Small is Beautiful, by E.F. Schumacher

Peaceful relations among humans on earth, and peaceful relations between humans and the other life forms on the planet, are imperative for the survival of planet earth as a habitat for life as we know it. Making the achievement of peace an affirmative goal for all humanity is noble and essential.

Re: Small is Beautiful, by E.F. Schumacher

Postby admin » Tue Jan 05, 2016 2:24 am

Nine: Nuclear Energy - Salvation or Damnation?

The main cause of the complacency - now gradually diminishing - about future energy supplies was undoubtedly the emergence of nuclear energy, which, people felt had arrived just in time. Little did they bother to inquire precisely what it was that had arrived. It was new, it was astonishing, it was progress, and promises were freely given that it would be cheap. Since a new source of energy would be needed sooner or later, why not have it at once?

The following statement was made six years ago. At the time, it seemed highly unorthodox.

The religion of economics promotes an idolatry of rapid change, unaffected by the elementary truism that a change which is not an unquestionable improvement is a doubtful blessing. The burden of proof is placed on those who take the "ecological viewpoint": unless they can produce evidence of marked injury to man, the change will proceed. Common sense, on the contrary, would suggest that the burden of proof should lie on the man who wants to introduce a change; he has to demonstrate that there cannot be any damaging consequences. But this would take too much time, and would therefore be uneconomic. Ecology, indeed, ought to be a compulsory subject for all economists, whether professionals or laymen, as this might serve to restore at least a modicum of balance. For ecology holds "that an environmental setting developed over millions of years must be considered to have some merit. Anything so complicated as a planet, inhabited by more than a million and a half species of plants and animals, all of them living together in a more or less balanced equilibrium in which they continuously use and re-use the same molecules of the soil and air, cannot be improved by aimless and uninformed tinkering. All changes in a complex mechanism involve some risk and should be undertaken only after careful study of all the facts available. Changes should be made on a small scale first so as to provide a test before they are widely applied. When information is incomplete, changes should stay close to the natural processes which have in their favour the indisputable evidence of having supported life for a very long time".''

The argument, six years ago, proceeded as follows: Of all the changes introduced by man into the household of nature, large-scale nuclear fission is undoubtedly the most dangerous and profound. As a result, ionising radiation has become the most serious agent of pollution of the environment and the greatest threat to man's survival on earth. The attention of the layman, not surprisingly, has been captured by the atom bomb, although there is at least a chance that it may never be used again. The danger to humanity created by the so-called peaceful uses of atomic energy may be much greater. There could indeed be no clearer example of the prevailing dictatorship of economics. Whether to build conventional power stations, based on coal or oil, or nuclear stations, is being decided on economic grounds, with perhaps a small element of regard for the 'social consequences' that might arise from an over-speedy curtailment of the coal industry. Put that nuclear fission represents an incredible, incomparable, and unique hazard for human life does not enter any calculation and is never mentioned. People whose business it is to judge hazards, the insurance companies, are reluctant to insure nuclear power stations anywhere in the world for third party risk, with the result that special legislation has had to be passed whereby the State accepts big liabilities. Yet, insured or not, the hazard remains, and such is the thraldom of the religion of economics that the only question that appears to interest either governments or the public is whether 'it pays'.

It is not as if there were any lack of authoritative voices to warn us. The effects of alpha, beta, and gamma rays on living tissues are perfectly well known: the radiation particles are like bullets tearing into an organism, and the damage they do depends primarily on the dosage and the type of cells they hit. As long ago as 1927, the American biologist, H. J. Muller, published his famous paper on genetic mutations produced by X-ray bombardment.' and since the early 1930s the genetic hazard of exposure has been recognised also by non-geneticists. It is clear that here is a hazard with a hitherto inexperienced 'dimension', endangering not only those who might be directly affected by this radiation but their offspring as well.

A new 'dimension' is given also by the fact that while man now can - and does - create radioactive elements, there is nothing he can do to reduce their radioactivity once he has created them. No chemical reaction, no physical interference, only the passage of time reduces the intensity of radiation once it has been set going. Carbon-14 has a half -life of 5,900 years, which means that it takes nearly 6,000 years for its radioactivity to decline to one-half of what it was before. The half-life of strontium-90 is -twenty-eight years. But whatever the length of the half-life, some radiation continues almost indefinitely, and there is nothing that can be done about it, except to try and put the radioactive substance into a safe place.

But what is a safe place, let us say, for the enormous amounts of radioactive waste products created by nuclear reactors? No place on earth can be shown to be safe. It was thought at one time that these wastes could safely be dumped into the deepest parts of the oceans, on the assumption that no life could subsist at such depths." But this has since been disproved by Soviet deep-sea exploration. Wherever there is life, radioactive substances are absorbed into the biological cycle. Within hours of depositing these materials in water, the great bulk of them can be found in living organisms. Plankton, algae, and many sea animals have the power of concentrating these substances by a factor of 1,000 and in some cases even a million. As one organism feeds on another, the radio- active materials climb up the ladder of life and find their way back to man.

No international agreement has yet been reached on waste disposal. The conference of the international Atomic Energy Organisation at Monaco, in November 1959, ended in disagreement, mainly on account of the violent objections raised by the majority of countries against the American and British practice of disposal into the oceans. ‘High level' waste continue to be dumped into the sea, while quantities of so-called intermediate' and 'low-level' wastes are discharged into rivers or directly into the ground. An AEC report observes laconically that the liquid wastes 'work their way slowly into ground water, leaving all or part (sic!) of their radioactivity held either chemically or physically in the soil.

The most massive wastes are, of course, the nuclear reactors themselves after they have become unserviceable. There is a lot of discussion on the trivial economic question of whether they will last for twenty, twenty-five, or thirty years. No-one discusses the humanly vital point that they cannot be dismantled and cannot be shifted but have to be left standing where they are, probably for centuries, perhaps for thousands of years, an active menace to all life, silently leaking radioactivity into air, water and soil. No-one has considered the number and location of these satanic mills which will relentlessly accumulate. Earthquakes, of course, are not supposed to happen, nor wars, nor civil disturbances, nor riots like those that infested American cities. Disused nuclear power stations will stand as unsightly monuments to unquiet man's assumption that nothing but tranquillity, from now on, stretches before him, or else - that the future counts as nothing compared with the slightest economic gain now.

Meanwhile, a number of authorities are engaged in defining 'maximum permissible concentrations' (MPCs) and 'maximum permissible levels' (MPLs) for various radioactive elements. The MPC purports to define the quantity of a given radioactive sub- stance that the human body can be allowed to accumulate. But it is known that any accumulation produces biological damage. 'Since we don't know that these effects can be completely recovered from,' observes the US Naval Radiological Laboratory, 'we have to fall back on an arbitrary decision about how much we will put up with; i.e. what is "acceptable" or "permissible" - not a scientific finding, but an administrative decision.'" We can hardly be surprised when men of outstanding intelligence and integrity, such as Albert Schweitzer, refuse to accept such administrative decisions with equanimity: 'Who has given them the right to do this? Who is even entitled to give such a permission?'" The history of these decisions is, to say the least, disquieting. The British Medical Research Council noted some twelve years ago that:

'The maximum permissible level of strontium-90 in the human skeleton. accepted by the International Commission on Radiological Protection, corresponds to ].000 micro-micro- curies per gramme of calcium (= 1,000 SU). But this is the maximum permissible level for adults in special occupations and is not suitable for application to the population as a whole or to the children with their greater sensitivity to radiation.'

A little later, the MPC for strontium-90, as far as the general population was concerned, was reduced by ninety per cent, and then by another third. to sixty-seven SU. Meanwhile, the MPC for workers in nuclear plants was raised to 2,000 SUs.

We must be careful, however, not to get lost in the jungle of controversy that has grown up in this field. The point is that very serious hazards have already been created by the 'peaceful uses of atomic energy', affecting not merely the people alive today but all future generations, although so far nuclear energy is being used only on a statistically insignificant scale. The real development is yet to come, on a scale which few people are incapable of imagining. If this is really going to happen, there will be a continuous traffic in radioactive substances from the 'hot' chemical plants to the nuclear stations and back again; from the stations to waste- processing plants; and from there to disposal sites. A serious accident, whether during transport or production, can cause a major catastrophe; and the radiation levels throughout the world will rise relentlessly from generation to generation. Unless all living geneticists are in error, there will be an equally relentless, though no doubt somewhat delayed, increase in the number of harmful mutations. K. Z. Morgan, of the Oak Ridge Laboratory, emphasises that the damage can be very subtle, a deterioration of all kinds of organic qualities, such as mobility, fertility, and the efficiency of sensory organs. 'If a small dose has any effect at all at any stage of the life cycle of an organism, then chronic radiation at this level can be more damaging than a single massive dose.... Finally, stress and changes in mutation rates may be produced even when there is no immediately obvious effect on survival of irradiated individuals.'"

Leading geneticists have given their warnings that everything possible should be done to avoid any increases in mutation rates:' leading medical men have insisted that the future of nuclear energy must depend primarily on researches into radiation biology which are as yet still totally incomplete;" leading physicists have suggested that 'measures much less heroic than building ... nuclear reactors' should be tried to solve the problem of future energy supplies - a problem which is in no way acute at pre- sent;" and leading students of strategic and political problems, at the same time, have warned us that there is really no hope of preventing the proliferation of the atom bomb, if there is a spread of plutonium capacity, such as was 'spectacularly launched by President Eisenhower in his "atoms for peace proposals" of 8 December 1953'.

Yet all these weighty opinions play no part in the debate on whether we should go immediately for a large 'second nuclear programme' or stick a bit longer to the conventional fuels which, whatever may be said for or against them, do not involve us in entirely novel and admittedly incalculable risks. None of them are even mentioned: the whole argument, which may vitally affect the very future of the human race, is conducted exclusively in terms of immediate advantage, as if two rag and bone merchants were trying to agree on a quantity discount.

What, after all, is the fouling of air with smoke compared with the pollution of air, water, and soil with ionising radiation? Not that I wish in any way to belittle the evils of conventional air and water pollution: but we must recognise 'dimensional differences' when we encounter them: radioactive pollution is an evil of an incomparably greater 'dimension' than anything mankind has known before. One might even ask: what is the point of insisting on clean air, if the air is laden with radioactive particles? And even if the air could be protected, what is the point of it, if soil and water are being poisoned?

Even an economist might well ask: what is the point of economic progress, a so-called higher standard of living, when the earth, the only earth we have, is being contaminated by substances which may cause malformations in our children or grand- children? Have we learned nothing from the thalidomide tragedy? Can we deal with matters of such a basic character by means of bland assurances or official admonitions that 'in the absence of proof that (this or that innovation) is in any way deleterious, it would be the height of irresponsibility to raise a public alarm? Can we deal with them simply on the basis of a short-term profitability calculation?

'It might be thought.' wrote Leonard Beaten, 'that all the resources of those who fear the spread of nuclear weapons would have been devoted to heading off these developments for as long as possible. The United States, the Soviet Union and Britain might be expected to have spent large sums of money trying to prove that conventional fuels, for example, had been underrated as a source of-power.... In fact ... the efforts which have followed must stand as one of the most inexplicable political fantasies in history. Only a social psychologist could hope to explain why the possessors of the most terrible weapons in history have sought to spread the necessary industry to produce them.... Fortunately,... power reactors are still fairly scarce.

In fact, a prominent American nuclear physicist, A. W. Weinberg, has given some sort of explanation: 'There is.' he says, 'an understandable drive on the part of men of good will to build up the positive aspects of nuclear energy simply because the negative aspects are so distressing.' But he also adds the warning that 'there are very compelling personal reasons why atomic scientists sound optimistic when writing about their impact on world affairs. Each of us must justify to himself his preoccupation with instruments of nuclear destruction (and even we reactor people are only slightly less beset with such guilt than are our weaponeering colleagues).'

Our instinct of self-preservation, one should have thought, would make us immune to the blandishments of guilt-ridden scientific optimism or the unproved promises of pecuniary advantages. 'It is not too late at this point for us to reconsider old decisions and make new ones,' says a recent American commentator 'For the moment at least, the choice is available.' Once many more centres of radioactivity have been created, there will be no more choice, whether we can cope with the hazards or not.

It is clear that certain scientific and technological advances of the last thirty years have produced, and are continuing to produce, hazards of an altogether intolerable kind, At the Fourth National Cancer Conference in America in September 1960, Lester Breslow of the California State Department of Public Health reported that tens of thousands of trout in western hatcheries suddenly acquired liver cancers, and continued thus:

'Technological changes affecting man's environment are being introduced at such a rapid rate and with so little control that it is a wonder man has thus far escaped the type of cancer epidemic occurring this year among the trout.’

To mention these things, no doubt, means laying oneself open to the charge of being against science, technology, and progress. Let me therefore, in conclusion, add a few words about future scientific research. Man cannot live without science and technology any more than he can live against nature. What needs the most careful consideration, however, is the direction of scientific research. We cannot leave this to the scientists alone. As Einstein himself said.z1 'almost all scientists are economically completely dependent' and 'the number of scientists who possess a sense of social responsibility is so small' that they cannot determine the direction of research. The latter dictum applies, no doubt, to all specialists, and the task therefore falls to the intelligent layman, to people like those who form the National Society for Clean Ah and other, similar societies concerned with conservation. They must work on public opinion, so that the politicians, depending on public opinion, will free themselves from the thraldom of economism and attend to the things that really matter. What matters, as I said, is the direction of research, that the direction should be towards nonviolence rather than violence: towards an harmonious cooperation with nature rather than a warfare against nature; towards the noiseless, low-energy, elegant, and economical solutions normally applied in nature rather than the noisy, high-energy, brutal, wasteful, and clumsy solutions of our present-day sciences.

The continuation of scientific advance in the direction of ever increasing violence, culminating in nuclear fission and moving on to nuclear fusion, is a prospect of terror threatening the abolition of man. Yet it is not written in the stars that this must be the direction. There is also a life-giving and life-enhancing possibility, the conscious exploration and cultivation of all relatively non-violent, harmonious, organic methods of co-operating with that enormous, wonderful, incomprehensible system of God-given nature, of which we are a part and which we certainly have not made ourselves.

This statement, which was part of a lecture given before the National Society for Clean Air in October 1967. was received with thoughtful applause by a highly responsible audience, but was subsequently ferociously attacked by the authorities as 'the height of irresponsibility'. The most priceless remark was reportedly made by Richard Marsh, then Her Majesty's Minister of Power, who felt it necessary to 'rebuke' the author. The lecture, he said, war one of the more extraordinary and least profitable contributions to the current debate on nuclear and coal cost. (Daily Telegraph, 21 October 1967.)

However, times change. A report on the Control of pollution, presented in February 1972, to the Secretary of State for the Environment by an officially appointed Working Party, published by Her Majesty's Stationery Office and entitled Pollution: Nuisance or Nemesis?, has this to say:

'The main worry is about the future, and in the international context. The economic prosperity of the world seems to be linked with nuclear energy. At the moment, nuclear energy provides only one per cent of the total electricity generated in the world. By the year 2000, if present plans go ahead, this will have increased to well over fifty per cent and the equivalent of two new 500 MWe reactors - each the size of the one at Trawsfynydd in Snowdonia - will be opened every day.’

On radioactive wastes of nuclear reactors:

'The biggest cause of worry for the future is the storage of the long-lived radioactive wastes.... Unlike other pollutants, there is no way of destroying radioactivity.... So there is no alternative to permanent storage....

'In the United Kingdom, strontium-90 is at the present time stored as a liquid in huge stainless steel tanks at Wind-scale in Cumberland. They have to be continually cooled with water, since the heat given off by the radiation would otherwise raise the temperature to above boiling point. We shall have to go on cooling these tanks for many years, even if we build no more nuclear reactors. But with the vast increase of strontium-90 expected in the future, the problem may prove far more difficult. Moreover, the expected switch to fast breeder reactors will aggravate the situation even further, for they produce large quantities of radioactive substances with very long half-lives.

'In effect, we are consciously and deliberately accumulating a toxic substance on the off-chance that it may be possible to get rid of it at a later date. We are committing future generations to tackle a problem which we do not know how to handle.' Finally, the report issues a very clear warning:

'The evident danger is that man may have put all his eggs in the nuclear basket before he discovers that a solution cannot be found. There would then be powerful political pressures to ignore the radiation hazards and continue using the reactors which had been built. It would be only prudent to slow down the nuclear power programme until we have solved the waste disposal problem.... Many responsible people would go further. They feel that no more nuclear reactors should be built until we know how to control their wastes.' And how is the ever-increasing demand for energy to be satisfied?

'Since planned demand for electricity cannot be satisfied without nuclear power, they consider mankind must develop societies which are less extravagant in their use of electricity and other forms of energy. Moreover, they see the need for this change of direction as immediate and urgent.'

No degree of prosperity could justify the accumulation of large amounts of highly toxic substances which nobody knows how to make 'safe' and which remain an incalculable danger to the whole of creation for historical or even geological ages. To do such a thing is a transgression against life itself, a transgression infinitely more serious than any crime ever perpetrated by man. The idea that a civilisation could sustain itself on the basis of such a transgression is an ethical, spiritual, and metaphysical monstrosity. It means conducting the economic affairs of man as if people really did not matter at all.
admin
Site Admin
 
Posts: 36125
Joined: Thu Aug 01, 2013 5:21 am

Re: Small is Beautiful, by E.F. Schumacher

Postby admin » Tue Jan 05, 2016 2:29 am

Ten: Technology with a Human Face

The modern world has been shaped by its metaphysics, which has shaped its education, which in turn has brought forth its science and technology. So, without going back to metaphysics and education, we can say that the modern world has been shaped by technology. It tumbles from crisis to crisis; on all sides there are prophecies of disaster and, indeed, visible signs of breakdown.

If that which has been shaped by technology, and continues to be so shaped, looks sick, it might be wise to have a look at technology itself. If technology is felt to be becoming more and more inhuman, we might do well to consider whether it is possible to have something better - a technology with a human face.

Strange to say, technology, although of course the product of man, tends to develop by its own laws and principles, and these are very different from those of human nature or of living nature in general. Nature always, so to speak, knows where and when to stop. Greater even than the mystery of natural growth is the mystery of the natural cessation of growth. There is measure in all natural things - in their size, speed, or violence. As a result, the system of nature, of which man is a part, tends to be self- balancing, self-adjusting, self-cleansing. Not so with technology, or perhaps I should say: not so with man dominated by technology and specialisation. Technology recognises no self-limiting principle - in terms, for instance, of size, speed, or violence. It therefore does not possess the virtues of being self-balancing, self- adjusting, and self-cleansing. In the subtle system of nature, technology, and in particular the super-technology of the modern world, acts like a foreign body, and there are now numerous signs of rejection.

Suddenly, if not altogether surprisingly, the modern world, shaped by modern technology, finds itself involved in three crises simultaneously. First, human nature revolts against inhuman technological, organisational, and political patterns, which it experiences as suffocating and debilitating; second, the living environment which supports human life aches and groans and gives signs of partial breakdown; and, third, it is clear to anyone fully knowledgeable in the subject matter that the inroads being made into the world's non-renewable resources, particularly those of fossil fuels, are such that serious bottlenecks and virtual exhaustion loom ahead in the quite foreseeable future.

Any one of these three crises or illnesses can turn out to be deadly. I do not know which of the three is the most likely to be the direct cause of collapse. What is quite clear is that a way of life that bases itself on materialism, i.e. on permanent, limitless expansionism in a finite environment, cannot last long, and that its life expectation is the shorter the more successfully it pursues its, expansionist objectives. If we ask where the tempestuous developments of world industry during the last quarter-century have taken us, the answer is somewhat discouraging. Everywhere the problems seem to be growing faster than the solutions. This seems to apply to the rich countries just as much as to the poor. There is nothing in the experience of the last twenty-five years to suggest that modem technology, as we know it, can really help us to alleviate world poverty, not to mention the problem of unemployment which already reaches levels like thirty per cent in many so-called developing countries, and now threatens to become endemic also in many of the rich countries. In any case, the apparent yet illusory successes of the last twenty-five years cannot be repeated: the threefold crisis of which I have spoken will see to that. So we had better face the question of technology - what does it do and what should it do? Can we develop a technology which really helps us to solve our problems - a technology with a human face?

The primary task of technology, it would seem, is to lighten the burden of work man has to carry in order to stay alive and develop his potential. It is easy enough to see that technology fulfils this purpose when we watch any particular piece of machinery at work - a computer, for instance, can do in seconds what it would take clerks or even mathematicians a very long time. if they can do it at all. It is more difficult to convince oneself of the truth of this simple proposition when one looks at whole societies. When I first began to travel the world, visiting rich and poor countries alike, I was tempted to formulate the first law of economics as follows: 'The amount of real leisure a society enjoys tends to be in inverse proportion to the amount of labour-saving machinery it employs.' It might be a good idea for the professors of economics to put this proposition into their examination papers and ask their pupils to discuss it. However that may be, the evidence is very strong indeed. If you go from easy-going England to, say, Ger- many or the United States, you find that people there live under much more strain than here. And if you move to a country like Burma, which is very near to the bottom of the league table of industrial progress, you find that people have an enormous amount of leisure really to enjoy themselves. Of course, as there is so much less labour-saving machinery to help them, they 'accomplish' much less than we do; but that is a different point. The fact remains that the burden of living rests much more lightly on their shoulders than on ours.

The question of what technology actually does for us is therefore worthy of investigation. It obviously greatly reduces some kinds of work while it increases other kinds. The type of work which modern technology is most successful in reducing or even eliminating is skilful, productive work of human hands. in touch with real materials of one kind or another. In an advanced industrial society, such work has become exceedingly rare, and to make a decent living by doing such work has become virtually impossible. A great part of the modern neurosis may be due to this very fact; for the human being, defined by Thomas Aquinas as a being with brains and hands, enjoys nothing more than to be creatively, usefully, productively engaged with both his hands and his brains. Today, a person has to be wealthy to be able to enjoy this simple thing, this very great luxury: he has to be able to afford space and good tools; he has to be-lucky enough to find a good teacher and plenty of free time to learn and practise. He really has to be rich enough not to need a job: for the number of jobs that would be satisfactory in these respects is very small indeed.

