Schumacher: Meta-Economics versus the 'Idolatry of Giantism'
Bert W. Brookes
[Reprinted from Land & Liberty, May-June
1992]
It was just over 100 years ago that an American social crusader drew
the world's attention to what he called "the great enigma of our
times": the implacable tendency for poverty and hunger to intrude
and to thrive in a world in which wealth and affluence constantly rise
to new heights.
A century later, advancing science and technology have added relief
and contrast to the picture drawn by Henry George. The times have
changed, but the enigma has become more stark and conspicuous.
In the 1990s, more consumer goods are being churned out by the
semi-automated factories of Europe, America and the Far East than ever
before; more luxury food and drink is being consumed, more miles
motored and flown, more communication satellites circle the earth than
at any time in the past Yet there are, today, more absolutely poor
people in the world than there were in the 1960s; more unemployed and
underemployed, more people malnourished and without health care, more
children who have never seen a classroom, more people struggling to
exist in degrading shanty-towns.
However bright may be the world's general economic progress, the dark
blot of human suffering is broader and blacker than it has been since
civilisation began.
FIRST WORLD POVERTY
THE ENIGMA of progress with poverty is by no means confined to the
Third World. In the United States, the richest nation on earth, one
person in every eight is living at or below the poverty line. In the
United Kingdom, some 10,000 people are likely to be spending their
nights in cardboard boxes, more than 100,000 families are homeless and
one-fifth of the population would be living in destitution were it not
for government grants and allowances.
The Third World may be the vortex of the world's poverty, but it is
not a total-exclusion zone. From New York to Nairobi, from Buenos
Aires to Bombay, degrading, demeaning poverty is apparently woven into
the fabric of the free-market economy.
In the past century, a large number of measures prescribed as
possible cures for the poverty-disease -- and its virus, unemployment
-- have been tried and tested. The natural process of free trade,
essential to reap the benefits of the international division of
labour, has been abandoned or shackled, currencies have been detached
from their material bases to be "managed", trade unions have
acquired power and influence, while socialism has been wheeled out to
occupy the economic commanding heights; we have seen nationalisation
and privatisation, deficit financing and demand management, social
contracts and compacts, free bargaining and controls on wages and
prices.
Not one of these widely tried nostra has achieved the radical
improvement that their advocates sought Not one has come near to
solving that great enigma.
The socialism-inspired "welfare state" may ensure that its
subjects do not starve, but it no more grapples with the underlying
causes of poverty than an aspirin attacks the common cold. Without
their government's largess, social conditions in the developed
countries would differ little in pattern from those of the Third
World.
REMEDIES
THE LONG LIST of likely remedial measures excludes at least one that
was too hot to handle - that might have proved too potent for the
comfort of vested interests. It also excludes one that, having enjoyed
wide interest but limited practical support in the 1960s and 1970s,
was recently given an accolade by one of today's leading environment
commentators. In an article in
The Observer late last year, Geoffrey Lean suggested that the
proposals of Fritz Schumacher, whose ideas were launched 25 years ago,
merited much closer attention than they were accorded.
Schumacher, a German-born, naturalised Briton, had formally
enunciated in his 1973 book Small is Beautiful theories first
published in The Observer in 1965. According to Lean: "His
ideas swept the world. But the movement he founded ... has curiously
failed to take off."
Schumacher's approach was certainly unorthodox. Strangely for an
economist, he attacked the convention of considering the soundness of
an industrial or commercial project on the basis of whether it was
economic or uneconomic, insisting that there was a deeper,
metaphysical aspect to such questions which outweighed ordinary
material considerations. He envisaged a higher science -- he called
meta-economics -- whose principles are conveyed by the sub-title of
his book: A study of Economics as if People Mattered. He argued that
giving overriding weight to the needs and circumstances of the people
when taking economic decisions would not only bring a much-needed
breath of humanity into a cold, conscience-less science, but would
give new hope of solving the world's basic social problems.
His antipathy to the conventional ethics of 20th century society was
deep. The modern economy, he wrote, was propelled by "greed and
envy". Private enterprise, "the most perfect instrument for
the pursuit of personal enrichment," was "not concerned with
what it produced, but only with what it gains from production."
Such dyspeptic-almost paranoid -- condemnation of the process by
which millions of ordinary people earn their livings, would strike
many as sweeping and blinkered at the same time. However, Schumacher
modified it slightly, declaring, on second thoughts, that the degree
of acceptable private enterprise varied inversely with the size of the
undertaking. For small-scale businesses, private enterprise was "natural,
fruitful and just." For medium-scale undertakings, such a system
became "strained, unfruitful and unjust" and there needed to
be a "voluntary surrender of privilege" to the workers. But
in large-scale enterprises, private ownership was quite beyond
redemption; it was a system "enabling owners to live
parasitically on the labour of others."
