Small is Beautiful
A Study of Economics as if People Mattered

E.F. Schumacher, Blond & Briggs, London, 1973


Few can contemplate without a sense of exhilaration the splendid achievements of practical energy and technical skill, which, from the latter part of the seventeenth century, were transforming the face of material civilisation, and of which England was the daring, if not too scrupulous, pioneer. if however, economic ambitions are good servants, they are bad masters.

The most obvious facts are most easily forgotten. Both the existing economic order and too many of the projects advanced for reconstructing it break down through their neglect of the truism that, since even quite common men have souls, no increase in material wealth will compensate them for arrangements which insult their self-respect and impair their freedom. A reasonable estimate of economic organisation must allow for the fact that, unless industry is to be paralysed by recurrent revolts on the part of outraged human nature, it must satisfy criteria which are not purely economic."
R. H. Tawney
Religion and the Rise of Capitalism


By and large, our present problem is one of attitudes and implements. We are remodelling the Alhambra with a steam-shovel, and are proud of our yardage. We shall hardly relinquish the shovel, which after all has many good points, but we are in need of gentler and more objective criteria for its successful use.
Aldo Leopold
A Sand County Almanac


Links

E. F. Schumacher @ Wikipedia: https://en.wikipedia.org/wiki/E._F._Schumacher

Small is Beautiful @ Wikipedia: https://en.wikipedia.org/wiki/Small_Is_Beautiful

Full text "Small is Beautiful" (html): http://www.ditext.com/schumacher/small/small.html

Link to E. F. Schumacher Society: http://www.centerforneweconomics.org/

Link to "Schumacher College": http://www.www.schumachercollege.org.uk


Personal remarks


EF Schumacher has already identified over forty years ago how great the influence of economic models will be on our thoughts and actions in politics, economics and society. And that man with his individual abilities, needs and value preferences in the structural model is insufficient and not taken into account in the formulas, sizes and orientation indicators for corporate governance.
The German title: "Rückkehr zum menschlichen Mass" ("The return to the human scale") means ultimately, that this measure once existed. And indeed Adam Smith has written 1759 "The Theory of Moral Sentiments." It was not until 1776, he then published "Wealth of Nations", which still determines the foundations of contemporary economics significantly. The then postulated factors of production "land, labor, capital" are still the central paradigms which underlie today's economic theory.
Today, companies require for their contribution to the "Wealth of Nations" in addition to the material increasingly intangible (knowledge, skills .... of the staff) resources. The primary outcome of the headworkers work is immaterial and eludes objective scales that could be used 200 years ago.
That today's economists also use the unit of measure for the capital simultaneously for the value-scale ​​for the entire value accounting would apply in all other sciences as a scientific mortal sin.
It is logical that you can not explain enough the modern reality with such systemic errors in the foundations of a theory. That all recommendations based on this theory can only be correct by chance, one needs (fourteen and six years after the last two crashes in financial products) not really to explain any educated people.
The economic doctrines with their bases from the craft and steam era are toxic when they are applied in a "smart" economy with educated employees.
The book from EF Schumacher is perhaps even more relevant today than 40 years ago.

Three projects:

In the three projects, a broader view of things, a complementary logic and appropriate tools are presented, which previous systemic shortcomings of the economic doctrine are fixed at its root.

  1. Project NEMO (New/Next Economic Model) is important. It corrects systemic error in the fundamentals of economics, by extending this by the previously neglected dimensions of (intangible) resources and values​​. This extension of dominant paradigms in the basics of classical economic model allows the re-use of best (classical) models and also prevents systemically induced aberrations.
    In short:
    NEMO reduces the difference between of the experienced reality and the scientific models of explanation for the "post-industrial" economy. As a result, these methodological innovations enable a more sustainable development of economy, politics and society.
  2. INSEDE (Institute for Sustainable Economic Development) is the organization for the development and dissemination of the new models whose foundations are specified in the
  3. "Business Engineering Systems" (Toolbox, Mindware, Software).
    A modular generic work with several thousand documents. Registered Copyright TXu 512 154.

Links:
Project NEMO (New/Next Economic Model): http://project-nemo.org (opens in new window)
INSEDE (Institute for Sustainable Economic Development): http://insede.org (opens in new window)
"Business Engineering Systems" (Tools, Mindware, Software): http://bengin.net/bes/ (opens in new window)

Content

Introduction by Theodore Roszak

  1. Part I - The Modern World
    1. The Problem of Production
    2. Peace and Permanence
    3. see below - The Role of Economics
    4. see below - Buddhist Economics
    5. A Question of Size
  2. Part II RESOURCES
    1. The Greatest Resource -- Education
    2. The Proper Use of Land
    3. Resources for Industry
    4. Nuclear Energy -- Salvation or Damnation?
    5. Technology with a Human Face
  3. Part III THE THIRD WORLD
    1. Development
    2. Social and Economic Problems Calling for the Development of Intermediate Technology
    3. Two Million Villages
    4. The Problem of Unemployment in India
  4. Part IV ORGANISATION AND OWNERSHIP
    1. A Machine to Foretell the Future?
    2. Towards a Theory of Large-Scale Organisation
    3. Socialism
    4. Ownership
    5. New Patterns of Ownership

Introduction: Theodore Roszak

For nearly two centuries -- since Adam Smith published his Wealth of Nations in 1776 -- economists have been advertising themselves to the world as the most rigorous and successful of all the social scientists. The aspiration has transcended ideological boundaries. Whatever Marx and Engels may have rejected in the "dismal science" of David Ricardo and Nassau Senior, they never for a moment doubted that economics did indeed rank among the sciences. So they named their socialism "scientific" and hailed it as a breakthrough rivaling Darwin's achievement in biology.


I suppose we must, as of the 1970s, regard the economists' long-standing claim as vindicated, at least in the opinion of as official an intellectual consensus as the world ever musters in such matters. For in 1969 the Nobel Prize for "economic science" was established, an event that finally allows the economists to take their place beside the physicists, chemists, and biologists. Justifying the new award on behalf of the Nobel Committee, Professor Erik Lundberg observed that "economic science has developed increasingly in the direction of a mathematical specification and statistical quantification of economic contexts." Its "techniques of mathematical and statistical analysis," Lundberg explained, have "proved successful" and have left far behind "the vague, more literary type of economics" with which most laymen may be familiar. The initial prize was then given to two European economists whose aim had been "to lend economic theory mathematical stringency and to render it in a form that permits empirical quantification and a statistical testing of hypotheses."


