Small is Still Beautiful: Economics as if Families Mattered

Pearce, Joseph, Small is Still Beautiful: Economics as if Families Mattered, (Wilmington, DE: ISI Books, 2006), Retail: $18.00, Amazon.com: $12.24.

Review by Ryan Setliff

Economics As If Families Mattered

Small is Still Beautiful is a less a biography of a man, and more the biography of one man's idea — namely the humane scale vision of economist E.F. Schumacher. Schumacher was born in Bonn, Germany in 1911, and himself the son of an economist and professor. In his youth, E.F. Schumacher studied in Bonn and Berlin in his native Germany. Later in went to England to study as a Rhodes Scholar at Oxford, before going to Columbia University in New York City where he earned his Economics degree. According to The Times Literary Supplement, his book Small is Beautiful is among the one-hundred most influential books published in the post-WWII era. Beginning with the publication of this book in 1971, Schumacher issued a clarion call for the world to wake up, and start humanizing its economic structures, rather than continue lurking blindly in the wrong direction of centralization, environmental degradation, globalization and obsessive pursuit of material wealth.

The theme of Small is Beautiful is that people matter. And if people matter, so do all forms of life. Humanity is part of an integrated and ordered living creation and cannot exist in isolation from biosphere that sustains it. If we destroy life on our planet we are ultimately destroying ourselves. Biocide is suicide (p. 279).

Pierce writes, "Modern civilization can survive only if it begins again to educate the heart... for modern human beings are now far too clever to able to survive without wisdom" (p. 313). As Pierce writes in the introduction to his book:

A third of a century ago, E. F. Schumacher rang out a timely warning against the idolatry of giantism with his book Small Is Beautiful. Since then, millions of copies of Schumacher’s work have been sold in dozens of different languages; few books before or since have spoken so profoundly to urgent economic and social considerations. Schumacher, a highly respected economist and adviser to third-world governments, broke ranks with the accepted wisdom of his peers to warn of impending calamity if rampant consumerism, technological dynamism, and economic expansionism were not checked by human and environmental considerations. Humanity was lurching blindly in the wrong direction, argued Schumacher. It's obsessive pursuit of wealth would not, as so many believed, ultimately lead to utopia but more probably to catastrophe.

Schumacher’s greatest achievement was the fusion of ancient wisdom and modern economics in a language that encapsulated contemporary doubts and fears about the industrialized world. The wisdom of the ages, the perennial truths that have guided humanity throughout its history, serves as a constant reminder to each new generation of the limits to human ambition. But if this wisdom is a warning, it is also a battle cry. Schumacher saw that we needed to relearn the beauty of smallness, of human-scale technology and environments. It was no coincidence that his book was subtitled Economics as if People Mattered (p. xiii).

Schumacher's Intellectual Antecedents

Schumacher drew from a variety of influences, leading some to dub his work as Catholic economics and still others call it Buddhist economics. Schumacher following his rejection of Marxism and materialism begin to embark on a spiritual odyssey of sorts. Inspired in part by the teaching of Mahatma Gandhi, who boldly proclaimed that the world did not need more mass production but rather production by the masses, Schumacher echoed his own personal belief that technology should serve the masses. Hence, Schumacher's tireless promotion of intermediate technology designed with ecological and sustainable development considerations in mind.

Schumacher was also inudated with Catholic social thought. He reflected heavily upon the life works of Thomas Aquinas, and embraced Thomism. "He embarked upon an enormous course of reading," declared his friend Christopher Derrick, "Then somebody said you should read the social encyclicals of the Popes of Rome... He did so and was absolutely staggered. He said, 'Here were these celibates living in an ivory tower... [W]hy can they talk so much sense when everyone else talks nonsense...?" (p. 245) He noted the similarities between his own economic views and the teaching of papal encyclicals on socio-economic issues. Schumacher was fascinated by Leo XIII's Rerum Novarum to John XXIII's Mater et Magistra. Likewise, he countenanced the distributist ideas lauded by the Catholic thinkers G.K. Chesterton, Hilaire Belloc and Vincent McNabb.

