Schumacher now turns his attention to the notion of economic development, which for first world countries comes with lofty goals of improving the lot of people in third world countries in all aspects of life. The reality is quite different. Two serious problems that development aid has created in third world countries are mass unemployment and mass migration into cities. The result of these two phenomena is a “dual economy,…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 dual economy is undoubtably great for its beneficiaries, the rich who can live in gated communities, but the cost to the middle and lower classes is increasing economic and social hardship.
The reasons that development aid often causes more problems are twofold 1) a materialist lens looking at development and 2) a theoretical false assumption that development can be created.
Firstly, if one looks only at the material aspects of development and tries to duplicate them in a developing country, one is only looking at and duplicating a tenth of what is needed for development. The tangible material aspects of development are like the tip of an iceberg: they are at the top and visible only because of the existence of what is not seen. The most important pre-conditions of development success are generally invisible to the materialist. This is part of the reason why some countries’ successes are considered economic miracles – miracle meaning something unexpected and unexplainable. Secondly, the notion that we can develop a country, as in create development by simply sending money, resources, and time to build the trappings of industry, is the cause of the dual economy. This attitude of creating development in a third world by simply, for example, building a technologically advanced factory there Schumacher calls: “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.” The notion that we need to create jobs, or create opportunity, or create the conditions for flourishing is incomplete and by itself misguided. The notion of economic creation is only good for the very rich. It is based on the false assumption that what is good for the rich is good for everyone; the truth is closer to, what is best for the rich is usually bad for everyone else. Economic development, defined as the economic betterment of all, is not created; it must evolve.
The causes of poverty are not lack of material or its support – if these are in short supply it is a secondary byproduct of three missing immaterial components to development: education, organization, 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….the alleviation of poverty depends primarily on the removal of these three deficiencies.” Economic development cannot be ordered or bought or planned because education, organization, and discipline cannot “jump” they grow, building on what is already there: in other words, they evolve. Putting people without the necessary education, organizational experience, or the proper required disciple in positions which they are not prepared for will result in disaster. “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 of a tiny minority, but of the whole society.” Therefore, all true economic development makes everyone in the society better off – whereas fake development, the development we have seen in places that do no seem to make progress actually creates the dual economy that poisons both the city and the hinterland for most people. Any new future economic development, in order to be really successful – that is take poverty seriously – must involve the whole population in improving their education, organization, and discipline. While the author does not define exactly what he means by discipline, he seems to give the impression that it is the middle-class mindset of thinking about the future – the prevailing tendency to live in and think about the future rather than the past or the present.
The solution Schumacher gives is found in the introduction of intermediate technology in the hinterland. He is thinking specifically of Central and South America having noted the recent mass migration out of the countryside and the huge amount of unemployment in the slums of big cities. With the introduction of intermediate technology into the areas that are hardest hit by the effects of high technology in the cities he hopes to stem the exodus from the countryside while producing improvements in the lives of the people in the area so they do not feel they need to move to the cities for an imagined better life.
“[T]he primary consideration cannot be to maximise output per man; it must be to maximise work opportunities for the unemployed and under-employed.” Maximizing output is what the highest technology is for and part of the problem with it is that it easily leads to unemployment. Therefore, the profit seeking motive is not ideal for the development of the rural area or for economic development anywhere. Development that seeks the maximum profit is a static sort of development because it takes nothing else but profit into consideration and thus almost always hurts people, makes them desperate, and more likely to migrate. Schumacher advocates for a dynamic economic development which “pays heed to the needs and reactions of people: their first need is to start work of some kind that brings some reward…it is only when they experience that their time and labour is of value that they can become interested in making it more valuable.” The introduction of intermediate technology’s goal is therefore “to bring into existence millions of new workplaces in the rural areas and small towns.”
This goal can only be achieved with intermediate technology because it is by definition a slight evolution up of existing levels of education, organization, discipline. Even within the category of intermediate technology the right degree must be found for each location such that it is sustainable given the local levels of potential education, organization, and discipline. Only in this sense does it make sense to speak of economic development as job creation. Job creation of this type must be 1) in the areas where people live; 2) cheap enough to create large numbers of jobs; 3) with production methods that are relatively simple; and 4) from local materials for local use.
It is further required that regions be identified whose people are culturally and economically similar – meaning that could benefit from a similar solution. The practical problem of finding the right intermediate technology can be thought of as on the spectrum of cost to set up a workplace. If on one end it costs zero to set up a subsistence job living off the land and on the other, it costs a 1000 for a modern workplace then all jobs can fit in the spectrum between subsistence and the most advanced workplace. Next, one would determine what is being done in a particular region and the cost of setting up one more similar workplace. Or one can find something new but at about the same level on the spectrum. Schumacher claims that the cost of setting up an existing workspace is directly proportional to the degree of education, organization, and discipline in a region. The application of intermediate technology as economic development would see an investment that raises the cost of setting up a workplace by a small marginal amount. This would mean an evolutionary increase in the degree of education, organization, and discipline and thus would constitute healthy economic development. “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.”
Neocolonialism is what happens when a rich country tries to introduce too high levels of technology on a developing country: it creates dependence. The fundamental problem is that development is thought of and centered on goods. But a real and healthy development focuses on people. “This, then, should become the ever-increasing preoccupation of aid programs—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.”