[ Development theory: Who’s Who? Part 42 ]

E.F. Schumacher (1911-1977)
An early prophet of sustainability

I. Biographical outline

Ernst Friedrich Schumacher, the son of a university professor, was born in Bonn on August 16, 1911. Having taken his Abitur, he studied economics at first in Bonn and then at the London School of Economics. A brilliant student, he caught the attention of, among others, the English economist John Maynard Keynes and was awarded a two-year Rhodes Scholarship at Oxford. He used a one-year extension for further study at New York’s Columbia University, where he was appointed lecturer a short while later. Nonetheless, Schumacher did not end his studies with a formal degree. In the mid-1930s he tried his hand as a banker in Berlin.

To escape the Hitler regime he returned to London in 1937 to work as an investment consultant. When war broke out in 1939 the British government interned him as an enemy alien on a farm. Thanks to his academic contacts he did not remain isolated. Schumacher became a member of a group of progressive intellectuals around Keynes and William Beveridge, who were working on a design for a stable world economic system and conceived the foundations of the British welfare state. Keynes, the intellectual father of the World Bank and of the International Monetary Fund, even copied passages from a then unpublished Schumacher essay on cross-border transactions. Keynes was caught out in 1943 when the original essay, which had been written on the farm, was published by the journal Economica.

Schumacher’s links with leading economists explain his swift rise in early post-war Britain – which was extraordinary for a non-Jewish German at the time. Fritz, as his relatives and friends called him, served as an economic advisor to the British Control Commission in Germany, and, in the late 1940s, was the editorial writer on economics for The Times. From 1950 to 1970 he worked as Chief Economic Advisor for the British Coal Board.

All the time, he kept publishing – in later years particularly in the journal Resurgence. Schumacher also advised UN institutions and the governments of former colonies. A trip to Burma in 1955 made a particularly strong impression on him and provided the inspiration for the essay Buddhist Economics, in which Schumacher laid out the main theses of his developmental thinking. Later, the essay became a chapter of book Small Is Beautiful. The bestselling book was published in 1973 and influenced thinking on development policy in many countries, including Germany. Due to this success, the author became a much sought-after speaker. In 1976, he spoke to audiences in the USA totalling about 60,000 – including Jimmy Carter, the winner of that year’s Presidential election. On September 4, 1977, Schumacher died of a heart attack in Switzerland where he had gone on a lecture tour.


II. Work and appraisal

Schumacher’s thinking focused on the question of human-scale dimension. He disputed that economics was in a position to judge such issues correctly because the academic discipline merely takes market prices into account rather than the essence of things. According to the Coal Board officer this was evident in the fact that that neither economic theory nor market practice distinguish between reproducible and finite goods. Consequently, rapid overexploitation of raw materials was regarded as a productive contribution to the spread of prosperity, although in reality irretrievable assets were being destroyed. In Schumacher’s view, western industrial society was incapable of appreciating and preserving “natural capital” – a term in which he included clean water, healthy soil and pure air. Schumacher stated categorically that economic tenets should apply only to industrial production, not to the organisation of entire societies or their dealing with nature.

For Schumacher, economists’ fixation on profitability in terms of market prices resulted from the discipline’s “metaphysical blindness”. He saw markets as the “institutionalisation of individualism and irresponsibility”. Academic economics rested on unproved assumptions, he said, according to which the greatest possible production of goods meant the greatest possible satisfaction of needs, which in turn brought about peace. In reality, the attempt to increase output by all means contradicts basic human needs. For instance, academic economics views work as a necessary evil to be reduced as much as possible by the use of capital. This thinking ignores other functions of work – as for example that it creates a sense of community and enables people to develop their capabilities and find satisfaction.