The extent to which modern technology has taken over the work of human hands may be illustrated as follows. We may ask how much of 'total social time' - that is to say, the time all of us have together, twenty-four hours a day each - is actually engaged in real production, Rather less than one-half of the total population of this country is, as they say, gainfully occupied, and about one-third of these are actual producers in agriculture, mining, construction, and industry. I do mean actual producers, not people who tell other people what to do, or account for the past, or plan for the future, or distribute what other people have produced. In other words, rather less than one-sixth of the total population is engaged in actual production; on average, each of them supports five others beside himself, of which two are gainfully employed on things other than real production and three are not gainfully employed. Now, a fully employed person, allowing for holidays, sickness, and other absence, spends about one-fifth of his total time on his job. It follows that the proportion of 'total social time' spent on actual production - in the narrow sense in which I am using the term - is, roughly, one-fifth of one-third of one-half, i.e. 33 per cent. The other 96 per cent of 'total social time' is spent in other ways, including sleeping, eating, watching television, doing jobs that are not directly productive, or just killing time more or less humanely.

Although this bit of figuring work need not be taken too literally, it quite adequately serves to show what technology has enabled us to do: namely, to reduce the amount of time actually spent on production in its most elementary sense to such a tiny percentage of total social time that it pales into insignificance, that it carries no real weight, let alone prestige. When you look at industrial society in this way, you cannot be surprised to find that prestige is carried by those who help fill the other 96 per cent of total social time. primarily the entertainers but also the executors of Parkinson's Law. In fact, one might put the following proposition to students of sociology: 'The prestige carried by people in modern industrial society varies in inverse proportion to their closeness to actual production.'

There is a further reason for this. The process of confining productive time to 31 per cent of total social time has had the inevitable effect of taking all normal human pleasure and satisfaction out of the time spent on this work. Virtually all real production has been turned into an inhuman chore which does not enrich a man but empties him. 'From the factory,' it has been said, 'dead matter goes out improved, whereas men there are corrupted and degraded.'

We may say, therefore, that modern technology has deprived man of the kind of work that he enjoys most, creative, useful work with hands and brains, and given him plenty of work of a fragmented kind, most of which he does not enjoy at all. It has multiplied the number of people who are exceedingly busy doing kinds of work which, if it is productive at all, is so only in an indirect or 'roundabout' way, and much of which would not be necessary at all if technology were rather less modem. Karl Marx appears to have foreseen much of this when he wrote: 'They want production to be limited to useful things, but they forget that the production of too many useful things results in too many useless people.' to which we might add: particularly when the processes of production are joyless and boring. All this confirms our suspicion that modern technology, the way it has developed, is developing, and promises further to develop, is showing an increasingly inhuman face, and that we might do well to take stock and reconsider our goals.

Taking stock, we can say that we possess a vast accumulation of new knowledge, splendid scientific techniques to increase it further, and immense experience in its application. All this is truth of a kind. This truthful knowledge, as such, does not commit us to a technology of gigantism, supersonic speed, violence, and the destruction of human work-enjoyment. The use we have made of our knowledge is only one of its possible uses and, as is now becoming ever more apparent, often an unwise and destructive use.

As I have shown, directly productive time in our society has already been reduced to about 3) per cent of total social time, and the whole drift of modern technological development is to reduce it further, asymptotically* to zero. Imagine we set ourselves a goal in the opposite direction - to increase it six fold, to about twenty per cent, so that twenty per cent of total social time would be used for actually producing things, employing hands and brains and, naturally, excellent tools. An incredible thought! Even children would be allowed to make themselves useful, even old people. At one-sixth of present-day productivity, we should be producing as much as at present. There would be six times as much time for any piece of work we chose to undertake - enough to make a really good job of it, to enjoy oneself, to produce real quality, even to make things beautiful. Think of the therapeutic value of real work: think of its educational value. No-one would then want to raise the school-leaving age or to lower the retirement age, so as to keep people off the labour market. Everybody would be welcome to lend a hand. Everybody would be admitted to what is now the rarest privilege, the opportunity of working usefully, creatively, with his own hands and brains, in his own time, at his own pace - and with excellent tools. Would this mean an enormous extension of working hours? No, people who work in this way do not know the difference between work and leisure. Unless they sleep or eat or occasionally choose to do nothing at all, they are always agreeably, productively engaged. Many of the 'on-cost jobs' would simply disappear; I leave it to the reader's imagination to identify them. There would be little need for mindless entertainment or other drugs, and unquestionably much less illness.

Now, it might be said that this is a romantic, a utopian, vision. True enough. What we have today, in modern industrial society, is not romantic and certainly not utopian, as we have it right here. But it is in very deep trouble and holds no promise of survival. We jolly well have to have the courage to dream if we want to survive and give our children a chance of survival. The threefold crisis of which I have spoken will not go away if we simply carry on as before. It will become worse and end in disaster, until or unless we develop a new life-style which is compatible with the real needs of human nature, with the health of living nature around us, and with the resource endowment of the world.

Now. this is indeed a tall order, not because a new life-style to meet these critical requirements and facts is impossible to conceive, but because the present consumer society is like a drug addict who, no matter how miserable he may feel, finds it extremely difficult to get off the hook. The problem children of the world - from this point of view and in spite of many other considerations that could be adduced - are the rich societies and not the poor.

It is almost like a providential blessing that we, the rich countries, have found it in our heart at least to consider the Third World and to try to mitigate its poverty. In spite of the mixture of motives and the persistence of exploitative practices, I think that this fairly recent development in the outlook of the rich is an honourable one. And it could save us: for the poverty of the poor makes it in any case impossible for them successfully to adopt our technology. Of course, they often try to do so, and then have to bear the more dire consequences in terms of mass unemployment, mass migration into cities, rural decay, and intolerable social tensions. They need, in fact, the very thing I am talking about, which we also need: a different kind of technology, a technology with a human face, which instead of making human hands and brains redundant, helps them to become far more productive than they have ever been before.

As Gandhi said, the poor of the world cannot be helped by mass production, only by production by the masses. The system of mars production, based on sophisticated, highly capital- intensive, high energy-input dependent, and human labour-saving technology, presupposes that you are already rich, for a great deal of capital investment is needed to establish one single workplace. The system of production by the masses mobilises the priceless resources which are possessed by all human beings, their clever brains and skilful hands, and supports them with first-class tools. The technology of mass production is inherently violent, ecologically damaging, self-defeating in terms of non-renewable resources, and stultifying for the human person. The technology of production by the masses, making use of the best of modern knowledge and experience, is conducive to decentralisation, compatible with the laws of ecology, gentle in its use of scarce resources, and designed to serve the human person instead of making him the servant of machines. I have named it intermediate technology to signify that it is vastly superior to the primitive technology of bygone ages but at the same time much simpler, cheaper, and freer than the super-technology of the rich. One can also call it self-help technology, or democratic or people's technology - a technology to which everybody can gain admittance and which is not reserved to those already rich and powerful. It will be more fully discussed in later chapters.

Although we are in possession of all requisite knowledge, it still requires a systematic, creative effort to bring this technology into active existence and make it generally visible and available. It is my experience that it is rather more difficult to recapture directness and simplicity than to advance in the direction of ever more sophistication and complexity. Any third-rate engineer or researcher can increase complexity; but it takes a certain flair of real insight to make things simple again. And this insight does not come easily to people who have allowed themselves to become alienated from real, productive work and from the self-balancing system of nature, which never fails to recognise measure and limitation. Any activity which fails to recognise a self-limiting principle is of the devil. In our work with the developing countries we are at least forced to recognise the limitations of poverty, and this work can therefore be a wholesome school for all of us in which, while genuinely trying to help others, we may also gain knowledge and experience how to help ourselves.

I think we can already see the conflict of attitudes which will decide our future. On the one side, I see the people who think they can cope with our threefold crisis by the methods current, only more so; I call them the people of the forward stampede. On the other side, there are people in search of a new life-style, who seek to return to certain basic truths about man and his world; I call them home-comers. Let us admit that the people of the forward stampede, like the devil, have all the best tunes or at least the most popular and familiar tunes. You cannot stand still, they say; standing still means going down; you must go forward; there is nothing wrong with modern technology except that it is as yet incomplete: let us complete it. Dr Sicco Mansholt, one of the most prominent chiefs of the European Economic Community, may be quoted as a typical representative of this group. 'More, further, quicker, richer,' he says, 'are the watchwords of present-day society.' And he thinks we must help people to adapt 'for there is no alternative'. This is the authentic voice of the forward stampede, which talks in much the same tone as Dostoyevsky's Grand Inquisitor: 'Why have you come to hinder us?' They point to the population explosion and to the possibilities of world hunger. Surely, we must take our flight forward and not be fainthearted. If people start protesting and revolting, we shall have to have more police and have them better equipped. If there is trouble with the environment, we shall need more stringent laws against pollution, and faster economic growth to pay for anti-pollution measures. If there are problems about natural resources, we shall turn to synthetics; if there are problems about fossil fuels, we shall move from slow reactors to fast breeders and from fission to fusion. There are no insoluble problems. The slogans of the people of the forward stampede burst into the newspaper headlines every day with the message, 'a breakthrough a day keeps the crisis at bay'.

And what about the other side? This is made up of people who are deeply convinced that technological development has taken a wrong turn and needs to be redirected. The term 'home-comer' has, of course, a religious connotation. For it takes a good deal of courage to say 'no' to the fashions and fascinations of the age and to question the presuppositions of a civilisation which appears destined to conquer the whole world; the requisite strength can be derived only from deep convictions. If it were derived from nothing more than fear of the future, it would be likely to disappear at the decisive moment. The genuine 'homecomer' does not have the best tunes, but he has the most exalted text, nothing less than the Gospels. For him, there could not be a more concise statement of his situation, of our situation, than the parable of the prodigal son. Strange to say, the Sermon on the Mount gives pretty precise instructions on how to construct an outlook that could lead to an Economics of Survival.

• How blessed are those who know that they are poor: the Kingdom of Heaven is theirs.
• How blessed are the sorrowful; they shall find consolation.
• How blessed are those of a gentle spirit; they shall have the earth for their possession.
• How blessed are those who hunger and thirst to see right prevail; they shall be satisfied;
• How blessed are the peacemakers; God shall call them his sons.

It may seem daring to connect these beatitudes with matters of technology and economics. Bur may it not be that we are in trouble precisely because we have failed for so long to make this connection? It is not difficult to discern what these beatitudes may mean for us today:

• We are poor, not demigods.
• We have plenty to be sorrowful about, and are not emerging into a golden age.
• We need a gentle approach, a non-violent spirit, and small is beautiful.
• We must concern ourselves with justice and see right prevail.
• And all this, only this, can enable us to become peace- makers.

The home-comers base themselves upon a different picture of man from that which motivates the people of the forward stampede. It would be very superficial to say that the latter believe in 'growth' while the former do not. In a sense, everybody believes in growth, and rightly so, because growth is an essential feature of life. The whole point, however, is to give to the idea of growth a qualitative determination; for there are always many things that ought to be growing and many things that ought to be diminishing.

Equally, it would be very superficial to say that the home- comers do not believe in progress, which also can be said to be an essential feature of all life. The whole point is to determine what constitutes progress. And the home-comers believe that the direction which modern technology has taken and is continuing to pursue - towards ever-greater size, ever-higher speeds, and ever- increased violence, in defiance of all laws of natural harmony - is the opposite of progress. Hence the call for taking stock and finding a new orientation. The stocktaking indicates that we are destroying our very basis of existence, and the reorientation is based on remembering what human life is really about.

In one way or another everybody will have to take sides in this great conflict. To 'leave it to the experts' means to side with the people of the forward stampede. It is widely accepted that politics is too important a matter to be left to experts. Today, the main content of politics is economics, and the main content of economics is technology. If politics cannot be left to the experts, neither can economics and technology.

The case for hope rests on the fact that ordinary people are often able to take a wider view, and a more 'humanistic' view, than is normally being taken by experts. The power of ordinary people, who today tend to feel utterly powerless, does not lie in starting new-lines of action, but in placing their sympathy and support with minority groups which have already started. I shall give two examples, relevant to the subject here under discussion. One relates to agriculture, still the greatest single activity of man on earth, and the other relates to industrial technology.

Modern agriculture relies on applying to soil, plants, and animals ever-increasing quantities of chemical products, the long- term effect of which on soil fertility and health is subject to very grave doubts. People who raise such doubts are generally con- fronted with the assertion that the choice lies between 'poison or hunger'. There are highly successful farmers in many countries who obtain excellent yields without resort to such chemicals and without raising any doubts about long-term soil fertility and health. For the last twenty-five years, a private, voluntary organisation, the Soil Association, has been engaged in exploring the vital relationships between soil, plant, animal, and man; has undertaken and assisted relevant research: and has attempted to keep the public informed about developments in these fields. Neither the successful farmers nor the Soil Association have been able to attract official support or recognition. They have generally been dismissed as 'the muck and mystery people', because they are obviously outside the mainstream of modern technological progress. Their methods bear the mark of non-violence and humility towards the infinitely subtle system of natural harmony, and this stands in opposition to the life style of the modern world. But if we now realise that the modern life-style is putting us into mortal danger, we may find it in our hearts to support and even join these pioneers rather than to ignore or ridicule them.

On the industrial side, there is the Intermediate Technology Development Group. It is engaged in the systematic study on how to help people to help themselves. While its work is primarily concerned with giving technical assistance to the Third World, the results of its research are attracting increasing attention also from those who are concerned about the future of the rich societies. For they show that an intermediate technology, a technology with a human face, is in fact possible; that it is viable: and that it reintegrates the human being, with his skilful hands and creative brain, into the productive process. It serves production by the masses instead of mars production, Like the Soil Association, it is a private, voluntary organisation depending on public support.

I have no doubt that it is possible to give a new direction to technological development, a direction that shall lead it back to the real needs of man, and that also means: to the actual size of man. Man is small, and, therefore, small is beautiful. To go for gigantism is to go for self-destruction. And what is the cost of a reorientation? We might remind ourselves that to calculate the cost of survival is perverse. No doubt, a price has to be paid for anything worth while: to redirect technology so that it serves man instead of destroying him requires primarily an effort of the imagination and an abandonment of fear.
admin
Site Admin
 
Posts: 36125
Joined: Thu Aug 01, 2013 5:21 am

Re: Small is Beautiful, by E.F. Schumacher

Postby admin » Tue Jan 05, 2016 2:32 am

Part Three: The Third World

Eleven: Development


A British Government White Paper on Overseas Development some years ago stated the aims of foreign aid as follows:

'To do what lies within our power to help the developing countries to provide their people with the material opportunities for using their talents, of living a full and happy life and steadily improving their lot.'

It may be doubtful whether equally optimistic language would be used today, but the basic philosophy remains the same. There is, perhaps, some disillusionment: the task turns out to be much harder than may have been thought - and the newly independent countries are finding the same. Two phenomena, in particular, are giving rise to world-wide concern - mass unemployment and mass migration into cities. For two-thirds of mankind, the aim of a 'full and happy life' with steady improvements of their lot, if not actually receding, seems to be as far away as ever. So we had better have a new look at the whole problem.

Many people are having a new look and some say the trouble is that there is too little aid. They admit that there are many unhealthy and disrupting tendencies but suggest that with more massive aid one ought to be able to over-compensate them. If the available aid cannot be massive enough for everybody, they suggest that it should be concentrated on the countries where the promise of success seems most credible. Not surprisingly, this proposal has failed to win general acceptance.

One of the unhealthy and disruptive tendencies in virtually all the developing countries is the emergence, in an ever more accentuated form, of the 'dual economy', in which there are two different patterns of living as widely separated from each other as two different worlds. It is not a matter of some people being rich and others being poor. both being utilised by a common way of life: it is a matter of two ways of life existing side by side in such a manner that even the humblest member of the one disposes of a daily income which is a high multiple of the income accruing to even the hardest working member of the other. The social and political tensions arising from the dual economy are too obvious to require description.

In the dual economy of a typical developing country, we may find fifteen per cent of the population in the modern sector. mainly confined to one or two big cities. The other eighty-five per cent exists in the rural areas and small towns. For reasons which will be discussed, most of the development effort goes into the big cities, which means that eighty-five per cent of the population are largely by-passed. What is to become of them? Simply to assume that the modern sector in the big cities will grow until it has absorbed almost the entire population - which is, of course, what has happened in many of the highly developed countries - is utterly unrealistic. Even the richest countries are groaning under the burden which such a misdistribution of population inevitably imposes.

In every branch of modern thought, the concept of 'evolution' plays a central role. Not so in development economics, although the words 'development' and 'evolution' would seem to be virtually synonymous. Whatever may be the merit of the theory of evolution in specific cases, it certainly reflects our experience of economic and technical development. Let us imagine a visit to a modern industrial establishment, say, a great refinery. As we walk around in its vastness, through all its fantastic complexity, we might well wonder how it was possible for the human mind to conceive such a thing. What an immensity of knowledge, ingenuity, and experience is here incarnated in equipment! How is it possible? The answer is that it did not spring ready-made out of any person's mind - it came by a process of evolution. It started quite simply, then this was added and that was modified, and so the whole thing became more and more complex. But even what we actually see in this refinery is only, as we might say, the tip of an iceberg.

What we cannot see on our visit is far greater than what we can see: the immensity and complexity of the arrangements that allow crude oil to flow into the refinery and ensure that a multitude of consignments of refined products, properly prepared, packed and labelled, reaches innumerable consumers through a most elaborate distribution system. All this we cannot see. Nor can we see the intellectual achievements behind the planning, the organising, the financing and marketing. Least of all can we see the great educational background which is the precondition of all, extending from primary schools to universities and specialised research establishments, and without which nothing of what we actually see would be there. As I said, the visitor sees only the tip of the iceberg: there is ten times as much somewhere else, which he cannot see, and without the 'ten', the 'one' is worthless. And if the 'ten' is not supplied by the country or society in which the refinery has been erected, either the refinery simply does not work or it is, in fact, a foreign body depending for most of its life on some other society. Now, all this is easily forgotten, because the modern tendency is to see and become conscious of only the visible and to forget the invisible things that are making the visible possible and keep it going.

Could it be that the relative failure of aid, or at least our disappointment with the effectiveness of aid, has something to do with our materialist philosophy which makes us liable to overlook the most important preconditions of success, which are generally invisible? Or if we do not entirely overlook them, we tend to treat them just as we treat material things - things that can be planned and scheduled and purchased with money according to some all- comprehensive development plan. In other words, we tend to think of development, not in terms of evolution, but in terms of creation.

Our scientists incessantly tell us with the utmost assurance that everything around us has evolved by small mutations sieved out through natural selection. Even the Almighty is not credited with having been able to create anything complex. Every complexity, we are told. is the result of evolution. Yet our development planners seem to think that they can do better than the Almighty, that they can create the most complex things at one throw by a process called planning, letting Athene spring, not out of the head of Zeus. but out of nothingness, fully armed, resplendent, and viable.

Now, of course, extraordinary and unfitting things can occasionally be done. One can successfully carry out a project here or there. It is always possible to create small ultra-modern islands in a pre-industrial society. But such islands will then have to be defended, like fortresses, and provisioned, as it were, by helicopter from far away, or they will be flooded by the surrounding sea. Whatever happens, whether they do well or badly, they produce the 'dual economy' of which I have spoken. They cannot be integrated into the surrounding society, and tend to destroy its cohesion.

We may observe in passing that similar tendencies are at work even in some of the richest countries, where they manifest as a trend towards excessive urbanisation, towards 'megalopolis', and leave, in the midst of affluence, large pockets of poverty-stricken people, 'drop-outs', unemployed and unemployables.

Until recently, the development experts rarely referred to the dual economy and its twin evils of mass unemployment and mass migration into cities. When they did so, they merely deplored them and treated them as transitional. Meanwhile, it has become widely recognised that time alone will not be the healer. On the contrary, the dual economy, unless consciously counteracted, produces what I have called a 'process of mutual poisoning', whereby successful industrial development in the cities destroys the economic structure of the hinterland, and the hinterland takes its revenge by mass migration into the cities, poisoning them and making them utterly unmanageable. Forward estimates made by the World Health Organisation and by experts like Kingsley Davies predict cities of twenty, forty, and even sixty million in- habitants, a prospect of 'immiseration' for multitudes of people that beggars the imagination.

Is there an alternative? That the developing countries cannot do without a modern sector, particularly where they are in direct contact with the rich countries, is hardly open to doubt. What needs to be questioned is the implicit assumption that the modern sector can be expanded to absorb virtually the entire population and that this can be done fairly quickly. The ruling philosophy of development over the last twenty years has been: 'What is best for the rich must be best for the poor.' This belief has been carried to truly astonishing lengths, as can be seen by inspecting the list of developing countries in which the Americans and their allies and in some cases also the Russians have found it necessary and wise to establish 'peaceful' nuclear reactors - Taiwan, South Korea, Philippines, Vietnam. Thailand, Indonesia, Iran, Turkey. Portugal, Venezuela - all of them countries whose overwhelming problems are agriculture and the rejuvenation of rural life, since the great majority of their poverty-stricken peoples live in rural areas.

The starting point of all our considerations is poverty, or rather, a degree of poverty which means misery, and degrades and stultifies the human person: and our first task is to recognise and understand the boundaries and limitations which this degree of poverty imposes. Again, our crudely materialistic philosophy makes us liable to see only 'the material opportunities' (to use the words of the White Paper which I have already quoted) and to overlook the immaterial factors. Among the causes of poverty, I am sure, the material factors are entirely secondary - such things as a lack of natural wealth, or a lack of capital, or an insufficiency of infrastructure. The primary causes of extreme poverty are immaterial, they lie in certain deficiencies in education, organisation, and discipline.

Development does not start with goods; it starts with people and their education, organisation, and discipline. Without these three, all resources remain latent, untapped potential. There are prosperous societies with but the scantiest basis of natural wealth. and we have had plenty of opportunity to observe the primacy of the invisible factors after the war. Every country, no matter how devastated, which had a high level of education. organisation, and discipline, produced an 'economic miracle'. In fact these were miracles only for people whose attention is focused on the tip of the iceberg. The tip had been smashed to pieces, but the base, which is education, organisation, and discipline, was still there.

Here, then. lies the central problem of development. If the primary causes of poverty are deficiencies in these three respects, then the alleviation of poverty depends primarily on the removal of these deficiencies. Here lies the reason why development cannot be an act of creation. why it cannot be ordered, bought, comprehensively planned: why it requires a process of evolution. Education does not 'jump'; it is a gradual process of great subtlety.

