…
To start with, he reiterates his conclusions from Chapter 11 that, despite the money and expertise poured into development, most of it only touches the lives of people who live in cities. Mostly, it completely ignores “the vast majority of the total population, where the patterns of living and working are not only profoundly unsatisfactory but also in a process of accelerating decay.”
Schumacher emphasizes that his one concern is entirely with those in what he calls the “non-modern sector”:
“This does not imply the suggestion that constructive work in the modern sector should be discontinued, and there can be no doubt that it will continue in any case. But it does imply the conviction that all successes in the modern sector are likely to be illusory unless there is also a healthy growth – or at least a healthy condition of stability – among the very great numbers of people today whose life is characterized not only by dire poverty but also by hopelessness,”
He denies that the unemployment in rural areas has much to do with population growth, even if that must have some effect. So why can’t they do extra work, he asks rhetorically?
Because, in a free system, more people ought theoretically to mean more paid work and more demand. But for some reason that doesn’t work in the global south:
“It is said that they cannot work because they lack ‘capital’,” writes Schumacher. “But what is ‘capital’? It is the product of human work. The lack of capital can explain a low level of productivity, but it cannot explain a lack of work opportunities.”
We know from the last chapter that desperate people in rural areas tend to go into the burgeoning cities: “Rural unemployment produces mass-migration into cities, leading to a rate of urban growth which would tax the resources of even the richest societies” he says. “Rural unemployment becomes urban unemployment.”
Conventional economists are obsessed with productivity and ‘output per man’. But that cannot help the unemployed and underemployed. Because “even poorly paid and relatively unproductive work is better than idleness”.
Because this is a report, and his original purpose was to make it clear that he is no single voice ‘crying in the wilderness’, he digs out a number of economists and other officials who agree with key elements of his argument.
“ ‘Coverage must come before perfection,’ to use the words of Mr Gabriel Ardant,” writes Schumacher. Ardant was a French official and accountant who also wrote books – he rose to be inspector-general at the General Inspectorate of Finances. he was a near contemporary of Schumacher’s – five years older, but both men died in 1977. Like Schumacher, Ardant started off as a convinced Keynesian before he varied it a little, à la française, collaborating with Pierre Mendès France, the leader of the French radical party, who was a reforming prime minister of France for less than a year from 1954-5.
Even so, Ardant wrote ‘A Plan for Full Employment in the Developing Countries’ in International Labour Review, in 1963:
“It is important that there should be enough work for all because that is the only way to eliminate anti-productive reflexes and create a new state of mind – that of a country where labour has become precious and must be put to the best possible use,” he wrote and Schumacher quotes him approvingly.
“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,” he writes, praising Egypt and Japan but criticizing Turkey and India, whose five-year plans typically end with more unemployment than they began with.
To summarize, Schumacher sets the following propositions:
- “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.”
- “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.”
- “That the production methods employed must be relatively simple, so that the demands for high skills are minimized, not only in the production process itself but also in matters of organization, raw material supply, financing, marketing, and so forth.”
- “That production should be mainly from local materials and mainly for local use.”
He also spells out how it should be achieved:
1. Regional development approach
Huge areas within the country “will benefit little and may indeed suffer,” says Schumacher. “If the purpose of development is to bring help to those who need it most, each ‘region’ or ‘district’ within the country needs its own development. This is what is meant by a ‘regional’ approach.”
This is also true of the Italian south, or parts of north Wales or Cornwall in the UK. or West Virginia in the USA:
“The bigger the country, the greater is the need for internal ‘structure’ and for a decentralized approach to development. If this need is neglected, there is no hope for the poor.”
2. The technology used needs to be appropriate.
Although Schumacher is trying to be positive in this chapter, he can’t resist a sideswipe a the traditional economist Dr Nicky Kaldor, who claimed research had “shown that the most modern machinery produces much more output per unit of capital invested than less sophisticated machinery which employs more people.”
This is Schumacher’s riposte:
“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.”
And what about the idea Kaldor suggested that “the capital/output ratio grows if capital is concentrated on fewer workplaces”?
“No-one with the slightest industrial experience would ever claim to have noticed the existence of such a ‘law’, nor is there any foundation for it in any science. Mechanization and automation are introduced to increase the productivity of labour, i.e. the worker/output ratio, and their effect on the capital/output ratio may just as well be negative as it may be positive. Countless examples can be quoted where advances in technology eliminate workplaces at the cost of an additional input of capital without affecting the volume of output. It is therefore quite untrue to assert that a given amount of capital invariably and necessarily produces the biggest total output when it is concentrated on the smallest number of workplaces.”
This is unusual. It is Schumacher arguing about concepts in economics, using the territory and language of the enemy, so to speak.
“The greatest weakness of the argument, however, lies in taking ‘capital’ – and even ‘wages goods’ – as ‘given quantities’ in an under-employed economy. Here again, the static outlook inevitably leads to erroneous conclusions. The central concern of development policy, as I have argued already, must be the creation of work opportunities for those who, being unemployed, are consumers – on however miserable a level – without contributing anything to the fund of either ‘wages goods’ or ‘capital’. Employment is the very precondition of everything else. The output of an idle man is nil, whereas the output of even a poorly equipped man can be a positive contribution, and this contribution can be to ‘capital’ as well as to ‘wages goods’. The distinction between those two is by no means as definite as the econometricians are inclined to think, because the definition of ‘capital’ itself depends decisively on the level of technology employed.”
