Blogs >> E.F. Schumacher offers a route out of the crisis - by Adam Lent

E.F. Schumacher offers a route out of the crisis - by Adam Lent

EF Schumacher Alternative Economics	& Sustainable Economics

Adam LentAdam Lent Alternative Economics	and Sustainable Economic

For most of his life E.F. Schumacher was a very conventional economist. As a young man he held mainstream conservative views and dedicated himself to statistical analysis. However, deeply shocked by the Depression and the war, he followed the economic mainstream by falling under the spell of John Maynard Keynes. After the war he became the Chief Economist for the UK’s National Coal Board which ran the newly nationalised coal industry.

Ironically, given his later work, Schumacher was at the heart of an establishment that believed big was beautiful.

Throughout the nineteenth century, American corporations had been amassing special privileges and political support until, in the final decade of that century, a ‘merger mania’ took hold shrinking the number of leading companies in the States from 2,000 to 200. The mega-corporation was born. By the 1930s, European business leaders and politicians were falling over themselves to adopt ‘the American model’.

Keynes’s views, or at least a certain interpretation of them, provided the intellectual justification for governments to follow suit. Just as the economy had become dominated by a handful of huge, hierarchical firms churning out standardised products, politicians were increasingly enamoured by the idea that government could be done in the same way. Vast welfare, health, housing and education systems were established to be run by technocrats and employing millions.

By the 1960s, Schumacher, broke with this ‘big consensus’. Bigness may have delivered rising living standards, he concluded, but at a huge cost. Work, which should be a source of creativity and self-realisation, had become dehumanised. Ownership, which should be a way of earning a decent living, had become a cause of inequality. And nature, which should be treated as a renewable resource, was being raided as though it was an inexhaustible supply of materials.

Schumacher marshalled his thoughts in his book Small is Beautiful in 1973. The work was an overnight success catapulting the economist to global celebrity.

The popularity of Small is Beautiful was driven by the fact that the world of big corporations and big government was deeply troubled in the 1970s with increasing economic problems after a thirty year period of uninterrupted growth. However, Schumacher died in 1977 just as new markets were opening up in Asia giving the troubled economies of the West a lifeline. A new era of growth began until, of course, it came to a juddering halt once again in 2008.

Searching for a solution to our current crisis, many have looked back to Keynesian values.  The answer we are often told is to accept a new role for big government, stimulating and guiding the economy and using powerful regulation to control the behaviour of big business. Concerns that such solutions failed to prevent crisis in the 1970s which ultimately spurred the search for a new model which led to crisis in 2008 are wilfully ignored.

Schumacher recognised that something more profound had to change in our economy and society if we were not to find ourselves permanently stuck in a cycle of growth and crisis.

He recognised that concentrating so much power and wealth in the hands of a few not only rips the humanity out of our economy, it is also profoundly dangerous. In our complex world, the ‘right’ decisions cannot be made by small elites with access to highly imperfect information. Big organisations are a breeding ground for big mistakes which lead ultimately to dire consequences for the millions of people who rely on those organisations for their livelihoods.

Schumacher saw that a world built around a much wider distribution of power and wealth across many small organisations would be one where creativity and respect was more likely to flourish and one where sustainability and stability was more likely to take hold.

As our current crisis trundles on six years after the Crash, now may be the time for us to turn to the ideas of Schumacher rather than Keynes.

Adam Lent is the Director of the Action and Research Centre at the RSA. He is crowdfunding for his new book, Small is Powerful: Why the era of big business, big government and big culture is over (and why it’s a good thing). You can back the book and bag yourself a copy here.

A discount for all our blog readers is valid for 1 month - just enter the code schumacher5 at checkout for 'Small is Powerful' on the Unbound site to get £5 off any of the pledge levels.

Adam is on Twitter here.


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