In so honoring the economists, the Nobel Committee was doing no more than endorsing a conception of economics that decision makers in government and business have held and acted upon at least since World War II. Other not-yet-scientific-enough behavioral scientists might envy the economists their status as Nobel laureates, but even more so they are apt to covet them their privileged access to the corridors of power. Today there is no government in any industrial society which does not have its counterpart of the American Council of Economic Advisors, where economic policy can supposedly be formulated with all the professional precision attending the discussion of purely technical or scientific questions. Under the tutelage of their economic counselors, political leaders manipulate discount rates and the money supply with all the confidence of space scientists at Cape Kennedy pushing the buttons and throwing the switches which guide rocket ships to the moon and home. Like the physicists, engineers, and operations analysts, the economists have become an indispensible part of the new industrial state's panoply of expertise. How many of us can even imagine a presidential press conference on the state of the economy where a surplus of Professor Lundberg's "mathematical specification and statistical quantification" is not the order of the day?


For those to whom economics means a book filled with numbers, charts, graphs, and formulae, together with much heady discussion of abstract technicalities like the balance of payments and gross national product, this remarkable collection of essays is certain to come either as a shock or a relief. E. F. Schumacher's economics is not part of the dominant style. On the contrary, his deliberate intention is to subvert "economic science" by calling its every assumption into question, right down to its psychological and metaphysical foundations.


Perhaps this sounds like a project that only a brash amateur would take on. But this book is the work of as professional and experienced an economist as any who bears the credentials of the gild. Schumacher has been a Rhodes Scholar in economics, an economic advisor to the British Control Commission in postwar Germany, arid, for the twenty years prior to 1971, the top economist and head of planning at the British Coal Board. It is a background that might suggest stuffy orthodoxy, but that would be exactly wrong. For there is another side to Schumacher, and it is there we find the vision of economics reflected in these pages. It is an intriguing mix: the president of the Soil Association, one of Britain's oldest organic farming organizations; the founder and chairman of the Intermediate Technology Development Group, which specializes in tailoring tools, small-scale machines, and methods of production to the needs of developing countries; a sponsor of the Fourth World Movement, a British-based campaign for political decentralization and regionalism; a director of the Scott Bader Company, a pioneering effort at common ownership and workers' control; a close student of Gandhi, nonviolence, and ecology. For more than two decades, Schumacher has been weaving his economics out of this off-beat constellation of interests and commitments and giving his ideas away from the platforms of peace, social justice, do-good, and third world organizations all over Europe. With few exceptions, the principal forums for his writing have been those little, intensely alive, pathfinding journals (like MANAS in America and Resurgence in England) which more than make up for their limited audience by being ten years ahead of the field in the quality of their thought.


As all this should make clear, Schumacher's work belongs to that subterranean tradition of organic and decen-tralist economics whose major spokesmen include Prince Kropotkin, Gustav Landauer, Tolstoy, William Morris, Gandhi, Lewis Mumford, and, most recently, Alex Comfort, Paul Goodman, and Murray Bookchin. It is the tradition we might call anarchism, if we mean by that much abused word a libertarian political economy that distinguishes itself from orthodox socialism and capitalism by insisting that the scale of organization must be treated as an independent and primary problem. The tradition, while closely affiliated with socialist values, nonetheless prefers mixed to "pure" economic systems. It is therefore hospitable to many forms of free enterprise and private ownership, provided always that the size of private enterprise is not so large as to divorce ownership from personal involvement, which is, of course, now the rule in most of the world's administered capitalisms. Bigness is the nemesis of anarchism, whether the bigness is that of public or private bureaucracies, because from bigness comes impersonality, insensitivity, and a lust to concentrate abstract power. Hence, Schumacher's title, Small Is Beautiful. He might just as well have said "small is free, efficient, creative, enjoyable, enduring" -- for such is the anarchist faith.


Reaching backward, this tradition embraces communal, handicraft, tribal, gild, and village lifestyles as old as the neolithic cultures. In that sense, it is not an ideology at all, but a wisdom gathered from historical experience. In our own time, it has reemerged spontaneously in the communitarian experiments and honest craftsmanship of the counterculture, where we find so many desperate and often resourceful efforts among young dropouts to make do in simple, free, and self-respecting ways amid the criminal waste and managerial congestion. How strange that this renewed interest in ancient ways of livelihood and community should reappear even as our operations re- I searchers begin to conceive their most ambitious dreams of cybernated glory. And yet how appropriate. For if there is to be a humanly tolerable world on this dark side of the emergent technocratic world-system, it will surely have to flower from this still fragile renaissance of organic husbandry, communal households, and do-it-yourself technics whose first faint outlines we can trace through the pages of publications like the Whole Earth Catalog, the Mother Earth News, and the People's Yellow Pages. Arid if that renaissance is to have an economist to make its case before the world, E. F. Schumacher is the man. Already his brilliant essay "Buddhist Economics" has become a much-read and often-reprinted staple of the underground press. It would be no exaggeration to call him the Keynes of postindustrial society, by which I mean (and Schumacher means) a society that has left behind its lethal obsession with those very megasystems of production and distribution which Keynes tried so hard to make manageable.


The first example of Schumacher's work I came across was an informal talk he gave in the mid-sixties on the practicality of Gandhi's economic program in India. I was at the time editing a small pacifist weekly in London (Peace News) and was on the lookout for anything about Gandhi I could find. But here was a viewpoint I had never heard expounded even by ardent Gandhians, most of. whom brushed over Gandhi's concern for village life and the spinning wheel as if it were the once regrettable folly of an otherwise great and important man. Not so of Schu1"! macher. Step by step, he spelled out the essential good sense of a third world economic policy that rejected imitation of Western models: breakneck urbanization, heavy j capital investments, mass production, centralized development planning, and advanced technology. In contrast, Gandhi's scheme was to begin with the villages, to stabilize and enrich their traditional way of life by use of labor-intensive manufacture and handicrafts, and to keep the nation's economic decision making as decentralized as possible, even if this slowed the pace of urban and industrial growth to a crawl.


