E. F. Schumacher on Gandhi

by Surur Hoda

Dustwrapper art courtesy Harper Publishing; harpercollins.com

Gandhi’s visions of Gram Swaraj, self-sufficient but inter-linked village republics with decentralised small-scale economic structures and participatory democracy, left him immediately at odds with those in and outside the Indian National Congress who were seeking to develop India into a modern industrial nation state. To Gandhi, political freedom was merely the first step towards attainment of real independence, namely social, moral and economic freedom for seven hundred thousand villages. ‘If the villages perish India will perish,’ he had said. But the majority of academically trained, modern economists called his vision ‘retrograde’. Some extremists even described it as ‘reactionary’ or ‘counter-revolutionary’ and accused him of aiming to put the clock back.

Many of those who admired Gandhi’s skill in leading the struggle for national liberation reluctantly tolerated his economic views as the price to pay for his political leadership. They were sold on the concept of large-scale urban industrialisation and mass production. They failed to understand Gandhi’s economic insights and criticised him by saying ‘Whatever Gandhi’s merit as “Father of the Nation”, he simply does not understand economics.’

Yet almost a quarter of a century after Gandhi assassination, the German born economist E. F. Schumacher, when delivering the Gandhi Memorial Lecture at the Gandhian Institute of Studies at Varanasi (India) in 1973, described him as the greatest ‘People’s Economist.’ In his opening remarks, Schumacher told this story: ‘A famous German conductor was once asked who he considered the greatest of all composers. “Unquestionably Beethoven” was his answer. He was then asked, “Would you not even consider Mozart?” He said, “Forgive me. I thought you were referring to the others.”’ Drawing a parallel Schumacher said the same question might he put as to who was the greatest economist. ‘Unquestionably Keynes,’ he would reply, and be immediately asked, ‘Would you not even consider Gandhi?’ His answer would be,  ‘Forgive me, I thought you were referring to the others.’

Schumacher’s highly influential book, Small Is Beautiful: A Study of Economics as if People Mattered, identified Gandhi as ‘the people’s economist’ whose theory was compatible with spirituality as opposed to materialism. As he says, ‘Gandhi refused to treat economics as if people did not matter.’ Gandhi had his finger on the pulse of the masses and therefore when someone put it to him that no religion was any good that did not make sense in terms of economics, Gandhi countered that no economics was any good that did not make sense in terms of morality and the poor. Schumacher therefore interpreted Gandhian economics as a people’s economics and explained the difference between economic reasoning based on ‘people’ as against ‘goods’, as with materialistic economic thinking.

Schumacher explained that economic reasoning based on ‘goods’ would be solely concerned with increasing supply by means of advanced technology, scientific knowledge and modern equipment. Based on this line of thinking industries should be large scale, highly sophisticated, capital intensive and labour saving, even to the point of total automation. From the ‘goods’ point of view, human beings were not ideal agents of mass production because they tended to make mistakes, were tardy, argued back and joined trade unions. The ideal therefore was to eliminate the ‘human factor’.

However, if the economic means of development was based on people, as in Gandhian thinking, one had to direct attention to people in need and start asking why they were poor. Was it because their productivity was zero, and if so how could it be raised? The eradication of unemployment was of paramount importance. The most disturbing aspect of most developing countries, Schumacher thought, was the fact that millions and millions of people were without work or had such a low level of productivity as to be negligible. How could these people be helped to help themselves? It was in order to address this issue that Gandhi called for ‘production by the masses’ instead of ‘mass production.’ While giving his prescription to the nation, he said that ‘the salvation of India is impossible without the salvation of the villages and their poor inhabitants.’

The Gandhian Prescription

When asked how Gandhi, were he alive today, would view India’s present situation after three decades of independence, Schumacher pointed out that the number of rich, even very rich, people in India had increased as had the number of desperately poor people. He added that the situation in India reflected the situation of the world as a whole and Gandhi would undoubtedly consider this a grievous failure.

The obvious question, Schumacher asked, was ‘Why has it not been possible to help millions of unemployed and underemployed people to help themselves out of poverty?’ And the answer, Schumacher added, was that an approach to economic problems, which started from ‘goods’ and therefore aimed to eliminate the human factor from the productive process, could not possibly lead to constructive job provision. Gandhi would not have found it difficult to understand this. Schumacher prophesied that if the next twenty-five years in India produced a continuation of the trends of development based on the Western model established since independence, the outlook for the mass of poor people was grim, even hopeless.

