Our refreshed study guide, “Small is Beautiful Revisited…50 Years On,” revisits Schumacher’s 1973 landmark of ecological economics. Organized chapter by chapter, this guide is sparking generative discussions in college classrooms, workplaces, and circles of contemplation. Each chapter guide is available on our site (in addition to a full downloadable PDF).
Chapter 5 deals with the issue of scale in the economic. In it, Schumacher illustrates how the conventional economic discipline, dealing in abstractions, fails to grapple realistically with poverty, environmental degradation, unequal resource and capital flows, and the conflict that results from these inequities.
The global causes of peace, justice, and ecological harmony call for us to reconstitute our material needs, and how we meet them, in community. Since the 1970s, the vision and action that stemmed from this analysis is ushering in a world wherein each community and region participates in decentralized networks from a basis of economic self-reliance and healthy local reinvestment.
Small is Beautiful in various editions and languages, from our library.
Excerpt from the Guide to Chapter 5
In 1998, more than 5,000 corporate mergers with a combined value of more than $2 trillion took place in the United States. Federal agencies approved virtually every merger application, even when their own studies empirically verified the ‘convenience, humanity, and manageability of smallness.’
Consider the case of banks. In 1996, two Federal Reserve economists found no improved efficiencies when bank assets grow beyond $200 million, a size larger than 80 percent of the 12,000 banks operating in the United States. Other studies provided evidence that small banks serve their communities better. Small banks make over 80 percent of all commercial loans to very small business borrowers… Fees for checking accounts and other basic services were on average 15 percent higher at large, multi-state banks than at small, community banks, concluded a 1997 study…
— David Morris, Institute for Local Self-Reliance, Boston (in the 25th anniversary edition, Hartley & Marks, 1999)
This chapter, the last in the introductory section, looks at scale and goes to the heart of the title of the book, which – as I noted earlier – is not the one that Schumacher originally planned for it.
What the Chapter Says
Schumacher starts by setting out three “truths which everyone knows” – all of which he has some reason to doubt.
- That the process of organization goes from families to towns, to nations, towards world government.
- That a prosperous country had to be big – the bigger the better.
- That modern technology requires companies to be even bigger than before.
- In fact, he says, the process appears to be at least as much in the other direction, a force pushing the opposite way.
As he says, the United Nations began in 1945 with only 60 member nations. Yet, when he was writing – for a 1968 lecture in London (this chapter was first published in Resurgence magazine later that same year) – the number had doubled. These days, it has more than trebled, to 193.
Also, if you were to look at Chrysler General Motors under Alfred Sloan or the National Coal Board under Lord Robens – where Schumacher worked for two decades – you would find, he said, a number of people trying to break down these huge organizations into smaller, more human units (more on this in Chapter 16):
People find it most difficult to keep two seemingly opposite necessities of truth in their minds at the same time. They always tend to clamor for a final solution, as if in actual life there could ever be a final solution other than death. For constructive work, the principal task is always the restoration of some kind of balance. Today. we suffer from an almost universal idolatry of gigantism. It is therefore necessary to insist on the virtues of smallness…
And there you have the phrase on which publisher Anthony Blond hung the title of the book – though actually it was a quotation from Leopold Kohr, an old friend of Schumacher’s who wrote The Breakdown of Nations. Schumacher himself always claimed that what was most important was that cities, companies or nations should be the appropriate size.
What, for example, is the appropriate size for a city or a nation? There have been a number of answers, before and since, on the size of communities and cities. But Schumacher doesn’t get drawn into this cul-de-sac: “It is quite clear that above such a size nothing is added to the virtue of the city. In places like London, or Tokyo or New York, the millions do not add to the city’s real value but merely create enormous problems and produce human degradation…”
He then imagines the USA in the grip of megalopolis, with three cities of 60 million population each stretching from Washington to Boston, and the same from San Diego to San Francisco. The city of Brisbane in Australia now stretches for more than 70 miles along the Queensland coast. Or London, which in some ways stretches from Bishops Stortford in the north right down to the Surrey hills – and it would have filled the whole of south east England if it had not been for powerful planning legislation in the 1940s.
And those are just developed, first world cities – consider those cities that have now topped populations of over 20m, and there are now ten of them – from Tokyo (39m), Djakarta (34m), Chungong (32m), Seoul (26m). Shanghai (25m), Manila (24m), Sao Paolo (22m), Beijing (22m), Mexico City (22m) and Mumbai (21m).
“If this is somebody’s conception of the future of the United States, it is hardly a future worth having. But whether we like it or not, this is the result of people having become footloose; it is the result of that marvellous mobility of labour which economists treasure above all else,” said Schumacher. At that sort of scale most – if not all those places – will become completely ungovernable:
…[I]t does make a lot of difference if a poor community or province finds itself politically tied to or ruled by a rich community or province. Why?
In a mobile, footloose society the law of disequilibrium is infinitely stronger than the so-called law of equilibrium. Nothing succeeds like success, and nothing stagnates like stagnation. The successful province drains the life out of the unsuccessful, and without protection against the strong, the weak have no chance: either they remain weak or they must migrate and join the strong, they cannot effectively help themselves…
So here is the problem. Despite all the political rhetoric, richer areas feed off poorer ones: as he says: “The successful province drains the life out of the unsuccessful.”
Yet the same applies to smaller nations next to more powerful ones, like Scotland versus England, or parts of divided cities like Camden New Jersey and Philadelphia or St Louis and East St Louis. Nor does the economic success of a place have much to do with its size – because there is no need to be part of a larger nation just to trade with anyone else. As Schumacher said: “If you want to trade with the whole world you don’t need to annex the whole world in order to do so.”
The poor tend to stay poor come what may – because of these assumptions by the wealthy:
Invariably, it proves that only such policies are viable as have in fact the result of making those already rich and powerful, richer and more powerful. It proves that industrial development only pays if it is as near as possible to the capital city or another very large town, and not in the rural areas. It proves that large projects are invariably more economic than small ones, and it proves that capital-intensive projects are invariably to be preferred as against labour-intensive ones. The economic calculus, as applied by present-day economics, forces the industrialist to eliminate the human factor because machines do not make mistakes which people do. Hence the enormous effort at automation and the drive for ever-larger units…
What follows is the economic credo of Schumacher:
Therefore we must learn to think in terms of an articulated structure that can cope with a multiplicity of small-scale units. If economic thinking cannot grasp this it is useless. If it cannot get beyond its vast abstractions, the national income, the rate of growth, capital/output ratio, input-output analysis, labour mobility, capital accumulation; if it cannot get beyond all this and make contact with the human realities of poverty, frustration, alienation, despair, breakdown, crime, escapism, stress, congestion, ugliness. and spiritual death, then let us scrap economics and start afresh.
In “What Happened Next,” David Boyle identifies threads of decentralized economic activism, inspired by Small is Beautiful, that seek to “find a way up using their own resources.”
To direct capital appropriately within a community or region, local regeneration “requires information” and “local know-how,” things which big finance either cannot, or will not, manage. Pioneers in place-based, non-extractive finance and circulation are “managing to engage the energies and enthusiasm of local people to regenerate their local economies.”