Organisation does not 'jump'; it must gradually evolve to fit changing circumstances. And much the same goes for discipline. All three must evolve step by step, and the foremost task of development policy must be to speed this evolution. All three must become the property not merely of a tiny minority, but of the whole society.

If aid is given to introduce certain new economic activities, these will be beneficial and viable only if they can be sustained by the already existing educational level of fairly broad groups of people, and they will be truly valuable only if they promote and spread advances in education, organisation, and discipline. There can be a process of stretching - never a process of jumping. If new economic activities are introduced which depend on special education, special organisation, and special discipline, such as are in no way inherent in the recipient society, the activity will not promote healthy development but will be more likely to hinder it. It will remain a foreign body that cannot be integrated and will further exacerbate the problems of the dual economy.

It follows from this that development is not primarily a problem for economists, least of all for economists whose expertise is founded on a crudely materialist philosophy. No doubt, economists of whatever philosophical persuasion have their usefulness at certain stages of development and for strictly circumscribed technical jobs, but only if the general guidelines of a development policy to involve the entire population are already firmly established.

The new thinking that is required for aid and development will be different from the old because it will take poverty seriously. It will not go on mechanically, saying: 'What is good for the rich must also be good for the poor.' It will care for people - from a severely practical point of view. Why care for people? Because people are the primary and ultimate source of any wealth whatsoever. If they are left out, if they are pushed around by self-styled experts and high-handed planners, then nothing can ever yield real fruit.

The following chapter is a slightly shortened version of a paper prepared in 1965 for a Conference on the Application of Science and Technology to the Development of Latin America, organised by UNESCO in Santiago, Chile. At that time, discussions on economic development almost invariably tended to take technology simply as 'given', the question was how to transfer the given technology to those not yet in possession of it. The latest was obviously the best, and the idea that it might not serve the urgent needs of developing countries because it failed to fit into the actual conditions and limitations of poverty, was treated with ridicule. However, the paper became the basis on which the Intermediate Technology Development Group was set up in London.
admin
Site Admin
 
Posts: 36125
Joined: Thu Aug 01, 2013 5:21 am

Re: Small is Beautiful, by E.F. Schumacher

Postby admin » Tue Jan 05, 2016 2:41 am

Twelve: Social and Economic Problems Calling for the Development of Intermediate Technology

INTRODUCTION


In many places in the world today the poor are getting poorer while the rich are getting richer, and the established processes of foreign aid and development planning appear to be unable to overcome this tendency. In fact, they often seem to promote it, for it is always easier to help those who can help themselves than to help the helpless. Nearly all the so-called developing countries have a modern sector where the patterns of living and working are similar to those of the developed countries, but they also have a non-modern sector, accounting for the vast majority of the total population, where the patterns of living and working are not only profoundly unsatisfactory but also in a process of accelerating decay.

I am concerned here exclusively with the problem of helping the people in the non-modern sector. This does not imply the suggestion that constructive work in the modern sector should be discontinued, and there can be no doubt that it will continue in any case. But it does imply the conviction that all successes in the modern sector are likely to be illusory unless there is also a healthy growth - or at least a healthy condition of stability - among the very great numbers of people today whose life is characterised not only by dire poverty but also by hopelessness.

THE NEED FOR INTERMEDIATE TECHNOLOGY

The Condition of the Poor

What is the typical condition of the poor in most of the so-called developing countries? Their work opportunities are so restricted that they cannot work their way out of misery. They are underemployed or totally unemployed, and when they do find occasional work their productivity is exceedingly low. Some of them have land, but often too little. Many have no land and no prospect of ever getting any. They are underemployed or totally unemployed, and then drift into the big cities. But there is no work for them in the big cities either and, of course, no housing. All the same, they flock into the cities because the chances of finding some work appear to be greater there than in the villages where they are nil.

The open and disguised unemployment in the rural areas is often thought to be due entirely to population growth, and` no doubt this is an important contributory factor. But those who hold this view still have to explain why additional people cannot do additional work. It is said that they cannot work because they lack 'capital'. But what is 'capital'? It is the product of human work. The lack of capital can explain a low level of productivity, but it cannot explain a lack of work opportunities.

The fact remains, however, that great numbers of people do not work or work only intermittently, and that they are therefore poor and helpless and often desperate enough to leave the village to search for some kind of existence in the big city. Rural unemployment produces mass-migration into cities, leading to a rate of urban growth which would tax the resources of even the richest societies. Rural unemployment becomes urban unemployment.

Help to Those who Need it Most

The problem may therefore be stated quite simply thus: what can be done to bring health to economic life outside the big cities, in the small towns and villages which still contain - in most cases - eighty to ninety per cent of the total population? As long as the development effort is concentrated mainly on the big cities, where it is easiest to establish new industries, to staff them with managers and men, and to find finance and markets to keep them going, the competition from these industries will further disrupt and destroy nonagricultural production in the rest of the country, will cause additional unemployment outside, and will further accelerate the migration of destitute people into towns that cannot absorb them. The process of mutual poisoning' will not be halted.

It is necessary, therefore, that at least an important part of the development effort should by-pass big cities and be directly concerned with the creation of an agro-industrial structure' in the rural and small-town areas. In this connection it is necessary to emphasise that the primary need is workplaces, literally millions of workplaces. No-one, of course, would suggest that output-per- man is unimportant but the primary consideration cannot be to maximise output per man, it must be to maximise work opportunities for the unemployed and underemployed For a poor man the chance to work is the greatest of all needs, and even poorly paid and relatively unproductive work is better than idleness. 'Coverage must come before perfection', to use the words of Mr Gabriel Ardant.'

'It is important that there should be enough work for all because that is the only way to eliminate anti-productive reflexes and create a new state of mind - that of a country where labour has become precious and must be put to the best possible use.

In other words, the economic calculus which measures success in terms of output or income, without consideration of the number of jobs, is quite inappropriate in the conditions here under consideration, for it implies a static approach to the problem of development. The dynamic approach pays heed to the needs and reactions of people: their first need is to start work of some kind that brings some reward, however small; it is only when they experience that their time and labour is of value that they can become interested in making it more valuable. It is therefore more important that everybody should produce something than that a few people should each produce a great deal, and this remains true even if in some exceptional cases the total output under the former arrangement should be smaller than it would be under the latter arrangement It will not remain smaller, because this is a dynamic situation capable of generating growth.

An unemployed man is a desperate man and he is practically forced into migration. This is another justification for the assertion that the provision of work opportunities is the primary need and should be the primary objective of economic planning. Without it, the drift of people into the large cities cannot be mitigated, let alone halted.

The Nature of the Task

The task, then, is to bring into existence millions of new workplaces in the rural areas and small towns. That modern industry, as it has arisen in the developed countries, cannot possibly fulfil this task should be perfectly obvious. It has arisen in societies which are rich in capital and short of labour and therefore cannot possibly be appropriate for societies short of capital and rich in labour. Puerto Rico furnishes a good illustration of the point, To quote from a recent study:

'Development of modern factory-style manufacturing makes only a limited contribution to employment. The Puerto Rican development programme has been unusually vigorous and successful; but from 1952-62 the average increase of employment in EDA-sponsored plants was about 5,000 a year. With present labour force participation rates, and in the absence of net emigration to the mainland, annual additions to the Puerto Rican labour force would be of the order of 40,000 ...

'Within manufacturing, there should be imaginative exploration of small-scale, more decentralised, more labour-using forms of organisation such as have persisted in the Japanese economy to the present day and have contributed materially to its vigorous growth.

Equally powerful illustrations could be drawn from many other countries, notably India and Turkey, where highly ambitious five- year plans regularly show a greater volume of unemployment at the end of the five-year period that at the beginning, even assuming that the plan is fully implemented.

The real task may be formulated in four propositions:

First, that workplaces have to be created in the areas where the people are living now, and not primarily in metropolitan areas into which they tend to migrate.

Second, that these workplaces must be, on average, cheap enough so that they can be created in large numbers without this calling for an unattainable level of capital formation and imports.

Third, that the production methods employed must be relatively simple, so that the demands for high skills are minimised, not only in the production process itself but also in matters of organisation, raw material supply, financing, marketing, and so forth.

Fourth, that production should be mainly from local materials and mainly for local use. These four requirements can be met only if there is a 'regional' approach to development and, second, if there is a conscious effort to develop and apply what might be called an 'intermediate technology'. These two conditions will now be considered in turn.


The Regional or District Approach

A given political unit is not necessarily of the right size for economic development to benefit those whose need is the greatest. In some cases it may be too small, but in the generality of cases today it is too large. Take, for example, the case of India. It is a very large political unit, and it is no doubt desirable from many points of view that this unity should be maintained. But if development policy is concerned merely - or primarily - with 'India-as-a- whole', the natural drift of things will concentrate development mainly in a few metropolitan areas, in the modern sector. Vast areas within the country, containing eighty per cent of the population or more, will benefit little and may indeed suffer. Hence the twin evils of mass unemployment and mass migration into the metropolitan areas. The result of 'development' is that a fortunate minority have their fortunes greatly increased, while those who really need help are left more helpless than ever before. If the purpose of development is to bring help to those who need it most, each 'region' or 'district' within the country needs its own development. This is what is meant by a 'regional' approach.

A further illustration may be drawn from Italy, a relatively wealthy country. Southern Italy and Sicily do not develop merely as a result of successful economic growth in 'Italy-as-a-whole'. Italian industry is concentrated mainly in the north of the country, and its rapid growth does not diminish but on the contrary tends to intensify, the problem of the south. Nothing succeeds like success and, equally, nothing fails like failure. Competition from the north destroys production in the south and drains all talented and enterprising men out of it. Conscious efforts have to be made to counteract these tendencies, for if the population of any region within a country is by-passed by development it becomes actually worse off than before, is thrown into mass unemployment, and forced into mass migration. The evidence of this truth can be found all over the world, even in the most highly developed countries.

In this matter it is not possible to give hard and fast definitions. Much depends on geography and local circumstances. A few thousand people, no doubt, would be too few to constitute a 'district' for economic development; but a few hundred thousand people, even if fairly widely scattered, may well deserve to be treated as such. The whole of Switzerland has less than six million inhabitants: yet it is divided into more than twenty 'cantons', each of which is a kind of development district, with the result that there is a fairly even spread of population and of industry and no tendency towards the formation of excessive concentrations.

Each 'district', ideally speaking, would have some sort of inner cohesion and identity and possess at least one town to serve as a district centre. There is need for a 'cultural structure' just as there is need for an '.economic structure'; thus, while every village would have a primary school, there would be a few small market towns with secondary schools, and the district centre would be big enough to carry an institution of higher learning. The bigger the country, the greater is the need for internal 'structure' and for a decentralised approach to development. If this need is neglected, there is no hope for the poor.

The Need for an Appropriate Technology

It is obvious that this 'regional' or 'district' approach has no chance of success unless it is based on the employment of a suit- able technology. The establishment of each workplace in modern industry costs a great deal of capital - something of the order of, say, Pounds 2,000 on average. A poor country, naturally, can never afford to establish more than a very limited number of such work- places within any given period of time. A 'modern' workplace, moreover, can be really productive only within a modern environment, and for this reason alone is unlikely to fit into a 'district' consisting of rural areas and a few small towns. In every 'developing country' one can find industrial estates set up in rural areas, where high-grade modern equipment is standing idle most of the time because of a lack of organisation finance, raw material supplies, transport, marketing facilities, and the like. There are then complaints and recriminations: but they do not alter the fact that a lot of scarce capital resources - normally imports paid from scarce foreign exchange - are virtually wasted.

The distinction between 'capital-intensive' and 'labour-intensive' industries is, of course, a familiar one in development theory. Although it has an undoubted validity, it does not really make contact with the essence of the problem; for it normally induces people to accept the technology of any given line of production as given and unalterable. If it is then argued that developing countries should give preference to 'labour-intensive' rather than 'capital-intensive' industries, no intelligent action can follow, be cause the choice of industry, in practice, will be determined by quite other, much more powerful criteria, such as raw material base, markets, entrepreneurial interest, etc. The choice of industry is one thing; but the choice of technology to be employed after the choice of industry has been made, is quite another. It is therefore better to speak directly of technology, and not cloud the discussion by choosing terms like 'capital intensity' or 'labour intensity' as one's point of departure. Much the same applies to another distinction frequently made in these discussions, that between 'large-scale' and 'small-scale' industry. It is true that modern industry is often organised in very large units. but 'large- scale' is by no means one of its essential and universal features. Whether a given industrial activity is appropriate to the conditions of a developing district does not directly depend on 'scale', but on the technology employed. A small-scale enterprise with an average cost per workplace of Pounds 2,000 is just as inappropriate as a large-scale enterprise with equally costly workplaces.

I believe, therefore, that the best way to make contact with the essential problem is by speaking of technology: economic development in poverty stricken areas can be fruitful only on the basis of what I have called 'intermediate technology'. In the end, intermediate technology will be 'labour-intensive' and will lend itself to use in small-scale establishments. But neither 'labour- intensity' nor 'small-scale' implies 'intermediate technology'.

Definition of Intermediate Technology

If we define the level of technology in terms of 'equipment cost per workplace', we can call the indigenous technology of a typical developing country - symbolically speaking - a Pounds l -technology, while that of the developed countries could be called a Pounds 1,000- technology. The gap between these two technologies is so enormous that a transition from the one to the other is simply impossible. In fact, the current attempt of the developing countries to infiltrate the Pounds 1,000-technoIogy into their economies inevitably kills off the Pounds l-technology at an alarming rate, destroying traditional workplaces much faster than modern workplaces can be created, and thus leaves the poor in a more desperate and helpless position than ever before. If effective help is to be brought to those who need it most, a technology is required which would range in some intermediate position between the Pounds 1-technology and the Pounds 1,000- technology. Let us call it - again symbolically speaking - a Pounds 100- technology.

Such an intermediate technology would be immensely more productive than the indigenous technology (which is often in a condition of decay), but it would also be immensely cheaper than the sophisticated, highly capital-intensive technology of modern industry. At such a level of capitalisation, very large numbers of workplaces could be created within a fairly short time; and the creation of such workplaces would be 'within reach' for the more enterprising minority within the district, not only in financial terms but also in terms of their education, aptitude, organising skill, and so forth.

This last point may perhaps be elucidated as follows:

The average annual income per worker and the average capital per workplace in the developed countries appear at present to stand in a relationship of roughly 1:1. This implies, in general terms, that it takes one man-year to create one workplace, or that a man would have to save one month's earnings a year for twelve years to be able to own a workplace. If the relationship were 1:10, it would require ten man-years to create one workplace, and a man would have to save a month's earnings a year for 120 years before he could make himself owner of a workplace. This, of course, is an impossibility, and it follows that the Pounds 1,000- technology transplanted into a district which is stuck on the level of a Pounds 1- technology simply cannot spread by any process of normal growth. It cannot have a positive 'demonstration effect'; on the contrary. as can be observed all over the world, its 'demonstration effect' is wholly negative. The people, to whom the Pounds 1,000- technology is inaccessible, simply 'give up' and often cease doing even those things which they had done previously.

The intermediate technology would also fit much more smoothly into the relatively unsophisticated environment in which it is to be utilised. The equipment would be fairly simple and therefore understandable, suitable for maintenance and repair on the spot. Simple equipment is normally far less dependent on raw materials of great purity or exact specifications and much more adaptable to market fluctuations than highly sophisticated equipment. Men are more easily trained: supervision, control, and organisation are simpler; and there is far less vulnerability to un- foreseen difficulties.

Objections Raised and Discussed

Since the idea of intermediate technology was first put forward, a number of objections have been raised. The most immediate objections are psychological: 'You are trying to withhold the best and make us put up with something inferior and outdated.' This is the voice of those who are not in need. who can help themselves and want to be assisted in reaching a higher standard of living at once. It is not the voice of those with whom we are here concerned, the poverty-stricken multitudes who lack any real basis of existence, whether in rural or in urban areas, who have neither 'the best' nor 'the second best' but go short of even the most essential means of subsistence. One sometimes wonders how many 'development economists' have any real comprehension of the condition of the poor.

There are economists and econometricians who believe that development policy can be derived from certain allegedly fixed ratios, such as the capital output ratio. Their argument runs as follows: The amount of available capital is given. Now, you may concentrate it on a small number of highly capitalised workplaces, or you may spread it thinly over a large number of cheap workplaces. If you do the latter, you obtain less total output than if you do the former: you therefore fail to achieve the quickest possible rate of economic growth. Dr Kaldor, for instance, claims that 'research has shown that the most modern machinery produces much more output per unit of capital invested than less sophisticated machinery which employs more people'. Not only capital' but also 'wages goods' are held to be a given quantity, and this quantity determines 'the limits on wages employment in any country at any given time'.

'If we can employ only a limited number of people in wage labour, then let us employ them in the most productive way, so that they make the biggest possible contribution to the national output, because that will also give the quickest rate of economic growth. You should not go deliberately out of your way to reduce productivity in order to reduce the amount of capital per worker. This seems to me nonsense because you may find that by increasing capital per worker tenfold you increase the output per worker twenty fold. There is no question from every point of view of the superiority of the latest and more capitalistic technologies.''

The first thing that might be said about these arguments is that they are evidently static in character and fail to take account of the dynamics of development. To do justice to the real situation it is necessary to consider the reactions and capabilities of people, and not confine oneself to machinery or abstract concepts. As we have seen before, it is wrong to assume that the most sophisticated equipment, transplanted into an unsophisticated environment, will be regularly worked at full capacity, and if capacity utilisation is low, then the capital / output ratio is also low. It is therefore fallacious to treat capital / output ratios as technological facts, when they are so largely dependent on quite other factors.

The question must be asked, moreover, whether there is such a law, as Dr Kaldor asserts, that the capital/output ratio grows if capital is concentrated on fewer workplaces. No-one with the slightest industrial experience would ever claim to have noticed the existence of such a 'law', nor is there any foundation for it in any science. Mechanisation and automation are introduced to increase the productivity of labour, i.e. the worker/output ratio, and their effect on the capital/output ratio may just as well be negative as it may be positive. Countless examples can be quoted where advances in technology eliminate workplaces at the cost of an additional input of capital without affecting the volume of output. It is therefore quite untrue to assert that a given amount of capital invariably and necessarily produces the biggest total output when it is concentrated on the smallest number of workplaces.

The greatest weakness of the argument, however, lies in taking 'capital' - and even 'wages goods' - as 'given quantities' in an under-employed economy. Here again, the static outlook inevitably leads to erroneous conclusions. The central concern of development policy, as I have argued already, must be the creation of work opportunities for those who, being unemployed, are consumers - on however miserable a level - without contributing anything to the fund of either 'wages goods' or 'capital'. Employment is the very precondition of everything else. The output of an idle man is nil, whereas the output of even a poorly equipped man can be a positive contribution, and this contribution can be to 'capital' as well as to 'wages goods'. The distinction between those two is by no means as definite as the econometricians are inclined to think, because the definition of 'capital' itself depends decisively on the level of technology employed.

Let us consider a very simple example. Some earth-moving job has to be done in an area of high unemployment. There is a wide choice of technologies, ranging from the most modern earth- moving equipment to purely manual work without tools of any kind. The 'output' is fixed by the nature of the job, and it is quite clear that the capital / output ratio will be highest, if the input of 'capital' is kept lowest. If the job were done without any tools, the capital/output ratio would be infinitely large, but the productivity per man would be exceedingly low. If the job were done at the highest level of modern technology, the capital/output ratio would be low and the productivity per man very high. Neither of these extremes is desirable, and a middle way has to be found. Assume some of the unemployed men were first set to work to make a variety of tools, including wheel-barrows and the like, while others were made to produce various 'wages goods'. Each of these lines of production in turn could be based on a wide range of different technologies, from the simplest to the most sophisticated. The task in every case would be to find an intermediate technology which obtains a fair level of productivity with- out having to resort to the purchase of expensive and sophisticated equipment. The outcome of the whole venture would be an economic development going far beyond the completion of the initial earth-moving Project. With a total input of 'capital' from outside which might be much smaller than would have been involved in the acquisition of the most modern earth-moving equipment, and an input of (previously unemployed) labour much greater than the 'modern' method would have demanded, not only a given project would have been completed, but a whole community would have been set on the path of development.

I say, therefore, that the dynamic approach to development. which treats the choice of appropriate, intermediate technologies as the central issue, opens up avenues of constructive action, which the static, econometric approach totally fails to recognise. This leads to the next objection which has been raised against the idea of intermediate technology. It is argued that all this might be quite promising if it were not for a notorious shortage of entrepreneurial ability in the under-developed countries. This scarce resource should therefore be utilised in the most concentrated way, in places where it has the best chances of success and should be endowed with the finest capital equipment the world can offer. Industry, it is thus argued, should be established in or near the big cities, in large integrated units, and on the highest possible level of capitalisation per workplace.

The argument hinges on the assumption that 'entrepreneurial ability' is a fixed and given quantity, and thus again betrays a purely static point of view. It is, of course, neither fixed nor given, being largely a function of the technology to be employed Men quite incapable of acting as entrepreneurs on the level of modern technology may nonetheless be fully capable of making a success of a small-scale enterprise set up on the basis of intermediate technology - for reasons already explained above In fact, it seems to me, that the apparent shortage of entrepreneurs in many developing countries today is precisely the result of the 'negative demonstration effect' of a sophisticated technology infiltrated into an unsophisticated environment. The introduction of an appropriate, intermediate technology would not be likely to founder on any shortage of entrepreneurial ability. Nor would it diminish the supply of entrepreneurs for enterprises in the modem sector; on the contrary, by spreading familiarity with systematic, technical modes of production over the entire population it would undoubtedly help to increase the supply of the required talent.

Two further arguments have been advanced against the idea of intermediate technology - that its products would require protection within the country and would be unsuitable for export. Both arguments are based on mere surmise. In fact a considerable number of design studies and costings, made for specific products in specific districts, have universally demonstrated that the products of an intelligently chosen intermediate technology could actually be cheaper than those of modern factories in the nearest big city. Whether or not such products could be exported is an open question: the unemployed are not contributing to exports now, and the primary task is to put them to work so that they will produce useful goods from local materials for local use.