From the standpoint of conventional economics, this sounds like a prescription for starvation. It is not that at all. Schumacher's point was that Gandhi's economics, for all its lack of professional sophistication (or perhaps for that very reason) was nonetheless the product of a wise soul, one which shrewdly insisted on moderation, preservation, and gradualism on the assumption that to seek "progress" by releasing cataclysmic social change is only a way to demoralize the many and make them the helpless dependents of the rich and expert few. And even then, it may not be a way to feed the hungry. Gandhi's economics started (and finished) with people, with their need for strong morale and their desire to be self-determining -- objectives which headlong development can only thwart. As Schumacher points out, "poor countries slip, and are pushed, into the adoption of production methods and consumption standards which destroy the possibilities of self-reliance and self-help. The results are unintentional neocolonialism and hopelessness."


It is typical of Schumacher that he should take Gandhi's economic principles seriously, as much in dealing with the advanced industrial countries as in discussing the third world. In doing so, he endorses much that his profession has written off with unexamined self-assurance. But then, economists, for all their purported objectivity, are the most narrowly ethnocentric of people. Since they are universally urban intellectuals who understand little of rural ways, they easily come to regard the land, and all that lives and grows upon it, as nothing more than another factor of production. Hence, it seems to them no loss, but indeed a gain, to turn all the world's farming into high-yield agri-industry, to depopulate the rural areas, and to crowd the cities to the point of chronic breakdown and crisis. Since they inherit their conception of work from the darkest days of early industrialization, they find it impossible to believe that labor might ever be a freely-chosen, nonex-ploitive, and creative value in its own right. Hence, itj seems to them self-evident that work must be eliminated in favor of machines or cybernated systems. Worst of all, since their world view is a cultural by-product of industrialism, they automatically endorse the ecological stupidity of industrial man and his love affair with the terrible simplicities of quantification. They thus overlook or distort the incommensurable qualities of life, especially Schumacher's holy trinity of "health, beauty, and permanence."


Such an ethnocentric, Western economics must clearly be as devastating for the underdeveloped countries which import its vision of life as for the developed societies which originated it. Today in poor nations everywhere we find far too many Western and Soviet financed projects like the African textile factory Schumacher describes: industries demanding such advanced expertise and such refined materials to finish their luxurious products that they cannot employ local labor or use local resources, but must import skills and goods from Europe and America. In Ghana the vast Volta River power project, built with American money at high interest, provides Kaiser Aluminum with stupendously cheap electricity contracted at a long-term low price. But no Ghanaian bauxite has been used by Kaiser, and no aluminum plants have been built in the country. Instead, Kaiser imports its aluminum for processing and sends it to Germany for finishing. Elsewhere we find prestigious megaprojects like Egypt's Aswan high dam, built by Russian money and brains to produce a level of power far beyond the needs of the nation's economy, that meanwhile blights the environment and the local agriculture in a dozen unforeseen and possibly insoluble ways. Or consider the poor countries that sell themselves to the international tourist industry in pursuit of those symbols of wealth and progress the West has taught them to covet: luxurious airports, highrise hotels, six-lane motor ways. Their people wind up as bellhops and souvenir sellers, desk clerks and entertainers, and their proudest traditions soon degenerate into crude caricatures. But the balance sheet may show a marvelous increase in foreign-exchange earnings. As for the developed countries from which this corrupting ethos of progress goes out: more and more their "growthmania" distorts their'' environments and robs the world of its nonrenewable resources for no better end than to increase the output of ballistic missiles, electric hairdryers, and eight-track stereophonic tape recorders. But in the statistics of the economic index such mad waste measures out as "productivity," and all looks rosy.


What kind of economics can treat all this as anything more than childish nonsense or criminal prodigality? The answer is: an economics that has no higher idea of what people are here on earth to be and to do than was bequeathed to it by Andrew Ure and Samuel Smiles and that has long since translated that debased conception of humanity into the objective quantities of its science, as if to quantify benightedness were to dignify it.


"The great majority of economists," Schumacher laments, "are still pursuing the absurd ideal of making their 'science' as scientific and precise as physics, as if there were no qualitative difference between mindless atoms and men made in the image of God." He reminds us that economics has only become scientific by becoming statistical. But at the bottom of its statistics, sunk well out of sight, are so many sweeping assumptions about people like you and me -- about our needs and motivations and the purpose we have given our lives. Again and again Schumacher insists that economics as it is practiced today -- whether it is socialist or capitalist economics -- is a "derived body of thought." It is derived from dubious, "meta-economic" preconceptions regarding man and nature that are never questioned, that dare not be questioned if economic science is to be the science it purports to be rather than (as it should be) a humanistic social wisdom that trusts to experienced intuition, plays by ear, and risks I a moral exhortation or two.


What, then, if those preconceptions are obsolete? What if they were never correct? What if there stir, in all those expertly quantified millions of living souls beneath the statistical surface, aspirations for creativity, generosity, brotherly and sisterly cooperation, natural harmony, and self-transcendence which conventional economics, by virtue of a banal misanthropy it mistakes for "being realistic," only works to destroy? If that is so (and there is no doubt in my mind that it is), then it is no wonder the policies which stem from that economics must so often be made to work, must be forced down against resistance upon a confused and recalcitrant human material which none dare ever consulf except by way of the phony plebiscite of the marketplace, which always turns out as predicted because it is rigged up by cynics, voted by demoralized masses, and tabulated by opportunists. And what sort of science is it that must, for the sake of its predictive success, hope and pray that people will never be their better selves, but always be greedy social idiots with nothing finer to do than getting and spending, getting and spending? It is, as Schumacher tells us: "when the available 'spiritual space' is not filled by some higher motivations, then it will necessarily be filled by something lower -- by the small, mean, calculating attitude to life which is rationalized in the economic calculus."


If that is so, then we need a nobler economics that is not afraid to discuss spirit and conscience, moral purpose and the meaning of life, an economics that aims to educate and elevate people, not merely to measure their low-grade behavior. Here it is.

III. The Role of Economics


Partly based on The Des Voeux Memorial Lecture, 1967, "Clean Air and Future Energy -- Economics and Conservation," published by the National Society for Clean Air, London, 1967.

