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Small is beautiful but Schumacher's economics of scale runs deeper

EF Schumacher was interested in appropriateness of scale, not smallness a challenge the 'too big to fail' banks should heed
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Andrew Simms guardian.co.uk, Monday 14 November 2011 16.21 GMT Article history

The European Union 'is collapsing partly because its super-size currency is chronically incapable of meeting the needs of such a diverse range of economies'. Photograph: Remy De La Mauviniere/AP Link to this audio If EF Schumacher's great work on rethinking economics had been called the Principle of Subsidiary Function its audience, I suspect, might not have reached the millions that were touched by Small is Beautiful.

Yet the former is a more accurate description of the concept at the heart of his work and the latter, in spite of being key to his book's success, not only did Schumacher resist, but it became a caricature of his ideas, easier for opponents to dismiss than the subtlety of his actual arguments. Because Schumacher's interest was not in smallness, per se. That would, in every sense of the term, be small-minded. He was interested in "appropriateness of scale". The more accurate, if cumbersome, term "subsidiarity" he borrowed from the teachings of the Catholic church. In a papal encyclical, Pope Pius XII put it like this: "It is an injustice and at the same time a grave evil and disturbance of right order to assign to a greater and higher association what lesser and subordinate organisations can do." Things are best done, in other words, at the smallest appropriate scale. Hence, Schumacher's vision wasn't that everything should be small and local, but that in all things, ranging from decision-making in firms, to growing and distributing food and generating energy, our default position should be toward human scale. In this, the distance between decision and consequence, production and consumption, is kept as short as usefully and practically possible. Every neighbourhood might, therefore, have its own bakery, but not a factory making trains. He wrote: "There is wisdom in smallness if only on account of the smallness and patchiness of human knowledge, which relies on experiment far more than on understanding." In a warning that with the growth, concentration of ownership, power and market share of modern multinational corporations more, not less relevant Schumacher adds: "The greatest danger invariably arises from the ruthless application, on a vast scale, of partial knowledge such as we are currently witnessing in the application of nuclear energy, of the new chemistry in agriculture, of transportation technology, and countless other things." The bitterly ironic phrase synonymous with the finance-driven economic collapse of the last four years "too big to fail" is a perfectly dark reflection of Schumacher's irresistibly optimistic vision for reinventing economics as if people (and the planet) mattered. There couldn't be a better illustration of the failure of economics at the macro level to develop a theory of scale than the current crisis over the future of euro. How ironic that a European Union that designed in "subsidiarity" as a political insurance policy, is collapsing partly because its super-size currency is chronically incapable of meeting the needs of such a diverse range of economies. In some ways Schumacher was culturally conservative. His understanding of the role of women in the economy was a poor reflection of his times. Marilyn Waring's classic work on feminist economics, If Women Counted, published a decade after Schumacher's death, is a necessary addition to Small is Beautiful. But, otherwise, the sheer breadth of his challenge to economics, and its bristling relevance to now is extraordinary. Even with the benefit of far more sophisticated ecosystems modelling (which merely reinforces his analysis) his thoughts on how to re-engineer industry and work, the management of natural resources and the purpose of economics itself have not been bettered. He understood very clearly the need to make finance subservient to human needs, environmental imperatives and the real

economy, and promoted democratic trusteeship as an ownership and management model to achieve it. This, he wrote, overcomes, "the reductionism of the private ownership system and uses industrial organisations as a servant of man, instead of allowing it to use men simply as means to the enrichment of the owners of capital". As we look around the world at the backlash against inequality and the tyranny of casino finance, a passage from Small Is Beautiful's epilogue rings out. He quotes admiringly from a government report that concluded: "The fundamental questioning of conventional values by young people all over the world is a symptom of the widespread unease with which our industrial civilisation is increasingly regarded." Without a paradigm shift, it adds, "the downfall of civilisation will not be a matter of science fiction. It will be the experience of our children and grand-children".

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The Big Ideas

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Comments in chronological order (Total 27 comments)


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terryburgess 14 November 2011 4:32PM Nice article, thanks Andrew.