Applicability of Intermediate Technology

The applicability of intermediate technology is, of course, not universal. There are products which are themselves the typical outcome of highly sophisticated modern industry and cannot be produced except by such an industry. These products, at the same time, are not normally an urgent need of the poor. What the poor need most of all is simple things - budding materials, clothing, household goods, agricultural implements - and a better return for their agricultural products. They also most urgently need in many places: trees, water, and crop storage facilities. Most agricultural populations would be helped immensely if they could themselves do the first stages of processing their products. All these are ideal fields for intermediate technology.

There are, however, also numerous applications of a more ambitious kind. I quote two examples from a recent report:

'The first relates to the recent tendency (fostered by the policy of most African, Asian and Latin American governments of having oil refineries in their own territories, however small their markets) for international firms to design small petroleum refineries with low capital investment per unit of output and a low total capacity, say from 5,000 to 30,000 barrels daily, These units are as efficient and low-cost as the much bigger and more capital-intensive refineries corresponding to conventional design. The second example relates to "package plants" for ammonia production, also recently designed for small markets. According to some provisional data, the investment cost per ton in a "package plant" with a sixty-tons-a-day capacity may be about 30,000 dollars, whereas a conventionally designed unit, with a daily capacity of 100 tons (which is, for a conventional plant, very small) would require an investment of approximately 50,000 dollars per ton.'

The idea of intermediate technology does not imply simply a 'going back' in history to methods now out-dated although a systematic study of methods employed in the developed countries, say, a hundred years ago could indeed yield highly suggestive results. It is too often assumed that the achievement of western science, pure and applied, lies mainly in the apparatus and machinery that have been developed from it, and that a rejection of the apparatus and machinery would be tantamount to a rejection of science. This is an excessively superficial view. The real achievement lies in the accumulation of precise knowledge, and this knowledge can be applied in a great variety of ways, of which the current application in modern industry is only one. The development of an intermediate technology, therefore, means a genuine forward movement into new territory, where the enormous cost and complication of production methods for the sake of labour saving and job elimination is avoided and technology is made appropriate for labour surplus societies.

That the applicability of intermediate technology is extremely wide, even if not universal, will be obvious to anyone who takes the trouble to look for its actual applications today. Examples can be found in every developing country and, indeed, in the advanced countries as well. What. then is missing? It is simply that the brave and able practitioners of intermediate technology do not know of one another, do not support one another, and cannot be of assistance to those who want to follow a similar road but do not know how to get started. They exist, as it were, outside the mainstream of official and popular interest. 'The catalogue issued by the European or United States exporter of machinery is still the prime source of technical assistance" and the institutional arrangements for dispensing aid are generally such that there is an insurmountable bias in favour of large-scale projects on the level of the most modern technology.

If we could turn official and popular interest away from the grandiose projects and to the real needs of the poor, the battle could be won. A study of intermediate technologies as they exist today already would disclose that there is enough knowledge and experience to set everybody to work, and where there are gaps, new design studies could be made very quickly. Professor Gadgil, director of the Gokhale Institute of Politics and Economics at Poona, has outlined three possible approaches to the development of intermediate technology, as follows:

'One approach may be to start with existing techniques in traditional industry and to utilise knowledge of advanced techniques to transform them suitably. Transformation implies retaining some elements in existing equipment, skills and procedures.... This process of improvement of traditional technology is extremely important, particularly for that part of the transition in which a holding operation for preventing added technological unemployment appears necessary...,

'Another approach would be to start from the end of the most advanced technology and to adapt and adjust so as to meet the requirements of the intermediate.... In some cases, the process would also involve adjustment to special local circumstances such as type of fuel or power available.

'A third approach may be to conduct experimentation and research in a direct effort to establish intermediate technology. However, for this to be fruitfully undertaken it would be necessary to define, for the scientist and the technician, the limiting economic circumstances. These are chiefly the scale of operations aimed at and the relative costs of capital and labour and the scale of their inputs - possible or desirable. Such direct effort at establishing intermediate technology would undoubtedly be conducted against the background of knowledge of advanced technology in the field. However, it could cover a much wider range of possibilities than the effort through the adjustment and adaptation approach'.

Professor Gadgil goes on to plead that:

'The main attention of the personnel on the applied side of National Laboratories, technical institutes and the large university departments must be concentrated on this work The advancement of advanced technology in every field is being adequately pursued in the developed countries; the special adaptations and adjustments required in India are not and are not likely to be given attention in any other country. They must, therefore, obtain the highest priority in our plans. Intermediate technology should become a national concern and not, as at present, a neglected field assigned to a small number of specialists, set apart.'

A similar plea might be made to supranational agencies which would be well-placed to collect, systematise, and develop the scattered knowledge and experience already existing in this vitally important field.

In summary we can conclude:

1. The 'dual economy' in the developing countries will remain for the foreseeable future. The modern sector will not be able to absorb the whole.

2. If the non-modern sector is not made the object of special development efforts, it will continue to disintegrate; this disintegration will continue to manifest itself in mass unemployment and mass migration into the metropolitan areas; and this will poison economic life in the modern sector as well.

3. The poor can be helped to help themselves, but only by making available to them a technology that recognises the economic boundaries and Limitations of poverty - an inter- mediate technology.

4. Action programmes on a national and supranational basis are needed to develop intermediate technologies suitable for the promotion of full employment in developing countries.
admin
Site Admin
 
Posts: 36125
Joined: Thu Aug 01, 2013 5:21 am

Re: Small is Beautiful, by E.F. Schumacher

Postby admin » Tue Jan 05, 2016 2:46 am

Thirteen: Two Million Villages

The results of the second development decade will be no better than those of the first unless there is a conscious and determined shift of emphasis from foods to people. Indeed, without such a shift the results of aid will become increasingly destructive.

If we talk of promoting development, what have we in mind - goods or people? If it is people - which particular people? Who are they? Where are they? Why do they need help? If they cannot get on without help, what, precisely, is the help they need? How do we communicate with them? Concern with people raises countless questions like these. Goods, on the other hand, do not raise so many questions. Particularly when econometricians and statisticians deal with them, goods even cease to be anything identifiable, and become GNP, imports, exports, savings, investment, infrastructure, or what not. Impressive models can be built out of these abstractions, and it is a rarity for them to leave any room for actual people. Of course, 'populations' may figure in them, but as nothing more than a mere quantity to be used as a divisor after the dividend, i.e. the quantity of available goods, has been determined. The model then shows that 'development' that is, the growth of the dividend, is held back and frustrated if the divisor grows as well.

It is much easier to deal with goods than with people - if only because goods have no minds of their own and raise no problems of communication. When !he emphasis is on people, communications problems become paramount. Why are the helpers and who are those to be helped? The helpers, by and large, are rich, educated (in a somewhat specialised sense), and town-based. Those who most need help are poor, uneducated, and rurally based. This means that three tremendous gulfs separate the former from the latter: the gulf between rich and poor; the gulf between educated and uneducated; and the gulf between city-men and country-folk, which includes that between industry and agriculture. The first problem of development aid is bow to bridge these three gulfs. A great effort of imagination, study, and compassion is needed to do so. The methods of production, the patterns of consumption, the systems of ideas and of values that suit relatively affluent and educated city people are unlikely to suit poor, semi-illiterate peasants. Poor peasants cannot suddenly acquire the outlook and habits of sophisticated city people. If the people cannot adapt themselves to the methods, then the methods must be adapted to the people. This is the whole crux of the matter.

There are, moreover, many features of the rich man's economy which are so questionable in themselves and, in any case, so inappropriate for poor communities that successful adaptation of the people to these features would spell ruin. If the nature of change is such that nothing is left for the fathers to teach their sons, or for the sons to accept from their fathers, family life collapses. The life, work, and happiness of all societies depend on certain 'psychological structures' which are infinitely precious and highly vulnerable. Social cohesion, co-operation, mutual respect and above all self-respect, courage in the face of adversity, and the ability to bear hardship - all this and much else disintegrates and disappears when these 'psychological structures' are gravely damaged. A man is destroyed by the inner conviction of uselessness. No amount of economic growth can compensate for such losses - though this may be an idle reflection, since economic growth is normally inhibited by them.

None of these awesome problems figure noticeably in the cosy theories of most of our development economists. The failure of the first development decade is attributed simply to an insufficiency of aid appropriations or, worse still, to certain alleged defects inherent in the societies and populations of the developing countries. A study of the current literature could lead one to suppose that the decisive question was whether aid was dispensed multilaterally or bilaterally, or that an improvement in the terms of trade for primary commodities, a removal of trade barriers, guarantees for private investors, or the effective introduction of birth control, were the only things that really mattered.

Now, I am far from suggesting that any of these items are irrelevant, but they do not seem to go to the heart of the matter, and there is in any case precious little constructive action flowing from the innumerable discussions which concentrate on them. The heart of the matter, as I see it, is the stark fact that world poverty is primarily a problem of two million villages, and thus a problem of two thousand million villagers. The solution cannot be found in the cities of the Door countries. Unless life in the hinterland can be made tolerable, the problem of world poverty is in- soluble and will inevitably get worse.

All important insights are missed if we continue to think of development mainly in quantitative terms and in those vast abstractions - like GNP, investment, savings, etc. - which have their usefulness in the study of developed countries but have virtually no relevance to development problems as such. (Nor did they play the slightest part in the actual development of the rich countries!) Aid can be considered successful only if it helps to mobilise the labour-power of the masses in the receiving country and raises productivity without 'saving' labour. The common criterion of success, namely the growth of GNP, is utterly misleading and, in fact, must of necessity lead to phenomena which can only be described as neocolonialism.

I hesitate to use this term because it has a nasty sound and appears to imply a deliberate intention on the part of the aid- givers. Is there such an intention? On the whole, I think, there is not. But this makes the problem greater instead of smaller. Unintentional neo-colonialism is far more insidious and infinitely more difficult to combat than neo-colonialism intentionally pursued. It results from the mere drift of things, supported by the best intentions. Methods of production, standards of consumption, criteria of success or failure, systems of values. and behaviour patterns establish themselves in poor countries which, being (doubtfully) appropriate only to conditions of affluence already achieved, fix the poor countries ever more inescapably in a condition of utter dependence on the rich. The most obvious example and symptom is increasing indebtedness. This is widely recognised, and well- meaning people draw the simple conclusion that grants are better than loans, and cheap loans better than dear ones. True enough. But increasing indebtedness is not the most serious matter. After all, if a debtor cannot pay he ceases to pay - a risk the creditor must always have had in mind.

Far more serious is the dependence created when a poor country fails for the production and consumption patterns of the rich. A textile mill I recently visited in Africa provides a telling example. The manager showed me with considerable pride that his factory was at the highest technological level to be found anywhere in the world Why was it so highly automated? 'Because.' he said, 'African labour, unused to industrial work, would make mistakes, whereas automated machinery does not make mistakes. The quality standards demanded today.' he explained, 'are such that my product must be perfect to be able to find a market.' He summed up his policy by saying: 'Surely, my task is to eliminate the human factor.' Nor is this all. Because of inappropriate quality standards, all his equipment had to be imported from the most advanced countries; the sophisticated equipment demanded that all higher management and maintenance personnel had to be imported. Even the raw materials had to be imported because the locally grown cotton was too short for top quality yarn and the postulated standards demanded the use of a high percentage of man-made fibres. This is not an untypical case. Anyone who has taken the trouble to look systematically at actual 'development' projects - instead of merely studying development plans and econometric models - knows of countless such cases: soap factories producing luxury soap by such sensitive processes that only highly refined materials can be used, which must be imported at high prices while the local raw materials are exported at low prices; food-processing plants; packing stations; motorisation, and so on - all on the rich man's pattern. In many cases, local fruit goes to waste because the consumer allegedly demands quality standards which relate solely to eye-appeal and can be met only by fruit imported from Australia or California where the application of an immense science and a fantastic technology ensures that every apple is of the same size and without the slightest visible blemish. The examples could be multiplied without end. Poor countries slip - and are pushed - into the adaptation of production methods and consumption standards which destroy the possibilities of self-reliance and self-help. The results are unintentional neo-colonialism and hopelessness for the poor.

How, then, is it possible to help these two million villages? First, the quantitative aspect. If we take the total of western aid after eliminating certain items which have nothing to do with development, and divide it by the number of people living in the developing countries, we arrive at a pe-rhead figure of rather less than Pounds 2 a year. Considered as an income supplement, this is, of course, negligible and derisory. Many people therefore plead that the rich countries ought to make a much bigger financial effort - and it would be perverse to refuse to support this plea, But what is it that one could reasonably expect to achieve? A per-head figure of Pounds 3 a year, or Pounds 4 a year? As a subsidy, a sort of 'public assistance' payment, even Pounds 4 a year is hardly less derisory than the present figure.

To illustrate the problem further, we may consider the case of a small group of developing countries which receive supplementary income on a truly magnificent scale - the oil producing countries of the Middle East, Libya, and Venezuela. Their tax and royalty income from the oil companies in 1968 reached Pounds 2,349 million, or roughly Pounds 50 per head of their populations. Is this input of funds producing healthy and stable societies, contented populations, the progressive elimination of rural poverty, a flourishing agriculture, and widespread industrialisation? In spite of some very limited successes, the answer is certainly no. Money alone does not do the trick. The quantitative aspect is quite secondary to the qualitative aspect. If the policy is wrong, money will not make it right; and if the policy is right, money may not, in fact, present an unduly difficult problem.

Let us turn then to the qualitative aspect. If we have learnt anything from the last ten or twenty years of development effort. it is that the problem presents an enormous intellectual challenge. The aid-givers - rich, educated, town-based - know how to do things in their own way: but do they know how to assist self-help among two million villages, 'among two thousand million villagers - poor, uneducated, country-based? They know how to do a few big things in big towns; but do they know how to do thousands of small things in rural areas? They know how to do things with lots of capital: but do they know how to do them with lots of labour - initially untrained labour at that?

On the whole, they do not know; but there are many experienced people who do know, each of them in their own limited field of experience. In other words, the necessary knowledge, by and large, exists; but it does not exist in an organised, readily accessible form. It is scattered, unsystematic, unorganised and no doubt also incomplete.

The best aid to give is intellectual aid, a gift of useful knowledge. A gift of knowledge is infinitely preferable to a gift of material things. There are many reasons for this. Nothing becomes truly 'one's own' except on the basis of some genuine effort or sacrifice. A gift of material goods can be appropriated by the recipient without effort or sacrifice; it therefore rarely becomes 'his own' and is all too frequently and easily treated as a mere windfall. A gift of intellectual goods, a gift of knowledge, is a very different matter. Without a genuine effort of appropriation on the part of the recipient there is no gift. To appropriate the gift and to make it one's own is the same thing, and 'neither moth nor rust doth corrupt'. The gift of material goods makes people dependent, but the gift of knowledge makes them free - provided it is the right kind of knowledge, of course. The gift of knowledge also has far more lasting effects and is far more closely relevant to the concept of 'development'. Give a man a fish, as the saying goes, and you are helping him a little bit for a very short while; teach him the art of fishing, and he can help himself all his life. On a higher level: supply him with fishing tackle; this will cost you a good deal of money, and the result remains doubtful; but even if fruitful, the man's continuing livelihood will still be dependent upon you for replacements. But teach him to make his own fishing tackle and you have helped him to become not only self-supporting, but also self-reliant and independent.

This, then, should become the ever-increasing preoccupation of aid programmes - to make men self-reliant and independent by the generous supply of the appropriate intellectual gifts, gifts of relevant knowledge on the methods of self-help. This approach, incidentally, also has the advantage of being relatively cheap, that is to say, of making money go a very long way. For Pounds 100 you may be able to equip one man with certain means Of production; but for the same money you may well be able to teach a hundred men to equip themselves. Perhaps a little 'pump-priming' by way of material goods will in some cases be helpful to speed the process; but this would be purely incidental and secondary, and if the goods are rightly chosen. those who need them can probably pay.

A fundamental reorientation of aid in the direction I advocate would require only a marginal reallocation of funds. If Britain is currently giving aid to the tune of about Pounds 250 million a year, the diversion of merely one per cent of this sum to the organisation and mobilisation of ‘gifts of knowledge' would, I am certain, change all prospects and open a new and much more hopeful era in the history of 'development'. One per cent, after all, is about E2t million - a sum of money which would go a very, very long way for this purpose if intelligently employed. And it might make the other ninety-nine per cent immensely more fruitful.

Once we see the task of aid as primarily one of supplying relevant knowledge, experience, know-how, etc. - that is to say, intellectual rather than material goods - it is clear that the present organisation of the overseas development effort is far from adequate. This is natural as long as the main task is seen as one of making funds available for a variety of needs and projects proposed by the recipient country, the availability of the knowledge factor being more or less taken for granted. What I am saying is simply that this availability cannot be taken for granted, that it is precisely this knowledge factor which is conspicuously lacking, that this is the gap, the 'missing link', in the whole enterprise. I am not saying that no knowledge is currently being supplied: this would be ridiculous. No, there is a plentiful flow of know-how, but it is based on the implicit assumption that what is good for the rich must obviously be good for the poor. As I have argued above, this assumption is wrong, or at least only very partially right and preponderantly wrong.

So we get back to our two million villages and have to see how we can make relevant knowledge available to them. To do so, we must first possess this knowledge ourselves. Before we can talk about giving aid, we must have something to give. We do not have thousands of poverty-stricken villages in our country; so what do we know about effective methods of self-help in such circumstances? The beginning of wisdom is the admission of one's own lack of knowledge. As long as we think we know, when in fact we do not, we shall continue to go to the poor and demonstrate to them all the marvellous things they could do if they were already rich. This has been the main failure of aid to date.

But we do know something about the organisation and systematisation of knowledge and experience: we do have facilities to do almost any job, provided only that we clearly understand what it is. If the job is, for instance, to assemble an effective guide to methods and materials for low-cost building in tropical countries, and, with the aid of such a guide. to train local builders in developing countries in the appropriate technologies and methodologies, there is no doubt we can do this, or - to say the least - that we can immediately take the steps which will enable us to do this in two or three years' time. Similarly, if we clearly understand that one of the basic needs in many developing countries is water, and that millions of villagers would benefit enormously from the availability of systematic knowledge on low-cost, self-help methods of water-storage, protection, transport, and so on - if this is clearly understood and brought into focus, there is no doubt that we have the ability and resources to assemble, organise and communicate the required information.

As I have said already, poor people have relatively simple needs, and it is primarily with regard to their basic requirements and activities that they want assistance. If they were not capable of self-help and self-reliance, they would not survive today. But their own methods are all too frequently too primitive, too inefficient and ineffective; these methods require up-grading by the input of new knowledge, new to them, but not altogether new to every- body. It is quite wrong to assume that poor people are generally unwilling to change; but the proposed change must stand in some organic relationship to what they are doing already, and they are rightly suspicious of, and resistant to, radical changes proposed by town-based and office-bound innovators who approach them in the spirit of: 'You just get out of my way and I shall show you how useless you are and how splendidly the job can be done with a lot of foreign money and outlandish equipment.'

Because the needs of poor people are relatively simple, the range of studies to be undertaken is fairly limited. It is a perfectly manageable task to tackle systematically. but it requires a different organisational set-up from what we have at present (a set-up primarily geared to the disbursement of funds). At present, the development effort is mainly carried on by government officials, both in the donor and in the recipient country; in other words, by administrators. They are not. by training and experience, either entrepreneurs or innovators, nor do they possess specific technical knowledge of productive processes, commercial requirements, or communication problems. Assuredly, they have an essential role to play, and one could not - and would not - attempt to proceed without them. But they can do nothing by themselves alone. They must be closely associated with other social groups, with people in industry and commerce, who are trained in the 'discipline of viability' - if they cannot pay their wages on Friday, they are out! - and with professional people, academics, research workers, journalists, educators, and so on, who have time, facilities, ability, and inclination to think, write, and communicate. Development work is far too difficult to be done successfully by any one of these three groups working in isolation. Both in the donor countries and in the recipient countries it is necessary to achieve what I call the A-B-C combination, where A stands for administrators; B stands for businessmen; and C stands for communicators - that is intellectual workers, professionals of various descriptions. It is only when the A-B-C combination is effectively achieved that a real impact on the appallingly difficult problems of development can be made.

In the rich countries, there are thousands of able people in all these walks of life who would like to be involved and make a contribution to the fight against world poverty, a contribution that goes beyond forking out a bit of money; but there are not many outlets for them. And in the poor countries, the educated people, a highly privileged minority, all too often follow the fashions set by the rich societies - another aspect of unintentional neocolonialism - and attend to any problem except those directly concerned with the poverty of their fellow-countrymen. They need to be given strong guidance and inspiration to deal with the urgent problems of their own societies.

The mobilisation of relevant knowledge to help the poor to help themselves, through the mobilisation of the willing helpers who exist everywhere, both here and overseas, and the tying together of these helpers in 'A-B-C-Groups', is a task that requires some money, but not very much. As I said, a mere one per cent of the British aid programme would be enough - more than enough - to give such an approach all the financial strength it could possibly require for quite a long time to come. There is therefore no question of turning the aid programmes upside down or inside out. It is the thinking that has to be changed and also the method of operating. It is not enough merely to have a new policy: new methods of organisation are required, because the policy is in the implementation.

To implement the approach here advocated, action groups need to be formed not only in the donor countries but also, and this is most important, in the developing countries themselves. These action groups, on the A-B-C pattern. should ideally be outside the government machine, in other words they should be non- government voluntary agencies. They may well be set up by voluntary agencies already engaged in development work.
There are many such agencies, both religious and secular, with large numbers of workers at the 'grass roots level', and they have not been slow in recognising that 'intermediate technology' is precisely what they have been trying to practise in numerous in- stances, but that they are lacking any organised technical backing to this end. Conferences have been held in many countries to discuss their common problems, and it has become ever more apparent that even the most self-sacrificing efforts of the voluntary workers cannot bear proper fruit unless there is a systematic organisation of knowledge and an equally systematic organisation of communications - in other words, unless there is something that might be called an 'intellectual infrastructure'. Attempts are being made to create such an infrastructure, and they should receive the fullest support from governments and from the voluntary fund-raising organisations. At least four main functions have to be fulfilled:

The function of communications - to enable each field worker or group of field workers to know what other work is going on in the geographical or 'functional' territory in which they are engaged, so as to facilitate the direct exchange of information.

The function of information brokerage - to assemble on a systematic basis and to disseminate relevant information on appropriate technologies for developing countries, particularly on low-cost methods relating to building, water and power, crop- storage and processing, small-scale manufacturing, health ser- vices, transportation and so forth. Here the essence of the matter is not to hold all the information in one centre but to hold 'information on information' or 'know-how on know- how'.

