mathematical models or more detailed statistics, because they were hardwired into the assumptions underlying economics itself. Every way of thinking about the world rests ultimately on presuppositions that are, strictly speaking, metaphysical in Nature: that is, they deal with fundamental questions about what exists and what has value. Trying to ignore the metaphysical dimension does not make it go away, but rather simply ensures that those who make this attempt will be blindsided whenever the real world fails to behave according to their unexamined assumptions. Contemporary economics fails to predict the behavior of the economy because it fails to criticize its own underlying metaphysics. Thus, a hard look at those basic assumptions is an unavoidable part of straightening out the mess into which current economic ideas have helped land us.
These four propositions are among the key points made in Schumacher’s most famous book, Small Is Beautiful: Economics As If People Mattered, which was published in 1973 to immediate acclaim. Theodore Roszak spoke for many perceptive thinkers at that time in the closing words of his introduction: “We need a nobler economics that is not afraid to discuss spirit and conscience, moral purpose and the meaning of life, an economics that aims to educate and elevate people, not merely to measure their low-grade behavior. Here it is.”2 The more thoughtful end of the alternative scene of the seventies took Schumacher’s ideas as one of the core foundations of its thought and practice; it’s no exaggeration to say that any bookshelf in that decade that had a copy of The Whole Earth Catalog and Mother Earth News on it generally had a copy of Small Is Beautiful perched nearby.
Like the rest of the alternative thinking of that decade, Schumacher’s work went into eclipse in the following decades as industrial societies abandoned the promising steps toward sustainability taken in the seventies and embraced a radical new ideology that insisted on the free market’s infallibility. For a while, that new ideology seemed to work, but its successes rested on a foundation rarely discussed, then or later. The seventies had been defined in part by repeated energy crises and resulting economic troubles. Those difficulties helped catalyze a sharp decrease in energy use in the world’s industrial nations; it also drove frenzied efforts to locate untapped petroleum reserves — efforts that, as it happened, turned up large fields in the North Sea and Alaska’s North Slope.
A reasonable approach to energy policy would have treated those discoveries as vital sources of energy to fill in the gaps while industrial nations made the transition to a new economy powered by renewable sources and structured to maximize energy efficiency — exactly the policy that Schumacher, among many others, detailed in his writings. Unfortunately for all of us, that was not what happened. Instead, the North Sea and North Slope fields were pumped at a breakneck pace, flooding oil markets around the world with cheap oil and sending prices plummeting to what, corrected for inflation, was their lowest level in history. As the efficiencies and innovative programs of the seventies gave way to the extravagances of the eighties and nineties, the possibility of a smooth transition to a sustainable future went by the boards.
We are now living with the first consequences of that monumentally short-sighted decision. The wild swings in energy costs, the even wilder cycles of economic boom and bust and the sharp impacts of all this volatility on the social and political fabric of the world’s industrial nations have their source in the disastrous mismatch between an economic and technological system geared to exponential growth and the hard limits of a finite planet.3 The consequences to our descendants will be even more extreme. Still, it may be possible to mitigate the worst of those consequences, and make life considerably easier for generations to come, by revisioning the ways that human societies deal with the production and distribution of goods and services. The crisis of the present makes such a revisioning necessary, but it also provides a window of opportunity in which such a revision might just be able to find its way from theory into practice.
This book is meant to further that hard but necessary process. I am not a professional economist, and the cult of expertise that pervades modern culture may make it seem presumptuous for someone without an economics degree to suggest a redefinition of contemporary economics. It may seem even more presumptuous in that several movements toward an ecologically sane economics have risen since Schumacher’s time; economists such as Nicholas Georgescu-Roegen, Kenneth Boulding, Herman Daly and Robert Costanza have presented densely reasoned works of economic theory arguing for the inclusion of the value of “natural capital” — in Schumacher’s terms, primary goods — in economic calculations, and challenging the simplistic ways that conventional economic thought brushes aside environmental destruction and resource depletion as nonissues.
Still, it may be worth noting that Adam Smith did not have an economics degree, and his pathbreaking study of economics lacked any trace of the intricate mathematical formulations that today’s economists too often consider essential to their craft. Smith worked instead on the level of fundamental ideas; Schumacher, whose writings are just as sparse in their use of calculations, did the same; so, in its own way, does this book. Like Smith’s and Schumacher’s works, too, this book is not addressed to economists. Rather, its goal is to communicate the failure of modern economics, and potential solutions to the crises driven by that failure, to the audience that has the final say in matters of public policy: the public itself.
The predicament into which industrial civilization has backed itself at the end of the age of cheap energy, the subject of my previous books The Long Descent and The Ecotechnic Future, has a crucial economic dimension, and The Wealth of Nature is intended to help make sense of that dimension by applying E. F. Schumacher’s Copernican revolution in economic thought to the crisis of our time. If the ideas suggested here inspire others to rethink the foundations of contemporary economics, and set aside some of the mistaken ideas that have so consistently blocked a sane response to the largely unacknowledged roots of our current troubles, this book will have done its work.
IMAGINE FOR A MOMENT that you are on board a sailing ship in the middle of the ocean. You wake in the middle of the night with an uneasy feeling, as if trouble is brewing. You get dressed and go on deck. It’s a clear night with a steady wind, and you can see some distance over the water; as you glance off to starboard, though there is no land in sight, you are horrified to see waves crashing over black jagged rocks not far from the ship, setting the sea afoam.
You hurry aft to the midship bridge to warn the crew members on watch, and find the first mate and several other crew members sitting there, calmly smoking their pipes and paying no attention to the rocks. When you ask them about the rocks, they deny that any such thing exists in that part of the ocean, and insist that what you’ve seen is an optical illusion common in those latitudes. One of the crew members takes you into the chart room and shows you a chart with the ship’s progress marked on it. Sure enough, there are no rocks anywhere near the ship’s course, but as you glance over the chart you realize that there are no rocks marked anywhere else, either, nor any reefs, shoals or other hazards to navigation.
You leave the chart room, shaking your head, and glance at the compass in the binnacle. This only increases your discomfort; its needle indicates that magnetic north ought to be off the port bow, but a glance up at the sky shows the Little Dipper dead astern. When you mention this to the crew members, though, they roll their eyes and tell you that you obviously haven’t studied navigation. You leave the midship bridge and walk forward, looking ahead to see where the ship is going, and sure enough, the pale gleam of rough water around rocks shows up in the distance.
It would be comforting if this scenario was just a nightmare; unfortunately, it mirrors one of the most troubling realities of contemporary life. The metaphoric charts and compass used nowadays to guide most of the important decisions made by the world’s nations come from the science of economics, and the policy recommendations presented by economists to decision makers and ordinary people alike consistently fail to provide useful guidance in the face of some of the most central challenges of our time.
This may seem like an extreme statement, but the facts to back it up are as close as the nearest