SMALL IS BEAUTIFUL: ECONOMICS AS IF PEOPLE MATTERED

E.F. Schumacher
New York: Perennial Library, Harper & Row, 1973
SBN # 06-080352-5
305 pages

Comments by Bob Corbett
January 2009

After Schumacher’s book was published in 1973 I incorporated his book into my teaching, especially in courses that dealt with voluntary economic simplicity.

My wife and I had already adopted many aspects of such a life and Schumacher gave much added intellectual defense and situating of my own views. His work helped me in my own life, and many of the students who studied both Schumacher and voluntary economic simplicity were also rewarded and appreciative of this exposure.

Time has passed, and now that I am nearly 10 years into my retirement, I have become less active in the lifeform of economic simplicity, and more indulgent of my own economic activity than I used to be. Thus when the economic crisis of 2008 hit, I began to reflect back that many of the troubles we currently see were the sort of things that Schumacher anticipated back in 1973 and earlier, and that it might be good for me to return to his book, reread the essays and reassess them in light of today’s economic situation.

It turned out to be a marvelous intuition, and I have been simply DELIGHTED to return to Schumacher, yet a bit saddened as well. I always knew and argued that a concept of a life of voluntary economic simplicity (which is essential what Schumacher’s economy would be) would (or will) never appeal to the masses of folks. The changes Schumacher calls for may well come to the contemporary world by force of economic blinders of the past 200 years, but they are unlikely, even now, to generate much voluntary embracing of the economy of Schumacher’s central theme – his subtitle: “economics as if people mattered.”

In this book of essays spanning about 15 years, Schumacher is offering an “alternative” economy. He knows he is speaking to a minority of people and that the masses who have interest in economy are (then as well as now) interested in the maximization of wealth and care little for other issues.

Schumacher is writing for, and appealing to, those who, for whatever reasons, are looking for some alternative to standard economics and wish to find economic notions which are much more caring that all people prosper, that production be safe, ecologically and medically, and that the healthy of the people and planet itself be central to the organization of economy.

He is no utopian expecting masses to embrace his views, but also knows there are many people vaguely sharing most or all of his aims, but who do not have a clear understanding of economics or the meaning of what it would take to create this alternative economy to which they are drawn.

Schumacher was writing in the heat of the cold war and in the very last essay of the book he points up what he thinks are the three key polar choices an economy makes: Between

private ownership vs. public
market economy vs. planned economy
freedom vs. totalitarianism

He is at pains to point out that in each category one may couple that factor with either pole in the other two areas, thus creating 8 possible outcomes, not merely the choice of private ownership market economy in a free society or the other choice of public planned economy in totalitarianism. In 1973 the problematic was couched in terms of two choices: The economy of the United States and the west against the economy of the Soviet Union. But Schumacher point out there are six other combinations possible and he is arguing for aspects of those other six.

Now, having once again read the book with care some 35 years after my first reading and about 30 years after I used it in classes of mine, I have reaffirmed my admiration of Schumacher’s insights and arguments. Oh me, I wish I had paid much more attention to it, and done much more to embrace more aspects of Schumacher’s proposals than I did. From the point of view of standard western society most who would have regarded the life I’ve lead and the processes my wife and I used in raising our children, would probably say: “They certainly embraced a strange view of life, value and economics.” But, looking back I can only say: Oh my, I did too too little and missed too much of what was available and too much of what Schumacher was offering.

Now the world economy is in crisis and on edge. There are pressures on the planet and ecology of Earth that are more critical than even 35 years ago. Perhaps in this environment more elements of Schumacher’s world view will be pressed into service on planet Earth.

I do hope so.

Below I will summarize some bits and pieces of Schumacher’s views, expressed in these essays he had written or delivered over the years. What I offer are not summaries of each essay, but a few comments on some aspects of his arguments which I found particularly interesting or challenging in this re-read.

I believe there are two different categories of contribution of the Schumacher book:

  1. Considerations of meta-economics, or perhaps more exactly, the pre-conditions of economics.
  2. Concrete analyses of situations in the world of the day (whether his day in the 1960s and 70s, or our world of the second decade of the 21st century).
    It is the first set of considerations which once again excited me the most. Schumacher argues that when one begins to reflect on economics for the past couple hundred years there is an immediate assumption that what is “economic” is central and demanded of rational people, and that what is economic is primarily a matter of profit in a world in which the natural world and even the people in it are primarily regarded as income items, not as capital.
    Contrary to this Schumacher believes an economy has at least three primary purposes and/or limits:
    1. It must be a social organization of work and production which has as a key consideration the creation of a world in which the mass of people live a decent life of material security in a world that is as aesthetically satisfying as possible.
    2. It must protect the ecology of the planet to preserve the natural order as a precondition of human happiness.
    3. It must be centrally concerned to safeguard the natural resources of the planet that provide for human long-term security, i.e. PERMANENCE.
    Thus it is the notion that economics is a system of the organization of work and production “as if people mattered” (the subtitle of the book). Those “people” are not the self, nor one’s family, nuclear or familial, not one’s region or even one’s nation, but the people of the planet Earth.