"the downfall of civilisation will not be a matter of science fiction. It will be the experience of our children and grand-children". Certainly sends a chill down my spine.
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conanthebarbarian 14 November 2011 4:40PM Response to terryburgess, 14 November 2011 4:32PM But not mine. I haven't got any.
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emale 14 November 2011 4:42PM "The fundamental questioning of conventional values by young people all over the world is a symptom of the widespread unease with which our industrial civilisation is increasingly regarded." Without a paradigm shift, it adds, "the downfall of civilisation will not be a matter of science fiction. It will be the experience of our children and grand-children". I guess my children must be different from most as they seem to be very happy with the products of "industrial civilisation", whether in the form of computer games, social networking media, mp3 players, mobile communication devices, the list goes on. These are the products of man's imagination and the risks some people take with their savings. Both need to be recognised and rewarded.
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rustat 14 November 2011 4:49PM The quotation attributed to Pius XII is a misattribution; it was in fact written by Pius XI in his encyclical Quadragessimo Anno in defense of the principle of subsidiarity which alas had unfortunate links with Italian fascism (espousing selection of leadership rather than election) and the discredited political system known as distributism developed by Hilair Belloc, G.K. Chesterton, and one Father Vincent McNabb (last heard of at Hyde Park Corner) urging that we should clean our shoes with the natural oils of our skin and ceaset to live in flats.
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terryburgess 14 November 2011 4:55PM Response to conanthebarbarian, 14 November 2011 4:40PM This comment was removed by a moderator because it didn't abide by our community standards. Replies may also be deleted. For more detail see our FAQs.

Ajmohno

14 November 2011 4:59PM As we look around the world at the backlash against inequality and the tyranny of casino finance, a passage from Small Is Beautiful's epilogue rings out. He quotes admiringly from a government report that concluded: "The fundamental questioning of conventional values by young people all over the world is a symptom of the widespread unease with which our industrial civilisation is increasingly regarded." Without a paradigm shift, it adds, "the downfall of civilisation will not be a matter of science fiction. It will be the experience of our children and grand-children". It's noticable that this "fundamental questioning" has arisen in a downturn in the economic cycle. I would be a lot more impressed with the motives and attribute a far greater level of credibility to the "fundamental questioning" had it occurred during "the good times". But, as night follows day, you don't see protestors out on the streets when everyones filling their boots.
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kikithefrog 14 November 2011 5:00PM He wrote: "There is wisdom in smallness if only on account of the smallness and patchiness of human knowledge, which relies on experiment far more than on understanding." A good solid free market argument. Sounds almost like Hayek. What have you done with the Andrew Simms from our universe?
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ingo 14 November 2011 5:05PM This comment was removed by a moderator because it didn't abide by our community standards. Replies may also be deleted. For more detail see our FAQs.

Optymystic 14 November 2011 5:13PM Response to terryburgess, 14 November 2011 4:55PM As in these pages previously - its Conan, not Onan!
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ingo 14 November 2011 5:14PM Response to emale, 14 November 2011 4:42PM emale, yes indeed they are fond of modernity and its gizmotronics, it is taking their minds away from mums moods, homework, walking the dog, whatever it is. What if they one day wake up and want to know what you have done to safeguard their future? what you

have done when they borrowed from the next two egnerations to pay for their over consumption today? The importance of Schumachers message is monumental, it grows every day and the sooner we decentralise our massive London centric political system, and with it the powers to raise taxes, establish accountable county Governments with a delegated, rotated central staff speaking on our behalf abroad, the better.
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kikithefrog 14 November 2011 5:26PM Response to conanthebarbarian, 14 November 2011 4:40PM "the downfall of civilisation will not be a matter of science fiction. It will be the experience of our children and grand-children". terryburgess: Certainly sends a chill down my spine. conanthebarbarian: But not mine. I haven't got any. Now that's what I call a really spineless comment.
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Ajmohno 14 November 2011 5:27PM Response to ingo, 14 November 2011 5:14PM The importance of Schumachers message is monumental, it grows every day and the sooner we decentralise our massive London centric political system, and with it the powers to raise taxes, establish accountable county Governments with a delegated, rotated central staff speaking on our behalf abroad, the better Have you ever met a local councillor??
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Optymystic 14 November 2011 5:34PM Isn't there something profoundly ironic in taking lessons on the appropriate level of decision making from a highly centralized organization, which has proved highly resistant to devolution of power over the centuries? Couple that with its markedly antidemocratic tendencies and one might begin to wonder if there are not better alternatives in e.g. Quakerism for models for running our affairs. The second irony lies in the the fact that much of the rationale for the failed economics adduced above is still based on the alleged efficiency, nay the perfection, of free competitive markets. The sort of competitive markets under which a handful of banks dominate our high street. Yet when we get into a banking crisis the authorities work towards even greater consolidation rather than greater competition. Perhaps the banks should have been broken up, not merged.

