E F Schumacher: The scale of wisdom
E F Schumacher's Buddhist approach to economics distinguishes between misery, sufficiency and surfeit. Economic growth is good only to the point of sufficiency. Limitless growth and limitless consumption are disastrous

Fritz Schumacher first came to Britain aged 18 as a Rhodes Scholar at New College , Oxford . He then taught economics at Columbia University , New York , before returning to Germany and joining a small team engaged in international trade. To escape Nazism he cut short this successful business career and settled in England in early 1937.

With the outbreak of the Second World War he did a spell in a British internment camp and was released to become a farm worker in Oxfordshire. A new career was launched when he wrote a paper setting out proposals for post-war international monetary reform. This was acclaimed by the economist Lord Keynes and political leaders of the day.

In 1949 Schumacher was appointed economic adviser (and later head of statistics) to the British National Coal Board, where he remained for some 20 years. In 1973 he published Small is Beautiful: Economics as if People Mattered , which caused a storm, even leading to death threats on his subsequent speaking tour of the US . 'He changed the thinking of a generation,' was how Barbara Ward summed up Schumacher's legacy when he died in 1977.

Schumacher's work in developing countries began in 1955, with a United Nations assignment to advise the government of Burma about its development programme. It was then that, as a student of Buddhism, he asked himself what an economics based on Buddhist values would look like. He concluded that at least in two fundamental ways it would be the exact opposite of conventional Western economics, the economic thinking that has resulted in 'globalisation'.

First, he argued, a Buddhist approach to economics would distinguish between misery, sufficiency and surfeit. Economic growth would be good only to the point of sufficiency. Limitless growth and limitless consumption would be seen to be disastrous. Secondly, a Buddhist economics would be based squarely on renewable resources: an economics of permanence.

In contrast, Western economies are based on the ruthless exploitation of nonrenewable resources; they do violent, possibly terminal damage to renewable resources such as agriculture, forestry and fishing; the technologies and systems employed are harmful to the great majority of people.

In his search for a new approach to development, inspiration came not from conventional economics but from Gandhi. Whereas the starting point of Western economics is always the production of goods, Gandhi's economic thinking always started with people - their needs, resources and skills. Schumacher made that his starting point, too. The challenge was how to make the poor more productive; and he was convinced that the answer must lie not in large-scale factories and mass production but in production by the masses.

Schumacher's opportunity to address this task came in 1962, when India 's prime minister, Jawaharlal Nehru, having read his paper on Buddhist economics, asked him to advise on India 's rural development. It was then that Schumacher came up with the idea of 'intermediate technology'.

Typical rich-country technology, he argues, was very large-scale and very expensive, capital- and energy-intensive, and environmentally damaging. There was no way it could provide the millions of new workplaces desperately needed in India and other developing countries. That need could be met only by technologies specially designed to fit into small rural economies. They would be relatively small, simple, capital-saving (instead of labour-saving) and environmentally benign; tools and equipment that could be owned and operated by poor people.

At the time of Schumacher's death, the world was at the high point of corporate organisation, of mass consumption, of mass employers, of geo-political blocs. Big seemed destined to succeed. But in reality, this world was already starting to come apart. Since then, the large employers shed jobs, the state shed functions, mass production started to give way to mass customisation. The inhumanities and abuses of power have not gone away, but the new models of organisation are different, appearing to focus on networks rather than on hierarchies.

At a shallow level, from cars to computers, the new consumer society, oriented to the personalisation of goods and services, has embraced the allure of the small. And yet not all that is small-scale is human scale, or carries the virtues of community, spiritual connection and ecological balance. The struggle for the kind of society Schumacher envisioned has moved on to new forms of articulation and organisation, while holding true to the same enduring truths and insights.

Schumacher's work lives on, not least through the UK and US Schumacher Societies and Schumacher College . The New Economics Foundation was started to take forward Schumacher's call for a new economics that gives human and environmental values a central place. The Intermediate Technology Development Group and the Soil Association also owe a debt to the work of Schumacher.

Institutions like these, and many more across the environmental, labour and consumer movements rely not on the fat profits of economic success but on the vision and inspiration of leaders such as Schumacher. They are far more than a counter-narrative to the wrongs of today. They are our best hope of a better tomorrow.

(Ed Mayo, a leading advocate of ethical market activity and public service reform, was the strategist behind the anti-poverty campaign, Jubilee 2000. George McRobie, one of the world's most distinguished proponents of sustainable development, was a colleague of the late E F Schumacher, with whom he co-founded the Intermediate Technology Development Group in Britain in 1965)

This article first appeared in Resurgence (No. 227, November/December 2004). It is distributed by Third World Network Features.