After his journey to Burma, Schumacher began speaking of “Buddhist Economics”. This concept was fundamentally opposed to standard economics with its orientation along aggregated figures such as the gross national product. To him, the people of the Asian country had appeared more fulfilled and more relaxed than those of Western Europe. For the economist, who himself harboured an inclination towards spiritual quest, this was a consequence of the Buddhist tradition, which rejects excessive attachment to material goods. Accordingly, Schumacher’s “Buddhist Economics” does not aspire to produce as many goods as possible. Rather, it is about achieving sufficient prosperity for fulfilled human existence with as little means as possible. In this context, Work is a meaningful activity and has to be conducted in an adequate balance with leisure. Whoever separates these complementary concepts destroys the pleasure in both of them. According to Schumacher, everyone feels the need to work “creatively, usefully and productively with head and hands”.

Schumacher also found inherently economic arguments against the conventional wisdom of development principally requiring investment in sophisticated technology. He believed the attempt was futile to solve the unemployment crisis of poor countries by creating jobs at the high technical level of the industrialised nations. The necessary capital investment was enormous – and could not be financed. The challenge, therefore, was to improve customary methods in such a way that they might generate income for as many people as possible. In turn, increased mass purchasing power would then stimulate economic activity.

“Technology with a human face,” Schumacher stated, could not be imported for large amounts of money. Rather, it had to be developed and maintained locally. According to Schumacher’s principles, such technology had to be cheap enough to enable the investor to create many jobs. In addition, the technology should be applicable in diverse ways so that it would serve workers (not the other way round). Critics accused Schumacher of hostility towards progress. His reply was that that high-tech installations in poor countries were frequently crippled by breakdowns and, as a consequence, their capacity was never used to the full. In addition, capital-intensive technology increased productivity thereby wiping out jobs.

For Schumacher, the issue was not blocking innovation. For this reason he also used the term “intermediary” instead of “appropriate” technology. After all there could be different balances of labour- and capital-intensiveness depending upon local conditions. To propagate this concept, he founded the Intermediate Technology Development Group in 1966. This international NGO specialises in providing practical answers to poverty. In Germany, his ideas became popular after some delay. The GTZ formed its German Appropriate Technology Exchange (GATE) Department in 1978 after the German edition of Small Is Beautiful had been published

Agriculture was of special relevance for Schumacher who involved himself in the British Soil Association for organic farming. Again, the amateur gardener advocated labour- instead of capital-intensive modernization. In this field, he linked several strands of his social criticism and development thinking. Particularly in rural areas, as widespread employment as possible was needed. This was, after all, where bitter poverty mainly prevailed, which, in turn, also affected the cities whenever people fled the land. Schumacher also came up with ecological reasons for warning against intensified agricultural production which endangered the health of the soil and, being “metaphysically blind”, equated the breeding of animals and plants with the manufacture of inanimate machines. For Schumacher, economic productivity could be only one of several agricultural goals – he regarded permanence, good health and beauty as equally important.

To environment and employment, Schumacher added a third main concern: the organisation of a self-determined life. Working at the bureaucratic top of Britain’s nationalised coal industry with its then some 800,000 employees he had come to believe that big organisations were destructive. Centralism emphasises order, decentralisation freedom. Schumacher regarded both as justified – but once again the issue was to get the balance right. Doing so would require the delegation of all decisions to the lowest possible level, and secondly, the obligation of superiors to account for their actions. Such ideas corresponded more to life in villages or small to medium-sized towns than in mega-cities.

On this basis, Schumacher viewed the development assistance of the 1960s and 1970s as misled. He criticised the fixation on high sums for industrial investment, as well as the fact that the money was being distributed by big bureaucratic organisations. As an alternative, he suggested to rely more on non-governmental initiatives. These, he said, could serve to convey knowledge decentrally and make people independent.