And the third lies in globalization, a universe in which transnational banks can whisk personnel and megabucks from tax haven to tax haven in the twinkling of an eye and are therefore beyond the regulation of states and legislatures, but mysteriously acquire a nationality when too many of their dodgy bets go wrong at the same time. If they are global banks, how come they they cease to be quite so global when they want a bale out? Have we reversed globalization? Is the retreat into national bunkers and the reduction in international lending some form of counter-revolution?
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theroadtowiganpier 14 November 2011 5:40PM Currently reading Small is beautiful for the first time and what a good book it is. Lots of wise words, common sense, and very enlightening. It's worrying how there's a complete absence of Schumacher's sensible wisdom in any of our political parties. Alisdair Grey touches some of themes of Schumacher in his great book Lanark. Although Lanark is a book on many levels; a novel, love story, science fiction, biography - it also contains a philosophy of smaller is better. Smaller regions, smaller governments, less huge multinational corporations, things on a more human scale where people matter. Probably not describing it very well but a lot of wisdom is there too.
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BertrandChorizo 14 November 2011 5:45PM Response to Ajmohno, 14 November 2011 4:59PM Ajmohno 14 November 2011 4:59PM As we look around the world at the backlash against inequality There is no backlash against inequality. 20million people spend 33m on lottery tickets on Saturday nights to make themselves more unequal. To be fair to Mr Simms, he and NEF, have been banging on about Schumacher good times and bad. The main meeting space in their office is even called the Schumacher Room.
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chinasyndrome 14 November 2011 6:09PM Response to Ajmohno, 14 November 2011 4:59PM You should be impressed, because he did raise these fundamental questions during the good times, well before peak oil.
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afancdogge 14 November 2011 6:21PM Andrew There are big problems associated with 'subsidiarity'. The idea that Gvt. or local authorities need not 'interfere' in smaller, community generated enterprises can lead to either the abandonment of projects or leave them open to 'takeover' by larger companies. This was evident from Objective 1 funding from EU - capital grants were often available but revenue support lacking. This sometimes left too short a timescale for new enterprises to become self funding. The other problem is this - these ideas are now incorporated into BS thinking. Already we are seeing established groups deprived of funding - this funding and support is going to larger, private providers . Some cooperative and community enterprises lose out in the bidding process because larger and richer orgs can underbid. Subsidiarity does not tackle the problems of an over arching economic system which holds the power. Most local enterprises concentrate on the provision of services or retail outlets and cannot compete in manufacturing . There is hope from Credit Unions which could challenge traditional banks - but some are already in danger of becoming overburdened by bureaucracy as local councils move in on them. They then fall under the control of the usual suspects and members lose their voice. They cease to be 'grass roots' and member driven. For as long as real wealth and power are held by the very few they can subvert ideas and movements to suite their own agenda.

I am actually a supporter of coops and similar approaches but there are lots of hurdles built into the prevailing system - access to land and property being among them. Leni
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babog 14 November 2011 6:52PM Good article, thanks. And Schumacher was right. Use of "the new chemistry in agriculture" has resulted in a a massive die-off of the honey bee. The result? In less than a decade we may be reduced to eating wheat and oats, and little else. The sense of the respect for the land, for people, for animals is non-existent in agribusiness. These are the same people whose actions caused the economic crisis. Anthropologists often say they are mystified as to how Easter Islanders could continue to fell trees in the full knowledge it would be catastrophic for their society. One only need to look at Western society to find the answer. Apathy. We know sprays kill bees and yet we continue to sell them. We know fossil fuels cause global warming and yet we continue to use them. We know allowing Big Business to buy local land will be disastrous and yet we continue to allow them to do so. Some of us do care, however. We don't want Big Business and we don't want agribusiness. Can we have small and local back before it is too late, please?

