The results of the second development decade will be no better than those of the first unless there is a conscious and determined shift of emphasis from foods to people. Indeed, without such a shift the results of aid will become increasingly destructive.
— E. F. Schumacher, opening lines of Ch. 13
Schumacher’s favorite economic system was the Gandhian decentralized model. In India today, the rural village economy is still very strong, especially in agriculture and crafts, despite Bombay, Calcutta, and New Delhi, where citizens prefer the globalized, international economy. Sixty to 70 percent of Indian villagers are practicing their crafts and small-scale agriculture without chemicals, fertilizers, and genetically modified and engineered patent seeds, and so on
— Satish Kumar, editor of Resurgence, in the 25th anniversary edition (1999).
Our growth economy is based on greed and envy stimulated by aggressive advertising to levels beyond that provided by original sin. Our modern alchemists, the economists, promise to transmute the sinful dross of private greed into the virtuous gold of public riches by the catalyst of the market, guided by their invisible hand. But even when the invisible hand produces wealth, private greed ultimately finds a way to defeat it, by concentrating increasing riches in visible but fewer hands. To meet the still unmet needs of the poor we are urged to give still freer rein to greed by allowing the consumption of natural and social capital and falsely counting it as income. Greed thus takes from the future as well as the present.
— Herman Daly, former World Bank senior economist and co-author of For the Common Good, from the 25th anniversary edition (1999).
This chapter had been published originally in a 1970 book in London called Britain and the World in the Seventies: A Collection of Fabian Essays. It had been published by George Cunningham, then a Labour MP.
The Fabian Society is a well-known leftist thinktank, founded in the 1890s by the husband and wife team of Sidney and Beatrice Webb.
What the chapter says…
Schumacher begins the chapter by distinguishing between development for people and development of goods, which “do not raise so many questions” about development. This is so particularly when econometricians and statisticians deal with them:
“Goods even cease to be anything identifiable, and become GNP, imports, exports, savings, investment, infrastructure, or what not. Impressive models can be built out of these abstractions, and it is a rarity for them to leave any room for actual people. Of course, ‘populations’ may figure in them, but as nothing more than a mere quantity to be used as a divisor after the dividend, i.e. the quantity of available goods, has been determined….”
People on the other hand have feelings, and pride, so that we have to leap three gulfs – between village people and city people, between the rich and the poor and between educated and uneducated:
“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. The methods of production, the patterns of consumption, the systems of ideas and of values that suit relatively affluent and educated city people are unlikely to suit poor, semi-illiterate peasants. Poor peasants cannot suddenly acquire the outlook and habits of sophisticated city people. If the people cannot adapt themselves to the methods, then the methods must be adapted to the people. This is the whole crux of the matter,” says Schumacher:
“If the nature of change is such that nothing is left for the fathers to teach their sons, or for the sons to accept from their fathers, family life collapses. The life, work, and happiness of all societies depend on certain ‘psychological structures’ which are infinitely precious and highly vulnerable. Social cohesion, co-operation, mutual respect and above all self-respect, courage in the face of adversity, and the ability to bear hardship – all this and much else disintegrates and disappears when these ‘psychological structures’ are gravely damaged. A man is destroyed by the inner conviction of uselessness.
“No amount of economic growth can compensate for such losses – though this may be an idle reflection, since economic growth is normally inhibited by them.”
Schumacher manages a good swipe at the point at his old profession:
“None of these awesome problems figure noticeably in the cosy theories of most of our development economists. The failure of the first development decade is attributed simply to an insufficiency of aid appropriations or, worse still, to certain alleged defects inherent in the societies and populations of the developing countries. A study of the current literature could lead one to suppose that the decisive question was whether aid was dispensed multilaterally or bilaterally, or that an improvement in the terms of trade for primary commodities, a removal of trade barriers, guarantees for private investors, or the effective introduction of birth control, were the only things that really mattered.”