ARGUMENTS AND INSIGHTS ALONG THE WAY

  1. The confusion of income and capital.

    Schumacher is at pains to show that in contemporary economy there is a confusion about things that are income items (i.e. do not have to be paid for or concerned with) and which are capital items, (i.e. items for which one must pay and replenish). The three key areas of mistake, on his view, are:

    1. Natural resources.
    2. Ruining nature itself
    3. Human nature (not much developed in this essay)
    He argues that it is critical that the current economy must change its view if we are to have an economy that does not deplete and despoil the earth, and that doesn’t destroy masses of people in the process of production. He further argues that use and misuse of natural materials should be paid for.

  2. In the early 1970s many economists were blaming the Cold War for the problems of the economy. They argued that if only peace would come to the planet, then modern economics would create a near utopia. Schumacher rejects this view arguing that:

    1. There’s little to suggest there will ever be “enough.”
    2. The earthly “cost” of production is excessive.
    3. The procedure of such production is rooted in a capitalism of greed and self-interest which can’t be turned off.
    His reply is that the way to peace is creating smaller material gains, consistent with long-term sustainability.

  3. Schumacher is concerned with the notion of what makes something “economic.” He replies that common answer asks does a particular activity make a profit for “… those who undertake it.” If so, the activity is “economic” otherwise it isn’t regarded as “economic.”

    He replies:
    “Do not overlook the words ‘to those who undertake it.’ It is a great error to assume, for instance, that the methodology of economics is normally applied to determine whether an activity carried on by a group within a society yields a profit to society as a whole.”
  4. Schumacher’s essay on Buddhist Economics

    Schumacher argues there is a special category of a Buddhist economics which differs METAPHYSICALLY from classical western economics – which since WWII has increasingly dominated the whole world and disvalues labor.
    “From the point of view of the employer, it [labor] is in one case simply an item of cost, to be reduced to a minimum if it cannot be eliminated altogether, say, by automation. From the point of view of the workman, it is a “disutility.” To work is to make a sacrifice of one’s leisure and comfort, and wages are a kind of compensation for the sacrifice. Hence the ideal from the point of view of the employer is to have output without employees, and the ideal for the point of view of the employees is to have income without employment.”
    The essence of the difference is not economic, but a metaphysical and value notion of labor.

    The Buddhist view of the role of an well-organized economy is:

    1. Gives a person the chance to develop his or her skills and talent.
    2. Joins people with others in co-operative effort.
    3. Brings forth society’s needed goods and services.


    The function of society is to develop the character of individuals. Work is a part of that. In modern materialist economics it is the metaphysics and values that are the problem. In modern materialist economics it is the product and profit that is the aim, not a well-ordered society.

    Buddhism’s respect for life – all living things – leads economically to very different attitudes toward the human use of nature. Even the Buddhists don’t go far enough for Schumacher. They focus even on the well-being of animals, Schumacher focuses on respect not only for humans, and animals, but even for trees and onward to the whole well-being of the whole planet – the search for an economy of permanence.

  5. Schumacher believes a key economic question is one of SIZE.

    Schumacher points up the significant role of a general belief about the need for and efficiency of “bigness.” But practical reality tends to suggest smallness (even inside largeness) is more efficient.

    Schumacher believes we have a contradictory need – Smallness, especially in action.

    Largeness, especially in values and general views and respect for each other and world.

    He thinks something in the area of a city of 500,000 is about the maximum that can be managed efficiently.

    He is less sure of how small is too small, but allows some historically small towns have been very successful.

    He notes the centrality of economics such that economics intervenes often to override other values, i.e. allowing foreign dictators and such to go about their ways since we need them economically.

    The arguments in that particular essay seem to pale in comparison of the problem of “bigness” in today’s so-called “global economy.”

  6. The problem of the use of land

    Schumacher quotes Tom Dale and Vernon Carter in the book Topsoil and Civilization (1955).
    “Civilized man was nearly always able to become master of his environment temporarily. His chief trouble came from his delusion that his temporary membership was permanent. He thought of himself as ‘master of the world,’ while failing to understand fully the laws of nature.”
    But Schumacher claims things are even more serious now than ever before in history.
    “The ‘ecological problem’ it seems, is not as new as it is frequently made out to be. Yet there are two decisive differences: the earth is now much more densely populated than it was in earlier times and there are, generally speaking, no new lands to move to; and the rate of change has enormously accelerated, particularly during the last quarter of a century.”
    And the gloomy picture these factors paint doesn’t even include the soon to be discovered problem of global warming. How could Schumacher fully imagine the despoliation of previously remote rain forests or the melting of polar ice caps?

