Buddhist Economics – The London Economic

By Dr Nigel Mellor

Buddhist economics will be forever associated with the work of Ernst Friedrich (Fritz) Schumacher. He brought us the powerful ideas of ‘intermediate technology’ and ‘small is beautiful’. In promoting ‘limits to growth’ and ‘sustainable development’, he was far ahead of his time. Schumacher wanted to restore the dignity of work, within economies built around a ‘middle way’, with ‘appropriate scale’ production. These concepts helped build his enlightened Buddhist economics which is still very relevant today (the exact details of this continue to be much discussed). He was warm and humorous. He was, however, a man of his time (1911-1977).

How times change

Schumacher’s ground-breaking Small is Beautiful: A study of economics as if people mattered contains two interesting quotations. The first : “ Women on the whole do not need an ‘outside’ job … to let mothers of children work in factories while their children run wild would be … uneconomic”. The second: “Man is … applying only one test to everything he does: money, profits and therefore giant operations…what about the cost in human terms, in happiness, health, beauty and conserving the planet?” The first quote is Schumacher’s own words. The second, on the book’s rear cover, is from the Daily Mail. How times change! But these curiosities, along with the sub-title of the book, hint at a way forward. However, we begin with some myths.

Myths of economics

Throughout his wonderfully clear book, Economics: A User’s Guide, Ha-Joon Chang politely demolishes myths behind the current cruel, neoliberal orthodoxy and reminds us of a dozen alternative approaches to economics. He is not alone. The previous governor of the Bank of England, Mervyn King pointed out: “The price of the financial crisis is being borne by people who absolutely did not cause it…I am surprised that the degree of public anger has not been greater”. The question is, where do we go from here? Part of the answer lies in aspects of economics that Fritz Schumacher and Ha-Joon Chang both largely overlook: a feminist analysis and the role of money. We will focus here on the contemporary movement towards using money as a route to social justice; feminism we will leave to another occasion.


In traditional economics, money is generally seen as a neutral sort of thing – a unit of account or a medium of exchange. In reality it is one of the most powerful forces in the world: it could destroy a country overnight. Until the mid twentieth century the control of money was largely in the hands of governments; then, money supply was taken over by private banks. Now, banks create mountains of money (as loans), literally out of thin air. As John Kenneth Galbraith emphasises in Money: “The process by which banks create money is so simple that the mind is repelled”. As a result, there is a massive debt-driven burden that can only be maintained with continuous, destructive growth, because the banks issue this money as loans, which they want back. With interest. We could, however, re-set the economy’s focus, not on profit but on sufficiency – a game-changing notion. And there is a democratic alternative to the role of the banks, which takes this enormous power out of private hands


Apart from a recent gigantic state subsidy to private financial institutions, called ‘quantitative easing’, we seem to have forgotten that states can issue money (and harness taxation to withdraw money, if necessary, to avoid inflation). Martin Wolf of the Financial Times underlines this point. This publicly issued money can be in many forms, but the main point is that it does not have to be repaid, with interest: there is no in-built unsustainable growth dynamic. Of course some growth, such as education, social care, health and culture are undoubtedly beneficial and can be ecologically maintained. But people must actively make such choices. Which brings us back to Schumacher and Buddhism.


There are many myths about Buddhism, for example, that it involves sitting cross-legged, ‘blissed out’. No: Buddhists look like you and me. And they can be socially engaged. And party. Another myth is that it is all about happiness (or its absence). No: Our modern understanding of happiness is generally biased towards pleasure and acquiring external, material goods and fame and fortune. Buddhists offer ‘inner peace’ – which is closer to an older meaning of happiness as ‘having a contented mind’. And the route to this inner peace underpins a new approach to economics, when combined with another fundamental Buddhist concept: compassion; strangely, via Mrs Thatcher.


Though this is rarely mentioned, Karl Popper (Mrs Thatcher’s hero) in The Open Society and its Enemies emphasises that states must protect “the economically weak” from the strong, and from “economic intimidation”. Returning to Schumacher’s vision, and noting that the original meaning of ‘wealth’ was ‘the condition of well-being’, we can revisit his book, subtitled economics as if people mattered. Evidently, current austerity does not promote the protection and well-being of the weak. It lacks compassion. Compassion would be central to any new Buddhist economics which recognised the role of money.

Inner peace

Bringing genuine compassion to the allocation of money, would allow wise decisions to be made about this powerful force. Eckhart Tolle explains in The Power of Now “Happiness depends on conditions being perceived as positive; inner peace does not”. With inner peace we would no longer be compelled to chase an illusory personal ‘happiness’ via material goods. We could focus economic decision making on the well-being and needs of the whole community, and the planet.

Buddhist economics now

The New Economics Foundation and, closer to home, Professor Mary Mellor (see her books and YouTube lectures) present the possibility of an ecologically sustainable and socially just future. Melding their ideas with Schumacher’s, and with the centrality of compassion in human interactions (Buddhist or otherwise) we can begin to construct an updated Buddhist economics, one where money is under mature democratic control – a compassionate, sufficiency economy for all.

Dr Nigel Mellor is author of Buddhism#now (Amazon)

2 Responses

  1. Enlightened self interest for the bankers …

    This is easily “forced” on the bankers! Sounds contradictory I know; but when you have them by the short and curlies their hearts and minds will follw.

    Set their income tax inversley proportional to the percentage unemployment level (multiplied by ten); set the bank-levy at the cost of unemployment benefit to the state.

    See bailoutswindle.com for fuller explanation.

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