Thursday, July 19, 2012

Book review: Small is Beautiful

Small is beautiful: Economics as if people mattered.
By E.F. Schumacher

Thanks Parul for giving the book. A one line review would be - Must read!

Published in 1972, this book pretty generations ahead in its ideas. It was one of the first few who rang the warning bells.  Many ideas in recent books can be traced back to this one. So, while reading this one, a lot of sections were familiar. What was fascinating was the ingenuity in that time and age,  the surprise that so much of those warnings have come true and how bad it is going to be.

I think you can find several reviews on web that talk what this book is about. Hence, i will not be a "me too". Instead i will talk about ideas that were quite fresh to me.

Unemployment - Unemployment is bad, everyone agrees it but the reason that is generally cited is that it leads to so much of economic loss. Atleast that was the reasoning that i had heard the most and i agreed with it. In Small is Beautiful, Schumacher argues that employment is not limited to economic productivity. Employment results in an individual's growth, his/her own development. This development is completely qualitative. Unemployment takes away this development, quantitatively this is more significant loss than just the economic one.

Nationalization - I have always known that nationalization was bad. Why shoudn't I, ofcourse we Indians have experienced this. But Schumacher offers couple of interesting points - (a) A nationalized company will always offer lesser profits than a corporate company. A nationalized company tries to maximize multiple objectives not just the profit margins. So, it is futile to compare the profit returns and make a case just on that.  (b)  Nationalization has to be de-centralized. Schumacher argues that everything has to be decentralized but it is more so important here. For reasons, you should read the book.

Education - Education should be scientific, it should be mathematic.  But, Schumacher claims that it should not be limited to this only. It should include humanities - how did things come into existence and metaphysics - what are our convictions, purpose and what do we want. This reminded me of Dr. Seth's comment that education should always have some room to respect the abstract. If everything was reduced to tangibility, then something has gone amiss.

 Reading this book, i felt a lot sad and depressed. All that he warned against is coming true now. The question in my mind was - is it too late now? With so much of natural resources already depleted, even if we start implementing his ideas today and by the time we even achieve 50% coverage, it would have taken decades and will there by anything left by then.

Schumacher raises various topics such as migration to cities, urban consumption, nature exploitation, modern economics and economists. His central thesis is that we need to rethink our strategy. The notion that we will figure things out as we progress forward is very optimistic and naive. His solution is de-cenetralization, think small, think collaborative and think people.

Based, on the book, it got me thinking what are the use cases around us where we can see the benefits of small is beautiful. Here are a couple of use cases that came to mind immediately -
(a) Water Harvesting - In Bangalore, pretty much every apartment society is now implementing water harvesting and recycling. This reduces their dependence on fresh river water. By this small-small initiatives, it can lead to a sustainable water cycle for urban population. A large scale initiative would require investment in water transportation, central location, huge energy etc etc.
(b) Composting - If every househould starts composting, it would lead to less garbage, less energy wastage in recycling, more manure for more plants. 

Finally, small should not be misinterpreted as individualism. If every farmer tries to grow crops on his small land, and if that crop fails, he ends up in debts, poverty trap etc. The solution here is cooperatives where a bunch of farmers come together, grow different crops and share the yield/profit.  Similar arguments applies to self-driving, aka we should carpool or use public transport. Small is bigger than tiny and every usecase will require its own scale, one size does not fit all.


This book was discussed as part of the July meetup of Bangalore Politically Inspired book club. A very interesting discussion followed. There were a couple who thought that this book was too idealistic/impractical and were optimistic that we will find a way. It was great to listen to counter-views. But in the end, one can not do anything when the argument comes as "I believe... that X will happen".  Everyone gave their views on how society would be 100 years from now. It was a very interesting thought exercise for everyone. My view is inclined towards "Natural selection" - aka things will get really bad before they get better :)

Update: I wanted to add this also to the list of things that i want to remember from this book.
The author argues that there are many processes in today's world which help us to live the way we are living now but they come at a cost. Right now, we are paying the cost and hoping that we will figure out the solutions to do these processes in a sustainable manner at some point in future. Often "need of the hour" is the term best described to take the shortcut and live. There is no way to measure(quantitatively) the impact of this cost for future generations and current economics conveniently ignores to do so, hence the proposition appears very profitable currently. Example is energy from nuclear power when we do not know what to do with the waste. Massive deforestation for 'n' reasons. Pollution caused by thermal power plants or excessive dependence on oil or its by products.
Schumacher argues that this has to stop. He says that we need to change our entire outlook, the way we look at things. Merely punting solutions to future generations is a very bad idea and we are just shifting the consequences on them. He argues that any solution/process which requires such assumption should not be implemented unless it becomes sustainable. If it takes time, we should be patient for the science to catch up. The economics has to change to incorporate this. It requires a radical overhaul of over thinking process and approach to problem solving.  

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