SCHUMACHER'S MAIN IDEAS
SCHUMACHER'S conception of large-scale enterprises as the creation of
parasites may indicate some intellectual unbalance, but he was on
firmer ground, perhaps, when he attacked the way modern industry,
aided and abetted by science and technology, was swallowing up the
world's non-renewable resources -- oil, for example.
The continuing resort to bigger and bigger industrial and
agricultural machinery, sprawling factories and other industrial
installations, amounted, in his eyes, to the "idolatry of
giantism." In posing a major threat to the environment, these
developments were not only failing to solve the problems of the day,
but were adding to them. Anew start was needed, he asserted, in which
it was essential to recognise "the virtues of smallness."
Linking his advocacy of smallness with his vision of a
humanity-oriented style of economics was his attitude to work. To
Schumacher, work was something desirable in itself. It should not be "an
inhuman chore, to be abolished as soon as possible by automation,"
but something "decreed by Providence for the good of man's body
and soul." Indeed, work and leisure were "complementary
parts of the same living process and cannot be separated without
destroying the joy of work and the bliss of leisure."
The implications of all this were obvious. If work was absent, then
work must be provided. Specifically, he envisaged the introduction and
development of "intermediate technology," under which,
especially in the Third World, governments would provide large numbers
of new "workplaces" -- small-scale, decentralised production
units -- which would bring the work to the worker instead of vice
versa. (If people cannot adapt themselves to the methods, then the
methods must be adapted to the people.")
International aid would play an important part in providing the
initial capital, but such programmes could be considered successful
only if they raised productivity without saving labour. Thus, the
importation into Third World countries of modern technology, involving
the employment of much sophisticated machinery but few human beings,
was to be avoided. Any aid project that promised -- or threatened --
labour-saving changes, even in production methods that pre-dated
Noah's Ark, was to be given a definite thumbs-down.
ECCENTRIC AND UNSOUND
THE FAILURE of Schumacher's philosophy to "take off" is
hardly as curious as Lean suggests.
To provide "work" in neat packages, as though airlifting
supplies to a beleaguered garrison, might make sense as a short-term
expedient, but as a permanent solution for large-scale unemployment it
hardly gets to first base. Putting people to work producing goods in
locations and by methods which are uneconomic and inefficient might
seem "human, "but the idea offends against human nature,
which instinctively strives for sensible and efficient methods.
Moreover, to the extent that production has to be financed by
governments, to that same extent is government expenditure on other
activities reduced. (To expand the budget by increasing taxes only
passes the reduction to the private sector.) Thus, the induced birth
of a new Schumacher-style job would almost certainly be a sentence of
death on a job elsewhere. Intermediate technology is no ticket to a
free lunch.
But this is not all. To survive for long, Schumacher's "workplaces"
would need to operate in economic greenhouses, given complete
protection from outside competition and nourished with regular and
perpetual injections of capital -- conditions which no government, in
the Third World or anywhere else, would be likely to accept with
confidence, let alone enthusiasm. Like the uneconomic, labour-hungry
industries of the former East Germany and the short-lived
co-operatives set up by some Third World countries, such enterprises
would quickly wither away if the barriers against the outside world
were removed. Was it, then, any real wonder that Schumacher's
brainchild was virtually still-born?
The hard fact is that Schumacher's concept of work was fundamentally
unsound. Far from being balm for man's body and soul (as he preached),
work, in essence, is no more than a way for man to obtain a living, to
support himself and his family at as high a standard as possible. It
is doubtless true that, in conditions where labour has lost its
bargaining power, work can become so menial, so soulless and so badly
paid as to be "an inhuman chore" but, to rectify this,
Schumacher would have been better employed seeking the causes of
labour's economic weakness rather than by enlisting the patronage of
metaphysics.
From his eccentric concept of work no doubt stemmed his choleric
attitude to private enterprise. Instead of seeing this as a
spontaneous, self-energising machine dedicated to the satisfaction of
people's needs and wants, he condemned it as an infernal device for
sordid money-grubbing. His grudging approval of it when the enterprise
is small raises many questions, not the least of which is "How
big is small?" At what point does salubrious smallness degenerate
into malign mediumness? What happens, intrinsically, when an
undertaking crosses that crucial barrier?
There can be no convincing answers to these questions. For
Schumacher's categorization was arbitrary, artificial and unreal.
Every productive enterprise, irrespective of size, brings together the
factors of production - land, labour and capital - and, assuming a
free market with no element of monopoly, its earnings will be shred -
albeit unequally - by these three factors. Schumacher failed to
perceive that whereas the returns to labour and capital reflect a
contribution to the effort of the enterprise, for which the reward is
competitive and defensible, the return to land reflects no such
contribution, being merely a peremptory exaction from the net
earnings.