Questioning the Logic of Globalization

Pierce, building on Schumacher's research, also questions the logic of globalization and "free trade," which he sees an illusory farce, because he weighs on unwarranted assumptions about infinite progress in a world of finite resources. Pierce notes, "Global free trade has become an unquestionable moral dogma enshrined at the heart of modern economic theory. Aware of this 'economic correctness,' politicians and economists are reluctant to question its presumptions and are failing to confront or even comprehend the effects of free trade on a world economy that is changing radically" (p. 51). Moreover, globalization facilitates economic and political centralization, the rape of the environment, and exploitation of the Third World. Yet with rapid technological innovation it is possible, even likely, that the globalization of trade will destabilize the (post)industrialized world while at the same time exacerbating the problems facing the developing world."

Exorbitant patterns of consumption in the industrialized world, particularly the United States, is said to be the result of melange of societal ills such as immediate gratification, greed, over-borrowing, and even mortgaging future generations with debt burdens. "The debt crisis," notes Pierce, "has meant that the governments of poor countries have had to take out new loans from the World Bank and IMF simply to meet their payments on the original ones, and to cover the budget and trade deficits that the original debt has caused. It is cruel and vicious circle" (p. 213). The effect has been runaway inflation, economic dislocations, and a dwindling quality-of-life, despite the alleged progress attained from the forced globalization of the economy.

The contemporary student of economics might be tempted to say "don't bite the hands that feed you," in the face of such an intellectual broadside against global capitalism. Pierce elucidates on the classical liberal theory behind free trade, so called "Economic Correctness," which both he and Schumacher fundamentally questions:

The dogma of free trade has its roots in the nineteenth century and is based on the interrelated concepts of specialization and comparative advantage. Free trade theory stipulates that countries should specialize in those economic activities in which they excel in order to achieve a competitive edge, or a comparative advantage. They should abandon less efficient activities, relying on imports. These imports are paid for by exporting the surplus produced in the specialized industries. The result is greater efficiency and productivity and, therefore, higher levels of prosperity. (p. 51)

Pierce offers a thought-provoking indictment of Ricardo's theory of comparative advantage. In the words of Pierce:

Sooner or later this is likely to cause major disruption. Labour costs in the developing world are as little as one-fiftieth of those in the developed, or over-developed, world. Since the free movement of technology and capital has 'leveled the playing field' the underpaid workers of the third world are now in direct competition with their comparatively rich counterparts in Europe and America. The workers of India, China and Bangladesh are part of the same global labour market as the workers of Britain and the United States. The implications are clear. Two identical enterprises, one in Britain and one in Vietnam, produce an identical product, using identical technology, destined for identical markets. They both have access to the same pool of international capital. Indeed they are both part of the same multinational corporation. There is only one significant difference: labour costs in Vietnam are one-fiftieth of those in Britain. It is not necessary to be an economist to realize which enterprise has the comparative advantage (p. 52.)

Schumacher stood aghast at politics of scale, and dared to reason that bigger is not better. Pierce notes,

The theory of progressive centralization was itself driven by the theory of the politics of scale. Schumacher had been brought up on the theory that a country had to be big in order to be prosperous—the bigger the better. Winston Churchill had derided `the pumpernickel principalities’ of Germany prior to the birth of the Bismarckian Reich. It was only through unification under Bismarck that German prosperity was possible. At least that’s how the theory goes. Once again, however, Schumacher offered a cautionary counterstance: `the German-speaking Swiss and the German-speaking Austrians, who did not join, did just as well economically, and if we make a list of all the most prosperous countries in the world, we find that most of them are very small; whereas a list of all the biggest countries in the world shows most of them to be very poor indeed. Here again, there is food for thought.’ (pp. 119-120.)

And, of course, as Churchill should know, the imperialist spirit of the Bismarckian Reich found its logical fulfillment in the Hitlerite Third Reich, with all the disastrous and destructive consequences that flowed from it.