He then gives an example of the manager of an African textile mill he met, who showed him around, boasting that his factory was at the highest technological level anywhere in the world. Why?
“Because.’ he said, ‘African labour, unused to industrial work, would make mistakes, whereas automated machinery does not make mistakes. The quality standards demanded today are such that my product must be perfect to be able to find a market. Surely, my task is to eliminate the human factor.’”
Worse, the equipment had to be imported – which meant that all higher management and maintenance personnel had to be imported too. Even the raw materials had to be imported because the locally grown cotton was too short for top quality yarn, and the standards demanded the use of a high percentage of man-made fibres. “This is not an untypical case,” he says.
It isn’t really about money, in any case, says Schumacher: this is a key tenet in the new economics back to John Ruskin.
“The oil producing countries of the Middle East, Libya, and Venezuela. Their tax and royalty income from the oil companies in 1968 reached £2,349 million, or roughly £50 per head of their populations. Is this input of funds producing healthy and stable societies, contented populations, the progressive elimination of rural poverty, a flourishing agriculture, and widespread industrialization? In spite of some very limited successes, the answer is certainly no. Money alone does not do the trick. The quantitative aspect is quite secondary to the qualitative aspect. If the policy is wrong, money will not make it right; and if the policy is right, money may not, in fact, present an unduly difficult problem.”
It is all about quality not quantity, he says:
“They know how to do a few big things in big towns; but do they know how to do thousands of small things in rural areas? They know how to do things with lots of capital: but do they know how to do them with lots of labour — initially untrained labour at that? On the whole, they do not know; but there are many experienced people who do know, each of them in their own limited field of experience. In other words, the necessary knowledge, by and large, exists; but it does not exist in an organized, readily accessible form. It is scattered, unsystematic, unorganized and no doubt also incomplete.”
You know the old story about giving someone a fish to feed them for a day, or teaching them to fish and, by doing so, feeding them for the rest of their life? It’s the same principle here.
The UK was then providing about £250 million a year in aid, which seems like a tiny amount compared to these days. Schumacher suggests diverting one per cent of that to organizing and mobilizing those ‘gifts of knowledge’. “It might also make the other ninety-nine per cent immensely more fruitful,” he says.
But how to do it?
“It is quite wrong to assume that poor people are generally unwilling to change; but the proposed change must stand in some organic relationship to what they are doing already, and they are rightly suspicious of, and resistant to, radical changes proposed by town-based and office-bound innovators who approach them in the spirit of: ‘You just get out of my way and I shall show you how useless you are and how splendidly the job can be done with a lot of foreign money and outlandish equipment’.”
We no longer have the knowledge we need, but they have it, he says. He suggests a series of teams, made up of administrators, business people and communicators, working together, rather than separately, at every level in both donor and recipient countries.
But then he has a flash of inspiration and hope:
“If the rural people of the developing countries are helped to help themselves, I have no doubt that a genuine development will ensue, without vast shanty towns and misery belts around every big city and without the cruel frustrations of bloody revolution. The task is formidable indeed, but the resources that are waiting to be mobilized are also formidable.”
Economic development is something much wider and deeper than economics, certainly than econometrics, says Schumacher. “Its roots lie outside the economic sphere, in education, organization, discipline and, beyond that, in political independence and a national consciousness of self-reliance.”
It can only work if…
“… it is carried forward as a broad, popular ‘movement of reconstruction’ with primary emphasis on the full utilization of the drive, enthusiasm, intelligence, and labour power of everyone. 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, organization, and discipline of the whole population. Anything less than this must end in failure.”
What happened next?
First of all, let’s look at Schumacher’s calculation about the UK aid budget in 1972 and what one percent of it would be worth. Deploying one per cent of that – about £2.5m a year “would, I am certain, change all prospects and open a new and much more hopeful era in the history of ‘development’.”
These days – half a century later – that sum would probably fail to cover the costs of those senior civil servants responsible for giving out the money.
