Ernst Friedrich Schumacher in his book “Small is Beautiful, Economics as if People Mattered,” (1973), deals with the economic assumption that bigger is better. His major theme is the wisdom of permanence as found in Buddhist teachings.
Schumacher begins by challenging some assumptions in modern economics. The first assumption is that the problem of production has been solved and that the only problem left is one of redistribution. This assumption is plausible based on the fact that we are producing so much more than ever before and that we are experiencing problems of excess rather than deficiency. “As this error pervades all present-day systems there is at present not much to choose between them.” Further along, “Modern man does not experience himself as a part of nature but as an outside force destined to dominate and conquer it.” It is this attitude, buttressed by the high level of technical and theoretical science that has blinded many into thinking the problem of production has been solved. But the fact is that we have failed “to distinguish between income and capital where this distinction matters most…. Namely, the irreplaceable capital which man has not made, but simply found, and without which he can do nothing.” As an example, if a businessperson sells their capital goods and counts it as income, then they may appear rich temporarily, but they will be out of business very soon. First, the capital stock that nature gives us is far, far, larger than the sum of all human created capital in the history of the world and for this reason is often not even thought of as capital. Yet it is being used up at an alarming and accelerating pace. A second source of natural capital is the bio-diversity of living nature. As a result of exponential growth in production after the second world war we have started to pollute the world; “we [are] very rapidly using up a certain kind of irreplaceable capital asset, namely the tolerance margins which benign nature always provides.” We may end up poisoning ourselves as a result of our technological progress. The third natural capital category, Schumacher describes as “human substance,” it is hard to imagine in our world today; “it cannot be measured at all except for certain symptoms of loss…such as crime, drug addiction, vandalism, mental breakdown, rebellion”. This simple solution is to start to look a the world and everything in it through a lens of permanence.
A second assumption we often hear is that prosperity brings peace. Its more accurate to say that prosperous countries consuming the resources of weaker and poorer countries are too busy to fight each other. “[W]here is the rich society that says: ‘Halt! We have enough’? there is none.” The notion of unlimited growth or prosperity is not compatible with a limited materiality of the world. On the one hand it is unlikely that the environment can provide for all what the wealthiest have and on the other even if it were possible (say from mining the rest of the solar system) it is unlikely the environment could cope with that high level of interference. “I suggest that the foundations of peace cannot be laid by universal prosperity, in the modern sense, because such prosperity, if attainable at all, is attainable only by cultivating such drives of human nature as greed and envy, which destroy intelligence, happiness, serenity, and thereby the peacefulness of man…. The cultivation and expansion of needs is the antithesis of wisdom. It is also the antithesis of freedom and peace. Every increase of needs tends to increase one’s dependence on outside forces over which one cannot have control, and therefore increases existential fear. Only by a reduction of needs can one promote a genuine reduction in those tensions which are the ultimate causes of strife and war.”
A third assumption is that the discipline of economics makes sense of problems in the markets and economies of countries. “[E]conomics…acts as a most effective barrier against the understanding of these [social and development] problems, owing to its addiction to purely quantitative analysis and its timorous refusal to look into the real nature of things,” The author gives several examples but spends the most time critiquing cost-benefit analysis which “is a procedure by which the higher is reduced to the level of the lower and the priceless is given a price. It [a cost benefit analysis] can therefore never serve to clarify the situation and lead to an enlightened decision. All it can do is lead to self-deception or the deception of tothers; for to undertake to measure the immeasurable is absurd and constitutes but an elaborate method of moving from preconceived notions to forgone conclusions….The logical absurdity, however is not the greatest fault of the undertaking: what is worse, and destructive of civilisation, is the pretence that everything has a price or, in other words, that money is the highest of all values.” Cost-benefit analysis is a mythology rather than a methodology. This mythology makes sense of the world in a way that is detrimental to the earth and to human sanity. There are 4 broad categories of “Goods” with two subgroups: under primary goods we have 1) non-renewable and 2) renewable. Under secondary goods we have 3) manufacture and 4) service goods. Now for example take the economic notion of “cost” it should be very different depending on which category of goods we are talking about. For example, the cost of depleting a non-renewable resource should be very different than depleting a renewable resource. Also consider the economic notion of production; it too should be very different if one is talking about manufactured goods or services goods. “[E]conomics, as currently constituted, fully applies only to manufactures (category 30, but is being applied without discrimination to all goods and services, because an appreciation of the essential qualitative differences between the four categories is entirely lacking,”
Part of the problem is that un-imaginability of an alternative economic perspective to the one existing in the world today. Curiously, Schumacher did not see a significant fundament difference between capitalist and the communist worlds in terms of economics. So, he contrasts our materialistic system with his notion of more immaterialistic Buddhist economics.
For a modern economist labour is seen as a necessary evil: from an employer perspective, a cost to be reduced as much as possible and from an employee perspective it is a sacrifice of leisure for a monetary compensation that needs to be maximized. Thus, we have an artificial conflict. Buddhists see work as an opportunity to develop one’s faculties, to come together in common cause, and “to bring forth the goods and services needed for a becoming existence.” Therefore, to make work boring or unethical is a failure of the economy as is making a distinction between work and leisure as are discussion on what constitutes full employment.
For a modern economist consumption is a measure of wellbeing. Growth in the number of monetary transactions means the economy is growing and providing more of what people want. “A Buddhist economist would consider this approach excessively irrational: since consumption is merely a means to human well-being, the aim should be to obtain the maximum of well-being with the minimum of consumption.” Buddhist economics would be the study of how to get good ends with the minimum means. These good ends are often different than a modern economist would surmise. Good ends for a modern economist are almost always fully or partially material. However the good ends of a Buddhist are non-material such as liberation, belonging, purpose, and meaningfulness.
The virtues of the two systems are also different. A modern economist would claim a particular type of productivity (one that can be measured in terms of monetary transactions) as productive; where as simplicity and non-violence (for example, not exploiting people or nature in production) are virtues in a Buddhist perspective. “[P]eople satisfying their needs by means of a modest use of resources are obviously less likely to be at each other’s throats than people depending upon a high rate of use. Equally, people who live in highly self-sufficient local communities are less likely to get involved in large-scale violence than people whose existence depends on world-wide systems of trade.”
Efficiency of production is a special virtue of modern economics that has led to worldwide just-in-time delivery for supply chains. Non-violence is a special virtue in Buddhism “therefore production from local resources for local needs is the most rational way of economic life, while dependence on imports from afar and the consequent need to produce for export to unknown and distant peoples is highly uneconomic and justifiable only in exceptional cases and on a small scale.” Buddhist economists would view world trade today as a failure of local production.