Schumacher’s thoughts, however, turned less and less on practical political recommendations. He was interested in the fundamentals of thinking, and criticised academia. He wrote that traditional philosophers and religious teachers had handed down orderly idea systems by which people could interpret the world and align their lives. Modern scholarship, however, was unable to do that because positivism and relativism were in the end metaphysical concepts which served only to repulse all other metaphysical questions and speculation. In his perspective, the permanent susceptibility to crises of the allegedly advanced industrial societies was the consequence of such “bad” metaphysics. In Schumacher’s view, it made the rich countries, not the poor ones, the “problem children of the world”. Attempts to transfer this model to other regions of the world systematically led to mass poverty in rural areas and huge urban slums.


III. Impact

The success of Small Is Beautiful was in a certain way a flash in the pan. Schumacher is only seldom cited today. One reason for this is surely that many decision-makers in the Third World rejected the concept of appropriate technologies. They interpreted his book as a flimsy justification for withholding state-of-the-art technology from disadvantaged economies. Therefore Schumacher’s arguments mostly fell on deaf ears even in New Delhi, although he explicitly referred to the teachings of Mahatma Gandhi.

The fading of interest in Schumacher was certainly also due to the ethical-speculative elements in his work. These passages sound more missionary than pragmatically academic. Schumacher, who at the end of his life was a professing Catholic, did not shy from referring to the Bible or Francis of Assisi. In the early 1970s, when do-gooder zeal was rampant even among professors, this was more or less acceptable. But this era ended quickly in Anglo-Saxon societies in the years when Thatcher and Ronald Reagan were in government.

Today, Schumacher’s intellectual and political legacy is guarded by a small group of committed, mostly British initiatives. After BSE and other animal epidemics, the Soil Association is now more influential than ever. Other official members of the Schumacher Circle include the journal Resurgence, the publisher Green Books, the Intermediate Technology Development Group and the think tank New Economics Foundation. A Schumacher Society to foster the memory of him was founded as early as 1977, and a Schumacher College was established in Devonshire in 1992.

Unease over latent sectarianism should not, however, obscure the fact that precisely Schumacher’s visionary approaches are still up-to-date – including in developmental terms. The call for decentralisation and wider societal participation is today a matter-of-course. Schumacher already discussed these issues under the now common buzzword of “ownership” in Small Is Beautiful. Equally, his categorical question about the right dimension and his scepticism concerning costly technology remain justified. The ongoing debates on the informal sector prove that. Here, income is generated by simple means – and reform proposals are aimed at easing the normally tough working conditions. Similarly, the manifold micro-loan programmes, as developed by the Grameen Bank in Bangladesh in a model way, illustrate that even small sums for modest investments can be enough to alleviate basic want.

Schumacher’s warning about the irreparability of destroyed natural capital now belongs to the fundamentals of global environmental and development policy. This applies to demands for the preservation of biodiversity, the much-discussed change in agriculture and the sparing use of fossil fuels. It is true that the latter is hardly explained with the finiteness of mineral resources any more. The threats of the greenhouse effect have become the core argument – but this does not make the concern any less urgent.

Schumacher was an early prophet of sustainable development. He himself spoke of a “lifestyle designed for permanence”. The UN Conference on the Environment and Development in Rio de Janeiro in 1992 took up this issue again. However, the promise of a just, democratic and permanently liveable (world) society remains unfulfilled.

Publications by E. F. Schumacher

1943: Multilateral Clearing, in: Economica, Vol. 10, pp. 150-65.
1973: Small is Beautiful – Economics as if People Mattered. London, Blond & Briggs.
1977: A Guide for the Perplexed. London: Jonathan Cape.
1977: This I Believe – and other Essays. London, Green Books (Anthology of Schumacher’s articles in Resurgence), reprint 1998.
1979: Good Work. London, Jonathan Cape.

Publication on E. F. Schumacher

Wood, Barbara: Alias Papa: A Life of Fritz Schumacher.
London, Jonathan Cape.

Websites
www.resurgence.org
www.neweconomics.org (New Economics Foundation)
www.schumacher.org.uk/schumacher_circle.htm
www.itdg.org (Intermediate Technology Development Group)