Publications / Article

E.F. Schumacher: An Appreciation

Fritz Schumacher used to say that he most enjoyed those responses to his book, Small ls Beautiful,  that did not praise its originality, but rather that he had articulated what his readers had always known to be true.

Above all, Schumacher believed in the common sense of ordinary people and their ability to expand their awareness of comprehensive, eternal truths. This was the essence of his work, and that most meaningful to me as a citizen activist. He gave me and millions like me the courage of our convictions, even when facing the mystifications of legions of brilliant quantitative specialists and narrow economic rationalizers. As the citizen movements arose over the past decade in the U.S.A., Canada and all mature industrial societies, they were driven by physical awareness of the social costs – all the dis-economies, dis­-services and dis-amenities that economists had dismissed in their Freudian slip as “externalities”. We began to smell the dirty air, hear the rising noise levels, taste the adulterated food and water, see the growing piles of garbage, experience the dislocation of our families and communities, feel the pain of unemployment and meaninglessness, and sense the ungovernability (now confirmed by many new studies), of our faceless cities, giant bureaucracies, corporations and institutions.

When Small is Beautiful was first published in the U.S.A. in 1973 it went unnoticed by the conventional economists and the dominant culture, because it struck at the heart of their economic rationale. Many, including myself, had pointed out that economics is not a science. As Walter Weisskopf noted in his Alienation and Economics, in 1971, economics is a normative discipline parading as a “value-free,” objective science. Theodore Roszak had struck the same chord in Where The Wasteland Ends in 1972. In his Introduction to Small is Beautiful he notes how far the enthroning of economics had progressed, in the institution of 1969 of Nobel Prizes in “economic science.” Roszak quoted Professor Erik Lundberg of the Nobel Committee in justifying the new Award: “Economic science has developed increasingly in the direction of a mathematical specification and a statistical quantification of economic contexts These techniques have proved successful and left far behind the vague, more “literary” type of economics.” While Roszak points out the absurdity of raising the pseudo-rigor of mathematical economics to the status of a science, it is also necessary to clarify that the prize set up for economics is, in fact, not a Nobel Prize at all. In reality, this prize was set up in 1968 by the Central bank of Sweden in the amount of $145,000, in the memory of Alfred Nobel, and is the only one of the Prizes that was not set up by Nobel himself.2 The confusion perpetrated on the public that erroneously portrays economics as a science is now compounded by the confusion that this discipline has been sanctified by the awarding of Nobel Prizes in it, rather than the truth that the Swedish bank persuaded the Nobel Committee to lend its prestige to their own award in economics by allowing it to be called the “Nobel Memorial Prize”.

Fritz Schumacher precisely exposed and debunked this type of narrow, quantitative empiricism which ignores all incommensurables and qualitative differences and reduces them to a single coefficient: that of money. Karl Polanyi had illuminated this particular form of madness in The Great Transformation in 1944. Polanyi noted that far from being derived from God (or some “human propensity to barter,” as Adam Smith had thought) that the “free market” was actually a package of social legislation enacted in Britain over almost a century of bitter conflict. The keystone of this social legislation installing “the free market”, was of course, the enclosure of land so that it could be bought and sold as a commodity. It’s inevitable corollary was the commoditization of human beings, driven off the land and thus forced to wander to the towns and factories to sell thier ”labour.” 3

Polanyi noted that while markets had always existed in human societies, this was the first attempt in human history to institutionalize a nationwide system of “free markets” as the chief means of allocating resources. Polanyi warned that such a monstrous over-simplification of maximizing market-measured cash transactions and production, would simply lead to even greater social dislocation and environmental depletion. Soon, social reformers in 18th century began to fret that the marvelous increase in production of goods seemed to have led to increasing social misery, with ragged starving bands of “paupers” wandering all over the land. But by 1776, when Adam Smith published his Inquiry into the Nature and Causes of the Wealth of Nations, he saw only the new landscape of small buyers and sellers all orchestrated by the “invisible hand” of competition with even human workers simply part of the overall scheme: competing with each other to sell their labour at the lowest price to the factory and property owners.

But even in those early days of the Industrial Revolution there was another problem: that of “nuisances” smoke, smells, etc., which augured, of course, the avalanche of social costs of industrialism we see today. Schumacher zeroed in on these flaws in industrial logic. He says, “In a sense, the market is the institutionalization of individualism and non-responsibility. We need not be surprised that it is highly popular among businessmen. What causes us surprise is that it is considered virtuous to make the maximum use of this freedom of responsibility!” Schumacher suggested that one of the most fateful errors is the inability to recognize that the modern industrial system, with all its intellectual sophistication, consumes the very basis on which it has been erected: the irreplaceable “capital” which it treats as income; fossil fuels, the tolerance margins of nature and the human substance. The centrally-planned socialist economies are founded on the same unsustainable basis. It is now clearly not just a problem of who owns the means of production but also a problem of the means of production themselves! Both Marxian and market-oriented economists espouse labour theories of value, thus short-changing the role of natural resources and photosynthesis and solar-energy driven processes.

