Economics as if People Mattered

On Friday last, Satish Kumar gave a talk at the Gulbenkian, as part of its Environmental Program’s “Reading the Classics.” A friend of EF Schumacher’s, Kumar spoke of his 1973 classic, Small is Beautiful: A Study of Economics as if People Mattered. The interview with Kumar published in today’s Público gives the main points Kumar shared, that our crisis is not one of the economy, but of money, for Nature continues to be productive. The local economy should be the economic base, for it offers work, creates community and is less destructive of the environment. Our obsession with money has led us to forget its purpose, which is to provide for human welfare. Kumar believes we are at the cusp of great transformation.

It is time to re-read Schumacher’s classic, particularly for the way he thought as highlighted by Olivia Bina, respondent at the conference. It is this type of thinking that will bring us out of our crisis that goes beyond finance and the economy, to touch the essence of civilization, which is humanity. An economist, Schumacher thought like a philosopher. He sought not to prove any theory, but to discern on important issues. Adam Smith was firstly a philosopher, and economics started as a branch of philosophy. JM Keynes commented that an economist must be “mathematician, historian, statesman and philosopher,” an integrated, reflective and responsible person. But economists today shun philosophy for its “non-objectivity.”

Schumacher highlighted the dignity of humans and distinguished between jobs and work. Modern economics considers labor as a necessary evil, as a “disutility…a sacrifice of one’s leisure and comfort, and wages are a kind of compensation for the sacrifice.” For Schumacher, there is dignity in work, as it allows humans to develop their faculties, collaborate with others on a common task, and bring forth the goods and services necessary for existence. It is a noble and creative task.

Schumacher criticized the modern industrial system for consuming the very basis on which it has been erected, for living on irreplaceable capital which is treated as income. Money can be created, but natural resources cannot. He advocated “a life-style designed for permanence” and criticized the systematic cultivation of greed and envy to promote unwarrantable wants and unlimited consumption. He questioned “if the foundations are unsound, how could society be sound?” He wrote that “the substance of man cannot be measured by GNP.”

He termed the market the “institutionalization of individualism and non-responsibility.” He highlighted ethics beyond the “sanctity of private property,” and reminded us that Ghandi spoke disparagingly of “dreaming of systems so perfect that no one will need to be good.” He called for wisdom and stressed the importance of human behavior and reflected judgment in building the world we wish to inhabit. It is up to us to say what is “enough,” for economists value growth above all and have no concept of what is “enough.” The trouble he saw with valuing means above ends is that “it destroys man’s freedom and power to choose the ends he really favors.”

Schumacher called for “meta-economics,” dealing with humans and with Nature. He was the first holistic thinker, mindful of the wonder of Nature and of humanity placed within Nature. It is this harmonic living that can bring the happiness much debated today. It is time to re-read Schumacher and reflect on the implications of what he wrote.