He then quotes two examples. The first is about what Schumacher calls “the recent tendency (fostered by the policy of most African, Asian and Latin American governments of having oil refineries in their own territories, however small their markets) for international firms to design small petroleum refineries with low capital investment per unit of output and a low total capacity.”
The second example relates to ammonia packaging production, also recently designed for small markets. In fact, people in the 85 per cent need something far simpler:
“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. 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.”
Those products – like mini oil refineries – are not normally an urgent need of the poor, says Schumacher:
“It is too often assumed that the achievement of western science, pure and applied, lies mainly in the apparatus and machinery that have been developed from it, and that a rejection of the apparatus and machinery would be tantamount to a rejection of science. This is an excessively superficial view. The real achievement lies in the accumulation of precise knowledge, and this knowledge can be applied in a great variety of ways, of which the current application in modern industry is only one.”
The idea of intermediate technology does not imply simply a ‘going back’ in history to methods, says Schumacher.
He then looks at some of the arguments against intermediate technology:
“It is argued that all this might be quite promising if it were not for a notorious shortage of entrepreneurial ability in the under-developed countries. This scarce resource should therefore be utilized in the most concentrated way, in places where it has the best chances of success and should be endowed with the finest capital equipment the world can offer. Industry, it is thus argued, should be established in or near the big cities, in large integrated units, and on the highest possible level of capitalization per workplace. The argument hinges on the assumption that ‘entrepreneurial ability’ is a fixed and given quantity, and thus again betrays a purely static point of view. It is, of course, neither fixed nor given, being largely a function of the technology to be employed. Men quite incapable of acting as entrepreneurs on the level of modern technology may nonetheless be fully capable of making a success of a small-scale enterprise set up on the basis of intermediate technology – for reasons already explained above. In fact, it seems to me, that the apparent shortage of entrepreneurs in many developing countries today is precisely the result of the ‘negative demonstration effect’ of a sophisticated technology infiltrated into an unsophisticated environment. The introduction of an appropriate, intermediate technology would not be likely to founder on any shortage of entrepreneurial ability. Nor would it diminish the supply of entrepreneurs for enterprises in the modem sector; on the contrary, by spreading familiarity with systematic, technical modes of production over the entire population it would undoubtedly help to increase the supply of the required talent.”
The catalogue issued by the European or United States exporters of machinery 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,” says Schumacher:
“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. A study of intermediate technologies as they exist today already would disclose that there is enough knowledge and experience to set everybody to work, and where there are gaps, new design studies could be made very quickly…”
The next expert Schumacher quotes with approval is the Indian economist Professor Dhananjay Ramchandra Gadgil, who he describes as ‘director of the Gokhale Institute of Politics and Economics at Puna – though he had actually left Gokhale in 1933. Gadgil was later vice-chair of the Indian Planning Commission and the author of two of their five-year plans, so he wasn’t an obvious ally.
Even so, he quotes Gadgil on ‘appropriate technology’ and the three possible approaches he suggests in his book, Appropriate Technologies for Indian Industry (SIET Institute, Hyderabad, India, 1964). There you find the key quotation:
“The advancement of advanced technology in every field is being adequately pursued in the developed countries; the special adaptations and adjustments required in India are not and are not likely to be given attention in any other country. They must, therefore, obtain the highest priority in our plans. Intermediate technology should become a national concern and not, as at present, a neglected field assigned to a small number of specialists, set apart.”
Finally, Schumacher summarizes the chapter like this:
- The ‘dual economy’ in developing countries will remain for the foreseeable future.
- If the non-modern sector is not made the object of special development efforts, it will continue to disintegrate, leading to mass unemployment and mass migration into the cities.
- The poor can be helped to help themselves, but only by making available to them a technology that recognizes the economic boundaries and limitations of poverty – an inter- mediate technology.
- Action programs, both national and supranational ones, are needed to develop intermediate technologies.
What happened next?
As we know, Schumacher’s report inspired enough people in London to launch the Intermediate Technology Development Group (ITDG), which began life in 1965 (it changed its name to Practical Action in 2005, by which time ‘IT’ had come to mean something quite else…)
Within a year or so, they had given up being technology consultants and were getting their hands dirty developing the technology.
Former ITDG chair George McRobie said in the 25th anniversary edition of Small is Beautiful (Hartley & Marks, 1999) that there “now dozens of appropriate technology organizations, ranging from technical research and development teams to information networking groups…
“The growth of these groups and other voluntary bodies led Intermediate Technology to decentralize its work by setting up country offices with local staff involved in the following activities: Bangladesh (agro-processing, textiles), Kenya (transport, stoves, building materials, animal husbandry), Peru (agro-processing, mining, building materials, micro-hydro, Nepal (micro-hydro), Sri Lanka (rural workshops, transport, stoves, agro-processing), Sudan (food security) and Zimbabwe (transport, mining, agro-processing, building materials).”