    Schumacher claims the problem is one of metaphysics. He distinguishes man-as-producer and man-as-consumer. He argues the first is viewed in economic terms, the other in metaphysical terms. There is really a great confusion between the two and contradictions. Land and creatures on the land are viewed solely as items of production; the confusions abound.
    “Human life at the level of civilization, however, demands the-balance-of the two principles, and the balance is ineluctably destroyed where people fail to appreciate the – essential – difference between agriculture and industry…”
    Schumacher holds that humans must treat land and particularly agriculture as essentially different from industrial production or the quality of all life and even over safety as a species, are at great risk.

  7. Perhaps one of the key essays of the book is: “Technology With a Human Face” The entire book has a key emphasis that is less on economic development than metaphysical or moral decisions about human existence.

    He repeats his insistence that we are suffering:


    Schumacher’s “law:” “The amount of real leisure a society enjoys tends to be in inverse proportion to the amount of labor-saving machinery it enjoys.” He allows that the society may not “achieve” as much, but that isn’t the question here. He recommends intermediate technology: Not a hands off nature, but one that puts people and the earth first and sees what is possible that can be WIDELY shared, and emphasizes human development.

  8. The Third World

    Schumacher argues that the differences between the first (and second – Soviet World) and the Third World is not a difference of level but in life from. The rich spend many multiples of the poor.

    He argues one cannot “create” development. Genuine development demands three conditions:

    Development requires time and it is not economists who are needed but developers.

  9. He follows the argument of the “conditions” of development with a call for development via intermediate technology “… it is always easier to help those who can help themselves than to help those who cannot help themselves.” The desperately poor are often either ignored or nearly so in development since the three conditions argued for above are not in place.

    He argues that there are some critical rules for development of the very poor:

    • Create work places in rural areas.
    • Create work places that are inexpensive
    • Use simple technology
    • Use local materials for local consumption.

    Learning how to provide self help is the most efficient and cost-effective way to bring development to most needy folks.

  10. Further on he claims there are four factors in creating sustainable labor and economy in very poor environments:

    1. The people need to be motivated to produce.
    2. They need the know-how to produce.
    3. They need the capital to produce and market.
    4. They need markets for their goods.

    The choice of technologies is key as well. In modern economy the Third World workers are “gap fillers” in the economy of the rich, not part of their own economy. That’s a key error in development theory for the Third World.

    I would add that I saw this error close up in Haiti for nearly 25 years. I ran a small development project there. Moved by Schumacher’s arguments I tried his model and I must say I think many of our projects were successful. [See: PEOPLE DEVELOPMENT AS THE PRIMARY AIM OF DEVELOPMENT WORK]

    However, most projects I saw in Haiti, all very well-intentioned, emphasized that role Schumacher talks about of the Haitians being “gap fillers.” That is, Haitians were to provide cheap labor and/or products to the external capitalist markets.

  11. Four stages in moving toward an alternative economy:

    1. First people just laugh at it.
    2. Next, some will give lip service but no acts.
    3. Eventually some will begin to do some serious planning
    4. Finally there will be those who move to practical action

    My own experience confirms this. Take the Schumacher book as an example. I came across it in 1973 when it first came out and I was deeply moved and impressed. But, when I would tell others about it, the typical first response was for people to laugh and say how sweet, utopian and crazy it all was. Most people, to this day would stay in that position, thus I have argued in these notes that Schumacher’s book is certainly no for everyone.

    In the early stages I was in the second phase -- lip service. The arguments moved me and I was in a process of MENTAL change and verbal change, but no anything economic.

    I moved to the third and four stages at about the same time, planning to act on his suggestions and slowly building them into our family life, however, other than my work in Haiti, I was never able to incorporate much of it into any social organization larger than my own family. Nonetheless, I still feel that doing something is better than doing nothing.

  12. The centrality of a metaphysics or value position on the meaning of human existence.

    Central to the whole book of essays is the thesis that BEFORE one can have an economic theory, one has to have a value theory rooted in a theory of metaphysics, that informs us as to what the meaning of human existence is. It is only on the basis of such values that one can rationally frame an economy.
    “… no system of 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.”
    In this regard Schumacher is very skeptical of the current western notions of private property. He claims the modern notion of “private property” in cases of larger firms is more analogous to times of serfdom than the bucolic private farmer or tradesman who are often celebrated. The analogies mislead our perception and thought.

    Schumacher points out the FIRST question is: what is it an economy should do? His view is not that it should produce wealth, but that it should create a society in which the masses of people have their needs met, have meaningful work, and an economy which is sustainable long-term without harming the environment or threatening the planet Earth itself.

  13. An example of a Schumacher-like economic enterprise.

    Schumacher develops the story of the Scott Bader Commonwealth. Bader founded the company in 1920, but in 1951 turned it over to employees – 131 of them.

    They set up a “commonwealth” in which they:



  14. Another model of possible for economic units

    Instead of taxes, he suggests 50% public ownership of every business:

Bob Corbett corbetre@webster.edu

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Bob Corbett corbetre@webster.edu