To say that our economic future is being determined by the economists would be an exaggeration; but that their influence, or in any case the influence of economics, is far-reaching can hardly be doubted. Economics plays a central role in shaping the activities of the modern world, inasmuch as it supplies the criteria of what is 'economic' and what is 'uneconomic', and there is no other set of criteria that exercises a greater influence over the actions of individuals and groups as well as over those of governments. It may be thought, therefore, that we should look to the economists for advice on how to overcome the dangers and difficulties in which the modern world finds itself, and how to achieve economic arrangements that vouchsafe peace and permanence.


How does economics relate to the problems discussed in the previous chapters? When the economist delivers a verdict that this or that activity is 'economically sound' or 'uneconomic', two important and closely related questions arise: first, what does this verdict mean? And, second, is the verdict conclusive in the sense that practical action can reasonably be based on it?


Going back into history we may recall that when there was talk about founding a professorship for political economy at Oxford 150 years ago, many people were by no means happy about the prospect. Edward Copleston, the great Provost of Oriel College, did not want to admit into the University's curriculum a science 'so prone to usurp the rest'; even Henry Drummond of Albury Park, who endowed the professorship in 1825, felt it necessary to make it clear that he expected the University to keep the new study 'in its proper place'. The first professor, Nassau Senior, was certainly not to be kept in an inferior place, Immediately, in his inaugural lecture, he predicted that the new science 'will rank in public estimation among the first of moral sciences in interest and in utility' and claimed that 'the pursuit of wealth ... is, to the mass of mankind, the great source of moral improvement'. Not all economists, to be sure, have staked their claims quite so high. John Stuart Mill (1806-73) looked upon political economy 'not as a thing by itself, but as a fragment of a greater whole; a branch of social philosophy, so interlinked with all the other branches that its conclusions, even in its own peculiar province, are only true conditionally, subject to interference and counteraction from causes not directly within its scope'. And even Keynes, in contradiction to his own advice (already quoted) that 'avarice and usury and precaution must be our gods for a little longer still', admonished us not to 'overestimate the importance of the economic problem, or sacrifice to its supposed necessities other matters of greater and more permanent significance'.


Such voices, however, are but seldom heard today. It is hardly an exaggeration to say that, with increasing affluence, economics has moved into the very centre of public concern, and economic performance, economic growth, economic expansion, and so forth have become the abiding interest, if not the obsession, of all modern societies. In the current vocabulary of condemnation there are few words as final and conclusive as the word 'uneconomic'.


If an activity has been branded as uneconomic, its right to existence is not merely questioned but energetically denied. Anything that is found to be an impediment to economic growth is a shameful thing, and if people cling to it, they are thought of as either saboteurs or fools. Call a thing immoral or ugly, soul- destroying or a degradation of man, a peril to the peace of the world or to the well-being of future generations: as long as you have not shown it to be 'uneconomic' you have not really questioned its right to exist, grow, and prosper.


But what does it mean when we say something is uneconomic? I am not asking what most people mean when they say this: because that is clear enough. They simply mean that it is like an illness: you are better off without it. The economist is supposed to be able to diagnose the illness and then, with luck and skill, remove it. Admittedly, economists often disagree among each other about the diagnosis and, even more frequently, about the cure: but that merely proves that the subject matter is uncommonly difficult and economists, like other humans, are fallible.


No, I am asking what it means, what sort of meaning the method of economics actually produces. And the answer to this question cannot be in doubt: something is uneconomic when it fails to earn an adequate profit in terms of money. The method of economics does not, and cannot, produce any other meaning. Numerous attempts have been made to obscure this fact, and they have caused a very great deal of confusion: but the fact remains. Society, or a group or an individual within society, may decide to hang on to an activity or asset for non-economic reasons -- social, aesthetic, moral, or political -- but this does in no way alter its uneconomic character. The judgment of economics, in other words, is an extremely fragmentary judgment: out of the large number of aspects which in real life have to be seen and judged together before a decision can be taken, economics supplies only one -- whether a thing yields a money profit to those who undertake it or not.


Do not overlook the words 'to those who undertake it'. It is a great error to assume, for instance, that the methodology of economics is normally applied to determine whether an activity carried on by a group within society yields a profit to society as a whole. Even nationalised industries are not considered from this more comprehensive point of view. Every one of them is given a financial target -- which is, in fact, an obligation -- and is expected to pursue this target without regard to any damage it might be inflicting on other parts of the economy. In fact, the prevailing creed, held with equal fervour by all political parties, is that the common good will necessarily be maximised if everybody, every industry and trade, whether nationalised or not, strives to earn an acceptable 'return' on the capital employed. Not even Adam Smith had a more implicit faith in the 'hidden hand' to ensure that 'what is good for General Motors is good for the United States'.


However that may be, about the fragmentary nature of the judgments of economics there can be no doubt whatever. Even within the narrow compass of the economic calculus, these judgments are necessarily and methodically narrow. For one thing, they give vastly more weight to the short than to the long term. because in the long tem~. as Keynes put it with cheerful brutality. we are all dead. And then, second, they are based on a definition of cost which excludes all 'free goods'. that is to say, the entire God-given environment, except for those parts of it that have been privately appropriated. This means that an activity can be economic although it plays hell with the environment, and that a competing activity, if at some cost it protects and conserves the environment, will be uneconomic.


Economics, moreover, deals with goods in accordance with their market value and not in accordance with what they really are. The same rules and criteria are applied to primary goods, which man has to win from nature, and secondary goods, which presuppose the existence of primary goods and are manufactured from them. All goods are treated the same, because the point of view is fundamentally that of private profit-making, and this means that it is inherent in the methodology of economics to ignore man's dependence on the natural world.


Another way of stating this is to say that economics deals with goods and services from the point of view of the market, where willing buyer meets willing seller. The buyer is essentially a bargain hunter; he is not concerned with the origin of the goods or the conditions under which they have been produced. His sole concern is to obtain the bat value for his money.


The market therefore represents only the surface of society and its significance relate to the momentary situation as it exists there and then. There is no probing into the depths of things, into the natural or social facts that lie behind them. In a sense, the market is the institutionalisation of individualism and non-responsibility. Neither buyer nor seller is responsible for anything but himself. It would be 'uneconomic' for a wealthy seller to reduce his prices to poor customers merely because they are in need, or for a wealthy buyer to pay an extra price merely because the supplier is poor. Equally, it would be 'uneconomic' for a buyer to give preference to home-produced goods if imported goods are cheaper. He does not, and is not expected to, accept responsibility for the country's balance of payments.