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padav 14 November 2011 7:10PM Thanks for this timely article Andrew EF Schumacher was interested in appropriateness of scale, not smallness Yes, the title of his most influential work does tend to mislead many. Schumacher was a pupil of Leopold Kohr and took much of his inspiration from his tutor. Kohr's seminal work "The Breakdown of Nations" doesn't receive the attention and accolades it really deserves. Kohr was visionary in his outlook, predicting the demise of the Nation State in its present form. Within Europe his words now seem increasingly prescient. His solution to Europe's woes is obvious in its simplicity yet frustrated at every turn by an insidious cocktail of Nationalistic fervour and the addiction of individual National administrations to that heady drug called power and influence. It really is about enabling the emergence of appropriate tiers of accountable (democratic) governance - if the matter in hand is big, manage it via a big institution - the Euro is big so manage it at the pan-European level. Healthcare may seem big but in reality its delivery is very localised and the same can be said for many facets of public service function - Education, Law & Order, Housing, IntraRegional Transport, Culture & Tourism are all policy portfolios lending themselves to localised delivery - so fund them at the local (Regional) level by raising tax revenues locally and prirotising the allocation of these finite resources at the same level. Why is the Chancellor of the Exchequer such a powerful figure in British political life answer; because he/she holds the purse strings, that's why - we all pay into a big central pot of tax money and this individual dispenses their largesse according to politically

driven whim - I want a large chunk of my taxes, those required to fund policy portfolios of an explicitly localised nature, levied at a much more local level and spent at that level, not sent off to some huge central pot! Here in the UK this penny is finally beginning to drop - in Scotland we have a perfect model to demonstrate the efficacy of this geo-political framework - and if it can work for Scotland with 5.5million population, why not Greater London with 7.5million or even Yorkshire at 4.7million, East Anglia at 3.9million or Lancastria (combined trad. counties of Lancashire & Cheshire) at 6.3million - the answer of course is that it would work but our exalted leadership in London would never allow such a subversive idea to take root!
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HarryTheHorrible 14 November 2011 7:30PM There couldn't be a better illustration of the failure of economics at the macro level to develop a theory of scale than the current crisis over the future of euro. How ironic that a European Union that designed in "subsidiarity" as a political insurance policy, is collapsing partly because its super-size currency is chronically incapable of meeting the needs of such a diverse range of economies.

Oh, really? Isn't the problem more that a bunch of silly banks have lent far too much money to fiscally incontinent governments and are now crying like little kids because they're worried they won't get their money back?
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terryburgess 14 November 2011 7:40PM Response to emale, 14 November 2011 4:42PM I guess my children must be different from most as they seem to be very happy with the products of "industrial civilisation", whether in the form of computer games, social networking media, mp3 players, mobile communication devices, the list goes on. And how happy will they be when things do finally break down and none of that crap works anymore?
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teaandchocolate 14 November 2011 7:56PM "The fundamental questioning of conventional values by young people all over the world is a symptom of the widespread unease with which our industrial civilisation is increasingly regarded." Without a paradigm shift, it adds, "the downfall of civilisation will not be a matter of science fiction. It will be the experience of our children and grand-children". I think that the people in the west are beginning to come to terms with their failure, to a certain extent. Occupy is a manifestation of this realisation. Largeness has always meant

cheap, plentiful and available. Now we are forced to accept that our world's resources are not limitless, we begin to grasp the horrific consequences of our excess. It's the east who want 'to have it' all nowadays. It's heartbreaking, but I fear we could be doomed.
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GreatGrandDad 15 November 2011 5:41AM The Collapse of Complex Societies (Painter 1988) is also relevant reading today--------and For the bCommon Good: Redirecting the Economy Toward Community, the Environment, and a Sustainable Future (Daley and Cobb 1989). However, 'teaandchocolate' (who says at 7:56 AM: It's the east who want 'to have it' all nowadays. It's heartbreaking, but I fear we could be doomed.) can take heart from the fact that it is only about one-sixth of the world's population (in the 'West' and a bit of the East) who have got themselves into this credit-based cul-de-sac of an industrialism/capitalism/consumerism structure that can no longer find fuels and ores at the levels that it needs to keep itself going. There was recently an International Global Finance Conference for which I stuck my tongue in my cheek and wrote, for the section on 'Risk of Financial Collapse', a paper on that risk as seen from Isaan. (The paper is on the website listed in my profile.) Basically, the paper said "My neighbours would cope without anything more than some slight inconvenience whilst they were making a few re-adjustments to what their grandparents used to do and which they know all about and have the necessary skills to implement." Those in 'the rich West' might like to compare their socio-economic situations with that of my neighbours.