Referring to the West, Schumacher said: ‘It is now widely accepted that there are limits to growth based on the established pattern, so that, in all probability, the trends established over the last twenty-five years cannot be continued even if everybody wished to do so. The requisite physical resources are simply not there, and living nature all around us, the Ecosystem, cannot stand the strain. Gandhi had known, and rich countries are now reluctantly beginning to realise, that their affluence is based on stripping the world. The USA with 5.6% of the world population is consuming up to 40% of the world’s resources, most of them non-renewable. Such a lifestyle cannot spread to the whole of mankind. In fact, the truth is now dawning that the world can’t really afford the USA, let alone the USA plus Europe plus Japan plus other highly industrialised countries. Enough is now known about the basic facts of spaceship Earth to realise that its first class passengers are making demands which cannot be sustained very much longer without destroying the spaceship.’

Schumacher summed up Gandhi’s prescription for the salvation of India and indeed for the whole world as follows:

  • Start all economic reasoning from the genuine needs of the people and help the poor to help themselves out of poverty.
  • Revitalise and foster not only agriculture as such but also all possible productive, non-agricultural activities in the rural areas such as cottage industries for potters, weavers, shoemakers, carpenters, blacksmiths, etc.
  • Resist the further concentration of the growing population in large cities by reversing the trend of migration from rural to urban areas.
  • Develop systematic policies, based on the best available knowledge, for the mobilisation of all productive resources, the greatest of which is the population itself.

Only by following the above prescription, Schumacher thought, could developing countries such as India hope to feed, clothe, house and provide the bare necessities of life for their hundreds of millions. He also went on to identify the five main pillars of Gandhian economic thinking as:

1.  Nonviolent;
2.  Simple;
3.  Small;
4.  Capital Saving;
5.  Rural Based (Self Reliant and Employment-Orientated).


Referring to the deep trouble in which the modern world found itself and the ecological crises facing it, Schumacher said that to most people this shock and crisis had come as a surprise. However, it would not have come as a surprise to Gandhi, who perceived that the modern urban-based industrial civilisation was exploitative and violent. Gandhi did not employ, nor did he require, a computer to arrive at his conclusions. Common sense told him that Western style industrialisation was inherently violent and could never be implemented for the whole of mankind. ‘It would strip the world like a locust,’ Gandhi had said and had warned that: ‘For India to change to industrialism is to court disaster.’

Gandhi abhorred the industrial civilisation because it was based on the callous exploitation of non-renewable resources. It made bodily welfare the sole object of life, which reduced man to nothing but a clever animal. It was the tendency of Indian civilisation and Indian philosophy to make man better than he was; Gandhi wanted India to follow a different path of development. Today people particularly the young, in the rich as well as poor countries, are looking for just this: a different path of development, a different type of society, a different lifestyle.

Schumacher, describing ‘nonviolence’ as a Gandhian term, widened its concept to include not merely the violence of man against man, but also the violence of man towards the living nature around him, and against the limited and finite resources of the Earth. Taking agricultural research as an example, Schumacher said that this was all based on violence: the use of insecticides, herbicides, fungicides, chemical fertilisers and the engineering of plants and animals. As a consequence modern agriculture had become a gigantic battle with nature, instead of a careful, devoted effort to synchronise with her unbelievably subtle and efficient methods. Organic agriculture, based on the strict observance of biological laws, the proper recycling of organic materials, decentralising, diversification and good husbandry, was receiving virtually no support and attention. Yet there could be no disagreement that agricultural systems, which depended completely and utterly on cheap availability of non-renewable materials such as oil, had no long-term future. But a civilisation ruled almost exclusively by town dwellers was always in danger of forgetting this basic truth.

Schumacher said, ‘As in agriculture, so in industry and in every other walk of life. We need to give our attention to the developing and perfection of nonviolent methods to find answers to the threefold crises of the modem world: the crises of resource exhaustion, the ecological crises and the crises of man’s alienation and disorientation. All this requires Gandhian work, in that spirit of truth and nonviolence which inspired Gandhi.’


A simple lifestyle was Gandhi’s hallmark. At his death his sole possessions were a pair of slippers, a watch, a pair of glasses and a few loincloths. He lived in poverty by choice most of his life in line with his motto, ‘Simple living and high thinking.’ And quoting Gandhi, Schumacher said that all real human needs were essentially simple, therefore only frivolities and extravagances like supersonic transport were inevitably complex. Complexity had to be seen not as a sign of progress but as a mark of failure. It entailed the need for extreme specialisation so that men became ‘fragmentary’, too specialised to be able to obtain wisdom. Schumacher maintained that the essence of the message of all the prophets and philosophers born in the East was a simple lifestyle. To emphasise this point Schumacher added that in the area of economics modern civilisation was moving at an ever-increasing speed towards immense complexity and high capital intensity with the sole object of increasing gross national product, growth rate and per capita income.


