Rediscovering E F Schumacher in the 21st Century

The surprising relevance of a 20th Century economist in the age of global warming and climate change

The first few pages of Small Is Beautiful, a collection of essays by renowned economist E F Schumacher, paints a decisive picture of the mindset of Western businessmen on the cusp of globalisation. It was an international intellectual sensation, influencing many readers to rethink their choices, and societal priorities in the modern world. The fact that this book was published in the same year as the 1973 Oil Crisis adds another dimension to its impact around the world. The unique synthesis of philosophy, economics, and politics proved to be a winning formula, one that is still fresh and original even today. To understand why the world has fallen into an almost irreversible state of decay, with the effects of climate change already being felt, we need to examine the circumstances that made our present predicament inevitable.

I chanced upon a battered old copy of Small Is Beautiful: A Study of Economics as if People Mattered at my uncle’s house. An avid reader himself, he said the book was a Bible of sorts for those inclined towards economics, and the social sciences. The first thing that strikes you as a reader is the bold and lucid style of writing that Schumacher employs. No one writes this way anymore. He states what he believes to be the core problem of Western society right out of the bat, which is, the attitude of people towards “the problem of production”. 

He writes, 

  “One of the most fateful errors of our age is the belief that ‘the problem of production’ has been solved. Not only is this belief firmly held …by experts, captains of industry, the economic managers…economic journalists as well.”

He follows this with a piercing insight into what people believe to be “human wickedness,” and the tendency to blame “the system” for the things that are wrong in the world. Schumacher posits that one of the main reasons why the “system” survives, in spite of its badness, is the erroneous view that “the problem of production” has been solved. The modern (Western) man does not consider himself a part of nature, and thus the narrow definition of “capital” in corporations does not include natural resources like fossil fuel. He says,

 “A businessman would not consider a firm to have solved its problems of production… if he saw that it was rapidly consuming its capital. How, then, could we overlook this vital fact when it comes to…the economy of Spaceship Earth?”

These views were undoubtedly heterodox and radical, but slowly grew to be accepted and discussed academic circles (Bunting 2011). While it would be interesting and rewarding to dive into Schumacher’s almost romantic notions of ‘small is beautiful’ economic enterprises, I would prefer to trace the trajectory of his predictions with respect to fossil fuels, and their effect on the environment. 

While the rest of the world was excited at the limitless possibilities of fossil fuels and nuclear energy, which has steadily increased in consumption since World War II, Schumacher was raising questions that ecologists and conservationists would struggle with for decades to come. 

Why was it that terms like pollution, environment, ecology, etc suddenly came into prominence? He claims that these terms were virtually unknown till the mid-1960s. The World War II had accelerated the rate of industrial growth so much so that the industrial production in 4 or 5 years in the 1970s would be greater than what all of mankind accomplished up to 1945. With such fervor existing in the corporate world, was not inevitable that we would end up in a decaying world? 

A recent summary of a United Nation’s report on biodiversity has confirmed the worst fears of environmental experts and activists. According to the report, 1 million plant and animal species could go extinct, which will pose a direct threat to ecosystems across the world. It concludes by saying that nature is declining globally at an unprecedented rate in human history, and while the extinction of species is not a phenomenon that is specific to an industrial society, “our highly mechanized, automated global economy—not to mention a human population that has more than doubled from 3.5 billion to 7.2 billion since 1900—has dramatically increased our destructive throw-weight” (Kluger 2019). 

For “rich” (read: Western) countries, with industrial expansion, the belief was that “mankind had, at last, come of age,” and the next task was believed to be “education for leisure” and the transfer  of technology to the poor countries, to improve their quality of life. In retrospect, we can safely say that the successful transfers have been of warfare technology, and the carryovers of globalisation, namely, global warming. Schumacher writes that those priorities were misguided because it was based on the assumption that oil and energy corporations were dealing with "capital" and not "income fuel."

Fossil fuels are non-renewable sources of energy, and hence cannot be replaced, and the supply of fossil fuel is not unlimited. The sophisticated machinery of our modern industrial system has been “consuming the irreplaceable base on which it was erected”. With warnings being sound about the imminent arrival of the no-return point of our environmental degradation, Schumacher’s eerily prophetic words are more relevant than ever. While other eminent economists like Amartya Sen were praising the boons of capitalism and globalisation, the Small Is Beautiful movement began to steadily grow in importance. Schumacher was a brave voice against capitalism and globalisation, at a time when it was risky to be so. 

With the world finally waking up to the danger our planet is in, even as many world leaders live in denial and refuse to take meaningful steps to curb emissions, the words of Schumacher are more relevant than ever.

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