Both theoretical considerations and practical experience have led me to the conclusion that socialism is of interest solely for its non-economic values and the possibility it creates for the overcoming of the religion of economics. A society ruled primarily by the idolatry of enrichissez-vous, which celebrates millionaires as its culture heroes, can gain nothing from socialization that could not also be gained without it…
— E. F. Schumacher, opening lines of Ch. 16
Schumacher’s concern about ‘the ruthless application of partial knowledge’ is still true today. It is true not only in the economic and corporate spheres, but also in the scientific and technological. On Wall Street, for example, there is an extreme simplicity of quantification. If stocks slip in forecasted earnings by a couple of cents, they are quickly sold off. Genetically modified organisms are being created by agrobusiness in pursuit of profits and higher stock prices. Their shareholders are deeply implicated in this ecologically dangerous application of limited knowledge because Wall Street has taught a generation of shareholders that the way to provide for their children’s college education and retirement is to play the stock-market.”
— Hazel Henderson, in the 25th anniversary edition (1999).
It is now abundantly demonstrated that neither the capitalist nor the state socialist economies can create viable conditions for the people of the world, nor have they been able to help developing countries to determine their own destinies. Capitalism is able to create an abundance of goods and services, but only by undermining future resources, creating increasing pollution, widening the gap between rich and poor, and unhealthily concentrating wealth and power in fewer hands. The statement ‘living off the future inheritance of our children’ sums it up. Endeavors through regulatory forces or wider shareholding in ever-larger corporations are largely ineffective.
Godric Bader, Scott Bader Commonwealth, in the 25th anniversary edition (1999).
This chapter is one of those that were written especially for this book. At first sight, it seems a little out of place – why is he critiquing socialism rather than any other of the prevailing ideologies, after all?
But the answer becomes clear as the chapter goes along…
What the chapter says…
“Many socialists in so-called advanced societies, who are themselves – whether they know it or not – devotees of the religion of economics, are today wondering whether nationalization is not really beside the point,” says Schumacher, introducing the problem as he sees it.
“If the purpose of nationalization is primarily to achieve faster economic growth, higher efficiency, better planning, and so forth, there is bound to be disappointment. The idea of conducting the entire economy on the basis of private greed, as Marx well recognize, has shown an extraordinary power to transform the world.”
But, in fact, Schumacher is just as critical of the private capitalist sector:
“The strength of the idea of private enterprise lies in its terrifying simplicity. It suggests that the totality of life can be reduced to one aspect – profits. The businessman, as a private individual, may still be interested in other aspects of life – perhaps even in goodness, truth and beauty – but as a businessman he concerns himself only with profits.”
Everything seems to be crystal clear once you have reduced reality to only one of its thousand aspects:
“Let no one befog the issue by asking whether a particular action is conducive to the wealth and well-being of society, whether it leads to moral, aesthetic, or cultural enrichment. Simply find out whether it pays: simply investigate whether there is an alternative that pays better. If there is, choose the alternative … It is no accident that successful businessmen are often astonishingly primitive; they live in a world made primitive by this process of reduction. They fit into this simplified version of the world and are satisfied with it.”
There are two ideologies – two attitudes to enterprise, he says:
- Private enterprise, characterized “by a strict limitation of outlook to ‘profitability’ and nothing else.” This tends towards “the total destruction of the dignity of man”.
- The ‘idealistic’ conception of public enterprise, based on “the need for a comprehensive and broad humanity in the conduct of economic affairs.” This tends towards what he calls “a chaotic kind of inefficiency”.
Schumacher says that we have to understand that both sides are valid and have important points to make:
“There is therefore really no strong case for public ownership if the objectives to be pursued by nationalized industry are to be just as narrow, just as limited as those of capitalist production: profitability and nothing else. Herein lies the real danger to nationalization in Britain at the present time, not in any imagined inefficiency.”
The problem lies not either in “the original socialist inspiration nor any actual failure in the conduct of the nationalized industry,” says Schumacher. It lies in a “lack of vision on the part of the socialists themselves… They will not recover, and nationalization will not fulfil its function, unless they recover their vision.”
This, finally, is Schumacher’s complaint about socialism:
“What is at stake is not economics but culture: not the standard of living but the quality of life. Economics and the standard of living can just as well be looked after by a capitalist system, moderated by a bit of planning and re-distributive taxation. But culture and, generally, the quality of life, can now only be debased by such a system.”
So what should the political left do?
“Socialists should insist on using the nationalized industries not simply to out-capitalize 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 utilization 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.”
What happened next?
This chapter – perhaps more than any of the others – belongs in the mid-1970s, when the nationalized industries of Europe, and the consensus in politics was beginning to break down. I remember meeting Sir Richard Acland, who had founded the UK’s Commonwealth Party in 1942 and had been a leading advocate of nationalization. He told me in 1976 that nationalized corporations were supposed to be hugely profitable. They were not.
Unfortunately, there was a problem with many of them. They were enormous monopolies, managed by government officials – and, far rom inspiring the people who worked for them, as they were supposed to do, people felt alienated, like small cogs in giant machines – which is what Schumacher suggests here.
Unfortunately, the most dysfunctional of the privatized utilities in the UK was the Post Office in charge of telecommunciations. So in 1984, the Thatcher government started the ball rolling by selling it off to shareholders until it lived on as British Telecom plc.
It was an atavistic reaction, simply taking the situation back to what it had been decades before. These days, so many of the privatized utilities are as dysfunctional as they ever were in public hands, so inevitably there will be a backlash – and we will be back where we started. Unless both sides begin to understand Schumacher’s message – that the ownership doesn’t matter nearly as much as the scale.
By 1997, the political Left was back in power in the UK – as it had been in the USA since 1993. In European Terms, these were socialists from the New Labour Party. Yet despite that, they still failed to learn the lessons. The Blair government realized that, even if they had wanted to bring the railways and water companies back into public ownership – and they didn’t want to in fact – they could no longer afford to do so.
Simply nationalizing industry, without any idea that it could be organized at a different scale would be, as Schumacher said, “an obvious case of dogmatic inflexibility, a mere ‘grab’ organized by frustrated politicians, untaught, unteachable, and incapable of intellectual doubt”.
In 1976, when Schumacher was in the USA, visiting President Carter, the UK parliament was debating the Shipbuilding Bill, which would have brought all UK shipbuilding into national ownership. Feelings ran so high there were fisticuffs in the House of Commons chamber, and a future deputy prime minister grabbed the ceremonial mace, and began to swing it around his head (the tabloid newspapers dubbed him ‘Tarzan’ as a result).
These issues, which seemed so important at the time, but the political response has been remarkably unimpressive.
Questions for discussion…
- Whose side do you think Schumacher would be on these days, 50 years later? How would he vote?
- Why is it that politicians seem to find it so hard to learn from the past or from previous generations?
- Might there still be any benefits from nationalization?
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