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The False Promise of Growth

Social Limits to Growth

by Fred Hirsch
A Twentieth Century Fund Study, Harvard University Press, 208 pp., $10.00

Ever since the publication of The Wealth of Nations in 1776, growth has been recognized as the distinctive characteristic of a capitalist society—at once its chief glory and its principal concern. As Smith pointed out, the process of accumulation of wealth brought about a social result previously unknown in history, namely the extension of “improvements” to the lower ranks of the people. But as Ricardo was soon to add, and Marx to hammer home, growth brought social dangers as well as material betterment. In Ricardo’s view the process of growth seemed likely to terminate in a stagnant state in which wealth would be transferred mainly into the hands of the landowners. And in Marx’s view, the accumulation process was not only inherently unstable, bringing with it recurrent periods of business ruin, but was bound eventually to create the conditions for the eruption of a new, anticapitalist, social order.

In our own time growth continues to be celebrated and worried over. More and more, growth has come to be recognized as the most important precondition for social harmony—indispensable for the maintenance of high employment, essential for the provision of the rising consumption standards that all have come to expect of capitalism. At the same time, economists have also begun to concern themselves with a heretofore ignored aspect of growth—its encroachment on the carrying capacity of the globe. A recent report by Wassily Leontief to the United Nations (The Future of the World Economy), for example, makes clear the enormous scale of social and technological effort required to sustain global growth for another twenty-five years. Although the report can be read optimistically as a demonstration that another twenty-five years of expansion is possible, to me its pessimistic implications with regard to the difficulties of continuing growth beyond that period are far more impressive.

To date, however, the concerns about growth have mainly been technical, some having to do with the control mechanisms required to keep the elements of an expanding system in balance, others with the boundaries and problems posed by resources or the environment. Only in the background has attention been paid to another aspect of the growth problem. This is the curiously disappointing, even negative, effects that growth has brought. A few observers have indeed remarked on the hollowness of the process that has been so uncritically admired. Richard Easterlin, in a much quoted study (“Does Money Buy Happiness?” The Public Interest, Winter 1973), has examined a wide variety of interviews on well-being conducted in this and other nations over the last thirty-odd years and noted that an improvement in US incomes had been accompanied by no change at all in the percentage of persons reporting themselves as “happy.” Similar polls disclose no shift toward “happiness” when we compare rich countries with poor ones. “Are we locked on a hedonic treadmill?” muses Easterlin.

Other economists have called into question the misleading nature of Gross National Product as a measure of “growth.” Conventional GNP includes outputs that are malign, useless, or simply “defensive”—war goods, superfluous advertising, or expenditures required to counteract the damage inflicted on the environment by the act of production itself. Meanwhile, GNP ignores the output of nonmarket services, including the work performed by house-wives and the consumption of leisure. The rate of growth of economic “welfare,” calculated by modes of measurements that are designed to take into account these conventionally ignored elements of output, shows much smaller increases than the steady increase of our standard GNP figures over the period 1947 to 1965. (In fact, by one set of calculations, there was an actual small decrease.)*

Finally, yet another criticism has lurked in the background, consigned to a minor role because it could not command the objective measurements and analytical techniques required to gain consideration from social scientists. This is the observation that our endlessly lauded material expansion was not merely exaggerated by its technical measurement but was actually nothing but a statistical chimera—a phenomenon that existed in the eyes of a statistical observer but that had only the most trivial meaning so far as human betterment is concerned. Perhaps it has been the continuous reiteration of the advantages that growth has supposedly brought—making us twice as rich as our parents, four times as rich as our grand-parents, incalculably richer than our colonial forebears, etc.—that has brought its own suspicions. Are we twice as content, engaged, or hopeful as our parents, not to mention our ancestors? Such questions answer themselves. We are not. Something about the notion of growth is fraudulent, something about the riches it purports to bring is illusory.

