Born in Germany in 1911, E. F. Schumacher was an economist who held various positions, including within the British National Coal Board and as an economic adviser to the United Nations.
His book, Small is Beautiful: A Study of Economics As If People Mattered*, published during the 1973 oil crisis, quickly gained him international recognition, until his death in 1977. In this work, which bridges philosophy and economics, Schumacher criticizes the “materialist philosophy” and its impact on the study of economics, focusing both on the social and environmental effects of the deployment of the modern industrial society.
For Schumacher, a characteristic of modernity is the dominance of a philosophy that “seeks fulfilment in the single-minded pursuit of wealth”. This belief, he argues, heavily influences the way economics are studied, which he criticizes throughout his book. His first critique targets the value theories which consider resources as free to dispose of whenever they are not the result of human production. Such theories fail to account for the existence of a “natural capital,” which the industrial system consumes as if it were a self-sustaining income, although its existence relies on it. He categorizes this capital into three types: non-renewable resources (with a special focus on fossil fuels), nature’s tolerance margins (analogous to today’s planetary boundaries), and human substance. His second critique challenges the belief that individual profit-seeking can lead to collective well-being. However, rather than focusing on market efficiency, he questions the attention central-stage dominance of markets, which often leads to treat production and consumption as objective rather than means to achieve well-being. While recognizing the need for certain abstractions in the study of economics, Schumacher argues that many economists’ focus on GDP growth involves excessive abstraction, causing them to lose touch with “essential human realities.”
Schumacher sees the inability to consider how irreplaceable natural capital is reflected in the technology that supports the industrial system. Modern technology depletes non-renewable resources by relying on excessive extraction. It impacts nature’s tolerance margins by producing various types of pollution. It also harms human substance by encouraging centralization and fragmented tasks, stripping work of its potential to give a man a chance to develop and use new faculties. In response to these issues, Schumacher anticipates a divide between two visions: one that seeks solutions in further technological advances to sustain a quantitative growth, and another that pursues qualitative growth supported by a reoriented technology.
One key takeaway from Schumacher’s work is his criticism of “gigantism,” which he considers to be benefitting from an “almost universal idolatry.” Opposing this, Schumacher advocates for small organizations and structures. He sees smallness as a way to maintain awareness of an activity’s impact on the ground, which is true both for businesses and extensive urban spaces, which, he argues, lead modern individuals to view themselves as separate from nature rather than as a part of it. Recognizing that large organizations are sometimes necessary, Schumacher proposes a list of principles to help these organizations retain a degree of “creative freedom” similar to smaller entities. Notably, the first of these principles, subsidiarity, is also foundational to the functioning of the European Union.
Alongside his critiques, Schumacher provides practical recommendations throughout his book, notably in the field of education, in which he argues that metaphysics defined as our “fundamental convictions” should be central (rather than merely “know-how”), for any educated person not to be in doubt about its view on the meaning and purpose of its life. Schumacher opposes totalizing explanations, criticizing both Adam Smith’s “invisible hand” and Karl Marx’s interpretation of history. Instead, he advocates for an acknowledgment in the humanities of problems for which no definitive answer can be found. Another recommendation therefore focuses on private property: he rejects ideologies that seek to sanctify private property, as well as some “socialists” that try to demonize it. Schumacher is inspired by the thought of R. H. Tawney who states that “precisely in proportion as it is important to preserve the property which a man has in the results of his labour, is it important to abolish that which he has in the results of the labour of someone else.” For Schumacher, this means supporting small private businesses while encouraging state ownership in companies exceeding a certain size. However, as an opponent to excessive centralization, he argues in favour of a stakeholders’ governance, in which state involvement is to be realized without traditional nationalizations.
Schumacher’s heterodoxy stands, as he frequently cites various religious texts or beliefs. He is particularly interested in Christianism and Buddhism, seeing certain of their principles as part of a “traditional wisdom of humanity” that, in some circumstances, may better guide us through crises than science or technology alone. A particularly modern and pertinent aspect of Small is Beautiful, still interesting in 2024, is its early focus on concepts that are now central to many discussions. For economists, it also raises questions about the links between economics and scientific positivism, which Schumacher largely rejects.
Tom Leclercq Ollivier, CEC/AgroParisTech intern research fellow.
* Schumacher, E.F., Small Is Beautiful – A Study of Economics As If People Mattered, Ed. Contretemps/Le Seuil, pp 316.