It is obvious, indeed, that no change of system or machinery can avert those causes of social malaise which consist in the egotism, greed, or quarrelsomeness of human nature. What it can do is to create an environment in which those are not the qualities which are encouraged. It cannot secure that men live up to their principles. What it can do is to establish their social order upon principles to which, if they please, they can live up and not live down…
— R. H. Tawney, as quoted by Schumacher as the opening lines of this chapter.
In public talks and private discussions, Schumacher often pondered ‘the land question’. An economic system that treats land as a commodity to be bought and sold on the market fails to foster the respect for land necessary to encourage its proper use. When an individual is allowed private ownership of a limited natural resource, that individual has an unfair economic advantage. The scarcity of arable land and a growing demand for its use result in an increase in the value of land through no effort on the part of the landowner… This potential for speculative gain places tremendous pressure on the landowner to maximize the dollar value of the land through excessive development and erodes the landowner’s commitment to community and place. A further result of the ability to make land a commodity is that a community’s capital is tied up in the land. Credit for the small business owner tightens. The region loses its diversity of enterprises, which is the basis of a more sustainable economy and a more environmentally responsible business sector.
— Bob Swann, co-founder of the Schumacher Center, 25th anniversary edition (1999).
Public and private partnerships are very fashionable today. We have learned that the old way was too narrow: rich and greedy companies not paying attention to the social problems they were creating, while nonprofits were often inefficient but well-meaning, and government was too big and far away to understand the issues. I advocate three partners: government (from local to national) to set the rules and framework; private enterprise to take care of the market; and civil society (the users) to evaluate whether a system is working well, which also encourages innovation. In the United States at the state and local level, people are beginning to follow this model by solving problems that have fallen between the cracks in public, private, and civic partnerships, such as redeveloping an inner city and dealing with drug addiction and crime.
— Hazel Henderson, sustainable economies advocate and entrepreneur, 25th anniversary edition (1999).
This chapter is made up partly of Schumacher drawing together some of the themes of the book, and partly also a tribute to the influential Christian socialist thinker and economic historian Richard Tawney, who had died in 1962.
What the chapter says…
“Every problem touched upon in the preceding chapters leads to the question of ‘system or machinery’, although, as I have argued all along, no system or machinery or economic doctrine or theory stands on its own feet: it is invariably built on a metaphysical foundation, that is to say, upon man’s basic outlook on life, its meaning and its purpose. I have talked about the religion of economics, the idol worship of material possessions, of consumption and the so-called standard of living, and the fateful propensity that rejoices in the fact that ‘what were luxuries to our fathers have become necessities for us’,” writes Schumacher, explaining the central theme of the book.
How then can we deal with the problems we have to face? We can’t like that, he says, because “greed and envy demand continuous and limitless economic growth of a material kind”. And that doesn’t work in a finite world.
Instead, we need to think about alternative systems, he says.
As for private property, he makes a distinction between:
- “property that is an aid to creative work, and
- “property that is an alternative to it.”
“There is something natural and healthy about the former -the private property of the working proprietor; and there is something unnatural and unhealthy about the latter – the private properly of the passive owner who lives parasitically on the work of others.”
Then he quotes Tawney in his support:
“It is idle, therefore, to present a case for or against private property without specifying the particular forms of property to which reference is made.”
Schumacher then draws a controversial conclusion:
“For it is not private ownership, but private ownership divorced from work, which is corrupting to the principle of industry; and the idea of some socialists that private property in land capital is necessarily mischievous is a piece of scholastic pedantry as absurd as that of those conservatives who would invest all property with some kind of mysterious sanctity.”
The rest of the chapter is concerned with making this distinction clearer:
“It is immediately apparent that in this matter of private ownership the question of scale is decisive. When we move from small-scale to medium-scale, the connection between ownership and work already becomes attenuated; private enterprise tends to become impersonal and also a significant social factor in the locality; it may even assume more than local significance. The very idea of private property becomes increasingly misleading.”
Owners
The owner, employing salaried managers, does not need to be a proprietor to be able to do his work. “Ownership, therefore, ceases to be functionally necessary.” The whole thing is also exploitative if owners take profits that are higher than a fair salary or gets a return on capital that is higher than he could borrow in other places.
Profits
“High profits are either fortuitous or they are the achievement not of the owner, but of the whole organization. It is therefore unjust and socially disruptive if they are appropriated by the owner alone. They should be shared with all members of the organization.”
Relationships and control
“Even autocratic control is no serious problem in small-scale enterprise which, led by a working proprietor, has almost a family character. It is incompatible with human dignity and genuine efficiency when the enterprise exceeds a certain – very modest – size.” What we need is for a systematic development of communications and consultation so that all members of the organization have some genuine participation in managing the company.
Social significance
The social significance where it is based demands some “socialization of ownership” beyond the members of the company. This “socialization may be effected by regularly devoting a part of the firms profits to public or charitable purposes and bringing in trustees from outside”.
“The so-called private ownership of large-scale enterprises is in no way analogous to the simple property of the small landowner, craftsman, or entrepreneur. It is, as Tawney says, analogous to ‘the feudal dues which robbed the French peasant of part of his produce till the revolution abolished them’,” says Schumacher.
To sum up:
- In private ownership, small-scale enterprise “ownership is natural, fruitful, and just”.
- In medium-scale enterprise, private ownership is already unnecessary. “The idea of ‘property’ becomes strained, unfruitful, and unjust. If there is only one owner or a small group of owners, there can be, and should be, a voluntary surrender of privilege to the wider group of actual workers – as in the case of Scott Bader & Co Ltd.”