It is these “moralistic” misgivings that are addressed in Social Limits to Growth by Fred Hirsch, former financial journalist, senior adviser to the International Monetary Fund, research fellow at Nuffield College, Oxford, and currently professor of international studies at Warwick. Not that Hirsch uses an admonitory tone. On the contrary, the book has power and importance because Hirsch has found an objective and analytical way of expressing the concerns of moralists—because he has succeeded in making moral concerns respectable, in this world of “scientific” values, by translating the sins of immorality into the problems of a dysfunctional economy.

Because of its demanding, intricately argued style—and its often obscure organization—I fear that Hirsch’s book will appeal only to a limited audience. Let me therefore present the gist of his thesis, as I interpret it.

The first half of Social Limits to Growth is devoted to the disappointment that has accompanied growth as a general social objective. Here Hirsch’s argument rests on his distinction between two kinds of output produced by capitalist (or most socialist) economies. One kind, which he calls material goods, consists of products whose enjoyments are wholly divorced from the number of persons who are consuming them. The pleasures of a meal that I eat are in no wise affected by whether or not you are dining as well as I am. There is no reason why a large number of people cannot enjoy good meals as much as a small number do, or why your purchase of a television set should in any way interfere with the enjoyment I derive from my set, or why your owning a life insurance policy should in the slightest degree lessen the value to me of my own life insurance policy.

Hirsch then depicts a second category, opposed to such goods, which he calls “positional goods.” Positional goods, as we would imagine, are goods whose individual enjoyments are integrally affected by their degree of general use or availability. The pleasure I gain from having a house with a view cannot remain unaffected if all have houses with views, which are then very likely to be views of one another. The satisfactions derived from “consuming” the services of an automobile are directly affected by how many others are also “consuming” their automobiles at the same time. The advantages of a college degree in competing for jobs will be vitiated if all have college degrees.

Positional goods, in a word, are goods whose enjoyments depend on the fact that they are owned by a minority. Conversely, they are goods whose advantages disappear when they are owned by a majority. The analogy, as Hirsch often says, is to standing on tiptoe in a crowd. The advantage works for a few but is self-defeating for all.

How much of today’s consumption is positional? Hirsch does not try to measure the degree to which consumption is affected by such elements as congestion or the mutual cancellation of advantages. He simply maintains—correctly, I think—that we encounter more and more positional consumption as we move away from societies whose main functions are the satisfaction of primary needs, and toward societies whose activities engage us in the quest for affluence.

Here Hirsch enlarges an argument first propounded by Sir Roy Harrod in 1958. Harrod pointed out that many of the advantages of being rich lie in the services that a wealthy person can afford—the bowing and scraping, the personal attention, the special treatment available to him. But these services depend on the existence of highly unequal incomes. If the incomes of those who provide many of these services were not low they would not offer themselves for the jobs of bellboy and waiter, maid and bootblack, steward and chauffeur. So, too, if the income of a rich person were not many times that of the workers whose services he buys, he could not afford to hire the very large amounts of labor embodied in the services he consumes.

These advantages of wealth are positional advantages which make wealth a generalized “good” that deteriorates with mass distribution. As the lower class improves its incomes, it will not offer its menial services so readily or so cheaply—witness the disappearance of white maids and butlers and the “exorbitant” prices that we must now pay to dine at a restaurant where the ratio of labor to consumer is what it was twenty years ago. Thus, as incomes rise generally, fewer of the rich will be able to afford their former enjoyments and still fewer of the newly affluent will ever know them. In this way the pleasures of wealth steadily diminish with growth. To the extent that “being rich” consists in being able to command cheap personal services, it is impossible for a society to enjoy general riches.

