Tuesday, September 30, 2008

Small Is Beautiful - E F Schumacher

A study of economics as if people mattered.

First printed in 1973. This is one of those gems I picked up at Select bookshop. After I read the blurb on the back cover, I knew I should read it. It seemed like yet another preconception was going to be soon verified.

It is a very well written book. In the first few chapters, the author explains in detail the premises of his argument to the readers. And then, the argument itself is built brick by brick. The argument is made adequate with facts, examples and statements by other authors.

A very broad view with an eye for various other areas of life. A truly holistic approach to problem solving.

The argument is built on really strong premises which include some of the existential basics which found all of man’s kingdom.

One whole chapter is dedicated to education which the author says is the most important resource. All branches of science, must be accorded a proper place in education and metaphysical awareness should be the center of all learning, he says. Today’s product of thinking is tomorrow’s instrument of thinking. With the progressive change in instruments of thinking with time, metaphysical awareness which should be at the centre is almost always lost. It is this lack of metaphysical awareness that causes man to spend his lifetime chasing wealth which he has no time to enjoy since all the good time was spent in earning this wealth!

The author emphasizes the proper use of land. Study how a society uses its land and you can come to pretty reliable conclusions as to what its future will be. The destinies of man’s empires and civilizations were determined largely by the way they used their land. Specifically, the author expresses concern about the disregard governments have for agriculture and the chemicals (fertilizers and pesticides) that farmers poison their lands with. He also expresses deep concern about the pollution of land being caused by large scale industrialization whose necessity economists justify by the quantity of goods and profits they produce without assigning any price or value to the pollution being caused. The author illustrates with many such examples how uneconomical most of mankind’s endeavours are when you take such factors into consideration.

The road to peace it is argued is to follow the road to riches. The author illustrates with the example of patterns of fuel consumption by various nations, by the rich and the poor, that this is a serious misconception.
My take – abject poverty and misery do lead to frustration and violence. But the inverse is not true. Wealth and material abundance certainly do not lead to peace.

Automation, another product of scientific research in the wrong direction, the author says is propelled by and serving to encourage a wrong attitude (of people) towards work. Work is seen as an inescapable liability, not as an activity that helps to develop one’s character and nurture one’s creativity.
Automation is alright to an extent. But when the human part of the work is automated, it reduces men to slaves of machines that simply need humans to turn them on or off. Automation reduces work – something decreed by Providence for the good of man’s body and soul – to an inhuman chore.

The chapter on Buddhist economics is very insightful. The opening para of the chapter goes – “The New Burma sees no conflict between religious values and economic progress. Spiritual health and material well being are not enemies.” Such is the Buddhist economy, that it does not hinder their spiritual well being! Read on.
There are two types of mechanization that must be clearly distinguished: one that enhances a man’s skill and power and one that turns the work of man over to a mechanical slave, leaving man in a position of having to serve the slave. How to tell one from the other?
The author quotes an example by Ananda Coomaraswamy. “The craftsman himself can draw the delicate distinction between the machine and the tool. The carpet loom is a tool, a contrivance for holding warp threads at a stretch for the pile to be woven round them by the craftsman’s fingers; but the power loom is a machine, and its significance as a destroyer of culture lies in the fact that it does the essentially human part of the work”.

Having made the premises clear, the author presents his argument.
There is a fundamental flaw in the very foundation of modern economics upon which are built the methodology, the definitions and the yardstick of modern economics. The flaw is that, the definitions, parameters, measures used by economists to analyse, estimate, calculate or assess a scenario are purely quantitative; parameters like cost, benefit, capital, income etc.
Qualitative distinctions like damage done to the environment, satisfaction of men at work, expenditure of non renewable resources, general satisfaction among the people are all together left out.

The result is, these quantitative measures when applied by economists to assess the economic well being of a nation, population, region etc produce results that are empty, hollow, meaningless and even untrue.

This is a very grave problem since economy dictates the direction or course of all other sciences, studies and human civilization itself.

The author counters the popular economic belief of “the more the growth in GDP, or the more consumption increases, the better the economy” with plain common sense as follows. An attitude to life which seeks fulfillment in the single minded pursuit of wealth – in short, materialism – does not fit into this world, because it contains within itself no limiting principle, while the environment in which it is placed is strictly limited.

Economics of permanence – nothing makes economic sense unless its continuance for a long time can be projected. Permanence is incompatible with a predatory attitude which rejoices in the fact that “what were luxuries for our fathers have become necessities for us”. This is because this attitude has no limiting principle while the environment in which it is placed is strictly limited.
The cultivation and expansion of needs is therefore the antithesis of permanence and hence uneconomical. Is this not the opposite of what the modern economists base their theories on - “The more the consumption, the better the economy”?

One observation I immediately found to be “my own” was that “Market is the institutionalisation of individualism and non responsibility”. This simply means that the buyer is concerned about his individual profit or interest while buying goods in the market and does not assume any sort of responsibility towards the society or anyone else while buying. All he cares about is value for his money.

He does not make a distinction between a product that was made using renewable resource and another product of the same category made using non renewable resource.
He does not bother to ask “Were the working conditions for labourers in the factory (that produced this commodity) good or bad?”, “Was the technology employed environment friendly or not?” He will not care to buy an indigenous product – which is essential to encourage indigenous industries – if the same product can be imported for a cheaper price.