Referring to his book Small Is Beautiful, Schumacher said that when Gandhi said ‘Not mass production but production by the masses,’ or when he talked about ‘decentralised rural based self-reliant economy,’ or when he demanded that ‘production and consumption must be reunited,’ he was talking the language of Small Is Beautiful.

‘Man is small and man is – or ought to be – beautiful and as such only the human scale economy of Gandhi’s dream is appropriate’, said Schumacher. The greater the size of the production unit, the greater the separation of production would be from consumption. Reuniting production and consumption was only possible if production units were small, and therefore easy to manage and adaptable to local conditions. One of the enormous advantages of small-scale production, reunited with small-scale consumption, was the minimisation of transport. Mass production entailed increased transport, which added to the cost but never added anything to the real value of goods.

Modern economic thinking celebrated high speed and massive goods transport as wonderful achievements and included their costs in the gross national product as an indicator of economic progress. Post-modern thinking, according to Schumacher, would formulate a negative theory of transport, and look upon the need for goods transport primarily as an indicator of failure, proving that goods were being produced in the wrong places. This kind of thinking was already quite familiar to factory planners and production agencies striving for the minimisation of transport inside the factory and did not take pride in creating an elaborate infrastructure just for transporting goods from place to place. The same thinking applied to society as a whole, which would never lose sight of the ideal that things should be produced where they were needed. To use Gandhi’s language: ‘Production and consumption should become reunited,’ or, to use another phrase of Gandhi’s: ‘Bring work to the people and not people to the work.’ And as Schumacher asked, ‘Can we utilise science and technology to this end?’ It was important to ask our scientists and technologists to use their knowledge and ingenuity not to make production units even bigger, an economics of scale, but to develop mini-plants so that people living in small communities in rural areas could again become productive, without being dependent on people already rich and powerful to provide job opportunities for them. ‘Economics of scale can be shown to be a twentieth century myth,’ said Schumacher.

Capital Saving

One of the pillars of Gandhian economic thinking was capital saving. Tragically, Schumacher pointed out, the world was moving at ever-increasing speed into large-scale, immensely complex modes of production with high capital intensity, and the elimination of the human factor, and this production was leading mankind into a crisis of survival. One of the reasons for Gandhi’s opposition to capital intensive and complex machinery was the fact that it turned a large number of people into ‘machine minders’. This did nothing to develop their personalities and merely robbed them of their creative power. In addition, highly capitalised modern, complex and gigantic technology had proved monstrously inefficient in solving the problems of the world.  Schumacher said, ‘If an ancestor of long ago visited us today, what would he be more astonished at? The skill of our dentists or the rottenness of our teeth? The speed of our transport or the length of time and the discomfort incurred in our travelling to and from work? The progress of our medicine or the overcrowding of our hospitals? Our ability to land man on the Moon or our inability to find employment for people wanting work? The efficiency of our machines or the inefficiency of our system as a whole?’

Admiring Gandhi’s sureness of touch, Schumacher added, ‘Gandhi knew that a capital intensive economy could never solve India’s unemployment problem, and went on to explain by giving an example. He said that in order to establish one work place it cost 100,000 Rupees (Rs.) and if you had Rs. 10,000,000 you could establish only 10,000 work places. If one had to tackle an unemployment problem for hundreds of millions, one could see the problem facing a poor country like India.’

Quoting another example, Schumacher said that he went to see a village potter, who was a marvellously skilled man but who had very primitive technical equipment worth Rs. 50. He then went to a city and met another potter minding a machine tool imported from Belgium, the price of which was in the region of Rs. 500,000. Evidently the worker could never afford that kind of money to set himself up in business and as a consequence would be forced to go to a big city like Bombay, where there were already hundreds of thousands of unemployed people. It therefore followed that constructive job provision was only possible if one followed the Gandhian prescription, namely to design work to develop modes of production which fitted into the existing conditions in terms of capital availability relative to labour availability, that is, systematic development of technologies cheap enough to give the chance of work to everybody.

Rural Based

For Gandhi, political independence was merely ‘the first step’ towards the attainment of real independence: i.e. social, moral and economic independence for India’s seven hundred thousand villages, as distinct from its cities and towns. In a document known as his ‘Last Will and Testament’ he provided a guideline to his followers to follow the Sarvodaya (Welfare of All) Movement for the uplifting of the villages. As Gandhi wrote: ‘You cannot build nonviolence on a factory civilisation. The economy which I conceived eschews exploitation, because exploitation is the essence of violence. You have to be rural minded before you can be nonviolent.’