The function of 'feed-back', that is to sag', the transmission of technical problems from the field workers in developing countries to those places in the advanced countries where suitable facilities for their solution exist.

The function of creating and co-ordinating 'sub-structures'. that is to say, action groups and verification centres in the developing countries themselves.

These are matters which can be fully clarified only by trial and error. In all this one does not have to begin from scratch - a great deal exists already, but it now wants to be pulled together and systematically developed. The future success of development aid will depend on the organisation and communication of the right kind of knowledge - a task that is manageable, definite, and wholly within the available resources.

Why is it so difficult for the rich to help the poor? The all- pervading disease of the modern world is the total imbalance between city and countryside, an imbalance in terms of wealth. power, culture, attraction, and hope. The former has become over-extended and the latter has atrophied. The city has become the universal magnet, while rural life has lost its savour. Yet it remains an unalterable truth that, just as a sound mind depends on a sound body, so the health of the cities depends on the health of the rural areas. The cities, with all their wealth, are merely secondary producers, while primary production, the precondition of all economic life, takes place in the countryside. The prevailing lack of balance, based on the age-old exploitation of countryman and raw material producer, today threatens all countries through- out the world, the rich even more than the poor. To restore a proper balance between city and rural life is perhaps the greatest task in front of modern man. It is not simply-a matter of raising agricultural yields so as to avoid world hunger. There is no answer to the evils of mass unemployment and mass migration into cities, unless the whole level of rural life can be raised, and this requires the development of an agro-industrial culture, so that each district. each community, can offer a colourful variety of occupations to its members.

The crucial task of this decade, therefore, is to make the development effort appropriate and thereby more effective, so that it will reach down to the heartland of world poverty, to two million villages. If the disintegration of rural life continues, there is no way out - no matter how much money is being spent. But if the rural people of the developing countries are helped to help them- selves, I have no doubt that a genuine development will ensue, without vast shanty towns and misery belts around every big city and without the cruel frustrations of bloody revolution. The task is formidable indeed, but the resources that are waiting to be mobilised are also formidable.

Economic development is something much wider and deeper than economics, let alone econometrics. Its roots lie outside the economic sphere, in education, organisation, discipline and, beyond that, in political independence and a national consciousness of self-reliance. It cannot be 'produced' by skilful grafting operations carried out by foreign technicians or an indigenous elite that has lost contact with the ordinary people. It can succeed only if it is carried forward as a broad, popular 'movement of reconstruction' with primary emphasis on the full utilisation of the drive, enthusiasm, intelligence, and labour power of everyone. Success cannot be obtained by some form of magic produced by scientists, technicians, or economic planners. It can come only through a process of growth involving the education, organisation, and discipline of the whole population. Anything less than this must end in failure.
admin
Site Admin
 
Posts: 36125
Joined: Thu Aug 01, 2013 5:21 am

Re: Small is Beautiful, by E.F. Schumacher

Postby admin » Tue Jan 05, 2016 2:50 am

Fourteen: The Problem of Unemployment in India

A talk to the India Development Group in London


When speaking of unemployment I mean the non-utilisation or gross under-utilisation of available labour. We may think of a productivity scale that extends from zero, i.e. the productivity of a totally unemployed person, to 100 per cent, i.e. the productivity of a fully and most effectively occupied person. The crucial question for any poor society is how to move up on this scale. When considering productivity in any society it is not sufficient to take account only of those who are employed or self-employed and to leave out of the reckoning all those who are unemployed and whose productivity therefore is zero.

Economic development is primarily a question of getting more work done. For this, there are four essential conditions. First, there must be motivation; second, there must be some know-how; third, there must be some capital; and fourth, there must be an outlet: additional output requires additional markets.

As far as the motivation is concerned, there is little to be said from the outside. If people do not want to better themselves, they are best left alone - this should be the first principle of aid. Insiders may take a different view, and they also carry different responsibilities. For the aid-giver, there are always enough people who do wish to better themselves, but they do not know how to do it. So we come to the question of know-how. If there are millions of people who want to better themselves but do not know how to do it, who is going to show them? Consider the size of the problem in India. We are not talking about a few thousands or a few millions, but rather about a few hundred millions of people. The size of the problem puts it beyond any kind of little amelioration, any little reform, improvement, or inducement, and makes it a matter of basic political philosophy. The whole matter can be summed up in the question: what is education for? I think it was the Chinese. before World War II, who calculated that it took the work of thirty peasants to keep one man or woman at a university. If that person at the university took a five-year course, by the time he had finished he would have consumed 150 peasant-work-years. How can this be justified? Who has the right to appropriate 150 years of peasant work to keep one person at university for five years, and what do the peasants get back for it? These questions lead us to the parting of the ways: is education to be a 'passport to privilege' or is it something which people take upon themselves almost like a monastic vow, a sacred obligation to serve the people? The first road takes the educated young person into a fashionable district of Bombay, where a lot of other highly educated people have already gone and where he can join a mutual admiration society, a 'trade union of the privileged', to see to it that his privileges are not eroded by the great masses of his contemporaries who have not been educated. This is one way. The other way would be embarked upon in a different spirit and would lead to a different destination. It would take him back to the people who, after all, directly or indirectly, had paid for his education by 150 peasant-work-years: having consumed the fruits of their work, he would feel in honour bound to return something to them.

The problem is not new. Leo Tolstoy referred to it when he wrote: 'I sit on a man's back, choking him, and making him carry me, and yet assure myself and others that I am very sorry for him and wish to ease his lot by any means possible, except getting off his back.' So this is the first question I suggest we have to face. Can we establish an ideology, or whatever you like to call it, which insists that the educated have taken upon themselves an obligation and have not simply acquired a 'passport to privilege'? This ideology is of course well supported by all the higher teachings of mankind. As a Christian, I may be permitted to quote from St Luke: 'Much will be expected of the man to whom much has been given. More will be asked of him because he was entrusted with more.' It is you might well say, an elementary matter of justice. If this ideology does not prevail, if it is taken for granted that education is a passport to privilege then the content of education will not primarily be something to serve the people, but something to serve ourselves, the educated. The privileged minority will wish to be educated in a manner that sets them apart and will inevitably learn and teach the wrong things, that is to say, things that do set them apart, with a contempt for manual labour, a contempt for primary production, a contempt for rural life, etc., etc. Unless virtually all educated people see themselves as servants of their country - and that means after all as servants of the common people - there cannot possibly be enough leadership and enough communication of know-how to solve this problem of unemployment or unproductive employment in the half million villages of India. It is a matter of 500 million people. For helping people to help themselves you need at ]east two persons to look after 100 and that means an obligation to raise ten million helpers, that is, the whole educated population of India. Now you may say this is impossible, but if it is, it is not so because of any laws of the universe, but because of a certain inbred, ingrained selfishness on the part of the people who are quite prepared to receive and not prepared to give. As a matter of fact, there is evidence that this problem is not insoluble; but it can be solved only at the political level.

Now let me turn to the third factor, after motivation and after, know-how, the factor I have called capital, which is of course closely related to the matter of know-how. According to my estimates there is in India an immediate need for something like fifty million new jobs. If we agree that people cannot do productive work unless they have some capital - in the form of equipment and also of working capital - the question arises: how much capital can you afford to establish one new job? If it costs Pounds 10 to establish a job you need Pounds 500 million for fifty million jobs. If it costs Pounds 100 to establish a job you need Pounds 5,000 million, and if it cost Pounds 5,000 per job, which is what it might cost in Britain and the USA, to set up fifty million jobs you require Pounds 250,000 million.

The national income of the country we are talking about, of India, is about f15.000 million a year, So the first question is how much can we offer for each job, and the second question, how much time have we to do it in. Let us say we want fifty million jobs in ten years. What proportion of national income (which I identify as about Pounds 15,000 million) can one reasonably expect to be available for the establishment of this capital fund for job creation? I would say, without going into any details, you are lucky if you can make it five per cent. Therefore, if you have five per cent of Pounds 15,000 million for ten years you have a total of Pounds 7,5000 million for the establishment of jobs. If you want fifty million jobs in those ten years, you can afford to spend an average of Pounds 150 per workplace. At that level of capital investment per workplace, in other words, you could afford to set up five million workplaces a year. Let us assume, however, that you say: 'No. Pounds 150 is too mean; it will not buy more than a set of tools; we want Pounds 1,500 per workplace', then you cannot have five million new jobs a year but only half a million. And if you say: 'Only the best is good enough; we want all to be little Americans right away, and that means Pounds 5,000 per workplace', then you cannot have half a million new jobs a year, let alone five million, but only about 170,000. Now, you have no doubt noticed already that I have simplified this matter very much because, in the ten years with investment in jobs, you would have an increase in the national income; but I have also left out the increase in the population, and I would suggest that these two factors cancel one another in their effect on my calculation.

It follows, I suggest, that the biggest single collective decision that any country in the position of India has to take is the choice of technology. I am not laying down the law of what ought to be. I am simply saying that these are the hard facts of life. A lot of things you can argue against, but you cannot argue against arithmetic. So you can have a few jobs at a high level of capitalisation or you can have many jobs at a relatively low level of capitalisation.

Now, all this of course links up with the other factors I have mentioned, with education, motivation, and know-how. In India there are about fifty million pupils in primary schools; almost fifteen million in secondary schools: and roughly one and a half million in institutions of higher learning. To maintain an educational machine on this kind of scale would of course be pointless unless at the end of the pipeline there was something for them to do. with a chance to apply their knowledge. If there is not, the whole thing is nothing but a ghastly burden. This rough picture of the educational effort suffices to show that one really does have to think in terms of five million new jobs a year and not in terms of a few hundred thousand jobs.

Now, until quite recently, that is to say, some fifty to seventy years ago, the way we did things was, by present standards, quite primitive. In this connection, I should like to refer to Chapter II of John Kenneth Galbraith's The New Industrial Estate.' It contains a fascinating report on the Ford Motor Company. The Ford Motor Company was set up on 16 June 1903, with an authorised capital of $150,000 of which $100,000 were issued but only $28,500 were paid for in cash, So the total cash which went into this enterprise was of the order of $30,000. They set up in June 1903 and the first car to reach the market appeared in October 1903, that is to say, after four months. The employment in 1903, of course, was small - 125 people, and the capital investment per workplace was somewhat below $100. That was in 1903. If we now move sixty years forward, to 1963, we find that the Ford Motor Company decided to produce a new model, the Mustang. The preparation required three and a half years. Engineering and styling costs were $9 million: the costs of tooling up for this new model were $50 million. Meanwhile the assets employed by the Company were $6.000 million which works out at almost Pounds 10,000 per person employed, about a hundred times as much as sixty years earlier.

Galbraith draws certain conclusions from all this which are worth studying. They describe what happened over these sixty years. The first is that a vastly increased span of time now separates the beginning of an enterprise from the completion of the job. The first Ford car, from the beginning of the work to its appearance on the market, took four months, while a mere change of model now takes four years. Second, a vast increase in capital committed to production. investment per unit of output in the original Ford factory was infinitesimal; material and parts were there only brie8y; no expensive specialists gave them attention; only elementary machines were used to assemble them into a car; it helped that the frame of the car could be lifted by only two men. Third, in those sixty years, a vast increase of inflexibility. Galbraith comments: 'Had Ford and his associates (in 1903) decided at any point to shift from gasoline to steam power, the machine shop could have accommodated itself to the change in a few hours.' If they now try to change even one screw, it takes that many months. Fourth, increasingly specialised manpower, not only on the machinery, but also on the planning, the foreseeing of the future in the uttermost detail. Fifth, a vastly different type of organisation to integrate all these numerous specialists, none of whom can do anything more than just one small task inside the complicated whole. 'So complex, indeed. will be the job for organising specialists that there will be specialists of organisation. More even than machinery, massive and complex business organisations are being tangible manifestations of advanced technology.' Finally, the necessity for long-range planning, which. I can assure you, is a highly sophisticated job, and also highly frustrating. Galbraith comments: 'In the early days of Ford, the future was very near at hand. Only days elapsed between the commitment of machinery and materials to production and their appearance as a car. If the future is near at hand, it can be assumed to be very much like the present', and the planning and forecasting is not very difficult.

Now what is the upshot of ah this? The upshot is that the more sophisticated the technology, the greater in general will be the foregoing requirements. When the simple things of life, which is all I am concerned with, are produced by ever more sophisticated processes, then the need to meet these six requirements moves ever more beyond the capacity of any poor society. As far as simple products are concerned - food, clothing, shelter and culture - the greatest danger is that people should automatically assume that only the 1963 model is relevant and not the 1903 model; because the 1963 way of doing things is inaccessible to the poor, as it presupposes great wealth. Now, without wishing to be rude to my academic friends, I should say that this point is almost universally overlooked by them. The question of how much you can afford for each workplace when you need millions of them is hardly ever raised. To fulfil the requirements that have arisen over the last fifty or sixty years in fact involves a quantum jump, Everything was quite continuous in human history till about the beginning of this century; but in the last half-century there has been a quantum jump, the sort of jump as with the capitalisation of Ford, from $30,000 to $6,000 million.

In a developing country it is difficult enough to get Henry Fords, at the 1903 level. To get Henry super-Fords, to move from practically nowhere on to the 1963 level, is virtually impossible. No-one can start at this level. This means that no-one can do anything at this level unless he is already established, is already operating at that level. This is absolutely crucial for our understanding of the modem world. At this level no creations are possible, only extensions, and this means that the poor are more dependent on the rich than ever before in human history, if they are wedded to that level. They can only be gap-fillers for the rich, for instance, where low wages enable them to produce cheaply this and that trifle. People ferret around and say: 'Here, in this or that poor country, wages are so low that we can get some part of a watch, or of a carburetor, produced more cheaply than in Britain. So let it be produced in Hong Kong or in Taiwan or wherever it might be.' The role of the poor is to be gap-fillers in the requirements of the rich. It follows that at this level of technology it is impossible to attain either full employment or independence. The choice of technology is the most important of all choices.

It is a strange fact that some people say that there are no technological choices. I read an article by a well-known economist from the USA who asserts that there is only one way of producing any particular commodity: the way of 1971. Had these commodities never been produced before? The basic things of life have been needed and produced since Adam left Paradise. He says that the only machinery that can be procured is the very latest. Now that is a different point and it may well be that the only machinery that can be procured easily is the latest. It is true that at any one time there is only one kind of machinery that tends to dominate the market and this creates the impression as if we had no choice and as if the amount of capital in a society determined the amount of employment it could have. Of course this is absurd. The author whom I am quoting also knows that it is absurd, and he then corrects himself and points to examples of Japan, Korea, Taiwan, etc., where people achieve a high level of employment and production with very modest capital equipment.

The importance of technological choice is gradually entering the consciousness of economists and development planners. There are four stages. The first stage has been laughter and scornful rejection of anyone who talked about this. The second stage has now been reached and people give lip service to it, but no action follows and the drift continues. The third stage would be active work in the mobilisation of the knowledge of this technological choice; and the fourth stage will then be the practical application. It is a long road but I do not wish to hide the fact that there are political possibilities of going straight to the fourth stage. If there is a political ideology that sees development as being about people, then one can immediately employ the ingenuity of hundreds of millions of people and go straight to the fourth stage. There are indeed some countries which are going straight to the fourth stage.

However, it is not for me to talk politics. If it is now being increasingly understood that this technological choice is of absolutely pivotal importance, how can we get from stage two to stage three, namely from just giving lip service to actually doing work? To my knowledge this work is being done systematically only by one organisation, the Intermediate Technology Development Group (ITDG). I do not deny that some work is also being done on a commercial basis, but not systematically. ITDG set itself the task to find out what are the technological choices. I will only give one example out of the many activities of this purely private group. Take foundry work and woodworking, metal and wood being the two basic raw materials of industry. Now, what are the alternative technologies that can be employed, arranged in the order of capital intensity from the most primitive, when people work with the simplest tools, to the most complicated? This is shown in what we call an industrial profile, and these industrial profiles are supported by instruction manuals at each level of technology and by a directory of equipment with addresses where it can be obtained.

The only criticism that can be levelled against this activity is that it is too little and too late. It is not good enough that in this crucial matter one should be satisfied with one little group of private enthusiasts doing this work. There ought to be dozens of solid, well-endowed organisations in the world doing it. The task is so great that even some overlapping would not matter. In any case, I should hope that this work will be taken up on a really substantial scale in India, and I am delighted to see that already some beginnings have been made.

I shall now turn to the fourth factor, namely markets. There is, of course, a very real problem here, because poverty means that markets are small and there is very little free purchasing power. All the purchasing power that exists already, is, as it were, be- spoken, and if I start a new production of, say, sandals or shoes in a poor area, my fellow-sufferers in the area will not have any money to buy the shoes when I have made them. Production is sometimes easier to start than it is to find markets, and then, of course, we get very quickly the advice to produce for export, because exports are mainly for the rich countries and their purchasing power is plentiful But if I start from nothing in a rural area, how could E hope to be competitive in the world market?

There are two reasons for this extraordinary preoccupation with exports, as far as I can see. One is real; the other not so good. I shall first talk about the second one. It is really a hangover of the economic thinking of the days of colonialism. Of course, the metropolitan power moved into a territory not because it was particularly interested in the local population, but in order to open up resources needed for its own industry. One moved into Tanzania for sisal, into Zambia for copper, etc., and into some other place for trade. The whole thinking was shaped by these interests.

'Development' meant the development of raw material or food supplies or of trading profits. The colonial power was primarily interested in supplies and profits, not in the development of the natives, and this meant it was primarily interested in the colony's exports and not in its internal market. This outlook has stuck to such an extent that even the Pearson Report considers the expansion of exports the main criterion of success for developing countries. But, of course, people do not live by exporting, and what they produce for themselves and for each other is of infinitely greater importance to them than what they produce for foreigners.

The other point, however, is a more real one. If I produce for export into a rich country. I can take the availability of purchasing power for granted, because my own little production is as nothing compared with what exists already. But if I start new production in a poor country there can be no local market for my products unless I divert the flow of purchasing power from some other product to mine. A dozen different productions should all be started together: then for every one of the twelve producers the other eleven would be his market. There would be additional purchasing power to absorb the additional output. But it is extremely difficult to start many different activities at once. So the conventional advice is: 'Only production for export is proper development.' Such production is not only highly limited in scope, its employment effect is also extremely limited. To compete in world markets, it is normally necessary to employ the highly capital-intensive and labour-saving technology of the rich countries In any case, there is no multiplier effect: my goods are sold for foreign exchange, and the foreign exchange is spent on imports (or the repayment of debt), and that is the end of it.

The need to start many complementary productive activities simultaneously presents a very severe difficulty for development, but the difficulty can be mitigated by 'pump-priming' through public works. The virtues of a massive public works programme for job creation have often been extolled. The only point I should like to make in this context is the following: if you can get new purchasing power into a rural community by way of a public works programme financed from outside, see to it that the fullest possible use is made of the 'multiplier effect'. The people employed on the public works want to spend their wages on 'wages goods', that is to say, consumers' goods of all kinds. If these wages goods can be locally produced, the new purchasing power made available through the public works programme dos not seep away but goes on circulating in local market and the total employment effect could be prodigious. Public works are very desirable and can do a great deal of good; but if they are not backed up by the indigenous production of additional wages goods, the additional purchasing power will flow into imports and the country may experience serious foreign exchange difficulties. Even so, it is misleading to deduce from this truism that exports are specially important for development. After all, for mankind as a whole there are no exports. We did not start development by obtaining foreign exchange from Mars or from the moon. Mankind is a closed society. India is quite big enough to be a relatively closed society in that sense - a society in which the able-bodied people work and produce what they need.

Everything sounds very difficult and in a sense it is very difficult if it is done for the people, instead of by the people. But let us not think that development or employment is anything but the most natural thing in the world. It occurs in every healthy person's life. There comes a point when he simply sets to work. In a sense this is much easier to do now than it has ever been in human history. Why? Because there is so much more knowledge. There are so much better communications. You can tap all this knowledge (this is what the Indian Development Group is there for). So let's not mesmerise ourselves by the difficulties, but recover the commonsense view that to work is the most natural thing in the world. Only one must not be blocked by being too damn clever about it. We are always having all sorts of clever ideas about optimising something before it even exists. I think the stupid man who says 'something is better than nothing' is much more intelligent than the clever chap who will not touch anything unless it is optimal. What is stopping us? Theories, planning. I have come across planners at the Planning Commission who have convinced themselves that even within fifteen years it is not possible to put the willing labour power of India to work. If they say it is not possible in fifteen months, I accept that, because it takes time to get around. But to throw up the sponge and say it is not possible to do the most elementary thing within fifteen years, this is just a sort of degeneracy of the intellect. What is the argument behind it? Oh! the argument is very clever, a splendid piece of model building. They have ascertained that in order to put a man to work you need on average so much electricity, so much cement, and so much steel. This is absurd. I should like to remind you that a hundred years ago electricity, cement and steel did not even exist in any significant quantity at all. (I should like to remind you that the Taj Mahal was built without electricity, cement and steel and that all the cathedrals of Europe were built without them. It is a fixation in the mind, that unless you can have the latest you can't do anything at all, and this is the thing that has to be overcome.) You may say, again, this is not an economic problem, but basically a political problem. It is basically a problem of compassion with the ordinary people of the world. It is basically a problem, not of conscripting the ordinary people, but of getting a kind of voluntary conscription of the educated.

Another example: we are told by theorists and planners that the number of people you can put to work depends upon the amount of capital you have, as if you could not put people to work to produce capital goods. We are told there is no choice of technology, as if production had started in the year 1971. We are told that it cannot he economic to use anything but the latest methods, as if anything could be more uneconomic than having people doing absolutely nothing. We are told that it is necessary to 'eliminate the human factor'.

The greatest deprivation anyone can suffer is to have no chance of looking after himself and making a livelihood. There is no conflict between growth and employment. Not even a conflict as between the present and the future. You will have to construct a very absurd example to demonstrate that by letting people work you create a conflict between the present and the future. No country that has developed has been able to develop without letting the people work. On the one hand, it is quite true to say that these things are difficult: on the other hand, let us never lose sight of the fact that we are talking about man's most elementary needs and that we must not be prevented by all these high-fainting and very difficult considerations from doing the most elementary and direct things.