UK aid reached its target of 0.7 per cent of GDP, only in 2020/1 to slip back to 0.5 per cent, though – since 1970 – the amount of money that goes on bilateral aid has increased enormously. The full UK aid budget now tips £11.4 billion – still, one per cent of that comes to £114m.
The year 1970 marked the moment when the 0.7 per cent of GNP (in those days) was set by the UN. The UK only achieved it by 2013 and, two years later, they set out legislation that would have made it compulsory for all UK governments. But it wasn’t to be.
Even so. if Schumacher was right about the quantities being relatively unimportant, maybe that doesn’t matter.
But then, take a look at the official objectives of UK aid – none of them seem unimportant exactly, but even so, they are not what he hoped for:
“1. Deliver honest and reliable investment, building on the UK’s financial expertise and the strengths of the City of London, and delivering the prime minister’s vision for the clean green initiative, supporting partner countries to grow their economies sustainably.
2, Provide women and girls with the freedom they need to succeed, unlocking their future potential, educating girls, supporting their empowerment and protecting them against violence.
3, Provide life-saving humanitarian assistance and work to prevent the worst forms of human suffering, prioritizing our funding and being a global leader in driving a more effective international response to humanitarian crises.
4, Take forward our work on climate change, nature and global health…”
The UK still now gives the fourth largest amount in aid in the world, behind the USA, Germany and Japan:
United States (£30.8bn)
Germany (£23.4bn)
Japan (£12.8bn)
There is another problem with conventional aid, which is that many countries in the global south increasingly feel that – whether it comes bilaterally governments or from big international agencies – aid is an outrageous interference in the internal life of their nations.
This isn’t a good sign. Just as the UK was painfully managing to donate 0.7 per cent of their GDP, a leaked report by India’s Intelligence Bureau (IB) accused NGOs of reducing India’s GDP by up to 3 per cent a year by campaigning against projects that the Indian government argued to be integral for economic growth.
NGOs, including Greenpeace and Amnesty, were accused of “serving as tools for foreign policy interests of western governments” by sponsoring campaigns to protect the environment or support human rights. These ‘anti-development’ activities included campaigns against climate change, workers’ rights, and even the disposal of electronic waste by India’s huge IT sector.
For a while, all the funds coming into India from the Ford Foundation were scrutinized by the Indian home ministry. There have been similar crackdowns in Egypt, Uganda, Ethiopia, Russia and China.
Increasingly, that may mean a bigger role for the local homegrown NGOs – like the women’s fund Tewa in Nepal, which has built up a network of over 5,000 individual Nepali donors, many of them ordinary women who themselves have benefited from Tewa’s grants in the past. On principle, Tewa only used resources it had raised locally for its grant-making as way of demonstrating the power of local assets and local buy-in.
It may be that Schumacher’s alternative might fit better into this kind of pattern.
***
The truth is that the combination of over-filled cities and surrounding poverty-stricken countryside was a big problem in the UK and other western cities a century ago. In 1899, a parliamentary shorthand writer called Ebenezer Howard published a book called Garden Cities of Tomorrow, with a potential solution.
The idea of ‘garden cities’ was supposed to be about re balancing cities and rural areas by building new communities. Letchworth and Welwyn were followed by three programs of new towns in the UK, which ended as Schumacher was visiting the USA in 1976.
In the USA, most of the decentralization of population has had to take place in an unplanned way and via the free market. That has had some disadvantages. The Washington Post reporter Joel Garreau wrote about the results in his 1991 bestseller Edge City, which found that some of the fledgling edge cities could not be found on any maps.
Once again. the American approach will only involve those who can afford to move. It provides precious few possible solutions for the problem identified by Schumacher.
Questions for discussion…
- How should the global development community go about tackling the increasing scepticism about aid from both authoritarian governments and western voters too?
- Who needs to act to make Schumacher’s vision of development a reality?
- How can we persuade the rural people of the developing countries to help themselves?
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