George McRobie adds: “We used the term ‘intermediate’ to indicate that, in terms of cost per workplace, the technology appropriate to a poor country would be somewhere between the almost nil cost of a primitive hand tool, and the £40,000-cost of a combine harvester. Thus if a developing country insisted on technologies that needed £40,000 for each new workplace, obviously, being short of capital, relatively few jobs could be created. But with a technology that cost £500, the country could create 80 times as many jobs. The best engineering talent available, we argued, should be engaged in the task of creating low-cost technologies: tools and equipment that could be owned and controlled by the rural and urban poor with which they could work themselves out of poverty.”
But Schumacher also explains very clearly in this chapter that similar issues afflict the developed world too – which may be why Glasgow came to be the scene of a related objective from the early 1980s – building what they called social enterprises.
They meant an enterprise that was designed both to meet local needs and to make a profit that is designed to employ local people – using business as method of attempting to tackle deprivation. The first social enterprise was probably the first co-op in Rochdale, in the 1840s, but in our own generation, the idea emerged at Strathclyde Community Business, in the deprived outlying estates of Glasgow, Easterhouse and Crownhill.
The problem was that it simply wasn’t attractive for business to set up effectively in some of these places. Yet, even in the most impoverished inner city areas, there were still needs which could be met as the basis for a business that might employ local people. Imagine you set up a business to meet local needs, whether it was for food or laundry or something more fundamental, and ran it – not to make a profit – but to provide local people with an income.
The first social enterprise in this wave was in 1978, a community laundry, and the movement spread out from there. A quarter of a century since the first UK social enterprises emerged around Glasgow, the social enterprise sector has developed enormously. Not-for-profit companies of various kinds, from mutuals to ordinary community interest companies, were increasingly recognized in law. As much as £4 billion in public services were being delivered by social enterprises, just in health and social care, but nobody really knew because of the variety of ways in which social enterprises were being defined.
Social enterprises don’t have to involve relationships. There are now huge social enterprises, like Welsh Water or Divine Chocolate. But they tend to have a more human face, perhaps because they are measuring their success more broadly than large, conventional companies do – and their local links are important to them.
Since social enterprises began to emerge in the 1980s, that has been a feature of their success. The role they are playing in the national economy is growing every year, accounting now for a combined turnover of £24 billion across the UK alone.
One of the corners of the world where social enterprise had really taken off to solve otherwise intractable problems has been in Quebec. As so often, their emergence there in the health and social care sector was a response to economic catastrophe, in this case in the run-up to their independence referendum in 1995: manufacturing industry was closing, the economy was restructuring and the ubiquitous economic centralization was bypassing peripheral areas everywhere, and all these issues were taking their toll.
But Quebec has taken a rather different turning from other places, adopting a set of ideas the French call economie solidaire, to create the lending institutions that can build up a co-operative network of small businesses; encourage small-scale enterprise and use some of the lessons of development economics, rather than traditional economic policy.
The watershed was a summit meeting of the different sectors held in 1996, which led to the creation of a series of institutions designed to provide the finance in hard-to-reach neighborhoods, and a collection of co-op networks known as the Chantier de l’economie sociale, which has driven the development of co-operative enterprise ever since.
Quebec’s trade unions had laid the foundations for this success fifteen years before when they decided to take a more pro-active stance, setting up a series of revolving investment funds to develop the co-operative enterprise sector. One of the major problem for social enterprises is that conventional banks find it very hard to assess their credit-worthiness.
This bold shift in approach delivered results: within five years Quebec’s ‘social economy’ included over 11,200 enterprises. Part of what made Quebec’s ultra-local economics policies successful was the concentration on two kinds of co-ops in particular: small-scale care co-ops which could provide sustainable jobs and low-cost social care, and childcare co-ops (nearly a thousand of those had been launched by 2002) to provide low cost nursery schooling. By 2008, the social care co-ops employed over 8,000 people, and the childcare co-ops over 40,000 people.
In the UK, the sector has also been changing, thanks partly to the emergence of the new national funders and lenders, from UnLtd to Big, both of which concentrate on social entrepreneurs, who want to set up a social enterprise, rather than just getting into business to get rich.
In the USA, the work of the Democracy Collaborative on community wealth building, starting in Cleveland, Ohio, has added to this sophistication, by setting up small local co-ops – training and employing locals – and clustering them around local institutions like hospitals, which will carry on spending no matter how impoverished the neighborhood gets.
And their first co-op was a laundry service, just as it was in Glasgow.
All these have been part of Schumacher’s inspiration in the developed world.
Questions for discussion…
- Given that the founder of the Democracy Collaborative, Gar Alperowicz, visited Tanzania in the mid-1970s to learn more about the Ujamma model and the co-operative villages being developed by the government of Julius Nyerere – how can you say that the inspiration comes from Schumacher?
- More people ought to mean more paid work and more demand, but for some reason that doesn’t work in the global south. Why not?
- Who is right – Kaldor or Schumacher – about the regularity and predictability of economic growth in the global south?
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