Schumacher and tourism

Small is beautiful proclaimed Dr E F Schumacher in his early-70s polemic on modern economic structures. A simplistic rendering of his main point is this – the modern economic landscape dominated by large organisations (big business & big government) is far less efficient than would be an economic structure in which a large number of small organisations work together in regional marketplaces.

As a financial consultant working on large infrastructure projects, I have seen the first model closely. Over the last 3 years or so, as a participant in the world of tourism, I can see the potential of the second model. In balance, I feel we in India have completely neglected the second model, which is why we are in the throes of a constant discussion on “inclusive growth”.

Tourism is the classic ‘small is beautiful’ industry. It is an industry in which very large, transnational or even pan-national entities are the exception. (As a simple mind game, try to think of large tourism businesses listed on any major stock exchange – other than a small number of tour operators, there are no large, pure-tourism businesses. The rest are hotel chains and airlines who are really in other businesses). The primary economic actors in tourism are the large number of small, independent hotels, little restaurants and street-food vendors, tour guides, local taxis and so on. Given the large number of individuals that this business touches, the direct impact of a booming local tourism economy is massive.

So if you want get the “inclusive growth” that our worthies have been repeating ad-nauseum about (and getting us into massive government pork-barrel projects in that name, which is exactly the kind of thing that Schumacher warned against), tourism, my friend, is the way to go.

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2 thoughts on “Schumacher and tourism

  1. There are plenty of examples that show tourism is NOT about inclusive growth. Some small businesses servicing the sector can get some benefits, sometimes, but the overall economy may not get many real gains. Also, you can see plenty of examples where larger corporations close out options for small operators. The sector is also prone to volatility and if small businesses tie themselves to tourism alone they will not last long (see a recent indication from another Barbados blog, http://barbadosfreepress.wordpress.com/2007/06/24/barbados-tourism-minister-noel-lynch-things-are-so-bad-that-they-have-just-got-to-get-better-i-hope-maybe-if/).

  2. Caribbeancomment – thanks for your participation. Yes, the points you are raise are indeed pertinent.

    I belong to Kerala, a state in southern India that over the last decade has developed a unique niche in Indian tourism. Over the decade, tourism has made a marked improvement in the lives of a vast number of Keralites – I have seen it up close & for real. It maybe that Kerala is particularly well-suited to this, since it has a very highly literate / educated population. But, the obvious reality is the mushrooming of a large number of small actors in this space in Kerala. I wish this were to happen across the country.

    India is a very large country with a large number of different spheres of economic activity; so the chance of complete dependence on tourism is relatively low.

    As for volatility, tourism in India can be a lot less volatile since the market is largely dependent on domestic tourists & not international tourists. Experience here shows that domestic tourists going on short-breaks to nearby, regional destinations is a pretty steady market. This market is not really affected by the usual international tourism crises such as the middle-east wars, outbreak of SARS, or even a damp world-cup.

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