Small Is Beautiful: Organization and Ownership

The final section of E.F. Schumacher’s Small Is Beautiful continues his critique of the economic system by scrutinizing the concept of ownership. He also gives real world examples of the ways he imagines an alternative arrangement of the economy working out.

Systems are never more nor less than incarnations of man’s most basic attitudes. Some incarnations, indeed, are more perfect than others. (263)

I think this insight touches on something very deep and basic about our systems, institutions and organizations. I agree that a system is more than the sum of the individuals that make up that system. There is something more at work in the organizations and institutions that we have created. In a very real sense they take on a life of their own. This is what Rauschenbusch referred to as “social sin” which needed a “social gospel”.

However, Schumacher reminds us that these organizations, even while having a life of their own beyond the individuals that constitute them, also are a reflection of the “basic attitudes” of those human beings that created them. It’s easy to just blame individuals for practicing “bad capitalism” or “bad Marxism” and try and maintain the system as something holy and perfect that is untouchable by the errors of our ways. No, the system is a product of our own attitudes towards the world and each other. If some “are more perfect than others”, then it only reflects the better parts of our nature. We should refrain from making idols of systems, because, if we do, Schumacher’s insight reveals that we are making idols and creating God in our own image.

The basis of the capitalist system is clearly the concept of private property. We have discussed this concept in some depth on this blog, but Schumacher has some helpful insights to add.

As regards private property, the first and most basic distinction is between (a) poperty that is an aid to creative work [the private property of the working proprietor] and (b) property that is an alternative to it [the private property of the passive owner who lives parasitically on the work of others]…[quoting R.H. Tawney] “it is idle to present a case for or against private property without specifying the particular form of property to which reference is made.”…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. (263-264)

Schumacher’s thesis, eloquently summed up in the title of his book, is that the scale of things matters. He argues that scale fundamentally distorts the concept and meaning of private property, particularly in terms of relationships, between owners and workers, between owners and property and between the both and their labor. Perhaps one way of describing large-scale capitalism is “extractive capitalism”. This form of economic activity depends not only on the extraction and exploitation of natural resources, but on the extraction of labor from individuals in order to prop up the absentee owner who passively profits from their labor. This, according to Schumacher, is a necessary result of the scale of the economic enterprise.

Just to be fair, Schumacher also points out the problems with the socialist version of large-scale enterprise, nationalization.

In general small enterprises are to be preferred to large ones. Instead of creating a large enterprise by nationalisation…and then attempting to decentralise power and responsibility to smaller formations, it is normally better to create semi-autonomous small units first and then to centralise certain functions at a higher level, if the need for better coordination can be shown to be paramount. (270-271)

While it would be a stretch to call Schumacher an anarchist, the emphasis on small, decentralized units fits within the realm of anarchist thinking and ideas. The anarchist would go further in requiring these small units to be autonomous, whereas Schumacher certainly still sees some role for a centralized authority. Regardless this emphasis on small decentralized units works for the strange bedfellows of both anarchist and libertarian thinking. I appreciate that Schumacher points out that both capitalism and socialism tend toward large centralized authority.

Schumacher uses the example of Scott Bader Co., Ltd. to flesh out some of these ideas. The owner has chosen to forgo the possibility of greater wealth to form a business that is organized and owned by the workers.

“In truth, ownership has been replaced by specific rights and responsibilities in the administration of assets.” (279)

Like other worker-owned cooperatives, this arrangement fundamentally shifts the nature of property and ownership. Rather than the right to simple possession of an object, this arrangement defines ownership in terms of “rights and responsibilities”. This relates to our previous conversations about the biblical concept of ownership and property, and the idea that ownership has more to do with stewardship and right relationship (tsedekah) to material things, including the earth and other human beings. If this other arrangement shifts the relationship of owner to worker and both to material goods, it begs the question what constitutes the nature of the previous arrangement.

Excessive wealth, like power, tends to corrupt. Even if the rich are not “idle rich,” even when they work harder than anyone else, they work differently, apply different standards, and are set apart from common humanity. They corrupt themselves by practising greed, and they corrupt the rest of society by provoking envy. (279)

There is a basic assumption here that the divide between rich and poor itself produces an inequality in relationship that produces a corruption on both sides that is the cause of all kinds of injustice. Can rich and poor be friends? Those who believe religiously in the holiness of the capitalist system might argue that economic inequality between human beings does not create a fundamental division. I, with Schumacher, would argue that this divide is the source of corruption of both rich and poor, producing both greed and envy, a dangerous combination indeed.

Schumacher considers the famous words of Jesus in Matthew 6 with an interesting twist of interpretation.

It is becoming apparent that there is not only a promise but also a threat in those astonishing words about the kingdom of God [Matthew 6:33]–the threat that ‘unless you seek first the kingdom, these other things, which you also need, will cease to be available to you.” (294)

I had never considered the antithesis of these words of Jesus. In light of Schumacher and others insistence on the economy’s dependence on our natural resources, it is clear that when things are not rightly ordered the promise can also become a curse. While human beings have created many different systems to order our lives, from feudalism to capitalism, communism and socialism as well as totalitarianism, democracy, oligarchy and corporatocracy, there are other systems beyond our control and creation which judge the validity of our arrangements, though on a time scale we tend to ignore. I’ll conclude, as Schumacher does, with this thought along those lines.

It is of little use trying to suppress terrorism if the production of deadly devices continues to be deemed a legitimate employment of man’s creative power. Nor can the fight against pollution be successful if the patterns of production and consumption continue to be of a scale, a complexity, and a degree of violence which, as is becoming more and more apparent, do not fit into the laws of the universe, to which man is just as much subject as the rest of creation. (295)

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