“Small is Beautiful” by E. F. Schumacher

The Problem of Production

“The modern industrial system, with all its intellectual sophistication, consumes the very basis on which it has been erected”, the irreplaceable capital which it treats as unlimited income, i.e., natural capital (capital provided by nature, not by man, e.g., fossil fuels) and human substance.

“We need methods and equipment which are cheap enough so that they are accessible to everyone, suitable for small-scale application and compatible with man’s need for creativity.” Unless people have ownership of the means of production, they would not achieve independence, political and economic power. Small-scale applications are less likely to do irreversible, system-wide damages than large ones.

Man should do intrinsically significant (and consequently profitable) work. “I know that nothing is better for them than to rejoice and to do good in their lives, and also that every man should eat and drink and enjoy the good of all his labor — it is the gift of God” (Ecclesiastes 3:12,13) When people are without work or subjected to monotonous, moronic and soul-destroying work, it would inevitably produce general frustration and alienation, even social turmoil.

A Theory of Large-Scale Organisation

1. The Principle of Subsidiarity: “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.

2. The Principle of Vindication: “Good government is always government by exception. Except for exceptional cases, the subsidiary unit must be defended against reproach and upheld”. The exception, the criterion for accountability, must be clearly defined so that the unit knows whether it is performing satisfactorily, taking into account special and inescapable advantages (rent) and disadvantages (subsidy).

3. The Principle of Identification: “Each subsidiary unit must have both a profit and loss account and a balance sheet. … A unit’s success should lead to greater freedom and financial scope for the unit, while failure –in the form of losses– should lead to restriction and disability. One wants to reinforce success and discriminate against failure.”

New Patterns of Ownership

“For it is not private ownership, but private ownership divorced from work, which is corrupting to the principle of industry”, royalties, ground-rents, monopoly profits, surpluses of all kinds. Private ownership in large-scale enterprise is enabling functionless owners to live parasitically on the labour of others.

“So the organisation of society on the basis of function, instead of on that of rights, implies three things: First, proprietary rights shall be maintained when they are accompanied by the performance of services and abolished when they are not. Second, the producers shall stand in direct relation to the community for whom production is carried on, so that their responsibility to it may be obvious and unmistakable. Third, the obligation for the maintaince of the service shall rest upon the professional organisations of those who perform it, subject to the supervision and criticism of the consumer.”

My question: Perhaps there shouldn’t be any stock or interests either, because they are not derived from work. This will perhaps help leveling the playing field between the rich and the poor. Why is that the rich get richer and the poor get poorer? Why can’t everyone have access to education and the support of infrastructure (information, communication and feedback) that private industries have?

Schumacher also argues that, since private enterprises derive large benefits from the infrastructure which the society has built up through public expenditure, the public should receive one-half of the distributed profits of large-scale enterprises, “not by means of profit taxes but by means of a fifty percent ownership of the equity of such enterprises.”

My question: Is there a way to estimate/calculate the price of infrastructure and natural resources, so that private enterprises can be charged for the resources they consume? But leave their profits free from taxation? Enterprises should not be  forced to pay taxes or give to the public/government. It is against human drive and instinct to give what they did not receive.

Schumacher seems to blame advances in science and technology for making people unemployed, and postulates that an “intermediate technology” should be deployed in third-world countries, so that there could be “production by the masses”, not “mass production”.

Here is where I disagree. We should not return to labor-intensive work just so that people can all be employed, but that we should provide the resources and training for them to empower them to do works that require human creativity and interactions. For example, supermarkets have started to use “self checkout” counters. Some may argue that it would make the salespeople unemployed, but if they can be trained to know the products they are selling and match them with the needs of the customers that come to them regularly. They can provide services that are far more valuable than just ringing up the cash registers.


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