The author uses several examples – the number of nations needed (large or small), the size of a city (big or small) and the scale of operations (large or small), to illustrate the duality of human requirement when it comes to the question of size. His answer is “many small within the large”.
Large scale industrialization creates large cities. Easy transportation – thanks to technology – makes people footloose, who desert towns and migrate to cities that are already filled to capacity. This has resulted in a collapse of structure and the country is like a big cargo ship in which the load is in no way secured. It tilts and all the load slips to one side and the ship founders.
Large scale industrialization produces a process of mutual poisoning whereby successful industrial development in the cities destroys economic structure of villages and villagers take revenge by mass migration into the cities, poisoning them and making them utterly unmanageable.
Taking the case of developing and under developed countries, the author says what we need is intermediate technology that is less capital intensive and more labour intensive as these countries have a surplus of labour and a shortage of capital.

Small scale operations no matter how numerous are always less likely to be harmful to the environment than large scale ones simple because their individual force of damage is small in relation to the recuperative forces of nature.

To the progressive man’s incorrigible optimism of “science will find a way out”, he responds thus – This could be right only if there is a conscious and fundamental change in the direction of scientific effort – towards non violent, eco friendly, people centric (as opposed to product centric) technology. As we all know scientific effort needs funding in astronomical proportions. This funding is approved by governments of nations that are dictated by economists. Therefore a change in direction of scientific effort calls for radical changes in popular economic beliefs.

As I read this book, I was taken back to a few other authors for various reasons.

The first was Tagore.
Schumacher observes the attitude of modern man, in particular the western man towards nature. In the age of industry, man does not experience himself as a part of nature but as an outside force destined to dominate and conquer it. This can be clearly seen in the way he expends all natural resources like air, water, coal, natural gas and oil, taking them for granted.
Here he fails to make a distinction between capital and income. He fails to understand that all natural resources are his capital which he must spend very judiciously and with conservation and instead takes them for granted, thus wasting them away as if they were an income (to be expended).

Did not Tagore express the same sentiment in his essay when he said, “man and nature should co exist in harmony as in the east and not in conflict as in the west”?

Schumacher says “science should orient itself towards the organic, gentle, non violent, elegant and beautiful” as he disapproves of the giant, powerful machines committing violence against nature. He also says, “Anything we do just for the sake of doing it does not lend itself to utilitarian calculation”, meaning everything in this world need not justify its existence by proving that it has a utilitarian value. I am reminded of Tagore who says “The fragmentariness of utility should never forget its subordinate position to the wholesomeness of beauty in the affairs of the world.”

Another author I could not help comparing Schumacher with was Erich Von Daniken who wrote Chariots of Gods.
Both authors are revolutionary in their ideas and unconventional. But what a difference in the way they present them. Erich is so bitter and sarcastic, whereas Schumacher’s sarcasm is subtle. While Erich mixed up his arguments, Schumacher has organized his matter perfectly well.

The author, Schumacher, I believe is influenced by Gandhi and his economy which is a socialist one. This is evident from the many pages in which the author has quoted Gandhi.

Here are certain lines from the book that I deem noteworthy.

Why should a rich man go to war? He has nothing to gain. Are not the poor, the exploited, the oppressed, most likely to do so as they have nothing to loose but their chains?

The amount of real leisure a society enjoys tends to be in inverse proportion to the amount to the labour saving machinery it employs. Very True.

A lot of people today talk about the importance of change (as opposed to constancy). They should also not forget the elementary truism that a change which is not an unquestionable improvement is a doubtful blessing. :-)

Confucius said, “when you know a thing to recognize that you know it, and when you do not, to know that you do not know – that is knowledge.”

Philosophy, as the Greeks conceived it, is one single effort of the human mind to interpret the system of signs and so to relate man to the world as a comprehensive order within which a place is assigned to him.

All predictions are unreliable, especially those about the future. :-)

New problems are not the consequences of incidental failure but of technological success- Prof. Barry Commoner.

War is a judgment that overtakes societies when they have been living upon ideas that conflict too violently with the laws governing the universe….never think wars are irrational catastrophes – Dorothy L Sayers.

Socialist economy is not a new subject, but all of a sudden it makes sooooo much sense and any other choice deviating from this even slightly seems absurd beyond argument. Surely it’s a very well written book in which every argument is very well expounded.

This book is a must read.

However, it’s relieving to see that a good 30 years after the author’s time and in spite of turning a deaf ear to the author’s serious concerns about the functioning and well being of the world post 1980 (that’s as far as he projected), the world is doing fairly well and there is no major existential crisis! His mercy!


Satish said...

capitalist mind with a socialist heart in a financial body, wouldn't that be something........

Many authors have had their take on the economics of the world, but still not able to build the most imporatant factors in the financial indices like happiness, satisfaction etc.....

Being in the domain of finance long enough to vouch that though the financials show just the numerical health of the company and not the emotional health(emlpoyee feelings)

CK said...


Interesting ! Great that you were able to trace this book !
In this book, Schumacher says an effective leader is like a balloon man holding on to the strings of a bunch of balloons fluttering away. Simply by holding the strings at the botton, he exercises control.

I use this example in my leadership sessions.

Your review made me realise I must give the book a thorough read.Thanks for that comprehensive review !

You may also want to check out "The Future Shock" by Alvin Toffler !

Sowmya said...


"Capitalist mind with a socialist heart in a financial body".... very interesting and very true... thanks for reading this really lengthy post.

Its a vicious circle.... difficult to come out of it..though not impossible... when u actually think about it, the common man can make a huge difference... by simply cutting down on consumerism.. isn't it?

CK.... thanks for stopping by.. I will surely check out the book u have suggested...