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Social Limits to Growth — Lessons for a post-crash economy

On 13 November 2017, the APPG on Limits to Growth hosted an evening debate at the House of Commons, to celebrate the 40th anniversary of the publication of Social Limits to Growth by Fred Hirsch. Caroline Lucas and Tim Jackson reflect on the continuing relevance of his ground-breaking work.

CC.0 :: Kaique Rocha / pexels.com

Fred Hirsch was born in Vienna in 1931. His family emigrated to Britain when he was just 3 years old. He graduated with first class honours from the London School of Economics, worked at the International Monetary Fund, wrote books about money and monetary policy and was for three years financial editor at The Economist magazine. In other words, he was a ‘proper economist’.

It’s probably fair to say that his work has largely been ignored by ‘proper economics’. But it’s been massively influential on environmental and social critiques of economic growth.

Social Limits was published just five years after the Club of Rome’s 1972 book on the Limits to Growth, which was roundly condemned by mainstream economics at the time. Today it seems much less contentious to suggest that human society faces physical limits.

But Fred Hirsch’s main argument was that, even at the time, society was also running up against limits which are social and psychological in nature. He argued that these social limits were even more immediate than the physical limits to growth and that the market economy – with its constant growth imperative – was making these challenges worse.

The book was famous for introducing the idea of ‘positional consumption’. Part of our consumption in western societies – and it’s an increasing part – is dedicated towards improving our social position in comparison to those around us.

Hirsch made a distinction between what he called material goods and positional goods. Material goods provide ‘utility’ because of the intrinsic characteristics they possess. I eat this apple because it tastes good, it’s nutritional – and I can afford it.

Positional goods achieve their utility at least in part from the fact that they are scarce. A beautiful view, a famous painting, a position of leadership. All these things confer status, importance, social distinction on their owners. But their utility stems from the fact that not everyone has them and not everyone can have them.

In fact, as more and more people want them, things start going wrong. The goods themselves begin to lose their value. The ability to travel in a fast car along an empty motorway rapidly disappears when lots of people all try to travel in fast cars along increasingly congested motorways; having a university degree no longer distinguishes you from the crowd when everyone has one – and it costs an arm and a leg to get one. In the end, these positional goods can end up making us feel less satisfied rather than more.

Hirsch was clearly saying something significant about human psychology. But he wasn’t arguing that we should change human nature. He was trying to understand what happens when the part of human nature that yearns for status and power interacts with a market economy which is trying to profit from the sale of commodities.

Once basic material needs are satisfied, modern economies increasingly rely on commercialising positional goods in order to achieve growth. This has massive implications of course for our planet, because these status goods can be very damaging in environmental terms.

But it also has social implications. In a constant competition for status, we end up destroying our beauty spots, turning art into commodities, eroding our education system. By pandering to the most selfish aspects of human nature we end up hindering satisfaction and undermining social solidarity.

One of the most devastating effects of the positional economy is its impact on inequality. As the market economy erodes social goods, it becomes more important (and also easier) for those with power to protect their wealth: not just their financial wealth, but their own importance and social standing. And at the same time it becomes less and less easy for others even to achieve a decent standard of living.

Thomas Piketty and his colleagues have shown how inequality has risen dramatically in so-called advanced economies in the years since Social Limits to Growth was first published. Back in 1977, economic growth still just about helped poor people more than it helped the richest in society. Wealth really did trickle down to the least well off.

Today, the main beneficiaries of growth are the superrich. In the US the top 0.001% of the population have seen their incomes rise by 6% on average each year since 1980, almost five times the average rate of growth. In the last couple of decades middle-class incomes have stagnated at best. And the poorest 5% of the population have actually seen their incomes fall in real terms.

The political ramifications of this inequality are all around us. Trump’s America, the trauma of Brexit, communities across the UK devastated by the decline of traditional industries and a chronic lack of investment. Those ‘left behind’ in the positional race are voicing their discontent in whatever way they can. Democracy is undermining itself through persistent inequality.

In other words, there’s never been a more important time to revive the lessons from Fred Hirsch’s work and inspiration: to bring his insights to bear on what’s happening in the UK right now. And to think more carefully about the advantages and disadvantages of an economic model that has privileged the interests of the few over the wellbeing of the many.

That process of thinking more carefully about capitalism is part of our rationale in establishing the APPG on Limits to Growth.

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