Diseconomies of Scale

"Macrophilia—the cult of bigness—has been the prevailing trend in economic thinking for almost two hundred years. It is rooted in the theory of 'economies of scale' which, alongside the 'hidden hand' of market forces and the dogma of economic growth, is a cornerstone of conventional economics" (p. 91).

In contrast to the proprietors of bigger is better dogma, Schumacher envisioned a humane alternative of sustainable economic development. Applied to the Third World, Schumacher noted "geniune development in the third world should bypass the big cities and concentrate instead on establishing an 'agro-industrial structure' in rural areas and small towns. This should compromise millions of small workplaces, each employing relatively few people in labor-intensive enterprises designed to meet local demands" (pp. 219-20). Schumacher also lauded the the utilization of intermediate technology, so as to effectuate some degree of local independence, autarkic self-sufficiency, and subsistence for the staples of life without dependence upon the outside world. This was in a nutshell, technology with a human face. As Schumacher wrote,

I have no doubt that it is possible to give a new direction to technological development, a direction that shall lead it back to the real needs of man, and that also means: to the actual size of man. Man is small, and, therefore, small is beautiful. To go for giantism is to go for self-destruction. And what is the cost of reorientation? We might remind ourselves that to calculate the cost of survival is perverse. No doubt, a price has to be paid for anything worth while: to redirect technology so that it serves man instead of destroying him requires primarily an effort of the imagination and the abandonment of fear (p. 224).

A Love for the Land

"Among natural resources, the greatest, unquestionably, is the land. Study how a society uses its land, and you can come to pretty reliable conclusions as to what its future will be," wrote E.F. Schumacher. As Pierce observes,

`The land carries the topsoil, and the topsoil carries an immense variety of living beings including man.’ These words from Small Is Beautiful should be in the mind of anyone who is genuinely concerned with the future of life on earth. They hold the key to any realistic discussion of the proper use of land. Our future, and the future of our natural environment, is rooted in the soil (p. 153).

Pierce captures the importance of the agrarian dispensation to Schumacher's social thought. A distributist thinker cannot help but to be sentimental about rural life.

As Pierce notes, "Schumacher's love for the land and its life-sustaining properties caused him to reject agrochemical food production in favor of the organic alternative. In the 1970s, he became president of the Soil Association, Britain's largest organic farming organization." His organization aimed to counter the centralizing trends of agribusiness, as well as the mechanistic industrial principles applied to the soil. Instead, of environmental degradation, Schumacher offered a vision of sustainable development and stewardship. He was disdainful the state-subsidized colossal corporate agribusiness sector in the industrialized West, as well as the corresponding diminishment of small-scale farms and freeholders in recent years. Schumacher declared:

If a farmer has a farm with beautiful hedgerows and woods, and masses of wildlife, and he loves the land and everything about it, that farmer would obviously look after it. A "big-business farmer," on the other hand, who only cares about money, would want to squeeze every penny out of every inch of land he could get his hands on. So if the Government comes along and says it will pay farmers extra cash if they grow more wheat, for example, the big-business farmer will think nothing of destroying all his woods and hedgerows to make one big field, which will be easier to plough, plant and harvest, and then drenching the empty landscape with weedkillers and insecticides and fertilizers to get a bumper crop. The "care-taking farmer," who loves his land will have a terrible choice of either doing the same thing and feeling like a vandal, or growing things which make less free money from the Government, and maybe going broke in the end and having to sell his farm to the big-business farmer who will wreck everything the good farmer is proud of. So that the good farmer might as well have wrecked it himself and got rich on free money. Anybody can see it isn't fair. It is a poisonous idea, including poisoning a good farmer's feelings of responsibility for his land.