As regards the buyer's non-responsibility, there is, significantly, one exception: the buyer must be careful not to buy stolen goods. This is a rule against which neither ignorance nor innocence counts as a defence and which can produce extraordinarily unjust and annoying results. It is nevertheless required by the sanctity of private property, to which it testifies.
To be relieved of all responsibility except to oneself, means of course an enormous simplification of business, We can recognise that it is practical and need not be surprised that it is highly popular among businessmen. What may cause surprise is that it is also considered virtuous to make the maximum use of this freedom from responsibility. If a buyer refused a good bargain because he suspected that the cheapness of the goods in question stemmed from exploitation or other despicable practices (except theft), he would be open to the criticism of behaving 'uneconomically'. which is viewed as nothing less than a fall from grace. Economists and others are wont to treat such eccentric behaviour with derision if not indignation. The religion of economics has its own code of ethics, and the First Commandment is to behave 'economically' -- many case when you are producing, selling, or buying. It is only when the bargain hunter has gone home and becomes a consumer that the First Commandment no longer applies: he is then encouraged to 'enjoy himself in any way he pleases. As far as the religion of economics is concerned, the consumer is extraterritorial. This strange and significant feature of the modern world warrants more discussion than it has yet received.


In the market place, for practical reasons, innumerable qualitative distinctions which are of vital importance for man and society are suppressed; they are not allowed to surface. Thus the reign of quantity celebrates its greatest triumphs in 'The Market'. Everything is equated with everything else. To equate things means to give them a price and thus to make them exchangeable. To the extent that economic thinking is based on the market, it takes the sacredness out of life, because there can be nothing sacred in something that has a price. Not surprisingly, therefore, if economic thinking pervades the whole of society. even simple non-economic values like beauty, health, or cleanliness can survive only if they prove to be 'economic'.


To press non-economic values into the framework of the economic calculus, economists use the method of cost/benefit analysis. This is generally thought to be an enlightened and progressive development, as it is at least an attempt to take account of costs and benefits which might otherwise be disregarded al- together. In fact, however, it is a procedure by which the higher is reduced to the level of the lower and the priceless is given a price, It can therefore never serve to clarify the situation and lead to an enlightened decision. All it can do is lead to self-deception or the deception of others; for to undertake to measure the immeasurable is absurd and constitutes but an elaborate method of moving from preconceived notions to foregone conclusions; all one has to do to obtain the desired results is to impute suitable values to the immeasurable costs and benefits. The logical absurdity, however, is not the greatest fault of the undertaking: what is worse, and destructive of civilisation, is the pretence that everything has a price or, in other words, that money is the highest of all values.


Economics operates legitimately and usefully within a 'given' framework which lies altogether outside the economic calculus. We might say that economics does not stand on its own feet, or that it is a 'derived' body of thought -- derived from meta- economics. If the economist fails to study meta-economics, or, even worse. If he remains unaware of the fact that there are boundaries to the applicability of the economic calculus, he is likely to fall into a similar kind of error to that of certain medieval theologians who tried to settle questions of physics by means of biblical quotations. Every science is beneficial within its proper limits but becomes evil and destructive as soon as it transgresses them.


The science of economics is 'so prone to usurp the rest' -- even more so today than it was 150 years ago, when Edward Copleston pointed to this danger -- because it relates to certain very strong drives of human nature, such as envy and greed. All the greater is the duty of its experts, the economists, to understand and clarify its limitations, that is to say, to understand meta-economics.


What, then, is meta-economics? As economics deals with man in his environment, we may expect that meta-economics consists of two parts -- one dealing with man and the other dealing with the environment. In other words, We may expect that economics must derive its aims and objectives from a study of man, and that it must derive at least a large part of ifs methodology from a study of nature.


In the next chapter, I shall attempt to show how the conclusions and prescriptions of economics change as the underlying picture of man and his purpose on earth changes. In this chapter, I confine myself to a discussion of the second part of meta- economics, i.e. the way in which a vital part of the methodology of economics has to be derived from a study of nature. As I have emphasised already, on the market all goods are treated the same, because the market is essentially an institution for unlimited bar- gain hunting, and this means that it is inherent in the methodology of modern economics, which is so largely market-oriented, to ignore man's dependence on the natural world. Professor E.H. Phelps Brown, in his Presidential Address to the Royal Economic Society on 'The Underdevelopment of Economics', talked about 'the smallness of the contribution that the most conspicuous developments of economics in the last quarter of a century have made to the solution of the most pressing problems of the times', and among these problems he lists 'checking the ad- verse effects on the environment and the quality of life of industrialism, population growth and urbanism'.


As a matter of fact, to talk of 'the smallness of the contribution' is to employ an euphemism, as there is no contribution at all; on the contrary, it would not be unfair to say that economics, as currently constituted and practised, acts as a most effective barrier against the understanding of these problems, owing to its addiction to purely quantitative analysis and its timorous refusal to look into the real nature of things.


Economics deals with a virtually limitless variety of goods and services, produced and consumed by an equally limitless variety of people. It would obviously be impossible to develop any economic theory at all, unless one were prepared to disregard a vast array of qualitative distinctions. But it should be just as obvious that the total suppression of qualitative distinctions, while it makes theorising easy, at the same time makes it totally sterile. Most of the 'conspicuous developments of economics in the last quarter of a century' (referred to by Professor Phelps Brown) are in the direction of quantification, at the expense of the understanding of qualitative differences. Indeed, one might say that economics has become increasingly intolerant of the latter, be cause they do not fit into its method and make demands on the practical understanding and the power of insight of economists, which they are unwilling or unable to fulfil. For example, having established by his purely quantitative methods that the gross National Product of a country has risen by, say, five per cent, the economist-turned-econometrician is unwilling, and generally unable, to face the question of whether this is to be taken as a good thing or a bad thing. He would lose all his certainties if he even entertained such a question: growth of GNP must be a good thing, irrespective of what has grown and who, if anyone, has benefited. The idea that there could be pathological growth, unhealthy growth. disruptive or destructive growth is to him a perverse idea which must not be allowed to surface. A small minority of economists is at present beginning to question how much further 'growth' will be possible, since infinite growth in a finite environment is an obvious impossibility: but even they cannot get away from the purely quantitative growth concept, Instead of insisting on the primacy of qualitative distinctions, they simply substitute non-growth for growth, that is to say, one emptiness for another.