Schumacher's condemnation of the owners of large-scale enterprises
for "living parasitically on the labour of others" should,
more properly, be applied to all enterprises, large, medium and small,
but only in respect of the receipt of land-rent, since this, though
legal and sanctioned by society, is clearly an unearned rake-off. It
is income that arises from an immoral privilege - the dubious
ownership of natural resources -rather than a fair return for a
contribution made. Schumacher's condemnation of the owners of
large-scale enterprises for "living parasitically on the labour
of others" should, more properly, be applied to all enterprises,
large, medium and small, but only in respect of the receipt of
land-rent, since this, though legal and sanctioned by society, is
clearly an unearned rake-off. It is income that arises from an immoral
privilege - the dubious ownership of natural resources -rather than a
fair return for a contribution made. Schumacher's condemnation of the
owners of large-scale enterprises for "living parasitically on
the labour of others" should, more properly, be applied to all
enterprises, large, medium and small, but only in respect of the
receipt of land-rent, since this, though legal and sanctioned by
society, is clearly an unearned rake-off. It is income that arises
from an immoral privilege - the dubious ownership of natural resources
-rather than a fair return for a contribution made.
The overriding impression of Schumacher, from a study of his main
work, is of a man so exercised by the potential of his remedy, and so
impatient to see it in operation, that he neglected to analyse fully
the malady for which he was prescribing. Captivated by the prospect of
seeing his "intermediate technology" absorb the throw-outs
of the free-market system, he neglected to consider why the system
should produce such flotsam in the first place. As a result, he
produced a "longstop" solution, a puny palliative that
ignored the system's Achilles heel and merely provided a tortuous
means of absorbing its victims. One suspects that, faced with the
problem of people falling over a cliff, Schumacher would have
organised an efficient ambulance service, whisking the injured to
hospital, but doing nothing about the erection of a fence at the
cliff-top.
HIS PERCEPTIVE CONCERNS
ALTHOUGH he showed, in
Small is Beautiful, that he was not above a little cheating to
bolster his thesis, Schumacher's sincere concern for the victims of
poverty cannot be doubted. In the Third World, he correctly saw the
danger of the emergence of two conflicting societies, polarised
between rich and poor. He also warned of the social upheaval
threatened by the mounting mass migration from country villages to
unsanitary shanty-towns on the outskirts of bloated cities. He even
pin-pointed some of the proximate causes of Third World poverty, such
as lack of capital, lack of natural wealth and deficiencies of
education. But nowhere did he seek its underlying causes. He noted
that, in the main, the poor of the Third World "have no land and
no prospect of ever getting any," but he failed to track down the
origin of their deprivation. Nor did he pursue the moral question of
landownership or the part that the large-scale commandeering of
natural resources by the powerful few plays in the pauperisation of
the many.
Schumacher 's book has sold over four million copies and has been
studied in every corner of the globe. Yet it yields two major
questions which are long overdue for answer.
TWO MAJOR DOUBTS
First, why did he condemn private enterprise, root and branch, when
only one facet of the system is Susceptible to criticism? How did a
perceptive, informed scientist of such calibre come to miss the vital
distinction between, on the one hand, the fair rewards of labour (for
manual, mental and managerial effort) and of capital (for the
provision of capital equipment) and, on the other, the exactions made
for the use of land, i.e., for the use of natural resources provided
by the Creator?
Second, why did he produce a scheme dependent on government
subvention or the charity of the outside world, to provide artificial
jobs for the cast-offs of the free-market system, without seeking the
kink in the system which produces those cast-offs? Why did he not spot
the shameful flaw that puts millions of families in the permanent grip
of idleness and poverty?
BLIND ABOUT LAND
WITH HIS experience of conditions overseas he must surely have been
aware of the grotesque, one-sided distribution of land in most
countries of the Third World. He must have seen for himself, in many
Latin American countries, the vast haciendas of the ruling families
with their many square miles of land held idle or for speculation,
while penurious peasants in their thousands scratch bare livings from
scraps of near-barren wasteland. He must have been aware of the
constant pressure in those countries for land reform. Why did he
ignore the evidence that a just system of land tenure would have meant
a new deal for the underdogs of those societies, yielding them the
prospect of real jobs instead of the mere hope of fabricated,
precarious jobs contrived by intermediate technology?
Since Schumacher died in 1977, precise answers to these questions are
now unlikely. But those who support his proposals should ask
themselves whether intermediate technology could ever promise to solve
that great enigma; could ever be a substantive and permanent remedy
for unemployment and poverty. Or whether it is just one more entry on
the list of makeshift expedients that offer to the world's deprived
merely a passing driblet of short-term relief.
References:
1. Henry George, Progress and Poverty (1879);
New York: Robert Schalkenbach Foundation, centenary edn., p. 10.
2. Child Poverty Action Group (cited in The Daily Telegraph,
23 October, 1991).
3. The Observer, 10 November 1991
4. In Chapter 111(4) of Small is Beautiful, Schumacher quotes
Leo Tolstoy as supporting his view that educated people should
consider themselves as servants of their country: "I sit on a
man's back, choking him and making him carry me, and yet assure myself
and others that I am very sorry for him and wish to ease his lot by
any means possible, except getting off his back." Tolstoy's words
(in What Then Must We Do), however, were written, not in the
context of education, but of the burden exerted on the worker by the
landowner.
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