EF Schumacher: Sure I’m a crank: “a small element in a machine that makes revolutions”

The humane economist EF Schumacher always said "his arm would wither if he voted Conservative". Yet, says Robert McCrum in The Observer, 40 years after the publication of his seminal book Small Is Beautiful: Economics As If People Mattered, Schumacher "looks set for rediscovery", largely thanks to David Cameron. "Several of the better themes of the Big Society" owe a good deal to Schumacher's influence: from its environmentalism and concern for the well-being of the individual in society, to its "emphasis on breaking up large-scale institutions into smaller elements". Schumacher, in fact, "turns out to be a natural godfather for the coalition".

A German-born Englishman, Schumacher revelled in defying categorisation, says The Guardian. The arguments in Small Is Beautiful have been plundered by everyone from eco-warriors and counter-cultural activists, to enemies of the Big State and management consultants arguing for breaking up big firms. Born in Bonn in 2011, to a family of diplomats and academics, Friedrich "Fritz" Schumacher came to Britain in 1930 as an Oxford Rhodes Scholar to study economics, notes the Distributist Review. He later moved to New York to teach at Columbia University. Finding "theory without practical experience unsatisfying", he returned to Germany to try his hand at business, farming and journalism. In 1937, "appalled with life in Hitler's Third Reich", he and his wife, Anna Maria, left for England.

He took a job in the City, finding a vent for his leftward political views at the Shanghai Club named after the Chinese restaurant in Soho where a group of intellectuals, including David Astor and George Orwell, often met. On the outbreak of war he was interned as an "enemy alien". He never held it against the British ("so long as they win, I will be satisfied") and used the time well, writing a paper that caught the eye of John Maynard Keynes, who pulled strings to facilitate his release. Schumacher's plan for economic reconstruction later influenced Keynes's work on the Bretton Woods Agreement.

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Schumacher was "the easiest man to live with, incredibly even tempered", recalls his second wife, Verena. But he was still "a young man in a hurry", mixing with the elite of the "postwar Labour reconstruction group", and getting up many people's noses, says The Observer. What changed his outlook was a sabbatical to Burma in 1955, when he began exploring what "a Buddhist economy" might mean (see box). But just a few years after he gained public recognition for his vision, his non-stop schedule took its toll. In September 1977, he dropped dead on a train to Zurich. Many labelled Schumacher a crank, observes one of his former editors. He happily agreed. What, after all, is a crank? "It's a small element in a machine that makes revolutions."

How his word-of-mouth bestseller changed the world

Equal parts economic analysis, spiritual tract and radical manifesto, Small Is Beautiful "reflected the contradictory nature of its author", says The Guardian. Yet what bound Schumacher's work was a "belief that modern society has lost touch with basic human needs and values and in doing so had failed both the planet and its people". When published in 1973, this slim volume of essays became a word-of-mouth bestseller. The Times Literary Supplement later proclaimed it one of the 100 most influential books published since World War II.

Its chief impact was to attack the prevailing "blind faith in bigness" as a driver of efficiency and prosperity, says Christopher Caldwell in the FT. "Any intelligent fool can make things bigger and more complex," Schumacher wrote. "It takes a touch of genius and a lot of courage to move in the opposite direction." He was probably the first to point out that General Motors under Alfred Sloan, apparently structured into a number of distinctive sub-companies, was actually a behemoth on the path to self-destruction. Schumacher's take on the issue of the earth's finite resources was equally forward-looking, says The Observer. In a "Buddhist economy", he wrote, there should be a "distinction between renewable and non-renewable resources". The former can be treated as income and spent freely. The latter should be seen as capital. In 1973, amid the oil crisis, Schumacher's arguments tapped into the zeitgeist, says Gareth Kane on Terrainfirma.co.uk. But by the 1990s, resource depletion had not materialised sparking a backlash, including the 1996 riposte by Wilfred Beckerman, Small Is Stupid. The pendulum has swung back again, now that the concept of "too big to fail" has been rammed down our throats. As Schumacher concluded: "Ever bigger machines, entailing every bigger concentrations of economic power and exerting ever greater violence against the environment, do not represent progress: they are a denial of wisdom."