It is of course true that quality is much more difficult to 'handle' than quantity, just as the exercise of judgement is a higher function than the ability to count and calculate. Quantitative differences can be more easily grasped and certainly more essay defined than qualitative differences: their concreteness is beguiling and gives them the appearance of scientific precision, even when this precision has been purchased by the suppression of Vital differences of quality. The great majority of economists are still pursuing the absurd ideal of making their 'science' as scientific and precise as physics. as if there were no qualitative difference between mindless atoms and men made in the image of God.


The main subject matter of economics is 'goods'. Economists make some rudimentary distinctions between categories of goods from the point of view of the purchaser, such as the distinction between consumers' goods and producers' goods; but there is virtually no attempt to take cognisance of what such goods actually are; for instance, whether they are man-made or God-given, whether they are freely reproducible or not. Once any goods, whatever their meta-economic character, have appeared on the market, they are treated the same, as objects for sale, and economics is primarily concerned with theorising on the bargain hunting activities of the purchaser.


It is a fact, however, that there are fundamental and vital differences between various categories of 'goods' which cannot be disregarded without losing touch with reality. The following might be called a minimal scheme of categorisation:


'Goods'
primary secondary
non-renewable renewable manufactures services
(category 1) (category 2) (category 3) (category 4)

There could hardly be a more important distinction, to start with. than that between primary and secondary goods, because the latter presuppose the availability of the former. An expansion of man's ability to bring forth secondary products is useless unless preceded by an expansion of his ability to win primary products from the earth. for man is not a producer but only a converter, and for every job of conversion he needs primary products. In particular, his power to convert depends on primary energy, which immediately points to the need for a vital distinction within the field of primary goods, that between non-renewable and renewable. As far as secondary goods are concerned, there is an obvious and basic distinction between manufactures and services. We thus arrive at a minimum of four categories, each of which is essentially different from each of the three others.


The market knows nothing of these distinctions. It provides a price tag for all goods and thereby enables us to pretend that they are all of equal significance. Five pounds' worth of oil (category 1) equals five pounds' worth of wheat (category 2), which equals five pounds' worth of shoes (category 3) or Eve pounds' worth of hotel accommodation (category 4). The sole criterion to determine the relative importance of these different goods is the rate of profit that can be obtained by providing them. If categories 3 and 4 yield higher profits than categories 1 and 2, this is taken as a 'signal' that it is 'rational' to put additional resources into the former and withdraw resources from the latter.


I am not here concerned with discussing the reliability or rationality of the market mechanism, of what economists call the 'invisible hand'. This has endlessly been discussed, but invariably without attention to the baric incommensurability of the four categories detailed above. It has remained unnoticed, for instance -- or if not unnoticed, it has never been taken seriously in the formulation of economic theory -- that the concept of 'cost' is essentially different as between renewable and non-renewable goods, as also between manufactures and services. In fact, without going into any further details, it can be said that economics, as currently constituted, fully applies only to manufactures (category 3), but it is being applied without discrimination to all goods and services, because an appreciation of the essential, qualitative differences between the four categories is entirely lacking.


These differences may be called meta-economic, inasmuch as they have to be recognised before economic analysis begins. Even more important is the recognition of the existence of 'goods' which never appear on the market, because they cannot be, or have not been, privately appropriated, but are nonetheless an essential precondition of all human activity, such as air, water, the soil, and in fact the whole framework of living nature.


Until fairly recently the economists have felt entitled, with tolerably good reason, to treat the entire framework within which economic activity takes place as given, that is to say. as permanent and indestructible. It was no part of their job and, indeed, of their professional competence, to study the effects of economic activity upon the framework. Since there is now increasing evidence of environmental deterioration, particularly in living nature, the entire outlook and methodology of economics is being called into question. The study of economics is too narrow and too fragmentary to lead to valid insights, unless complemented and completed by a study of meta-economics.


The trouble about valuing means above ends -- which, as confirmed by Keynes, is the attitude of modern economics -- is that it destroys man's freedom and power to choose the ends he really favours; the development of means, as it were, dictates the choice of ends. Obvious examples are the pursuit of supersonic transport speeds and the immense efforts made to land men on the moon. The conception of these aims was not the result of any insight into real human needs and aspirations, which technology is meant to serve, but solely of the fact that the necessary technical means appeared to be available.


As we have seen, economics is a 'derived' science which accepts instructions from what I call meta-economics. As the instructions are changed, so changes the content of economics. In the following chapter, we shall explore what economic laws and what definitions of the concepts 'economic' and 'uneconomic' result, when the meta-economic basis of western materialism is abandoned and the teaching of Buddhism is put in its place. The choice of Buddhism for this purpose is purely incidental; the teachings of Christianity, Islam, or Judaism could have been used just as well as those of any other of the great Eastern traditions.

When you can measure what you are speaking about, and express it in numbers, you know something about it;
but when you cannot measure it, when you cannot express it in numbers, your knowledge is of a meagre and unsatisfactory kind;
it may be the beginning of knowledge, but you have scarcely in your thoughts advanced to the state of Science, whatever the matter may be.

Lord Kelvin

IV. Buddhist Economics


First published in Asia: A Handbook, edited by Guy Wint, published by Anthony Blond Ltd., London, 1966.

'Right Livelihood' is one of the requirements of the Buddha's Noble Eightfold Path. It is clear, therefore, that there must be such a thing as Buddhist economics.


Buddhist countries have often stated that they wish to remain faithful to their heritage. So Burma: 'The New Burma sea no conflict between religious values and economic progress. Spiritual health and material wellbeing are not enemies: they are natural allies.'' Or: 'We can blend successfully the religious and spiritual values of our heritage with the benefits of modern technology.'' Or: 'We Burmese have a sacred duty to conform both our dreams and our acts to our faith. This we shall ever do.'"


All the same, such countries invariably assume that they can model their economic development plans in accordance with modern economics, and they call upon modern economists from so-called advanced countries to advise them, to formulate the policies to be pursued, and to construct the grand design for development, the Five-Year Plan or whatever it may be called. No one seems to think that a Buddhist way of life would call for Buddhist economics, just as the modern materialist way of life has brought forth modern economics.