Kenneth Boulding had pointed to the same insanity in his essay, in 1966, The Economics of the Coming Spaceship Earth, in that all of nature’s systems are closed-loops, while economic activities are linear and assume inexhaustible resources and “sinks” in which to throw away our refuse. Boulding also noted the one-dimensionality of market systems, which only map money transactions: 1) the threat system (give it to me or I’ll kill you) – or today’s more sophisticated version: “How much will you pay me to stop harming or annoying you”, (economists call this the “compensation principle), 2) the exchange system, that narrow waveband of market transactions with which neo-classical economies concerns itself, 3) the integrative system, i.e., the transactions based on the love, sharing and altruism of which human beings are capable in spite of their denial in economic theory.

Schumacher clothed Boulding’s insights in the unforgettable imagery of Right Livelihood in his most famous essay, Buddhist Economics. He showed how higher levels of ethics and greater sensitivity to all living beings could transcend the narrow market view, and how that most dreadful reduction of human beings to a commodity called “labour” could be replaced by the concept of “Good Work”: that which challenges individuals to grow and develop their faculties; to overcome their ego-centeredness by joining with others in common tasks; to bring forth those goods and services needed for a becoming existence and to do all this with an ethical concern for interdependence of all life forms of one planetary biosphere. Schumacher’s interest in Eastern thought stemmed from the years he spent advising the Government of Burma, and from his admiration of Mohandas Ghandi, and his view that India needed not the capital-intensive, mechanistic, centralized Western form of mass-production, but rather, ecologically and culturally compatible forms of decentralized “production by the masses”.

By concentrating on the values and goals of economic activities, Schumacher saw the possibilities of transforming unsustainable industrial modes of production into the perfecting of production methods that are biologically sound, build up soil fertility and produce health, beauty and permanence. From his knowledge of the true reality of our species situation on this planet, came Schumacher’s prescription of evolving “Small-scale, non-violent, intermediate technology-technology with a human face”, as he said, “so that people have a chance to enjoy themselves while they are working and, in new forms of partnership in managing enterprises,” and in such pioneering forms of common ownership as that of the Scott-Bader Commonwealth, of which he was a director.

One of the problems which our Western, dichotomizing logic produces is the polarities of “either-or” type of thinking. I remember Fritz Schumacher’s good-humoured frustration about this. “When I say that Small is Beautiful,” he told me, “Someone is sure to jump up and say “Ahah, So you think that Big is Bad.” “No!” he would patiently explain, “there are so many different economies of scale and it is a matter of restoring a lost balance and knowing when some things have reached obvious dis-economies of scale.” My own efforts have been focused in this area, and to illuminate these various “efficiencies of scale”. 5 Efficiency is indeed the slogan of the industrial era and its economic rationalizers. But efficiency is a value-laden or meaningless term unless one enquires “Efficiency for whom?” Efficiency over what time-frame? and efficiency at what level in the social system? For example, is individual efficiency to be maximized, or corporate efficiency; social efficiency or ecosystem efficiency? Each would require different policies. Never let an economist use that term in your presence without defining it.

Fritz Schumacher illustrated the lunacy of conventional economist’s view of efficiency and their ideas of comparative advantage, which led to a lot of frantic transporting of commodities to and fro; within and between nations. The social and ecological cost of all this unnecessary transporting of commodities range from depletion of petroleum supplies and pollution of the continual disruption of the domestic affairs of small, less powerful nations. It disrupts their workers, their agriculture and causes greater dependence on foreign capital, as they are forced onto the rollercoaster of world trade and an international monetary system dominated by the powerful nations, and justified by the abstraction of a “global free market”. As Polanyi showed, this monstrous abstraction of the free market as resource-allocator is a rare aberration in human history, associated only with the 200-year old history of Industrial Revolution, and that previously most human societies’ resource­ allocations have been based on two quite different principles: reciprocity and redistribution.

With his understated humour, Schumacher debunked the ideas of industrialism that the soundest foundation of world peace would be universal prosperity. “One may look in vain,” he wrote, “for historical evidence that the rich have regularly been more peaceful than the poor.” He chided the “trickle-down theory” of economic development of John Maynard Keynes by illustrating his ambivalent views that economic progress could be achieved by employing the baser human drives of greed and avarice. But Keynes thought that once we had all become rich, then perhaps our grandchildren could return to the sure and certain principles of religion and traditional virtue; “that avarice is a vice – the exaction of usury a misdemeanor and the love of money detestable.”