- In large-scale enterprise, private ownership is “a fiction for the purpose of enabling functionless owners to live parasitically on the labour of others. It is not only unjust but also an irrational element which distorts all relationships within the enterprise.”
Then he dares to use the N-word: “There are many methods of doing away with so-called private ownership in large-scale enterprise; the most prominent one is generally referred to as ‘nationalization.”
- Mixing business and politics normally “produces inefficient business and corrupt politics”. which means that, for every nationalized industry, you have to define carefully what rights politicians have – especially who they are allowed to appoint.
- Nationalized industries should have to make reasonable profits and to build up their reserves. But if they are excessive, they need to lower their prices.
- They should have a statutory obligation ‘to serve the public interest in all respects’. “The interpretation of what is the ‘public interest’ must be left to the enterprise itself, which must be structured accordingly. It is useless to pretend that the nationalized enterprise should be concerned only with profits, as if it worked for private shareholders.”
- We have to be able to recognize and safeguard the ‘public interest’ in nationalized industries. That means we need “arrangements by which all legitimate interests can find expression and exercise influence, namely, those of the employees, the local community. the consumers, and also the competitors… To implement this principle effectively still requires a good deal of experimentation. No perfect ‘models’ are available anywhere.”
- Over-centralization and the addiction to it by planners is the chief danger to nationalization. “In general, small enterprises are to be preferred to large ones.”
In fact, says Schumacher, “instead of creating a large enterprise by nationalization – as has invariably been the practice hitherto – and then attempting to decentralize power and responsibility to smaller formations, it is normally better to create semi-autonomous small units first and then to centralize certain functions at a higher level, if the need for better co-ordination can be shown to be paramount.”
By way of explanation, he says that “no-one has seen and understood these matters better than R. H. Tawney.” Which is why he ends the chapter by quoting him again:
“ So the organization of society on the basis of functions, instead of on that of rights, implies three things:
- “That proprietary rights shall be maintained when they are accompanied by the performance of service and abolished when they are not.”
- “That the producers shall stand in a direct relation to the community for whom production is carried on, so that their responsibility to it may be obvious and unmistakable, not lust, as at present, through their immediate subordination to shareholders whose interest is not service but gain.”
- “That the obligation for the maintenance of the service shall rest upon the professional organizations of those who perform it, and that, subject to the supervision and criticism of the consumer, those organizations shall exercise so much voice in the government of industry as may be needed to secure that the obligation is discharged’.”
What happened next?
Richard Henry Tawney was born in 1880 in London at the start of a life influencing the UK Labour Party, as an historian and political policy-maker. He was also a Christian socialist, and his most famous book, Religion and the Rise of Capitalism (1926), argued that puritanism had made acquisitiveness acceptable in England – worse: it had put commerce above God.
This was not a million miles from Schumacher’s position as a newly converted Roman Catholic. No wonder he revered Tawney.
It was Hilaire Belloc, the original Distributist (see Chapter 4), who first said that all political disagreement was at roots theological. He never set out precisely what he meant by that, but it was definitely a way of arguing that the old disputes between Catholic versus protestant, southern Europe versus the north, was alive and well.
You can see this most obviously in the conflict between the UK and the European Union (EU). The EU was designed primarily by Christian Democrats, conservative and predominantly catholic – which is presumably how the principle of subsidiarity (see Chapter 16) came to be so important to the structure of the EU.
One can make a reasonable case that the circle of stars on the European flag were taken from those around the head of the Virgin Mary in Renaissance and medieval paintings. But that is beside the point.
Whereas the UK has been a protestant country since the 16th century, and was usually the focus for resistance to papal authority before that – so it may have been inevitable that it would break free of the EU at some moment in history.
Schumacher was borrowing from Distributist thinking here about the importance of scale and ownership – rather than the crazy version of property today, which, as he rightly says, is virtually the opposite.
The Distributist League was intended as the beginning of a political movement. It launched in the UK in 1926 but, by the early 1950s, it had begun to peter out – as so many radical movements do – in anti-abortion and misogyny.
By then, a parallel movement had begun in the USA, inspired by Dorothy Day.
Both she and Schumacher were inspired by Distributism, and – through them – they are connected to the great tradition of back-to-the-land. But they both went beyond what the Distributists managed – both Belloc and Chesterton were deeply melancholic (see Chapter 4).
Wes Jackson, the co-founder of the Kansas-based Land Institute, described a visit by Schumacher in, March 1977 in the 25th anniversary edition (Hartley & Marks, 1999):
At that stage the Institute was “a fledgling organization scarcely six months old with little to show the distinguished visitor, whose philosophy most inspired our establishment. We had arranged for this widely acclaimed author to give a public lecture in the Salina Community Theatre. To a full auditorium, he began by telling a story of a trip he had made during the 1930s with some friends, an automobile trip across America that included passage through Kansas.
“They had stopped at a service station in a small Kansas town at the height of the Great Depression. Fritz engaged a local man at the station by asking, ‘How are things?’
‘Fine,’ the local replied.
‘What is it you do?’ asked Fritz.
‘Oh, I work on a farm over there,’ he said pointing. ‘I used to own that farm but I had no money to pay the hired hand, so I paid him in land. Eventually he owned all of my farm and now I work for him.’
‘That’s a very sad story,’ replied Fritz.
‘Well, not so sad,’ replied the hired hand. ‘He has no money either and so he is paying me back in land.’”
Questions for discussion…
- Why is it so difficult to shift people’s lazy support for massive, owned organizations?
- Can you really draw a line between small-scale, personal property ownership (good) and slightly bigger ownership (bad)? How would you pay for yourself in retirement otherwise if they got rid of all kinds of absentee ownership?
- Is it true that all political disputes are at root theological?
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