Yves here. It’s intriguing to observe Richard Murphy placing E. F. Schumacher alongside the likes of Karl Marx and Milton Friedman, given that Schumacher is seldom referenced in economic discussions. I must admit, I have only a passing familiarity with his work.
To simplify Schumacher’s perspective: larger isn’t always better; in many cases, it can actually lead to worse outcomes. We’ve noted how certain sectors, like banking, experience diseconomies of scale when they grow beyond a particular size. Murphy expresses confusion over society’s obsession with size. This fixation might stem from a culture that equates size—whether in terms of personnel, military might, or control of assets—with power, despite the reality that “too big to fail” often leads to mismanagement.
By Richard Murphy, Emeritus Professor of Accounting Practice at Sheffield University Management School and director of Tax Research LLP. Originally published at Funding the Future
Ernst Friedrich Schumacher was a remarkable economist who viewed economics through a humanist lens, seeing its purpose not as serving markets, but rather as serving life itself. His groundbreaking book, Small Is Beautiful: A Study of Economics as if People Mattered (1973), emerged during a time of oil crises and growing environmental concerns, yet its core message remains strikingly relevant.
Schumacher’s fundamental argument was straightforward: the contemporary economy is built on the false notion that “bigger is better”—a belief that equates size with progress. He cautioned that the relentless pursuit of expansion in business, nations, consumption, and technology erodes the natural, social, and moral foundations necessary for true prosperity.
He posed a profound question that remains unanswered by modern economics: how large can we grow before we lose our humanity?
Thus arises the Schumacher Question: if small is indeed beautiful because it honors life’s limits, why do we continue to idolize size, speed, and growth, which ultimately undermine our well-being?
Economics as if people mattered
Schumacher’s critique initiated a fundamental shift in priorities. He argued that economics should be rooted in moral philosophy, focusing on human flourishing, rather than merely calculating outputs.
He remarked that today’s economists “measure the cost of everything and the value of nothing.” This concentration on GDP and productivity overlooks critical factors, such as whether work has purpose, whether communities are cohesive, or whether we are preserving the environment.
An economy that equates success solely with money ultimately erodes those irreplaceable assets that cannot be bought.
The fetish of bigness
Schumacher identified a troubling superstition in society: the worship of “bigness.” Large corporations, extensive bureaucracies, and monumental technologies promised efficiency, yet often resulted in alienation. When scale overshadows empathy, individuals become mere numbers.
Large entities centralize power, dilute accountability, and create a gap between decision-making and its consequences.
He advocated for a principle he termed “appropriate scale,” which asserts that the ideal size for an enterprise is the smallest that can effectively accomplish its purpose. The right level of technology is the simplest solution that meets a community’s needs. Systems should be designed to keep power accessible to the people.
Being small doesn’t denote a longing for the past; it signifies a balanced approach.
Technology with a human face
Schumacher rejected the technocratic belief that machines could resolve every issue. He insisted that technology should serve humanity, not the other way around.
He championed what he dubbed “intermediate technology,” which focuses on tools that enhance local capacities rather than replace them and which respect human skill instead of rendering it obsolete.
In today’s world, captivated by artificial intelligence, this message is increasingly vital. Technology devoid of moral guidance becomes dehumanizing. The key question is not merely what we can achieve, but what we ought to pursue.
The ecological reality
Long before climate change became a central topic of discussion, Schumacher recognized the economy as a subsystem of the environment rather than its master. He criticized the exploitation of fossil fuels as treating capital like income, arguing that burning these resources recklessly amounts to depleting our planet’s wealth.
For Schumacher, sustainability was not just a trendy phrase—it was a moral obligation. Economics must function within ecological boundaries; otherwise, it faces inevitable collapse. Growth that jeopardizes its essential foundations isn’t progress; it is self-destructive.
Work as fulfilment
To Schumacher, work transcended mere income generation; it was a source of meaning. He contended that the purpose of work should be to free individuals from economic necessity and enable them to pursue a fulfilling life.
When labor is merely reduced to costs and individuals become “human resources,” societal values erode. Small-scale, community-driven production fosters dignity and encourages creativity.
The politics of enough
Schumacher challenged the prevailing ideology of scarcity that fuels modern capitalism. He argued that the issue is not one of lacking resources; it’s rooted in the desire for excess. The relentless quest for heightened consumption is, he asserted, a moral and ecological dead-end.
He proposed a new economic paradigm centered on sufficiency, where meaning is derived from adequacy rather than accumulation, quality over quantity, and well-being instead of wealth.
This concept is so revolutionary that even fifty years later, mainstream political discourse struggles to entertain it.
Answering Schumacher today
To address the Schumacher Question, we must move away from the cult of bigness and relearn the importance of proportion. This involves:
-
Localizing production, emphasizing shorter supply chains, community energy, and regional food systems.
-
Democratizing ownership by promoting cooperatives, municipal enterprises, and worker-led businesses that keep wealth circulating in local communities.
-
Redefining progress to replace GDP with metrics that truly reflect well-being, sustainability, and equity.
-
Humanizing technology, focusing on directing innovation towards care, restoration, and sustainability instead of mere speed and profit.
-
Establishing limits, recognizing that infinite growth on a finite planet is unfeasible and reshaping our vision of prosperity accordingly.
Inference
The Schumacher Question reveals the ethical void at the core of contemporary economics. We have confused scale with success, quantity with quality, and growth with genuine well-being.
Schumacher’s vision remains a vital alternative: economies rooted in community, grounded in ethics, and oriented towards sufficiency instead of excess.
If small is indeed beautiful, it isn’t merely quaint; it is sustainable, humane, and liberating.
Our challenge now is to restore beauty to economics and to create systems that nurture life rather than drain it.