Now, at the risk of being misunderstood, I will give you the simplest of all possible examples of self-help. The Good Lord has not disinherited any of his children and as far as India is concerned he has given her a variety of trees, unsurpassed anywhere in the world. There are trees for almost all human needs. One of the greatest teachers of India was the Buddha who included in his teaching the obligation of every good Buddhist that he should plant and see to the establishment of one tree at least every five years. As long as this was observed, the whole large area of India was covered with trees, free of dust, with plenty of water. plenty of shade, plenty of food and materials. Just imagine you could establish an ideology which would make it obligatory for every able- bodied person in India, man, woman and child, to do that little thing - to plant and see to the establishment of one tree a year, five years running. This, in a five-year period, would give you 2.000 million established trees. Anyone can work it out on the back of an envelope that the economic value of such an enterprise, intelligently conducted, would be greater than anything that has ever been promised by any of India's five-year plans. It could be done without a penny of foreign aid; there is no problem of savings and investment. It would produce foodstuffs, fibres, building material, shade, water, almost anything that man really needs.

I just leave this as a thought, not as the final answer to India's enormous problems. But I ask: what sort of an education is this if it prevents us from thinking of things ready to be done immediately? What makes us think we need electricity, cement, and steel before we can do anything at all? The really helpful things will not be done from the centre; they cannot be done by big organisations; but they can be done by the people themselves. If we can recover the sense that it is the most natural thing for every person born into this world to use his hands in a productive way and that it is not beyond the wit of man to make this possible, then I think the problem of unemployment will disappear and we shall soon be asking ourselves how we can get all the work done that needs to be done.
admin
Site Admin
 
Posts: 36125
Joined: Thu Aug 01, 2013 5:21 am

Re: Small is Beautiful, by E.F. Schumacher

Postby admin » Tue Jan 05, 2016 2:57 am

Part Four: Organisation and Ownership

Fifteen: A Machine to Foretell the Future?


The reason for including a discussion on predictability in this volume is that it represents one of the most important metaphysical - and therefore practical - problems with which we are faced. There have never been so many futurologists, planners, forecasters, and model-builders as there are today, and the most intriguing product of technological progress, the computer, seems to offer untold new possibilities. People talk freely about 'machines to foretell the future'. Are not such machines just what we have been waiting for? Ah men at all times have been wanting to know the future.

The ancient Chinese used to consult the I Ching, also called The Book of Changes and reputed to be the oldest book of mankind, Some of our contemporaries do so even today. The I Ching is based on the conviction that, while everything changes all the time, change itself is unchanging and conforms to certain ascertainable metaphysical laws. 'To everything there is a season.' said Ecclesiastes, 'and a time to every purpose under heaven ... a time to break down and a time to build up ... a time to cast away stones and a time to gather stones together'. or, as we might say, a time for expansion and a time for consolidation. And the task of the wise man is to understand the great rhythms of the Universe and to gear in with them. While the Greeks - and I suppose most other nations - went to living oracles, to their Pythias, Casandras, prophets and seers, the Chinese, remarkably. went to a book setting out the universal and necessary pattern of changes. the very Laws of Heaven to which all nature conforms inevitably and to which man will conform freely as a result of insight gained either from wisdom or from suffering. Modern man goes to the computer.

Tempting as it may be to compare the ancient oracles and the modern computer, only a comparison by contrast is possible. The former deal exclusively with qualities; the latter, with quantities. The inscription over the Delphic temple was 'Know Thyself'. while the inscription on an electronic computer is more likely to be: 'Know Me', that is, 'Study the Operating Instructions before Plugging in', It might be thought that the I Ching and the oracles are metaphysical while the computer model is 'real'; but the fact remains that a machine to foretell the future is based on meta- physical assumptions of a very definite kind. It is based on the implicit assumption that 'the future is already here', that it exists already in a determinate form, so that it requires merely good instruments and good techniques to get it into focus and make it visible. The reader will agree that this is a very far-reaching metaphysical assumption, in fact, a most extraordinary assumption which seems to go against all direct personal experience. It implies that human freedom does not exist or, in any case, that it cannot alter the predetermined course of events. We cannot shut our eyes to the fact, on which I have been insisting throughout this book. that such an assumption, like all metaphysical theses, whether explicit or implicit, has decisive practical consequences. The question is simply: is it true or is it untrue?

When the Lord created the world and people to live in it - an enterprise which, according to modern science, took a very long time - I could well imagine that He reasoned with Himself as follows: 'If I make everything predictable, these human beings, whom I have endowed with pretty good brains, will undoubtedly learn to predict everything, and they will thereupon have no motive to do anything at all, because they will recognise that the future is totally determined and cannot be influenced by any human action. On the other hand, if I make everything unpredictable: they will gradually discover that there is no rational basis for any decision whatsoever and, as in the first case, they will thereupon have no motive to do anything at all. Neither scheme would make sense. I must therefore create a mixture of the two. Let some things be predictable and let others be unpredictable, They will then, amongst many other things, have the very important task of finding out which is which.

And this, indeed, is a very important task, particularly today, when people try to devise machines to foretell the future. Before anyone makes a prediction, he should be able to give a convincing reason why the factor to which his prediction refers is inherently predictable.

Planners, of course, proceed on the assumption that the future is not 'already here', that they are not dealing with a predetermined - and therefore predictable - system, that they can determine things by their own free will, and that their plans will make the future different from what it would have been had there been no plan. And yet it is the planners, more than perhaps anyone else, who would like nothing better than to have a machine to foretell the future. Do they ever wonder whether the machine might incidentally also foretell their own plans before they have been conceived?

Need for Semantics

However this may be, it is clear that the question of predictability is not only important but also somewhat involved. We talk happily about estimating, planning, forecasting, budgeting, about surveys, programmes, targets, and so forth, and we tend to use these terms as if they were freely interchangeable and as if everybody would automatically know what was meant. The result is a great deal of confusion, because it is in fact necessary to make a number of fundamental distinctions. The terms we use may refer to the past or to the future; they may refer to acts or to events: and they may signify certainty or uncertainty. The number of combinations possible where there are three pairs of this kind is 2, or 8, and we really ought to have eight different terms to be quite certain of what we are talking about. Our language, however, is not as perfect as that. The most important distinction is generally that between acts and events. The eight possible cases may there fore be ordered as follows:

1 Act
Past Certain
2 Act
Future Certain
3 Act
Past Uncertain
4 Act
Future Uncertain
5 Event
Past Certain
6 Event
Future Certain
7 Event
 Past Uncertain
8 Event
Future Uncertain

The distinction between acts and events is as basic as that between active and passive or between 'within my control' or 'outside my control'. To apply the word 'planning' to matters outside the planner's control is absurd. Events, as far as the planner is concerned, simply happen. He may be able to forecast them and this may well influence his plan; but they cannot possibly be part of the plan. The distinction between the past and the future proved to be necessary for our purpose, because, in fact, words like 'plan' or 'estimate' are being used to refer to either. If I say: 'I shall not visit Paris without a plan,' this can mean: 'I shall arm myself with a street plan for orientation' and would therefore refer to case 5. Or it can mean: 'I shall arm myself with a plan which outlines in advance where I am going to go and how I am going to spend my time and money' - case 2 or 4. If someone claims that 'to have a plan is indispensable', it is not without interest to find out whether he means the former or the latter. The two are essentially different.

Similarly, the word 'estimate', which denotes uncertainty, may apply to the past or to the future. In an ideal world, it would not be necessary to make estimates about things that had already happened. But in the actual world, there is much uncertainty even about matters which, in principle, could be fully ascertained. Cases 3, 4, 7, and 8 represent four different types of estimates. Case 3 relates to something I have done in the past; case 7, to something that has happened in the past. Case 4 relates to some- thing I plan to do in the future, while case 8 relates to something I expect to happen in the future. Case 8, in fact, is a forecast in the proper sense of the term and has nothing whatever to do with 'planning'. How often, however, are forecasts presented as if they were plans - and vice versa! The British 'National Plan' of 1965 provides an outstanding example and, not surprisingly, came to nothing.

Can we ever speak of future acts or events as certain (cases 2 and 6)? If I have made a plan with full knowledge of all the relevant facts, being inflexibly resolve to carry it through - case 2 - I may, in this respect, consider my future actions as certain. Similarly, in laboratory science, dealing with carefully isolated deterministic systems, future 2vents may he described as certain. The real world, however, is not a deterministic system; we may be able to talk with certainty about acts or events of the past - cases 1 or 5 - but we can do so about future events only on the basis of assumptions. In other words, we can formulate conditional statements about the future, such as: ‘If such and such a trend of events continued for another x years, this is where it would take us.' This is not a forecast or prediction, which must always be uncertain in the real world, but an exploratory calculation, which, being conditional, has the virtue of mathematical certainty.

Endless confusion results from the semantic muddle in which we find ourselves today. As mentioned before, 'plans' are put forward which upon inspection turn out to relate to events totally outside the control of the planner. 'Forecasts' are offered which upon inspection turn out to be conditional sentences, in other words, exploratory calculations. The latter are misinterpreted as if they were forecasts or predictions. 'Estimates' are put forward which upon inspection turn out to be plans. And so on and so forth. Our academic teachers would perform a most necessary and really helpful task if they taught their students to make the distinctions discussed above and developed a terminology which fixed them in words.

Predictability

Let us now return to our main subject - predictability. Is prediction or forecasting - the two terms would seem to be interchangeable - possible at all? The future does not exist; how could there be knowledge about something non-existent? This question is only too well justified. In the strict sense of the word, knowledge can only be about the past. The future is always in the making, but it is being made largely out of existing material, about which a great deal can be known. The future, there, is largely predictable, if we have solid and extensive knowledge of the past.

Largely, but by no means wholly, for into the making of the future there enters that mysterious and irrepressible factor called human freedom. It is the freedom of a being of which it has been said that it was made in the image of God the Creator: the freedom of creativity.

Strange to say, under the influence of laboratory science many people today seem to use their freedom only for the purpose of denying its existence Men and women of great gifts find their purest delight in magnifying every mechanism', every inevitability', everything where human freedom does not enter or does not appear to enter A great shout of triumph goes up whenever anybody has found some further evidence - in physiology or psychology or sociology or economics or politics - of unfreedom, some further indication that people cannot help being what they are and doing what they are doing, no matter how inhuman their actions might be. The denial of freedom, of course, is a denial of responsibility: there are no acts, but only events; everything simply happens; no-one is responsible. And this is no doubt the main cause of the semantic confusion to which I have referred above. It is also the cause for the belief that we shall soon have a machine to foretell the future.

To be sure, if everything simply happened, if there were no element of freedom, choice, human creativity and responsibility, everything would be perfectly predictable, subject only to accidental and temporary limitations of knowledge. The absence of freedom would make human affairs suitable for study by the natural sciences or at least by their methods, and reliable results would no doubt quickly follow the systematic observation of facts. Professor Phelps Brown, in his presidential address to the Royal Economic Society, appears to adopt precisely this point of view when talking about 'The Underdevelopment of Economics'. 'Our own science,' he says, 'has hardly yet reached its seventeenth century. Believing that economics is metaphysically the same as physics, he quotes another economist, Professor Morgenstern, approvingly as follows:

'The decisive break which came in physics in the seventeenth century, specifically in the field of mechanics, was possible only because of previous developments in astronomy. It was backed by several millennia of systematic, scientific. astronomical observation.... Nothing of this sort has occurred in economic science. It would have been absurd in physics to have expected Kepler and Newton without Tycho - and there is no reason to hope for an easier development in economics.' Professor Phelps Brown concludes therefore that we need many. many more years of observations of behaviour, 'Until then, our mathematisation is premature.’

It is the intrusion of human freedom and responsibility that makes economics metaphysically different from physics and makes human affairs largely unpredictable. We obtain predictability, of course, when we or others are acting according to a plan. But this is so precisely because a plan is the result of an exercise in the freedom of choice: the choice has been made: all alternatives have been eliminated. If people stick to their plan, their behaviour is predictable simply because they have chosen to surrender their freedom to act otherwise than prescribed in the plan.

In principle, everything which is immune to the intrusion of human freedom, like the movements of the stars, is predictable, and everything subject to this intrusion is unpredictable. Does that mean that all human actions are unpredictable? No, because most people, most of the time, make no use of their freedom and act purely mechanically. Experience shows that when we are dealing with large numbers of people many aspects of their behaviour are indeed predictable; for out of a large number, at any one time, only a tiny minority are using their power of freedom, and they often do not significantly affect the total outcome. Yet all really important innovations and changes normally start from tiny minorities of people who do use their creative freedom.

It is true that social phenomena acquire a certain steadiness and predictability from the non-use of freedom, which means that the great majority of people responds to a given situation in a way that does not alter greatly in time, unless there are really overpowering new causes.

We can therefore distinguish as follows:

(a) Full predictability (in principle) exists only in the absence of human freedom, i.e. in 'sub-human' nature. The limitations of predictability are purely limitations of knowledge and technique.

(b) Relative predictability exists with regard to the behaviour pattern of very large numbers of people doing 'normal' things (routine).

(c) Relatively full predictability exists with regard to human' actions controlled by a plan which eliminates freedom, e.g. railway timetable.

(d) Individual decisions by individuals are in principle unpredictable.

Short-Term Forecasts

In practice all prediction is simply extrapolation, modified by known 'plans'. But how do you extrapolate? How many years do you go back? Assuming there is a record of growth, what precisely do you extrapolate - the average rate of growth. or the increase in the rate of growth, or the annual increment in absolute terms? As a matter of fact. there are no rules:* it is just a matter of 'feel' or judgment.

It is good to know of all the different possibilities of using the same time series for extrapolations with very different results. Such knowledge will prevent us from putting undue faith in any extrapolation. At the same time, and by the same token, the development of (what purport to be) better forecasting techniques can become a vice. In short-term forecasting, say, for next year, a refined technique rarely produces significantly different results from those of a crude technique. After a year of growth - what can you predict?

(a) that we have reached a (temporary) ceiling;

(b) that growth will continue at the same, or a slower, or a faster rate;

(c) that there will be a decline.

Now, it seems clear that the choice between these three basic alternative predictions cannot be made by 'forecasting technique but only by informed judgment. It depends, of course, on what you are dealing with. Which you have something that is normally growing very fast, like the consumption of electricity, your threefold choice is between the came rate of growth, a faster rate, or a slower rate.

It is not so much forecasting technique, as a full understanding of the current situation shat can help in the formation of a sound judgment for the future. If the present level of performance (or rate of growth) is known to be influenced by quite abnormal factors which are unlikely to apply in the coming year, it is, of course, necessary to take these into account. The forecast, 'same as last year', may imply a 'real' growth or a 'real' decline on account of exceptional factors being present this year, and this, of course, must be made explicit by the forecaster.

I believe, therefore, that all effort needs to be put into understanding the current situation, to identify and, if need be, eliminate 'abnormal' and nonrecurrent factors from the current picture. This having been done, the method of forecasting can hardly be crude enough. No amount of refinement will help one come to the fundamental judgment - is next year going to be the same as last year, or better, or worse?

At this point, it may be objected that there ought to be great possibilities of short-term forecasting with the help of electronic computers, because they can very easily and quickly handle a great mass of data and fit to them some kind of mathematical expression. By means of 'feedback' the mathematical expression can be kept up to date almost instantaneously. And once you have a really good mathematics then the machine can predict the future.

Once again, we need to have a look at the metaphysical basis of such claims. What is the meaning of a 'good mathematical fit'? Simply that a sequence of quantitative changes in the past has been elegantly described in precise mathematical language. But the fact that I - or the machine - have been able to describe this sequence so exactly by no means establishes a presumption that the pattern will continue. It could continue only if (a) there were no human freedom and (b) there was no possibility of any change in the causes that have given rise to the observed pattern.

I should accept the claim that a very clear and very strongly established pattern !of stability, growth, or decline) can be expected to continue for a little longer, unless there is definite knowledge of the arrival of new factors likely to change it. But I suggest that for the detection of such clear, strong and persistent patterns the non-electronic human brain is normally cheaper, faster, and more reliable than its electronic rival. Or to put it the other way round: if it is really necessary to apply such highly refined methods of mathematical analysis for the detection of a pattern that one needs an electronic computer, the pattern is too weak and too obscure to be a suitable basis for extrapolation in real life.

Crude methods of forecasting - after the current picture has been corrected for abnormalities - are not likely to lead into the errors of spurious verisimilitude and spurious detailing - the two greatest vices of the statistician. Once you have a formula and an electronic computer, there is an awful temptation to squeeze the lemon until it is dry and to present a picture of the future which through its very precision and verisimilitude carries conviction. Yet a man who uses an imaginary map, thinking it a true one, is likely to be worse o~ than someone with no map at all; for he will fail to inquire wherever he can, to observe every detail on his way, and to search continuously with all his senses and all his intelligence for indications of where he should go.

The person who makes the forecasts may still have a precise appreciation of the assumptions on which they are based. But the person who uses the forecasts may have no idea at all that the whole edifice, as is often the case, stands and falls with one single, unverifiable assumption. He is impressed by the thoroughness of the job done, by the fact that everything seems to 'add up', and so forth. If the forecasts were presented quite artlessly, as it were, on the back of an envelope, he would have a much better chance of appreciating their tenuous character and the fact that, forecasts or no forecasts, someone has to take an entrepreneurial decision about the unknown future.

Planning

I have already insisted that a plan is something essentially different from a forecast. It is a statement of intention, of what the planners - or their masters - intend to do. Planning (as I suggest the term should be used) is inseparable from power. It is natural and indeed desirable that everybody wielding any kind of power should have some sort of a plan, that is to say, that he should use power deliberately and consciously, looking some distance ahead in time. In doing so he must consider what other people are likely to do: in other words, he cannot plan sensibly without doing a certain amount of forecasting. This is quite straightforward as long as that which has to be forecast is, in fact, 'forecastable', if it relates either to matters into which human freedom does not enter, or to the routine actions of a very large number of individuals, or to the established plans of other people wielding power. Unfortunately, the matters to be forecast very often belong to none of these categories but are dependent on the individual decisions of single persons or small groups of persons. In such cases forecasts are little more than 'inspired guesses', and no degree of improvement in forecasting technique can help. Of course, some people may turn out to make better guesses than others, but this will not be due to their possessing a better forecasting technique or better mechanical equipment to help them in their computations.

What, then, could be the meaning of a 'national plan' in a free I society? It cannot mean the concentration of all power at one point, because that would imply the end of freedom: genuine planning is co-extensive with power. It seems to me that the only intelligible meaning of the words 'a national plan' in a free society would be the fullest possible statement of intentions by all people wielding substantial economic power, such statements being collected and collated by some central agency. The very inconsistencies of such a composite 'plan' might give valuable pointers.

Long-term Forecasts and Feasibility Studies

Let us now turn to long-term forecasting. by which I mean producing estimates dive or more years ahead. It must be clear that, change being a function of time, the longer-term future is even less predictable than the short-term. In fact, all long-term forecasting is somewhat presumptuous and absurd, unless it is of so general a kind that it merely states the obvious. All the same, there is often a practical necessity for 'taking a view' on the future, as decisions have to be taken and long-term commitments entered. Is there nothing that could help?

Here I should like to emphasise again the distinction between forecasts on the one hand and 'exploratory calculations' or 'feasibility studies' on the other. In the one case I assert that this or that will be the position in, say, twenty years' time. In the other case I merely explore the long-term effect of certain assumed tendencies. It is unfortunately true that in macro-economics feasibility studies are very rarely carried beyond the most rudimentary beginnings. People are content to rely on general forecasts which are rarely worth the paper they are written on.

It may be helpful if I give a few examples. It is very topical these days to talk about the development of underdeveloped countries and countless 'plans' (so-called) are being produced to this end. If we go by the expectations that are being aroused all over the world, it appears to be assumed that within a few decades most people the world over are going to be able to live more or less as the western Europeans are living today. Now, it seems to me, it would be very instructive if someone undertook to make a proper, detailed feasibility study of this project. He might choose the year 2000 as the terminal date and work backwards from there. What would be the required output of foodstuffs, fuels, metals, textile fibres, and so forth? What would be the stock of industrial capital? Naturally, he would have to introduce many new assumptions as he went along. Each assumption could then become the object of a further feasibility study. He might then find that he could not solve his equations unless he introduced assumptions which transcended all bounds of reasonable probability. This might prove highly instructive. It might conceivably lead to the conclusion that, while most certainly there ought to be substantial economic development throughout the countries where great masses of people live in abject misery, there are certain choices between alternative patterns of development that could be made, and that some types of development would appear more feasible than others.

Long-term thinking, supported by conscientious feasibility studies, would seem to be particularly desirable with regard to all non-renewable raw materials of limited availability, that is to say, mainly fossil fuels and metals. At present, for instance, there is a replacement of coal or oil. Some people seem to assume that coal is on the way out. A careful feasibility study, making use of all available evidence of coal, oil, and natural gas reserves, proved as well as merely assumed to exist, would be exceedingly instructive.

On the subject of population increase and food supplies, we have had the nearest thing to feasibility studies so far, coming mainly from United Nations organisations. They might be carried much further, giving not only the totals of food production to be attained by 1980 or 2000, but also showing in much greater detail than has so far been done the timetable of specific steps that would have to be taken in the near future if these totals are to be attained.

In all this, the most essential need is a purely intellectual one: a clear appreciation of the difference between a forecast and a feasibility study. It is surely a sign of statistical illiteracy to confuse the two. A long-term forecast, as I said, is presumptuous; but a long- term feasibility study is a piece of humble and unpretentious work which we shall neglect at our peril.

Again the question arises whether this work could be facilitated by more mechanical aids such as electronic computers. Personally, I am inclined to doubt it. It seems to me that the endless multiplication of mechanical aids in fields which require judgment more than anything else is one of the chief dynamic forces behind Parkinson's Law. Of course, an electronic computer can work out a vast number of permutations, employing varying assumptions, within a few seconds or minutes, while it might take the nonelectronic brain as many months to do the same job. But the point is that the non-electronic brain need never attempt to do that job, By the power of judgment it can concentrate on a few decisive parameters which are quite sufficient to outline the ranges of reasonable probability. Some people imagine that it would be possible and helpful to set up a machine for long-range forecasting into which current 'news' could be fed continuously and which, in response, would produce continual revisions of some long-term forecasts. No doubt, this would be possible; but would it be helpful! Each item of 'news· has to be judged for its long-term relevance, and a sound judgment is generally not possible immediately. Nor can I see any value in the continual revision of long-term forecasts, as a matter of mechanical routine. A forecast is required only when a long-term decision has to be taken or reviewed, which is a comparatively rare event even in the largest of businesses, and then it is worth while deliberately and conscientiously to assemble the best evidence, to judge each item in the light of accumulated experience, and finally to come to a view which appears reasonable to the best brains available. It is a matter of self-deception that this laborious and uncertain process could be short-circuited by a piece of mechanical apparatus.