Schumacher summed up the paradoxical Keynesian message thus, “Ethical considerations are not merely irrelevant – they are an actual hindrance for foul is useful and fair is not.” In other words, “The road to heaven is paved with bad intentions”? Rather, Schumacher suggested that the foundations of peace cannot be laid by universal prosperity – “because if attainable at all, it is attainable only by cultivating such drives of human nature as greed and envy. At the same time, the wealth of the rich depends on their making inordinately large demands on limited world resources and this puts them on an unavoidable collision course (not primarily with the poor who are weak and defenseless) but with other rich people.”

Thus, Schumacher revived the central economic issue of distribution which John Stuart Mill had illuminated in his great Principles of Political Economy, published in 1857. Mill emphasized that the distribution of wealth after it had been produced, was essentially a political matter, and that property ownership (even that deriving from one’s own labours), was secured only by the society’s willingness to employ police, and other means to guard the property-owner in his. possession. Thus, we see in today’s legitimate demands of the less developed countries for a New International Economic Order, this understanding that “economics” is merely politics in disguise.

Nowhere did Schumacher shine the illumination of his reason more clearly than on that statistical illusion which is the stock-in-trade indicator of all macro-economic advisors; the Gross National Product. He exposed its blind averaging of per-capital income, and aggregation of all the goods and “bads,” wealth and “ills” as gross product and its inability to distinguish between renewable and non-renewable resources. K. W. Kapp had clarified many of these absurdities in the Social Costs of Private Enterprise in 1950, and turned the Pollyanna assumptions of the benign workings of the “invisible hand” on their head, by pointing out an axiom (later adopted by general systems theorists) that maximizing behaviour on the part of micro-units of an economy (individuals and firms) tended to be at the expense of other micro-units and to sub-optimize the macro-economy and larger social system. Boulding and E.J. Mishan’s critiques are similar – both pointing to the inevitable “bads” in the form of social costs that come along with the goods. The great mathematician, Oskar Morgenstern railed against the statistical idiocies of the G.N.P. He drew attention to the problems caused by economist’s fascination with manipulating fiscal and monetary variables on the basis of this crude indicator, without confessing the inadequate formulations of its data collection and their leads and lags, which make the timing of economic intervention so erratic. Indeed, it is my contention that the business cycles of today are now caused by economic tinkering rather than the mysterious forces of the market, which are usually blamed.

Schumacher, in focusing on the essential difference between non­ renewable and renewable resources, and that between reversible and irreversible economic decisions, reinforced the work of Nicholas Georgescu-Roegan, who demonstrated, even to the satisfaction of the so-called “rigorous” economists, the conceptual flaws at the heart of their discipline. Gorgescu-Roegen in The Entropy Law and the Economic Process, in 1971, clarified unforgettably the difference between “stock” and “flows” and illuminated the fatal “flow-fetishism” of economists and their G.N.P. indicators, which allow us to use the non-renewable “capital stock” stored as fossil fuels and treats it as “income.” Similarly, as Herman Daly, Joan Robinson, J. Kenneth Galbraith and Robert Theobald have emphasized, economists tend to conveniently overlook that the stock of wealth, if tightly-held by a few, will force all the rest of the society to live on its flows, whether speeded up by inflating aggregate demand, public works projects, more stop-gap transfer payments, or larger military budgets. They also realized that ever-more centralized, automated production would simply shake more and more people out of the bottom of an economy, and we would need warfare, workfare, and welfare and more consumption, force-fed by advertising, to keep the whole thing going.

Schumacher’s great contribution to this debate was his focus on the role of intermediate-scale inexpensive technology as a way out of the Keynesian aggregate growth “trickle-down” model which had reached its logical limits and had become counter-productive, while conventional measures of “labour-productivity” have become little more than an “Automation-Index” – telling employers how well they are doing in getting rid of their employees. Schumacher focused on the crucial issue of how much capital it cost to create each workplace, and believed that it should be roughly equivalent to how much each worker could earn in the job per year. This measure has been a key one for me in developing the rationale and strategies of the coalition, Environmentalists for full Employment, since the cost and capital- intensity of each workplace is also a rough measure of its environmental effects: the more capital-intensive, by definition, the more resource and energy intensive, and therefore, the most environmentally depleting.’ Thus, we have Schumacher’s prescription for technology: 1) cheap enough to be accessible to everyone, 2) suitable for small-scale application, 3) compatible with human needs for creativity and, 4) in a non-violent relationship to nature.