Here in rural SE Asia (in the Middle Mekong region of Isaan and Laos) there's a population of 30 million who have an adequate amount of industry, capital, and consumption, but have not elevated them into -isms and so have not ended up with their society serving The Market. Commentators in 'the rich West' describe my neighbours as being amongst 'the rural poor'; but I think that 'peri-urban secure' would be closer to the mark. Their markets, along with reciprocity (sharing of work) and redistribution (sharing of 'windfalls) serve society and not vice versa. Some of the attributes of their lifestyle are: Housing that is adequate and owned outright on their own land. So no monthly rent or mortgage payment to find. 100% secure. Food that is locally-grown mostly by themselves and for which there are traditional recipes that make it delicious. The staple is rice that they have grown themselves, or had grown for them on their land by a landless neighbour on a half-shares basis. ('Tis the duty of the wealthy man to make employment for the artisan.) So both they and their landless neighbour, by being frugal over the years, will have got to where they hold three year's household supply in their granaries and only sell the surplus. 100% secure. They keep their savings in gold and are independent of forex rates. 100% secure. Mostly they work for themselves----and no boss ever sacked himself! 100% secure. Or they are part of an extended family and pull their weight in it. 100% secure. Even in real old age, each person has their role to play. I know one old lady, 95 and blind, who entertains her village's primary school children with stories that she heard as a child. And nobody is overworked. The four months of the dry season when there is very little to do on the land are the time for festival after festival of free fun. One day, 'the deluded one- sixth' in the so-called 'developed' nations will come to their senses, decide not to be 'doomed', and set about achieving such security through livelihoods that are thrifty, frugal, and within-one's-means. Meanwhile, though, I'll not hold my breath.
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TimWorstall 15 November 2011 8:23AM This is the same EF Schumacher who was the Chief Economist for the National Coal Board is it? And does his book still have that long chapter on how we really ought to be using coal to power the UK? It's just that no one seems to mention that part any more. And as kikthefrog points out: He wrote: "There is wisdom in smallness if only on account of the smallness and patchiness of human knowledge, which relies on experiment far more than on understanding." That's as good a description of a laissez faire market approach as you're going to get. Allow peop[le to do as they wish, experiement with this that and the other and then we'll all gravitate to those systems and methods which work best. And it's most certainly a very strong argument against the "precautionary principle". For we have to go and do the experiments, rather than try and prove they will do no harm before we do them.
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NotWithoutMyMonkey 15 November 2011 9:27AM Response to TimWorstall, 15 November 2011 8:23AM The chapter is still there in my late edition Tim. What of it when the book was written 40 years ago? Taken as a whole, its the overall insightfulness and prescience of Schumacher's work which leads us to reflect upon it today 4 decades on and motivates people to act in ways consistent with its values. Take 'Practical Action' for example and the 'Appropriate Technology' movement. David Hume, Voltaire, Immanuel Kant, Thomas Jefferson and even Adam Smith, despite his opposition to slavery hardly held progressive or enlightened attitudes towards the people of Africa. Surely, wherever we look we can surely find positions and opinions held by great and influential thinkers which no longer accord with the current moral schema. This fact however doesn't inhibit them from being broadly influential in the big picture stuff because it is possible for even moderately intelligent people to place such views in context.
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harmonyfuture 15 November 2011 11:44AM Good arrticle and some very good comments. Though it's nice to find opinion/theory that vindicates one's frustrations with the current state of affairs, they never provide the catalyst for change, self interest sees to that. History tells me that real change comes from the sort of strife that we all fear, be it natural or more often man made, so our choices are destroy and start again or business as usual.

mrpants 16 November 2011 12:38PM Response to BertrandChorizo, 14 November 2011 5:45PM Bertrand, completely off topic, but your your picture is a hoot!
http://www.guardian.co.uk/commentisfree/2011/nov/14/small-is-beautiful-ef-schumacher