Important social consequences follow from this emphasis on positional consumption. One of them is that we all become more money-minded. Even if we have no desire to improve our relative economic condition, we are forced to seek more income merely to protect our existing positions. “If one’s own income remains unchanged while the income of other people rises,” Hirsch writes, “one’s command over the positional sector will fall. The income that earlier supported a downtown apartment, a country home, the acquisition of elite educational qualifications, or simply an active life protected from crowds, is no longer sufficient…. It makes a difference if others earn more than you, even if you are interested exclusively in your own consumption possibilities.”

Worse follows. As a society becomes wealthier and more engaged in a positional contest for consumption, it becomes more difficult, not easier, to arrange for the redistribution of income by government. One would think that the resistance to surrendering a portion of our incomes would diminish as our incomes grew larger. But this assumes that we spend our incomes mainly on things that have no positional element. In so far as we find ourselves in a worsening competition for the good things of life as we get “richer,” we become less willing to relinquish income to the poor, or to give up a portion of our advantages in access to education, exclusiveness in recreation, neighborhood situation, and the like.

I have not traced every twist of Hirsch’s complex and many-sided argument. But the main message is clear. The riches enjoyed by a minority cannot be enjoyed by a majority. “The life depicted in the glossy magazines clearly is attractive to many of us, and no higher code of morality need be invoked to say that it ought not to be,” says Hirsch. “The snag is that much of it is unavailable to very many of us at once, and its diffusion may then change its own content and characteristics…. The flaw in the affluent society lies not in the false values of affluence but in its false promise.”

A problem of no less importance dominates the second half of Hirsch’s book. This is the deterioration of the moral foundation of an expansive capitalism—a deterioration brought about by the very process of growth.

Here Hirsch concentrates on the basic behavioral premise that has always shored up capitalism. This is the premise of self-interest—the legitimacy, not to say requirement, of following one’s rational, acquisitive bent. This premise, much touted by modern conservative economists as the most reliable force for social action, is not presumed to have a moral dimension. It is not supposed to matter whether individualistic acquisitive behavior is good or bad. What counts is that it works.

Does it? To begin with, Hirsch points out that the canon of private acquisitiveness has always been curiously limited. Applied with full blessings to those who participate in the market-place, it has always been withheld from those who control it—the governing officials whose presence has always been recognized as essential to maintain the structure of justice or the indispensable minimal housekeeping functions of government. The maxim Aggrandize Thyself has never been applied to these “guardians” of the state. Indeed, when the public guardians act to promote their private interests we are instantly outraged. Does this not reveal that the market system rests as critically on behavior that is “moral” as on behavior that is “amoral”?

Second, Hirsch brings out another moral foundation on which private market behavior depends. A market society in which all buyers and sellers, workers and managers, householders and corporations constantly cheated, lied, stole, used violence or trickery would not work. Why do most marketers not resort to such practices, which may clearly be in their rational self-interest? The answer is not that a policeman stands on every corner. It is that deep inhibitions of a moral or religious nature hold us back from the exercise of pure selfishness.

The market system thus depends on moral behavior both in the regulation of its controllers and of its active members. The pretense that rational self-interest is a sufficient motive to create a functional society is simply not true. “Truth, trust, acceptance, restraint, obligation—these are among the social virtues grounded in religious belief which…play a central role in the functioning of an individualistic, contractual economy,” writes Hirsch. “The market system [is], at bottom, more dependent on religious binding than the feudal system, having abandoned direct social ties maintained by the obligations of custom and status.”

The hitch is that the very rationality and individualism that constitute the official code of a market system erode this all-important moral binding. When the welfare system comes apart because individuals are “maximizing” their personal interest; when municipal unions place self-interest above community interest; when the commercial impulse sweeps all before it, we lament the decline of a public-mindedness, ignoring that these public vices are the other side of what we deem to be private virtues.

Sometimes we try to account for the prevailing absence of public virtue by explaining that our general immorality is simply a sign of man’s irremediable moral weakness. But Hirsch points out that this is an unjustified conclusion. For in another milieu, in which each person was not continually prodded to choose a self-seeking line of behavior, we might discover a wholly different texture of social behavior. Indeed, in such a setting, the pressures to display “altruistic” behavior might be as great and as self-enforcing as those to display a selfish nature in our society—a consideration that may explain the change in public behavior on which so many visitors to China have remarked.

