BUSINESS: The Ultimate Resource

May 2003 Upgrade #8

MANAGEMENT LIBRARY
Small Is Beautiful
By E. F. Schumacher Why Read It?
Schumachers book has become one of the most influential works ever on environmental issues and business. It looks at traditional Western economics in a radical way, arguing that big is not always best. His work has struck a chord with politicians, environmentalists, and a growing number of business leaders.

Getting Started
Schumacher argues that the relentless pursuit of profit and progress has resulted in economic inefficiency, environmental pollution, and inhumane working conditions. Instead, he proposes greater use of intermediate technology, based on smaller work units, communal ownership, and the use of local labor and resources.

Contribution
1. The Problem of Production Schumacher believes that business has not solved the problem of production. Businesses are using up the store of natural capital and he cites the spiraling demands on fossil fuels and other finite natural resources. The proposal to replace fossil fuels with human-made energy sources such as nuclear fuels creates its own problems. The authors view is that the concept of peace through universal prosperity is also unachievable. He argues that, if prosperity grew in line with population growth, the impact on fuel consumption and subsequent atmospheric pollution would be extremely damaging. 2. Changing the Emphasis of Economics The solution, he claims, lies in a reorientation of science and technology. The emphasis should not be on concentrating production in larger and larger units, it should be on making technology accessible and suitable for small-scale application. He also believes that technology should leave room for human creativity, rather than replacing it. Traditional economic theories are driven by market forces. Schumacher believes that they ignore humanitys dependence on the natural world. Economics, he says, is also overdependent on quantitative measures such as gross domestic product and consequently overlooks qualitative measures such as the impact of the economy on the environment. According to Schumacher, economics looks upon human labor as a necessary input to wealth. Business takes every opportunity to reduce the cost, making work meaningless. An

Bloomsbury Publishing Plc 2003

BUSINESS: The Ultimate Resource

May 2003 Upgrade #8

alternative point of view says that work should enable people to utilize their faculties and join in a common cause. This is in contrast to the theory that consumption is the only real end. 3. Toward a Smaller Scale Schumacher points out that scale is another important element of economic thinking. The traditional theory is that economic organizations, such as businesses, should be as large as possible. He counters that they only need to be big enough to meet real needs. Schumacher also argues for the more effective use of land. It is not simply a factor of production. He cites the flight from the land as evidence of this misunderstanding. 4. The Efficiency Gap The author is critical of modern industrial efficiency. The United States, for example, has around 5% of the worlds population, yet requires almost 40% of the worlds primary resources to sustain its economy. Apart from the demand on resources, Schumacher argues that this situation also creates problems between producer and consumer countries. An economy that is so dependent on other resources must in the long term suffer. 5. A Human Face for Technology Schumacher believes that technology needs a human face. Technology should free people from the burdens of work. He describes how the Intermediate Technology Development Group aims to broaden the use of technology, supporting production by the masses, instead of mass production. This approach, he feels, would be an effective way to support regional economic development around the world. Despite his emphasis on small-scale regional development, Schumacher accepts that large organizations, will remain an important part of the economy. He believes that setting up smaller units within a larger organization could help to overcome any inherent problems of size.

Context
Schumacher, like Hawken and Lovins in Natural Capitalism, highlights the conflict between business growth and the destruction of natural resources. Instead, he proposes a system of environmentally friendly business that takes account of limited resources and offers everyone a stake in success. He draws on a wide variety of influences and sources of thinking to develop his themes. These include Buddhist economics, Adam Smith, Ghandi, and economists such as Galbraith. Although Schumachers work could be regarded as utopian, he proposes practical working solutions, some of which have already been put into successful practice.

Bloomsbury Publishing Plc 2003

BUSINESS: The Ultimate Resource

May 2003 Upgrade #8

For More Information

Schumacher, E. F. Small is Beautiful: A Study of Economics As If People Mattered. New York: HarperCollins, 1989.

Further Reading
Hawken, Paul, Amory B. Lovins, and L. Hunter Lovins. Natural Capitalism: The Next Industrial Revolution. Boston, MA: Back Bay Books 2000.

!"
One of the most fateful errors of our age is the belief that the problem of production has been solved. Small Is Beautiful

Bloomsbury Publishing Plc 2003