When it comes to feasibility studies, as distinct from forecasts, it may occasionally seem useful to have apparatus which can quickly test the effect of variations in one's assumptions. But I have yet to be convinced that a slide rule and a set of compound interest tables are not quite sufficient for the purpose.

Unpredictability and Freedom

If I hold a rather negative opinion about the usefulness of 'automation' in matters of economic forecasting and the like, I do not underestimate the value of electronic computers and similar apparatus for other tasks, like solving mathematical problems or programming production runs. These latter tasks belong to the exact sciences or their applications. Their subject matter is non- human, or perhaps I should say, sub-human. Their very exactitude is a sign of the absence of human freedom, the absence of choice, responsibility and dignity. As soon as human freedom enters, we are in an entirely different world where there is great danger in any proliferation of mechanical devices. The tendencies which attempt to obliterate the distinction should be resisted with the utmost determination. Great damage to human dignity has resulted from the misguided attempt of the social sciences to adopt and imitate the methods of the natural sciences. Economics, and even more so applied economics, is not an exact science: it is in fact, or ought to be, something much greater: a branch of wisdom. Mr Colin Clark once claimed 'that long-period world economic equilibrium develop themselves in their own peculiar manner, entirely independently of political and social changes.

On the strength of this metaphysical heresy he wrote a book, in 1941, entitled The Economics’ of 1960.' It would be unjust to say that the picture he drew bears no resemblance to what actually came to pass; there is, indeed, the kind of resemblance which simply stems from the fact that man uses his freedom within an unchanged setting of physical laws of nature. But the lesson from Mr Clark's book is that his metaphysical assumption is untrue; that, in fact, world economic equilibria, even in the longer run. are highly dependent on political and social changes; and that the sophisticated and ingenious methods of forecasting employed by Mr Clark merely served to produce a work of spurious verisimilitude.

Conclusion

I thus come to the cheerful conclusion that life, including economic life, is still worth living because it is sufficiently unpredictable to be interesting. Neither the economist nor the statistician will get it 'taped'. Within the limits of the physical laws of nature, we are still masters of our individual and collective destiny, for good or ill.

But the know-how of the economist, the statistician, the natural scientist and engineer, and even of the genuine philosopher can help to clarify the limits within which our destiny is confined. The future cannot be forecast, but it can be explored. Feasibility studies can show us where we appear to be going, and this is more important today than ever before, since 'growth' has become a keynote of economics all over the world.

In his urgent attempt to obtain reliable knowledge about his essentially indeterminate future, the modern man of action may surround himself by ever-growing armies of forecasters, by ever-growing mountains of factual data to be digested by ever more wonderful mechanical contrivances: I fear that the result is little more than a huge game of make-believe and an ever more marvellous vindication of Parkinson's Law. The best decisions will still be based on the judgments of mature non-electronic brains possessed by men who have looked steadily and calmly at the situation and seen it whole. 'Stop, look, and listen' is a better motto than 'Look it up in the forecasts'.
admin
Site Admin
 
Posts: 36125
Joined: Thu Aug 01, 2013 5:21 am

Re: Small is Beautiful, by E.F. Schumacher

Postby admin » Tue Jan 05, 2016 3:06 am

Sixteen: Towards a Theory of Large-Scale Organisation

Almost every day we hear of mergers and takeovers: Britain enters the European Economic Community to open up larger markets to be served by even larger organisations. In the socialist countries, nationalisation has produced vast combines to rival or surpass anything that has emerged in the capitalist countries. The great majority of economists and business efficiency experts sup- ports this trend towards vastness.

In contrast, most of the sociologists and psychologists insistently warn us of its inherent dangers - dangers to the integrity of the individual when he feels as nothing more than a small cog in a vast machine and when the human relationships of his daily working life become increasingly dehumanised; dangers also to efficiency and productivity, stemming from ever-growing Parkinsonian bureaucracies.

Modern literature, at the same time, paints frightening pictures of a brave new world sharply divided between us and them, torn by mutual suspicion, with a hatred of authority from below and a contempt of people from above. The masses react to their rulers in a spirit of sullen irresponsibility, while the rulers vainly try to keep things moving by precise organisation and coordination, fiscal inducements, incentives, endless exhortations and threats.

Undoubtedly this is all a problem of communications. But the only really effective communication is from man to man, face to face. Franz Kafka's nightmarish novel, The Castle, depicts the why. He tries to get his position clarified, because the people he devastating effects of remote control. Mr K, the land surveyor, has been hired by the authorities, but nobody quite knows how and meets all tell him: Unfortunately we have no need of a land surveyor. There would not be the least use for one here.'

So, making every effort to meet authority face to face, Mr. K approaches various people who evidently carry some weight; but others tell him :'You haven't once up till now come into real contact with our authorities. All these contacts are merely illusory, but owing to your ignorance ... you take them to be real.

He fails utterly to do any real work and then receives a letter from The Castle: 'The surveying work which you have carried out thus far has my recognition.... Do not slacken your efforts! Bring your work to a successful conclusion. Any interruption would displease me ... I shall not forget you.

Nobody really likes large-scale organisation: nobody likes to take orders from a superior who takes orders from a superior who takes orders.... Even if the rules devised by bureaucracy are outstandingly humane, nobody likes to be ruled by rules, that is to say, by people whose answer to every complaint is: 'I did not make the rules: I am merely applying them.’

Yet, it seems, large-scale organisation is here to stay. Therefore it is all the more necessary to think about it and to theorise about it. The stronger the current, the greater the need for skilful navigation.

The fundamental task is to achieve smallness within large organisation.

Once a large organisation has come into being, it normally goes through alternating phases of centralising and decentralising, like swings of a pendulum. Whenever one encounters such opposites, each of them with persuasive arguments in its favour, it is worth looking into the depth of the problem for something more than compromise, more than a half-and-half solution. Maybe what we really need is not either-or but the-one-and-the-other- at-the-same-time.

This very familiar problem pervades the whole of real life, al- though it is highly unpopular with people who spend most of their time on laboratory problems from which all extraneous factors have been carefully eliminated. For whatever we do in real life, we must try to do justice to a situation which includes all so-called extraneous factors. Find we always have to face the simultaneous requirement for order and freedom.

In any organisation, large or small, there must be a certain clarity and orderliness; if things fall into disorder, nothing can be accomplished, Yet. orderliness. as such, is static and lifeless; so there must also be plenty of elbow-room and scope for breaking through the established order. to do the thing never done before, never anticipated by the guardians of orderliness, the new, unpredicted and unpredictable outcome of a man's creative idea.

Therefore any organisation has to strive continuously for the orderliness of order and the disorderliness of creative freedom, And the specific danger inherent in large scale organisation is that its natural bias and tendency favour order, at the expense of creative freedom.

We can associate many further pairs of opposites with this basic pair of order and freedom. Centralisation is mainly an idea of order; decentralisation, one of freedom, The man of order is typically the accountant and, generally, the administrator: while the man of creative freedom is the entrepreneur. Order requires intelligence and is conducive to efficiency; while freedom calls for. and opens the door to, intuition and leads to innovation.

The larger an organisation, the more obvious and inescapable is the need for order. But if this need is looked after with such efficiency and perfection that no scope remains for man to exercise his creative intuition, for entrepreneurial disorder, the organisation becomes moribund and a desert of frustration.

These considerations form the background to an attempt towards a theory of large-scale organisation which I shall now develop in the form of five principles.

The first principle is called The Principle of Subsidiarity or The Principle of Subsidiary Function A famous formulation is this principle reads as follows: '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. For every social activity ought of its very nature to furnish help to the members of the body social and never destroy and absorb them.' These sentences were meant for society as a whole, but they apply equally to the different levels within a large organisation. The higher level must not absorb the functions of the lower one, on the assumption that, being higher, it will automatically be wiser and fulfil them more efficiently. Loyalty can grow only from the smaller units to the larger (and higher) ones, not the other way round - and loyalty is an essential element in She health of any organisation.

The Principle of Subsidiary Function implies that the burden of proof lies always on those who want to deprive a lower level of its function, and thereby of its freedom and responsibility in that respect; they have to prove that the lower level is incapable of fulfilling this function satisfactorily and that the higher level can actually do much better. 'Those in command (to continue the quotation) should be sure that the more perfectly a graduated order is preserved among the various associations, in observing the principle of subsidiary function. the stronger wilt be the social authority and effectiveness and the happier and more prosperous the condition of the State.''

The opposites of centralising and decentralising are now far behind us: the Principle of Subsidiary Function teaches us that the centre will gain in authority and effectiveness if the freedom and responsibility of the lower formations are carefully preserved, with the result that the organisation as a whole will be 'happier and more prosperous'.

How can such a structure be achieved? From the administrator's point of view, i.e. from the point of view of orderliness, it will look untidy, comparing most unfavourably with the clear- cut logic of a monolith. The large organisation will consist of many semi-autonomous units, which we may call quasi-firms. Each of them will have a large amount of freedom, to give the greatest possible chance to creativity and entrepreneurship.

The structure of the organisation can then be symbolised by a man holding a large number of balloons in his hand. Each of the balloons has its own buoyancy and lift, and the man himself does not lord it over the balloons, but stands beneath them, yet holding all the strings firmly in his hand. Every balloon is not only an administrative but also an entrepreneurial unit. The monolithic organisation, by contrast, might be symbolised by a Christmas tree, with a star at the top and a lot of nuts and other useful things underneath. Everything derives from the top and depends on it, Real freedom and entrepreneurship can exist only at the top.

Therefore, the task is to look at the organisation's activities one by one and set up as many quasi-firms as may seem possible and reasonable. For example, the British National Coal Board, one of the largest commercial organisations in Europe, has found it possible to set up quasi-firms under various names for its opencast mining, its brickworks, and its coal products. But the process did not end there. Special, relatively self-contained organisational forms have been evolved for its road transport activities, estates, and retail business, not to mention various enterprises falling under the heading of diversification. The board's primary activity, deep-mined coal-getting, has been organised in seventeen areas, each of them with the status of a quasi-firm. The source already quoted describes the results of such a structurisation as follows: 'Thereby (the centre) will more freely, powerfully and effectively do all those things which belong to it alone because it alone can do them: directing, watching, urging, restraining, as occasion requires and necessity demands.'

For central control to be meaningful and effective, a second principle has to be applied, which we shall call The Principle of Vindication. To vindicate means: to defend against reproach or accusation: to prove to be true and valid; to justify; to uphold; so this principle describes very well one of the most important duties of the central authority towards the lower formations. Good government is always government by exception. Except for exceptional cases, the subsidiary unit must be defended against reproach and upheld. This means that the exception must be sufficiently clearly defined, so that the quasi-firm is able to know without doubt whether or not it is performing satisfactorily.

Administrators taken as a pure type, namely as men of orderliness, are happy when they have everything under control. Armed with computers, they can indeed now do so and can insist on accountability with regard to an almost infinite number of items - output, productivity, many different cost items, non- operational expenditure, and so on, leading up to profit or loss. This is logical enough: but real life is bigger than logic. If a large number of criteria is laid down for accountability, every subsidiary unit can be faulted on one item or another; government by exception becomes a mockery, and no-one can ever be sure how his unit stands.

In its ideal application, the Principle of Vindication would permit only one criterion for accountability in a commercial organisation, namely profitability. Of course, such a criterion would be subject to the quasi-firm's observing general rules and policies hid down by the centre. Ideals can rarely be attained in the real world, but they are none the less meaningful. They imply that any departure from the ideal has to be specially argued and justified Unless the number of criteria for accountability is kept very small indeed, creativity and entrepreneurship cannot flourish in the quasi-firm.

While profitability must be the final criterion, it is not always permissible to apply it mechanically. Some subsidiary units may be exceptionally well placed, others, exceptionally badly; some may have service functions with regard to the organisation as a whole or other special obligations which have to be fulfilled without primary regard to profitability. In such cases. the measurement of profitability must be modified in advance, by what we may call rents and subsidies.

If a unit enjoys special and inescapable advantages, it must pay an appropriate rent. but if it has to cope with inescapable disadvantages, it must be granted a special credit or subsidy. Such a system can sufficiently equalise the profitability chances of the various units, so that profit becomes a meaningful indication of achievement. If such an equalisation is needed but not applied, the fortunate units will be featherbedded, while others may be lying on a bed of nails. This cannot be good for either morale or performance.

If. in accordance with the Principle of Vindication, an organisation adopts profitability as the primary criterion for accountability - profitability as modified, if need be, by rents and subsidies - government by exception becomes possible. The centre can then concentrate its activities on 'directing. watching. urging, restraining, as occasion requires and necessity demands'. which, of course, must go on all the time with regard to all its subsidiary units.

Exceptions can be defined clearly. The centre will have two opportunities for intervening exceptionally. The first occurs when the centre and the subsidiary unit cannot come to a free agreement on the rent or subsidy, as the case may be, which is to be applied. In such circumstances the centre has to undertake a full efficiency audit of the unit to obtain an objective assessment of the unit's real potential. The second opportunity arises when the unit fails to earn a profit, after allowing for rent or subsidy. The management of the unit is then in a precarious position: if the centre's efficiency audit produces highly unfavourable evidence, the management may have to be changed.

The third principle The Principle of Identification. Each subsidiary unit or quasi-firm must have both a profit and loss account and a balance sheet. From the point of view of orderliness a profit and loss statement is quite sufficient, since from this one can know whether or not the unit is contributing financially to the organisation. But for the entrepreneur, a balance sheet is essential, even if it is used only for internal purposes. Why is it not sufficient to have but one balance sheet for the organisation as a whole?

Business operates with a certain economic substance, and this substance diminishes as a result of losses, and grows as a result of profit, What happens to the unit's profits or losses at the end of the financial year? They flow into the totality of the organisation’s accounts: as far as the unit is concerned, the; simply disappear. In the absence of a balance sheet, or something in the nature of a balance sheet. the unit always enters the new financial year with a nil balance. This cannot be right.

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. The balance sheet describes the economic substance as augmented or diminished by current results. This enables all concerned to follow the effect of operations on substance. Profits and losses are carried forward and not wiped out. Therefore, every quasi-firm should have its separate balance sheet, in which profits can appear as loans to the centre and losses as loans from the centre. This is a matter of great psychological importance.

I now turn to the fourth principle, which can be called The Principle of Motivation. It is a trite and obvious truism that people act in accordance with their motives. All the same, for a large organisation, with its bureaucracies, its remote and impersonal controls, its many abstract rules and regulations, and above all the relative incomprehensibility that stems from its very size, motivation is the central problem. At the top, the management has no problem of motivation, but going down the scale, the problem becomes increasingly acute, This is not the place to go into the details of this vast and difficult subject.

Modern industrial society, typified by large-scale organisations. gives far too little thought to it. Managements assume that people work simply for money. for the pay-packet at the end of the week, No doubt, this is true up to a point, but when a worker, asked why he worked four shifts last week. answers: 'Because I couldn't make ends meet on three shifts' wages.' everybody is stunned and feels check-mated.

Intellectual confusion exacts its price. We preach the virtues of hard work and restraint while painting utopian pictures of unlimited consumption without either work or restraint. We complain when an appeal for greater effort meets with the ungracious reply: 'I couldn't care less.' while promoting dreams about automation to do away with manual work, and about the computer relieving men from the burden of using their brains.

A recent Reith lecturer announced that when a minority will be 'able to feed, maintain, and supply the majority, it makes no sense to keep in the production stream those who have no desire to be in it'. Many have no desire to be in it, because their work does not interest them, providing them with neither challenge nor satisfaction, and has no other merit in their eyes than that it leads to a pay-packet at the end of the week. If our intellectual leaders treat work as nothing but a necessary evil soon to be abolished as far as the majority is concerned, the urge to minimise it right away is hardly a surprising reaction, and the problem of motivation becomes insoluble.

However that may be, the health of a large organisation depends to an extraordinary extent on its ability to do justice to the Principle of Motivation. Any organisational structure that is conceived without regard to this fundamental truth is unlikely to succeed.

My fifth, and last, principle is The Principle of the Middle Axiom. Top management in a large organisation inevitably occupies a very difficult position. It carries responsibility for everything that happens, or fails to happen, throughout the organisation, although it is far removed from the actual scene of events. It can deal with many well-established functions by means of directives, rules and regulations. But what about new developments, new creative ideas? What about progress, the entrepreneurial activity par excellence?

We come back to our starting point: all real human problems arise from the antinomy of order and freedom, Antinomy means a contradiction between two laws; a conflict of authority: opposition between laws or principles that appear to be founded equally in reason.

Excellent! This is real life, full of antinomies and bigger than logic. Without order, planning, predictability, central control, accountancy, instructions to the underlines, obedience, discipline - without these, nothing fruitful can happen, because everything disintegrates. And yet - without the magnanimity of disorder, the happy abandon, the entrepreneurship venturing into the unknown and incalculable, without the risk and the gamble, the creative imagination rushing in where bureaucratic angels fear to tread - without this, life is a mockery and a disgrace.

The centre can easily look after order; it is not so easy to look after freedom and creativity. The centre has the power to establish order, but no amount of power evokes the creative contribution How, then, can top management at the centre work for progress and innovation? Assuming that it knows what ought to be done: how can the management get it done throughout the organisation? This is where the Principle of the Middle Axiom comes in.

An axiom is a self-evident truth which is assented to as soon as enunciated. The centre can enunciate the truth it has discovered - that this or that is 'the right thing to do'. Some years ago, the most important truth to be enunciated by the National Coal Board was concentration of output, that is, to concentrate coal-getting on fewer coal faces, with a higher output from each. Everybody, of course, immediately assented to it, but, not surprisingly, very little happened.

A change of this kind requires a lot of work, a lot of new thinking and planning at every colliery, with many natural obstacles and difficulties to be overcome. How is the centre, the National Board in this case, to speed the change-over? It can, of course, preach the new doctrine. But what is the use, if everybody agrees anyhow? Preaching from the centre maintains the freedom and responsibility of the lower formations, but it incurs the valid criticism that 'they only talk and do not do anything'. Alternatively, the centre can issue instructions, but, being remote from the actual scene of operations, tile central management incur the valid criticism that 'it attempts to run the industry iron, Headquarters', sacrificing the need for freedom to the need for order and losing the creative participation of the people at the lower formulations - the very people who are most closely in touch with the actual job Neither the soft method of government by exhortation nor the tough method of government by instruction meets the requirements of the case. What is required is something in between a middle axiom, an order from above which is yet not quite an

When it decided to concentrate output, the National Coal Board laid down certain minimum standards for opening up new coalfaces, with the proviso that if any Area found it necessary to open a coalface that would fall short of these standards, a record of the decision should be entered into a book specially provided for the purpose, and this record should contain answers to three questions:

Why can this particular coalface not be laid out in such a way that the required minimum size is attained?

Why does this particular bit of coal have to be worked at all?

What is the approximate profitability of the coalface as planned?

This was a true and effective way of applying the Principle of the Middle Axiom and it had an almost magical effect. Concentration of output really got going, with excellent results for the industry as a whole. The centre had found a way of going far beyond mere exhortation, yet without in any way diminishing the freedom and responsibility of the lower formations.

Another middle axiom can be found in the device of Impact Statistics. Normally, statistics are collected for the benefit of the collector, who needs - or thinks he needs - certain quantitative information. Impact statistics have a different purpose, namely to make the supplier of the statistic, a responsible person at the lower formation, aware of certain facts which he might otherwise over- look. This device has been successfully used in the coal industry, particularly in the field of safety.

Discovering a middle axiom is always a considerable achievement. To preach is easy so also is issuing instructions. But it is difficult indeed fur top management to carry through its creative ideas without impairing the freedom and responsibility of the lower formations.

I have expounded five principles which i believe to be relevant to a theory of large-scale organisation, and have given a more or less intriguing name to each of them. What is the use of all this? Is it merely an intellectual game? Some readers will no doubt think so. Others - and they are the ones for whom this chapter has been written - might say: 'You are putting into words what I have been trying to do for years.' Excellent! Many of us have been struggling for years with the problems presented by large-scale organisation, problems which are becoming ever more acute. To struggle more successfully. we need a theory, built up from principles. But from where do the principles come? They come from observation and practical understanding.

The best formulation of the necessary interplay of theory and practice. that I know of, comes from Mao Tse-tung. Go to the practical people, he says, and learn from them: then synthesise their experience into principles and theories; and then return to the practical people and call upon them to put these principles and methods into practice so as to solve their problems and achieve freedom and happiness?
admin
Site Admin
 
Posts: 36125
Joined: Thu Aug 01, 2013 5:21 am

Re: Small is Beautiful, by E.F. Schumacher

Postby admin » Tue Jan 05, 2016 3:10 am

Seventeen: Socialism

Both theoretical considerations and practical experience have led me to the conclusion that socialism is of interest solely for its non- economic values and the possibility it creates for the overcoming of the religion of economics. A society ruled primarily by the idolatry of enrichissez-vous. which celebrates millionaires as its culture heroes, can gain nothing from socialisation that could not also be gained without it.

It is not surprising, therefore, that many socialists in so-called advanced societies, who are themselves - whether they know it or not - devotees of the religion of economics, are today wondering whether nationalisation is not really beside the point. It causes a lot of trouble - so why bother with it? The extinction of private ownership, by itself, does not produce magnificent results: everything worth while has still to be worked for, devotedly and patiently, and the pursuit of financial viability, combined with the pursuit of higher social aims, produces many dilemmas, many seeming contradictions, and imposes extra heavy burdens on management.

If the purpose of nationalisation is primarily to achieve faster economic growth, higher efficiency, better planning, and so forth, there is bound to be disappointment. The idea of conducting the entire economy on the basis of private greed, as Marx well recognised, has shown an extraordinary power to transform the world.

The bourgeoisie, wherever it has got the upper hand, has put an end to all feudal, patriarchal, idyllic relations and has left no other nexus between man and man than naked self- interest….