Economists themselves, like most specialists, normally suffer from a kind of metaphysical blindness, assuming that theirs is a science of absolute and invariable truths, without any presuppositions. Some go as far as to claim that economic laws are as free from 'metaphysics' or 'values' as the law of gravitation. We need not, however, get involved in arguments of methodology. Instead, let us take some fundamentals and see what they look like when viewed by a modern economist and a Buddhist economist.


There is universal agreement that a fundamental source of wealth is human labour. Now, the modern economist has been brought up to consider 'labour' or work as little more than a necessary evil. From the point of view of the employer, it is in any case simply an item of cost, to be reduced to a minimum if it cannot be eliminated altogether, say, by automation. From the point of view of the workman, it is a 'disutility'; to work is to make a sacrifice of one's leisure and comfort, and wages are a kind of compensation for the sacrifice. Hence the ideal from the point of view of the employer is to have output without employees, and the ideal from the point of view of the employee is to have income without employment.


The consequences of these attitudes both in theory and in practice are, of course, extremely far-reaching. If the ideal with regard to work is to get rid of it, every method that 'reduces the work load' is a good thing. The most potent method, short of automation, is the so-called 'division of labour' and the classical example is the pin factory eulogised in Adam Smith's Wealth of Nations.' Here it is not a matter of ordinary specialisation, which mankind has practised from time immemorial, but of dividing up every complete process of production into minute parts, so that the final product can be produced at great speed without anyone having had to contribute more than a totally insignificant and, in most cases, unskilled movement of his limbs.


The Buddhist point of view takes the function of work to be at least threefold: to give a man a chance to utilise and develop his faculties; to enable him to overcome his egocentredness by joining with other people in a common task; and to bring forth the goods and services needed for a becoming existence. Again, the consequences that flow from this view are endless. To organise work in such a manner that it becomes meaningless, boring, stultifying, or nerve-racking for the worker would be little short of criminal: it would indicate a greater concern with goods than with people, an evil lack of compassion and a soul-destroying degree of attachment to the most primitive side of this worldly existence. Equally, to strive for leisure as an alternative to work would be considered a complete misunderstanding of one of the basic truths of human existence, namely that work and leisure are complementary parts of the same living process and cannot be separated without destroying the joy of work and the bliss of leisure.


From the Buddhist point of view, there are therefore two types of mechanisation which must be clearly distinguished: one that enhances a man's skill and power and one that turns the work of man over to a mechanical slave, leaving man in a position of having to serve the slave. How to tell the one from the other? 'The craftsman himself.' says Ananda Coomaraswamy, a man equally competent to talk about the modem west as the ancient east, 'can always, if allowed to, draw the delicate distinction between the machine and the tool. The carpet loom is a tool, a contrivance for holding warp threads at a stretch for the pile to be woven round them by the craftsmen's fingers; but the power loom is a machine, and its significance as a destroyer of culture lies in the fact that it does the essentially human part of the work.'" It is clear, therefore. that Buddhist economics must be very different from the economics of modem materialism, since the Buddhist sees the essence of civilisation not in a multiplication of wants but in the purification of human character. Character, at the same time, is formed primarily by a man's work. And work, properly conducted in conditions of human dignity and freedom, blesses those who do it and equally their products. The Indian philosopher and economist J. C. Kumarappa sums the matter up as follows:
'If the nature of the work is properly appreciated and applied, it will stand in the same relation to the higher faculties as food is to the physical body. It nourishes and enlivens the higher man and urges him to produce the best he is capable of. It directs his free will along the proper course and disciplines the animal in him into progressive channels. It furnishes an excellent background for man to display his scale of values and develop his personality.-"


If a man has no chance of obtaining work he is in a desperate position, not simply because he lacks an income but because he lacks this nourishing and enlivening factor of disciplined work which nothing can replace. A modern economist may engage in highly sophisticated calculations on whether full employment 'pays' or whether it might be more 'economic' to run an economy at less than full employment so as to ensure a greater mobility of labour, a better stability of wages, and so forth, His fundamental criterion of success is simply the total quantity of goods produced during a given period of time. 'If the marginal urgency of goods is low,' says Professor Galbraith in The Affluent Society, 'then so is the urgency of employing the last man or the last million men in the labour force." And again: 'lf ... we can afford some unemployment in the interest of stability -- a proposition, incidentally, of impeccably conservative antecedents -- then we can afford to give those who are unemployed the goods that enable them to sustain their accustomed standard of living.'


From a Buddhist point of view, this is standing the truth on its head by considering goods as more important than people and consumption as more important than creative activity. It means shifting the emphasis from the worker to the product of work, that is, from the human to the sub-human, a surrender to the forces of evil. The very start of Buddhist economic planning would be a planning for full employment, and the primary purpose of this would in fact be employment for everyone who needs an 'outside' job: it would not be the maximisation of employment nor the maximisation of production. Women, on the whole, do not need an 'outside' job, and the large-scale -employment of women in offices or factories would be considered a sign of serious economic failure. In particular, to let mothers of young children work in factories while the children run wild would be as uneconomic in the eyes of a Buddhist economist as the employment of a skilled worker as a soldier in the eyes of a modern economist.


While the materialist is mainly interested in goods, the Buddhist is mainly interested in liberation. But Buddhism is 'The Middle Way' and therefore in no way antagonistic to physical well-being. It is not wealth that stands in the way of liberation but the attachment to wealth; not the enjoyment of pleasurable things but the craving for them. The keynote of Buddhist economics, therefore, is simplicity and non-violence. From an economist's point of view, the marvel of the Buddhist way of life is the utter rationality of its pattern -- amazingly small means leading to extraordinarily satisfactory results.


For the modern economist this is very difficult to understand. He is used to measuring the 'standard of living' by the amount of annual consumption, assuming all the time that a man who consumes more is 'better off' than a man who consumes less. A Buddhist economist would consider this approach excessively irrational: since consumption is merely a means to human well-being the aim should be to obtain the maximum of well-being with the minimum of consumption.


Thus, if the purpose of clothing is a certain amount of temperature comfort and an attractive appearance, the task is to attain this purpose with the smallest possible effort, that is, with the smallest annual destruction of cloth and with the help of designs that involve the smallest possible input of toil. The less toil there is, the more time and strength is left for artistic creativity. It would be highly uneconomic, for instance, to go in for complicated tailoring, like the modern west, when a much more beautiful effect can be achieved by the skilful draping of uncut material. It would be the height of folly to make material so that it should wear out quickly and the height of barbarity to make anything ugly, shabby or mean. What has just been said about clothing applies equally to all other human requirements. The ownership and the consumption of goods is a means to an end, and Buddhist economics is the systematic study of how to attain given ends with the minimum means.