Some writers might present such contradictions and deficiencies as the ones I have described as no more than “problems” with which a market society must cope; but it is one of the excellences of Hirsch’s book that he now places the social limits to growth in a historical perspective.

Bourgeois society, as he sees it, has risen to historical prominence on the basis of three commitments that eventually faced it with an unmanageable combination of tendencies. Its economic commitment was to a capitalist system of property rights. Its political commitment was to expand the degree of participation in democracy. And its social commitment was to a system of inequality expressed in an elongated pyramid of incomes.

Any two of these characteristics might be compatible,” Hirsch writes; “the three together were not.” That is, given the constraint of an unequal distribution of income, either the economic commitment to capitalism would have to give way before the onslaught of a democratic political force, or (again given the fact of inequality), political force would have to be curbed to preserve the structure of capitalism. But as we can see, one last possibility remained. Both capitalism and democracy might be retained, if the condition of inequality were removed. And this is precisely what growth promised to do. Although there was never enough income at the peak of the pyramid to allow an egalitarian distribution to raise the bottom very high, the magic process of growth would, or so it was thought, bring the bottom near to the top during a period of only a generation or two. Indeed such hopes became part of the official rhetoric of the Kennedy-Johnson period.

No wonder that this solution to the impasse of capitalism was everywhere welcomed, even if the nature of the impasse itself was but dimly understood. But it is just the efficacy of this solution that Hirsch has fatally challenged. The riches of an invidious, individualistic society can never be democratized, for reasons that we have seen. Meanwhile, the spread of bourgeois objectives throughout the larger body of society weakens its economic performance and undermines its social foundation. Thus the smooth working of the system—presented by most economists as an inherent characteristic of market processes—appears to Hirsch as “a special case, applying to the transitional period in which bourgeois aspirations [are] limited by political and, still more, by economic restraints to a small minority, and in which the underlying ethos of a market society [remains] heavily permeated by prebourgeois mentality.”

Thus Social Limits to Growth suggests that we are in a period of crisis that will worsen as the process of growth continues. “We may be near the limit of explicit social organization possible without a supporting social morality,” Hirsch concludes. What to do about this crisis? The necessary remedy may be beyond our grasp, for it requires nothing less than an abandonment of the primary behavioral premise of capitalism—that is, the replacement of the individualistic acquisitive ethos by a social, communally oriented perspective. Can this be achieved without falling into Chinese thought control? “We know what needs to be done,” writes Hirsch, “and cannot or dare not do it.”

I have only one small complaint to voice about this remarkable book. I regret that Hirsch did not add to his analysis of the social limits of growth the basic argument of the environmental limits to growth. For the two arguments are remarkably parallel. Both limits will worsen as time goes on. Both can only be remedied by social action that will effectively alter present-day capitalism beyond recognition.

But the addition of the pressures from “outside” gives us something the present study lacks. This is a timetable, admittedly very rough, for the required change. As Leontief’s study implies, it is unlikely that growth can continue uncontrolled for more than another quarter century. Thereafter will come a period marked by a rapidly mounting need for monitoring, restraining, and redirecting the economic process. This may well be the time when we can hope for the kind of redirection of the public ethos that Hirsch regards as essential. Whether the more highly controlled, more communally organized state that will supersede capitalism as we now know it will be better or worse than present-day society none can say. It is Fred Hirsch’s achievement to allow us to see that along with its institutions, the ethic of capitalism will have to change, not because we necessarily prefer it to, but for reasons of survival.

  1. *

    See William D. Nordhaus and James Tobin, “Is Growth Obsolete?” in Economic Growth (National Bureau of Economic Research, 1972).

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