Nuclear power, in Fritz Schumacher’s view, was the very antithesis of these properties, and he stated well the danger which “invariably arises from the ruthless application of partial knowledge.” C.S. Lewis saw the same danger in this simple minded application of knowledge to conquer nature which resulted in a few human beings having great power over all other human beings. The “victory” over nature is always hollow and evanescent, as we can see so clearly in the unforgiving, irreversible technology of nuclear power. As it proliferates it brings threats of terrorism, the problems of containing radioactive wastes; it has become a curse hanging over all future generations.

Most of all it is clarity of Fritz Schumacher’s vision that electrified millions and galvanized them into action for a saner future. He broke the spell laid on citizens by the empty expertise and mystifications of intellectual mercenaries. He punctures what Alfred North Whitehead called “the fallacies of misplaced concreteness” and called to account the cockeyed, generalizing of narrow specialists by showing the rest of us the limits of their “expertise and technique”. He elaborates on these themes in his new book, Guide for the Perplexed.

Fritz gave me courage in my efforts to call economists to account. I used to merely say that economics was getting in the way of citizens talking to each other about what is valuable under drastically changed conditions. After knowing Fritz, I have the courage to simply say that economics is a form of brain-damage.

Fritz Schumacher helped us all to reconceptualize our situation in the now-declining industrial era. He was a changer of cultural paradigms. He helped us to see that the proliferating paradoxes of our industrial cultures are signs of the exhaustion of their logic: of utilitarianism, materialism, technological determinism and their anthropocentric blindness to ecological realities.

But, in addition, he pointed to the new path we must travel. This is the dynamism of his work: intermediate and appropriate technology and now the rallying cries of broad political movements in the USA, Canada, West Europe, Japan, as well as rapidly-developing industries in conservation, recycling, solar and wind power and bio-conversion. In Australia and New Zealand his ideas underlie two new political parties, one of which captured 5% of the vote at the last election. His message was self-evident in many developing countries as a matter of bare necessity and common sense, as seen by the thousands of requests for assistance that poured into his London-based Intermediate Technology Development Group. But the triumph of his ideas was in the over­ developed world where the very success of industrialism had become to millions, clearly pathological; where we are now experiencing the scenario Pitirim Sorokin unerringly portrayed in 1937 in his Social Cultural Dynamics as the Twilight of the Sensate culture. 9 This modest good man, Fritz Schumacher, inspired dozens of new books and journals and lives in the hearts and deeds of his activist admirers. It is no accident, and a celebration of Fritz Schumacher – the warm, human, funny, profound, deeply rooted yet soaringly metaphysical man – that a new rash of bumper stickers has appeared: they say, Technology is the Answer – But what is the Question? Indeed, Fritz is with us still.

 

FOOTNOTES

See for example, Jay Forrester’s Urban Dynamics 1969; Report of the Trilateral Commission on the Governability of Democracies, 1975; Limits to the Management of Large Complex Systems, Duane Elgin, Feb. 1977, Stanford Research Institute, Menlo Park, Cal.

2 New York Times ”Britain’s Meade and Sweden’s Ohlin share Nobel Prize in

Economics”, Oct. 15, 1977, pp. 1.

Karly Polanyi, The Great Transformation, Beacon Press, 1944.

4 See for example, Public Administration Review, Reexamining the Goals of Knowledge, Hazel Henderson, Jan. 1975.

5 Hazel Henderson, Testimony Before the Joint Economic Committee, U.S. Congress, Nov. 18, 1976 (Reprinted in Alternatives) Trent University, Peterboro, Ont. Vol. 6, Number 3, Spring 1977.

6 Hazel Henderson in Creating Alternative Futures, Berkley Books G.P. Putnams Sons, N.Y., 1978. Chapter 8 pp. 113-135.

7 Gail Daneker and Richard Grossman, Jobs and Energy, March, 1977, Environmentalists for Full Employment, Washington, D.C.

8 C.S. Lewis, The Abolition of Man, McMillen Co., 1947.

9 Pitirim Sorokin, Social and Cultural Dynamics, 4 Vol., 1937-41 Revised edition 1957, Porter Sargent Publishers, Boston, pp. 669-704.

Share:

Publication By

Hazel Henderson

Hazel Henderson (D.Sc.Hon) was founder of Ethical Markets Media. She was a world-renowned futurist, evolutionary economist, a worldwide syndicated columnist, and author of award-winning Ethical Markets: Growing the Green Economy (2006) and eight other books. She created the Ethical Markets TV series, the EthicMark® Awards, the Green Transition Scoreboard® and co-created Ethical Biomimicry Finance®. Henderson’s first … Continued

Related Lectures

The Economics of Permanence
The Generosity of Nature
Inflation and Social Justice
Schumacher, Burma and “Buddhist Economics”
The Nature of Work: How Ecosystems Can Teach Us to Build Lasting and Fulfilling Businesses