Schumacher called Gandhi ‘a nonviolent social revolutionary’. Schumacher said: ‘The grand objective of the Sarvodaya Movement as conceived by Gandhi and pursued by his followers was the total reconstruction of society. This meant that the village would become the basic unit of politics, economy and society. In such a unit agriculture would remain the basic industry but other small-scale village industries using the most modern technology where it did not conflict with human needs would be developed. In short, Gandhi’s dream was to develop a decentralised economy in which each basic unit would be self-sufficient in meeting its main material needs – food, clothing and housing.’ Though India was on the way to becoming the tenth largest industrial state, Schumacher thought it remained a predominantly rural based agricultural economy. Despite the fact that almost 80% of the Indian people lived in villages, successive Indian governments gave little or no attention to improving the quality of life and creating employment opportunities in rural areas. As a result there was a large migration of people in search of employment from the rural areas to the cities where they only swelled the ranks of the slum dwellers. The only way to reverse this trend and save Indian villages from perishing was to create small village industries with the help of appropriate technology.

Big city-based industries and mass production methods destroyed the productive capacity of the rural inhabitants and robbed them of their means of livelihood. Citing an example of how villages had been deprived of their employment opportunity, Schumacher said: ‘Once the unmilled rice grown in the village was hand pounded in the village itself and consumed by the villagers, the surplus was sent to the nearest town or area where there was a shortage. But now, all the rice grown is taken by improved means of transport to the mills in a large city where it is pounded and sent back to the villages infected with all kinds of diseases. The village workers have lost their jobs and the net result remains the same, if not worse. What ought to have been done is to introduce improved threshing equipment in the village itself. Unless we put all the able-bodied young men and women to productive use in the villages it would not be possible to pull India out of the massive poverty in which it finds itself.’

Gandhi had written, ‘If we tap all our resources, I am quite sure, we can again be rich, which we were I suppose at one time. We can repeat the phenomenon if we profitably occupy the idle hours of the millions.’ Occupying the idle hours of the millions was the most serious challenge facing a country like India, Schumacher thought, and added that no country could develop without letting the people work. The greatest deprivation that anyone could suffer was to have no chance of making a livelihood. He questioned the wisdom of maintaining an educational system attended by hundreds of millions of youths, unless at the end of the pipeline there was something for them to do. One way to occupy the idle hours of the millions in the villages of India was to embark upon self-help projects.

Giving an example, Schumacher said, ‘One of the greatest teachers of India, the Buddha, included in his teaching the obligation of every good Buddhist to plant and see to the establishment of one tree every year for five years running. This in five years would give 2,000 million trees. The economic value of such an enterprise, intelligently conducted, would be greater than anything promised by five-year plans. It would produce foodstuffs, fibres, building materials, shade and water, in fact almost anything really needed. And all this would have been done without a penny of foreign exchange and very little investment.’

According to Schumacher, Gandhi identified himself completely with the starving millions of India and fought all his life to improve their lot. This is evident from the advice he gave to his followers, now known as Gandhi’s Talisman: ‘Whenever you are in doubt, or when self becomes too much, apply the following test: recall the face of the poorest and the weakest person you may have seen, and ask yourself if the step you contemplate is going to be of any use to that person. Will that person gain anything by it? Will it restore that person’s control over his or her own life and destiny? In other words, will it lead to Swaraj for the hungry and starving millions? Then you will find doubts and self melting away.’  Surely that is the challenge today for all the decision-makers of India.

EDITOR’S NOTE: Surur Hoda (1928-2003) was international secretary of the civil aviation section of the International Transport Workers’ Federation (ITWF). He was also chief executive of the London-based India Development Group (IDG). As a democratic socialist, he formed the India Socialist Group in London in 1960 and was an active member of Socialist International. In the 1980s he also began the Gandhi Foundation in London, to promote knowledge about Gandhi’s teachings and relate them to problems of violence, social injustice, environmental destruction and racial and cultural conflict. This article is courtesy of mkgandhi.org and gandhifoundation.org, with our thanks.

“When planted in the garden, the mustard seed, smallest of all the seeds, became a large tree, and birds came and made their home there.” Luke 13:19

“For me whatever is in the atoms and molecules is in the universe. I believe in the saying that what is in the microcosm of one’s self is reflected in the macrocosm.” M. Gandhi