'The bourgeoisie, by the rapid improvement of all instruments of production, by the immensely facilitated means of communication, draws all, even the most barbarian, nations into civilisation.' (Communist Manifesto)

The strength of the idea of private enterprise lies in its terrifying simplicity. It suggests that the totality of life can be reduced to one aspect - profits. The businessman, as a private individual, may still be interested in other aspects of life - perhaps even in goodness, truth and beauty - but as a businessman he concerns himself only with profits. In this respect, the idea of private enterprise fits exactly into the idea of The Market, which, in an earlier chapter, I called 'the institutionalisation of individualism and nonresponsibility'. Equally, it fits perfectly into the modern trend towards total quantification at the expense of the appreciation of qualitative differences; for private enterprise is not concerned with what it produces but only with what it gains from production.

Everything becomes crystal clear after you have reduced reality to one - one only - of its thousand aspects. You know what to do - whatever produces profits; you know what to avoid - whatever reduces them or makes a loss. And there is at the same time a perfect measuring rod for the degree of success or failure. Let no one befog the issue by asking whether a particular action is conducive to the wealth and well-being of society, whether it leads to moral, aesthetic, or cultural enrichment. Simply find out whether it pays: simply investigate whether there is an alternative that pays better. If there is, choose the alternative.

It is no accident that successful businessmen are often astonishingly primitive; they live in a world made primitive by this process of reduction. They fit into this simplified version of the world and are satisfied with it. And when the real world occasionally makes its existence known and attempts to force upon their attention a different one of its facets, one not provided for in their philosophy, they tend to become quite helpless and confused. They feel exposed to incalculable dangers and 'unsound' forces and freely predict general disaster. As a result, their judgments on actions dictated by a more comprehensive outlook on the meaning and purpose of life are generally quite worthless. It is a foregone conclusion for them that a different scheme of things, a business, for instance, that is not based on private ownership, cannot possibly succeed. If it succeeds all the same, there must be a sinister explanation -'exploitation of the consumer, 'hidden subsidies', 'forced labour', 'monopoly', 'dumping, or some dark and dreadful accumulation of a debit account which the future will suddenly present.

But this is a digression The point is that the real strength of the theory of private enterprise lies in this ruthless simplification, which fits so admirably also into the mental patterns created by the phenomenal successes of science. The strength of science, too, derives from a 'reduction' of reality to one or the other of its many aspects, primarily the reduction of quality to quantity. But just as the powerful concentration of nineteenth-century science on the mechanical aspects of reality had to be abandoned because there was too much of reality that simply did not fit, so the powerful concentration of business life on the aspect of 'profits' has had to be modified because it failed to do justice to the real needs of man. It was the historical achievement of socialists to push this development, with the result that the favourite phrase of the enlightened capitalist today is: 'We are all socialists now.

That is to say, the capitalist today wishes to deny that the one final aim of all his activities is profit. He says: 'Oh no, we do a lot for our employees which we do not really have to do, we try to preserve the beauty of the countryside; we engage may not pay off,' etc. etc. All these claims are very familiar; sometimes they are justified, sometimes not.

What concerns us here is this: private enterprise 'old style', let us say, goes simply for profits: it thereby achieves a most powerful simplification of objectives and gains a perfect measuring rod of success or failure. Private enterprise 'new style', on the other hand (let us assume), pursues a great variety of objectives; it tries to consider the whole fullness of life and not merely the money- making aspect; it therefore achieves no powerful simplification of objectives and possesses no reliable measuring rod of success or failure. If this is so, private enterprise 'new style', as organised in large joint stock companies, differs from public enterprise only in one respect; namely that it provides an unearned income to its shareholders.

Clearly, the protagonists of capitalism cannot have it both ways. They cannot sag 'We are all socialists now' and maintain at the same time that socialism cannot possibly work. If they themselves pursue objectives other thaI1 that of profit-making, then they cannot very well argue that it becomes impossible to administer the nation's means of production efficiently as soon as considerations other than those of profit making are allowed to enter. If they can manage without the crude yardstick of money-making, so can nationalised industry.

On the other hand, if all this is rather a sham and private enterprise works for profit and (practically) nothing else: if its pursuit of other objectives is in fact solely dependent on profit-making and constitutes merely its own choice of what to do with some of the profits, then the sooner this is made clear the better. In that case, private enterprise could still claim to possess the power of simplicity. Its case against public enterprise would be that the latter is bound to be inefficient precisely because it attempts to pursue several objectives at the same time, and the case of socialists against the former would be the traditional case, which is not primarily an economic one, namely, that it degrades life by its very simplicity, by basing all economic activity solely on the motive of private greed.

A total rejection of public ownership means a total affirmation of private ownership. This is just as great a piece of dogmatism as the opposite one of the most fanatical communist. But while all fanaticism shows intellectual weakness, a fanaticism about the means to be employed for reaching quite uncertain objectives is sheer feeble-mindedness.

As mentioned before, the whole crux of economic life - and indeed of life in general - is that it constantly requires the living reconciliation of opposites which, in strict logic, are irreconcilable. In macro-economics( the management of whole societies) it is necessary always to have both planning and freedom - not by way of a weak and lifeless compromise, but by a free recognition of the legitimacy of and need for both. Equally in micro- economics (the management of individual enterprises): on the one hand it is essential that there should be full managerial responsibility and authority; yet it is equally essential that there should be a democratic and free participation of the workers in management decisions, Again, it is not a question of mitigating the opposition of these two needs by some halfhearted compromise that satisfies neither of them, but to recognise them both. The exclusive concentration on one of the opposites - say, on planning, produces Stalinism; while the exclusive concentration on the other produces chaos. The normal answer to either is a swing of the pendulum to the other extreme. Yet the normal answer is not the only possible answer. A generous and magnanimous intellectual effort - the opposite of nagging, malevolent criticism - can enable a society, at least for a period, to find a middle way that reconciles the opposites without degrading them both.

The same applies to the choice of objectives in business life. One of the opposites - represented by private enterprise 'old style' - is the need for simplicity and measurability, which is best fulfilled by a strict limitation of outlook to 'profitability' and nothing else. The other opposite - represented by the original "idealistic' conception of public enterprise - is the need for a comprehensive and broad humanity in the conduct of economic affairs. The former, if exclusively adhered to, leads to the total destruction of the dignity of man; the latter, to a chaotic kind of inefficiency.

There are no 'final solutions' to this kind of problem. There is only a living solution achieved day by day on a basis of a clear recognition that both opposites are valid.

Ownership, whether public or private, is merely an element of framework. It does not by itself settle the kind of objectives to be pursued within the framework. From this point of view it is correct to say that ownership is not the decisive question. But it is also necessary to recognise that private ownership of the means of production is severely limited in its freedom of choice of objectives, because it is compelled to be profit-seeking, and tends to take a narrow and selfish view of things. Public ownership gives complete freedom in the choice of objectives and can therefore be used for any purpose that may be chosen. While private owner- ship is an instrument that by itself largely determines the ends for which it can be employed, public ownership is an instrument the ends of which are undetermined and need to be consciously chosen.

There is therefore really no strong case for public ownership if the objectives to be pursued by nationalised industry are to be just as narrow, just as limited as those of capitalist production: profitability and nothing else. Herein lies the real danger to nationalisation in Britain at the present time, not in any imagined inefficiency.

The campaign of the enemies of nationalisation consists of two distinctly separate moves. The first move is an attempt to convince the public at large and the people engaged in the nationalised sector that the only thing that matters in the administration of the means of production, distribution, and exchange is profitability; that any departure from this sacred standard - and particularly a departure by nationalised industry - imposes an intolerable burden on everyone and is directly responsible for anything that may go wrong in the economy as a whole. This campaign is remarkably successful. The second move is to suggest that since there is really nothing special at all in the behaviour of nationalised industry, and hence no promise of any progress towards a better society, any further nationalisation would be an obvious case of dogmatic inflexibility, a mere 'grab' organised by frustrated politicians, untaught, unteachable, and incapable of intellectual doubt. This neat little plan has all the more chance of success if it can be supported by a governmental price policy for the products of the nationalised industries which makes it virtually impossible for them to earn a profit.

It must be admitted that this strategy, aided by a systematic smear campaign against the nationalised industries, has not been without effect on socialist thinking.

The reason is neither an error in the original socialist inspiration nor any actual failure in the conduct of the nationalised industry - accusations of that kind are quite insupportable - but a lack of vision on the part of the socialists themselves. They will not recover, and nationalisation will not fulfil its function, unless they recover their vision.

What is at stake is not economics but culture: not the standard of living but the quality of life. Economics and the standard of living can just as well be looked after by a capitalist system, moderated by a bit of planning and redistributive taxation. But culture and, generally, the quality of life, can now only be debased by such a system.

Socialists should insist on using the nationalised industries not simply to out-capitalise the capitalists - an attempt in which they may or may not succeed but to evolve a more democratic and dignified system of industrial administration, a more humane employment of machinery, and a more intelligent utilisation of the fruits of human ingenuity and effort. If they can do that, they have the future in their hands. If they cannot, they have nothing to offer that is worthy of the sweat of free-born men.
admin
Site Admin
 
Posts: 36125
Joined: Thu Aug 01, 2013 5:21 am

Re: Small is Beautiful, by E.F. Schumacher

Postby admin » Tue Jan 05, 2016 3:21 am

Eighteen: Ownership

'It is obvious, indeed, that no change of system or machinery can avert those causes of social malaise which consist in the egotism, greed, or quarrelsomeness of human nature. What it can do is to create an environment in which those are not the qualities which are encouraged. It cannot secure that men live up to their principles. What it can do is to establish their social order upon principles to which, if they please, they can live up and not live down. It cannot control their actions. It can offer them an end on which to fix their minds. And, as their minds are, so in the long run and with exceptions, their practical activity will be.'

These words of R. H. Tawney were written many decades ago, They have lost nothing of their topicality, except that today we are concerned not only with social malaise but also, most urgently, with a malaise of the ecosystem or biosphere which threatens the very survival of the human race. Every problem touched upon in the preceding chapters leads to the question of 'system or machinery', although, as I have argued all along, no system or machinery or economic doctrine or theory stands on its own feet: it is invariably built on a metaphysical foundation, that is to say, upon man's basic outlook on life, its meaning and its purpose. I have talked about the religion of economics, the idol worship of material possessions, of consumption and the so-called standard of living, and the fateful propensity that rejoices in the fact that 'what were luxuries to our fathers have become necessities for us'.

Systems are never more nor less than incarnations of man's most basic attitudes. Some incarnations, indeed, are more perfect than others. General evidence of material progress would suggest that the modern private enterprise system is - or has been - the most perfect instrument for the pursuit of personal enrichment, The modern private enterprise system ingeniously employs the human urges of greed and envy as its motive power, but manages to overcome the most blatant deficiencies of laissez-faire by means of Keynesian economic management, a bit of redistributive taxation, and the 'countervailing power' of the trade unions.

Can such a system conceivably deal with the problems we are now having to face'? The answer is self-evident: greed and envy demand continuous and limitless economic growth of a material kind, without proper regard for conservation, and this type of growth cannot possibly fit into a finite environment We must therefore study the essential nature of the private enterprise system and the possibilities of evolving an alternative system which might fit the new situation.

The essence of Private enterprise is the private ownership of the means of production, distribution, and exchange Not surprisingly, therefore, the critics of private enterprise have advocated and in many cases successfully enforced the conversion of private ownership into so-called public or collective ownership Let us look, first of all, at the meaning of 'ownership' or ‘property’. As regards private property the first and most basic distinction is between (a) property that is an aid to creative work and (b) property that is an alternative to it. There is something natural and healthy about the former - the private property of the working proprietor; and there is something unnatural and unhealthy about the latter - the private properly of the passive owner who lives parasitically on the work of others. This basic distinction was clearly seen by Tawney who followed that it is idle, therefore, to present a case for or against private property without specifying the particular forms of property to which reference is made'.

'For it is not private ownership, but private ownership divorced from work, which is corrupting to the principle of industry; and the idea of some socialists that private property in land capital is necessarily mischievous is a piece of scholastic pedantry as absurd as that of those conservatives who would invest al~ property with some kind of mysterious sanctity.'

Private enterprise carried on with property of the first category is automatically small-scale, personal, and local. It carries no wider social responsibilities. Its responsibilities to the consumer can be safeguarded by the consumer himself. Social legislation and trade union vigilance can protect the employee. No great private fortunes can be gained from small-scale enterprises, yet its social utility is enormous.

It is immediately apparent that in this matter of private ownership the question of scale is decisive. When we move from small-scale to medium scale, the connection between ownership and work already becomes attenuated; private enterprise tends to become impersonal and also a significant social factor in the locality; it may even assume more than local significance. The very idea of private property becomes increasingly misleading.

1. The owner, employing salaried managers, does not need to be a proprietor to be able to do his work. His ownership, therefore, ceases to be functionally necessary. It becomes exploitative if he appropriates profit in excess of a fair salary to himself and a return on his capital on higher than current rates for capital borrowed from outside sources.

2. High profits are either fortuitous or they are the achievement not of the owner but of the whole organisation. It is therefore unjust and socially disruptive if they are appropriated by the owner alone. They should be shared with all members of the organisation. If they are 'ploughed back' they should be 'free capital' collectively owned, instead of accruing automatically to the wealth of the original owner.

3. Medium size, leading to impersonal relationships, poses new questions as to the exercise of control. Even autocratic control is no serious problem in small-scale enterprise which, led by a working proprietor, has almost a family character. It is incompatible with human dignity and genuine efficiency when the enterprise exceeds a certain - very modest - size. There is need, then, for the conscious and systematic development of communications and consultation to allow all members of the organisation some degree of genuine participation in management.

4. The social significance and weight of the firm in its locality and its wider ramifications call for some degree of 'socialisation of ownership’ beyond the members of the firm itself. This 'socialisation may be effected by regularly devoting a part of the firms profits to public or charitable purposes and bringing in trustees from outside.

There are private enterprise firms in the United Kingdom and other capitalist countries which have carried these ideas into successful practice and have thereby overcome the objectionable and socially disruptive features which are inherent in the private ownership of the means of production when extended beyond small- scale. Scott Bader & Co Ltd, at Wollaston in Northamptonshire. is one of them. A more detailed description of their experiences and experimentation will be given in a later chapter. When we come to large-scale enterprises, the idea of private ownership becomes an absurdity. The property is not and cannot be private in any real sense. Again, R. H. Tawney saw this with complete clarity:

'Such property may be called passive property, or property for acquisition, for exploitation, or for power, to distinguish it from the property which is actively used by its owner for the conduct of his profession or the upkeep of his household. To the lawyer the first is, of course, as fully property as the second. It is questionable, however, whether economists should call it "property" at all ... since it is not identical with the rights which secure the owner the produce of his toil, but is the opposite of them.'

The so-called private ownership of large-scale enterprises is in no way analogous to the simple property of the small landowner, craftsman, or entrepreneur. It is, as Tawney says, analogous to 'the feudal dues which robbed the French peasant of part of his produce till the revolution abolished them'.

'All these rights - royalties, ground- rents, monopoly profits, surpluses of all kinds - are "property". The criticism most fatal to them ... is contained in the arguments by which property is usually defended. The meaning of the institution, it is said, is to encourage industry by securing that the worker shall receive the produce of his toil. But then, precisely in proportion as it is important to preserve the property which a man has in the results of his labour, is it important to abolish that which he has in the results of the labour of someone else.'

To sum up:

a. in small-scale enterprise, private ownership is natural, fruitful, and just.

b. In medium-scale enterprise, private ownership is already to a large extent functionally unnecessary. The idea of 'property' becomes strained, unfruitful, and unjust. If there is only one owner or a small group of owners, there can be, and should be, a voluntary surrender of privilege to the wider group of actual workers - as in the case of Scott Bader & Co Ltd. Such an act of generosity may be unlikely when there is a large number of anonymous shareholders, but legislation could pave the way even then.

c. In large-scale enterprise, private ownership is a fiction for the purpose of enabling functionless owners to live parasitically on the labour of others. It is not only unjust but also an irrational element which distorts all relationships within the enterprise. To quote Tawney again:

'If every member of a group puts something into a common pool on condition of taking something out, they may still quarrel about the size of the shares ... but, if the total is known and the claims are admitted, that is all they can quarrel about..; But in industry the claims are not all admitted, for those who put nothing in demand to take something out.'

There are many methods of doing away with so-called private ownership in large-scale enterprise; the most prominent one is generally referred to as 'nationalisation'.

'But nationalisation is a word which is neither very felicitous nor free from ambiguity. Properly used it means merely ownership by a body representing ... the general public of consumers. No language possesses a vocabulary to express neatly the finer shades in the numerous possible varieties of organisation under which a public service may be carried on.

'The result has been that the singularly colourless word "nationalisation" almost inevitably tends to be charged with a highly specialised and quite arbitrary body of suggestions. It has come in practice to be used as equivalent to a particular method of administration, under which officials employed by the State step into the position of the present directors of industry and exercise all the power which they exercised. So those who desire to maintain the system under which industry is carried on, not as a profession serving the public, but for the ad- vantage of shareholders, attack nationalisation on the ground that State management is necessarily inefficient.'

A number of large industries have been 'nationalised' in Britain. They have demonstrated the obvious truth that the quality of an industry depends on the people who run it and not on absentee owners. Yet the nationalised industries, in spite of their great achievements, are still being pursued by the implacable hatred of certain privileged groups. The incessant propaganda against them tends to mislead even people who do not share the hatred and ought to know better. Private enterprise spokesmen never tire of asking for more 'accountability' of nationalised industries. This may be thought to be somewhat ironic - since the accountability of these enterprises. which work solely in the public interest, is already very highly developed, while that of private industry. which works avowedly for private profit, is practically nonexistent.

Ownership is not a single right, but a bundle of rights. 'Nationalisation' is not a matter of simply transferring this bundle of rights from A to B. that is to say, from private persons to 'the State', whatever that may mean: it is a matter of making precise choices as to where the various rights of the bundle are to be placed, all of which, before nationalisation, were deemed to belong to the so-called private owner. Tawney, therefore, says succinctly: 'Nationalisation (is) a problem of Constitution-making.' Once the legal device of private property has been removed, there is freedom to arrange everything anew - to amalgamate or to dissolve, to centralise or to decentralise, to concentrate power or to diffuse it, to create large units or small units, a unified system, a federal system, or no system at all. As Tawney put it: '

The objection to public ownership, in so far as it is intelligent, is in reality largely an objection to over-centralisation. But the remedy for overcentralisation is not the maintenance of functionless property in private hands, but the decentralised ownership of public property.

'Nationalisation' extinguishes private proprietary rights but does not, by itself, create any new 'ownership' in the existential - as distinct from the legal - sense of the word. Nor does it, by itself, determine what is to become of ·the original ownership rights and who is to exercise them. It is therefore in a sense a purely negative measure which annuls previous arrangements and creates the opportunity and necessity to make new ones. These new arrangements, made possible through 'nationalisation', must of course fit the needs of each particular case. A number of principles may, however, be observed in all cases of nationalised enterprises providing public services.

First, it is dangerous to mix business and politics. Such a mixing normally produces inefficient business and corrupt politics. The nationalisation act, therefore, should in every case carefully enumerate and define the rights, if any, which the political side, e.g., the minister or any other organ of government, or parliament, can exercise over the business side, that is to say, the board of management. This is of particular importance with regard to appointments.

Second, nationalised enterprises providing public services should always aim at a profit - in the sense of eating to live, not living to eat - and should build up reserves. They should never distribute profits to anyone, not even to the government. Excessive profits - and that means the building up of excessive reserves - should be avoided by reducing prices.

Third, nationalised enterprises, nonetheless, sh6uld have a statutory obligation 'to serve the public interest in all respects'. The interpretation of what is the 'public interest' must be left to the enterprise itself, which must be structured accordingly. It is useless to pretend that the nationalised enterprise should be concerned only with profits, as if it worked for private shareholders, while the interpretation of the public interest could be left to government alone. This idea has unfortunately invaded the theory of how to run nationalised industries in Britain, so that these industries are expected to work only for profit and to deviate from this principle only if instructed by government to do so and compensated by government for doing so. This tidy division of functions may commend itself to theoreticians but has no merit in the real world, for it destroys the very ethos of management within the nationalised industries. 'Serving the public interest in all respects' means nothing unless it permeates the everyday behaviour of management, and this cannot and should not be controlled, let alone financially compensated, by government. That there may be occasional conflicts between profit-seeking and serving the public interest cannot be denied. But this simply means that the task of running a nationalised industry makes higher demands than that of running private enterprise. The idea that a better society could be achieved without making higher demands is self-contradictory and chimerical.

Fourth, to enable the 'public interest' to be recognised and to be safeguarded in nationalised industries, there is need for arrangements by which all legitimate interests can find expression and exercise influence, namely, those of the employees, the local community. the consumers, and also the competitors. particularly if the last-named are themselves nationalised industries. To implement this principle effectively still requires a good deal of experimentation. No perfect 'models' are available anywhere. The problem is always one of safeguarding these interests without unduly impairing management's ability to manage.

Finally, the chief danger to nationalisation is the planner's ad- diction to over-centralisation. In general, small enterprises are to be preferred to large ones. Instead of creating a large enterprise by nationalisation - as has invariably been the practice hitherto - and then attempting to decentralise power and responsibility to smaller formations, it is normally better to create semiautonomous small units first and then to centralise certain functions at a higher level, if the need for better co-ordination can be shown to be paramount.

No-one has seen and understood these matters better than R. H. Tawney, and it is therefore fitting to close this chapter with yet another quotation from him:

'So the organisation of society on the basis of functions, instead of on that of rights, implies three: things. It means, first, that proprietary rights shall be maintained when they are accompanied by the performance of service and abolished when they are not. It means, second, that the producers shall stand in a direct relation to the community for whom production is carried on, so that their responsibility to it may be obvious and unmistakable, not lust, as at present, through their immediate subordination to shareholders whose interest is not service but gain. It means, in the third place, that the obligation for the maintenance of the service shall rest upon the professional organisations of those who perform it, and that, subject to the supervision and criticism of the consumer, those organisations shall exercise so much voice in the government of industry as may be needed to secure that the obligation is discharged.'
admin
Site Admin
 
Posts: 36125
Joined: Thu Aug 01, 2013 5:21 am

PreviousNext

Return to Peace Initiatives

Who is online

Users browsing this forum: No registered users and 2 guests

cron