Modern economics, on the other hand, considers consumption to be the sole end and purpose of all economic activity, taking the factors of production -- land, labour, and capital -- as the means, The former, in short, tries to maximise human satisfactions by the optimal pattern of consumption, while the latter tries to maximise consumption by the optimal pattern of productive effort. It is easy to see that the effort needed to sustain a way of life which seeks to attain the optimal pattern of consumption is likely to be much smaller than the effort needed to sustain a drive for maximum consumption. 'We need not be surprised, therefore, that the pressure and strain of living is very much less in say, Burma than it is in the United States in spite of the fact that the amount of labour- saving machinery used in the former country is only a minute fraction of the amount used in the latter.


Simplicity and non-violence are obviously closely related. The optimal pattern of consumption, producing a high degree of human satisfaction by means of a relatively low rate of consumption, allows people to live without great pressure and strain and to fulfil the primary injunction of Buddhist teaching: 'Cease to do evil; try to do good.' As physical resources are everywhere limited, people satisfying their needs by means of a modest use of resources are obviously less likely to be at each other's throats than people depending upon a high rate of use. Equally, people who live in highly self-sufficient local communities are less likely to get involved in large-scale violence than people whose existence depends on world-wide systems of trade.


From the point of view of Buddhist economics, therefore, production from local resources for local needs is the most rational way of economic life, while dependence on imports from afar and the consequent need to produce for export to unknown and distant peoples is highly uneconomic and justifiable only in exceptional cases and on a small scale. Just as the modern economist would admit that a high rate of consumption of transport services between a man's home and his place of work signifies a misfortune and not a high standard of life, so the Buddhist economist would hold that to satisfy human wants from faraway sources rather than from sources nearby signifies failure rather than success. The former tends to take statistics showing an increase in the number of ton/miles per head of the population carried by a country's transport system as proof of economic progress, while to the latter -- the Buddhist economist -- the same statistics would indicate a highly undesirable deterioration in the pattern of consumption.


Another striking difference between modern economics and I Buddhist economics arises over the use of natural resources. Bertrand de Jouvenel, the eminent French political philosopher, has characterised 'western man' in words which may be taken as a fair description of the modern economist:
'He tends to count nothing as an expenditure, other than human effort; he does not seem to mind how much mineral matter he wastes and, far worse, how much living matter he destroys. He does not seem to realise at all that human life is a dependent part of -an ecosystem of many different forms of life. As the world is ruled from towns where men are cut off from any form of life other than human, the feeling of belonging to an ecosystem is not revived. This results in a harsh and improvident treatment of things upon which we ultimately depend, such as water and trees.)"


The teaching of the Buddha, on the other hand, enjoins a reverent and nonviolent attitude not only to all sentient beings but also, with great emphasis, to trees. Every follower of the Buddha ought to plant a tree every few years and look after it until it is safely established, and the Buddhist economist can demonstrate without difficulty that the universal observation of this rule would result in a high rate of genuine economic development independent of any foreign aid. Much of the economic decay of south- east Asia (as of many other parts of the world) is undoubtedly due to a heedless and shameful neglect of trees.


Modern economics does not distinguish between renewable and non-renewable materials, as its very method is to equalise and quantify everything by means of a money price. Thus, taking various alternative fuels, like coal. oil, wood, or water-power: the only difference between them recognised by modern economics is relative cost per equivalent unit. The cheapest is automatically the one to be preferred, as to do otherwise would be irrational and 'uneconomic'. From a Buddhist point of view, of course, this will not do; the essential difference between non-renewable fuels like coal and oil on the one hand and renewable fuels like wood and water-power on the other cannot be simply overlooked. Non- renewable goods must be used only if they are indispensable, and then only with the greatest care and the most meticulous concern for conservation. To use them heedlessly or extravagantly is an act of violence, and while complete non-violence may not be attainable on this earth, there is nonetheless an ineluctable duty on man to aim at the ideal of non-violence in all he does.


Just as a modem European economist would not consider it a great economic achievement if all European art treasures were sold to America at attractive prices, so the Buddhist economist would insist that a population basing its economic life on non- renewable fuels is living parasitically, on capital instead of income. Such a way of life could have no permanence and could therefore be justified only as a purely temporary expedient. As the world's resources of non-renewable fuels -- coal, oil and natural gas -- are exceedingly unevenly distributed over the globe and undoubtedly limited in quantity, it is clear that their exploitation at an ever-increasing rate is an act of violence against nature which must almost inevitably lead to violence between men.


This fact alone might give food for thought even to those people in Buddhist countries who care nothing for the religious and spiritual values of their heritage and ardently desire to embrace the materialism of modem economics at the fastest possible speed. Before they dismiss Buddhist economics as nothing better than a nostalgic dream, they might wish to consider whether the path of economic development outlined by modern economics is likely to lead them to places where they really want to be. Towards the end of his courageous book The Challenge of Man's Future, Professor Harrison Brown of the California Institute of Technology gives the following appraisal:
'Thus we see that, just as industrial society is fundamentally unstable and subject to reversion to agrarian existence, so within it the conditions which offer individual freedom are unstable in their ability to avoid the conditions which impose rigid organisation and totalitarian control. Indeed, when we examine all of the foreseeable difficulties which threaten the survival of industrial civilisation, it is difficult to see how the achievement of stability and the maintenance of individual liberty can be made compatible.'


Even if this were dismissed as a long-term view there is the immediate question of whether 'modernisation', as currently practised without regard to religious and spiritual values, is actually producing agreeable results. As far as the masses are concerned. the results appear to be disastrous -- a collapse of the rural economy, a rising tide of unemployment in town and country, and the growth of a city proletariat without nourishment for either body or soul.


It is in the light of both immediate experience and long-term prospects that the study of Buddhist economics could be recommended even to those who believe that economic growth is more important than any spiritual or religious values. For it is not a question of choosing between 'modern growth' and 'traditional stagnation'. It is a question of finding the right path of development, the Middle Way between materialist heedlessness and traditionalist immobility, in short, of finding 'Right Livelihood'.