Still one of the problems faced by both Schumacher and Pierce is that their quixotic nostalgia for farm fresh on a global scale is untenable, and it would leave the mass of humanity into starvation. Indian biologist C.J. Prakash predicted that this sustainable agriculture project, if adopted on a widespread basis, would only act "to sustain poverty and malnutrition." Indeed, organic farming alone could not sustain humanity. British reporter Dick Taverne of the Guardian demurs:

The SA has argued that organic farming cannot be judged by scientific criteria because "the current tools of scientific understanding are not sufficiently developed" to measure its virtues. It seizes on any findings, however flimsy, that seem to confirm its claims and dismisses any contradictory evidence as irrelevant, prejudiced or influenced by the biotechnology industry. 1

So, how does sustainable development mesh with reality? Yes, the good steward recognizes the need to uphold, preserve, maintain, and tend to the well-being and health of the land. But in the past century, these much loathed insecticides and pesticides have arguably been instrumental in combating mosquitoes, the spread of malaria and typhus, while ensuring crops don't get devastated by insects. According to the British FSA,

There are no known deaths from pesticide residues (or GM foods). A cup of coffee contains natural carcinogens equal to at least a year's worth of carcinogenic synthetic residues in the diet. If people are worried about the effect of pesticides in farming on wildlife or human health, they should promote pesticide-resistant GM crops, which reduce their use. 2

In wrestling with the perils of modernity and the need for environmental stewardship, we need not turn to Luddite loathing of agribusiness for its own sake. But both Schumacher and Pierce offer a spirited critique of the ill-gotten consequences of applying industrial principles to agriculture. Pierce counsels that "small communities [in Europe] are working for change in their local areas. Initiatives such as 'local food links' are helping to revitalize local economies. Their aim is to create direct links between food producers and local consumers through the setting-up of small-scale farmers' markets, the opening of farm shops, and the instigation of box schemes which deliver organic produce to the door" (p. 207). Along with these endeavors are food cooperatives, orchards, and other forms of community-based agriculture production and distribution networks.

Closing Salvos

For many economists and observers, E.F. Schumacher may come across as a bit demagogic at times. For many, his observations seemed to be little more than warmed over socialism. But some of his harshest critics simply fail to grasp some of his crucial points regarding economic questions. Moreover, it is becoming painstakingly obvious that the old progressive vision of infinite progress and the obsession with efficiency and the gross national product has become shallow, trite, and arguably dangerous. As Ron Freher notes, "More and more people are coming to the realization that the materialism, the rootlessness, and the hedonism of the consumer's paradise we've built for ourselves are taking America down a dead-end road." Therefore, Schumacher's ideas still have relevence for today, and there is a modicum of wisdom to his economic and social thought in spite of its flaws. Freher continues, "He saw that we needed to relearn the beauty of smallness, of human-scale technology and environments."

"By placing humanity, or the Self, instead of God at the center of gravity, the sin of Pride throws the whole structure of things into ruin called Judgement" (p. 307). So, if anything else, Schumacher manifests a reality loss to the world of bean-counters, sophisters, calculators, and consumerists, namely that the intangibles—that is to say faith, family and good friends are what define and give meaning to life. Even if Schumacher's work is arguably deeply flawed at times, it is redeemed by waking up socio-political thinkers to the deep moral dimension of all economic considerations, and taking us out of the bankrupt philosphical realm of utilitarianism and scientism. Schumacher opined, "The hope that the pursuit of goodness and virtue can be postponed until we have attained universal prosperity and that by the single-minded pursuit of wealth, without bothering our heads about spiritual and moral questions, we could establish peace on earth, is an unrealistic, unscientific, and irrationale hope" (p. 69).

Pierce who is obviously far more sympathetic to Schumacher than myself has put together a well-written critique of Schumacher's life and legacy while reinvigorating his social-economic thought for the twenty-first century.

And for bringing renewed focus to the ideas of E.F. Schumacher in the twenty-first century, Small is Still Beautiful author Joseph Pearce is to be commended. This is a well-written exploration of the ideas of E.F. Schumacher, and a powerful intellectual broadside against our "Super-Size-It" culture.

1. 1. "The costly fraud that is organic food," Guardian Unlimited, 20 Jan 2007, http://www.guardian.co.uk/comment/story/0,3604,1210493,00.html
2. 2. Ibid.