Let us be clear on one point: the usual defenders of the free market—the Friedmans, Hayeks and Mises—are not primarily concerned with private property or liberty. They are firstly concerned with economic growth which mainly means continuous economic, technical and social change. For example, when airplanes became popular, air travel would have been very difficult and costly if traditional rights in air had been respected. (Flying through airspace was a trespass.) Instead, these rights were dismissed in the 1920’s to accommodate air travel. A free market within traditional air rights and property was an impediment to “growth.” Growth of this sort ultimately uses property rights as its disposable tools. The full pursuit of this ideology gives rise to a number of social and economic problems which were the subject matter of some of Wilhelm Roepke’s work. Since then British economist Fred Hirsch has also attacked the problem in his book Social Limits to Growth. The following arguments are rooted in his insights.
We need to separate out two kinds of goods or markets. One market includes material goods that can be mass-produced. These include cars, clothing, and Big Macs, for example, and the other includes all those goods that can’t be mass-produced that, in fact, must remain very limited no matter how much they’re demanded. These involve social and economic positions of prestige and high income like the desire to be the corporation’s president. Furthermore, the commitment to unlimited growth in the first kind of goods, which may be mass-produced and so made available for everyone, also whets the appetite for things which cannot be massed-produced and so can’t be available to everyone. We can all have Big Macs but we can’t all be corporation president. We might like to have a cottage on the shores of a secluded lake. But as more people buy cottages, the lake is no longer secluded and the price rises dramatically until perhaps only the rich can afford it. The result is unsolvable frustration.
Similarly, one generation may work hard to provide the basics of a good home and other material necessities but as these needs are met through economic growth, the family demands the non-growable or non-expandable “goods” for their children such as economic positions that command higher incomes relative to other people. “I don’t want my son to work in the factory as I did but to be a plant manager.” Very well. What if all the other factory workers want their sons to be plant managers? Because employers must have some way to decide among potential managers, education becomes the standard: you must have a high school degree first. This standard helps for a time but word leaks out and more kids get high school degrees. Then what? The standard is raised so that now plant managers must have college educations. The cycle is repeated until the next go-around the requirement is the now familiar MBA (Master of Business Administration).
The situation is similar to the secluded lake problem: demand is greater than supply and the supply cannot be increased to satisfy all. In this case we have to put more and more into education, to get the good jobs, which is what we finally want. But the lengthening of the educational process, the buying of more education is a cost, not a benefit, an intermediate good which we have to buy to get what we really want.
The problem of excessive growth also can be illustrated in another way by looking at an imaginary worker, George Moreless. Twenty years ago, George got up at 7 o’clock to get ready for work and arrived at the office at 8 o’clock. Today, George must get up at 6 o’clock in order to arrive at the same time.
What’s gone wrong? Why is George less “efficient” in getting to work? George must spend more time getting ready for work and especially more time driving to work to get to the office on time. This means he consumes much more gasoline and “car” (tires, oil changes, brakes, etc. and eventually the entire vehicle). George also has to buy another radio for the kitchen so he can listen to the traffic news to avoid congested routes if possible and buy more road maps to find these routes. He must spend more time preparing for his trip and its delays. George’s insurance rates go up, too, because he lives in a congested area now and because he drives more miles. His taxes go up to cover increased costs of police and ambulance service to clear away the dead and wounded on the highway and to minimize traffic delays. George buys a battery-operated razor to shave in his car during the inevitable delays along with a car phone to conduct business en route, etc. (In all charity we will neglect the increased stress, air pollution, and corresponding health costs.)
The same radio news that reports on the latest traffic jams also gives the latest economic reports reassuring George that his life is better because his consumption—what with all these things he’s bought—has gone up and so, with the help of his fellow Americans, he has helped increase the Gross National Product (GNP). George knows he consumes more, but he somehow feels he’s getting less. These extra amounts of consumption are not his primary goals. They are merely “in-between” items, things necessary in order to get what he really wants. That makes them a cost not a benefit. Unfortunately, due the nature of GNP and its manner of calculation, we can’t see this difference in the reported numbers. No economic report separates out the rising need for “in-between” goods from those of primary satisfaction. So it looks like life is better and the Wattenburgs of the world rejoice. But George’s life becomes increasingly one of “getting ready to get ready” as the chain of in-between goods gets longer.
One hears that Americans must now work four or five months out of a year just to pay taxes. But how much work time out of every working day must George devote just to be able to go to work? At best he must work harder just to keep the same social and economic position. He must run to stay in the same place.
Economists are fond of comparing economic growth with a rising tide. Everybody’s ship is raised. The tide of material growth means everyone today consumes more than he did before, certainly more than his grandfather did. But after we’ve satisfied our basic needs this becomes less and less relevant. People today don’t care that they earn and consume more than their ancestors. If they want that secluded lakeshore cottage, for example, they must earn more than their presently-living neighbors. This means that in an economy absolutely rich (your ship’s height above the sea-floor), the demand necessarily expands to include wanting to become relatively rich, that is, your ship must rise higher than the others to get the non-growable goods and services. Clearly, no matter how high the tide, it won’t change your position with your neighbor. This fact makes all the excessive promises of growth economists (that’s most of ’em) deceptive, a mirage. Because once you get to the good life, it vanishes or moves still farther away. Our expectations are increased, but their fulfillment is diminished. The resulting frustration is manifested in several ways but perhaps the most important is the tendency to get the advantages we couldn’t in the market by changing government policies in our favor. In this way the worship of economic growth induces government growth.
If we want to reduce government’s size and be less frustrated economically, we must let go of our commitment to unlimited economic growth. And this means that we must re-orient national policy to the issue of distribution, not as socialists conceive the problem, but in the manner of Roepke’s Third Way.
We will now examine two main points: (1) unlimited economic growth ultimately undermines the moral foundations it presupposes; and (2) this occurs because of a confusion of logic. This will also be based on Hirsch’s analysis and on Roepke’s.
Undermining the Foundations
In the Middle Ages Christian philosophers were concerned with questions of justice in economic exchange. The question of rationing out the economic pie, who gets what in the economy, was answered in terms of economic justice rooted heavily in religious doctrine, social structure, the concept of social status, and the after-life. But with the rise of the modern economy, the appeal was made to a doctrine of “natural harmony,” which claimed that in the workings of the free market system there is a natural coordination so that if the rules of the economic game are followed, things generally will turn out all right, people would benefit economically. In more recent times that doctrine was modernized to be “dynamic” as Hirsch argues, that is, there is a natural harmony through time. If you’re poor today that’s one thing, but with hard work in a free economy tomorrow you will be less poor and eventually perhaps even rich; there is certainly nothing locking you into poverty such as a rigid social system. But when they also try to apply this same reasoning to morality, that is, to depoliticize moral questions by making them matters of purely subjective preference, and so to work the same magic, the unintended social consequences that unfold over time are unwholesome. The policy that seeks to defuse the question of economic distribution, to dodge as it were the issue of “who gets what,” also necessarily dodges the issue of morality involved here by assuming economic growth is a substitute for justice. If injustices exist, they will be corrected over time through economic growth in a largely benign market system. But while this optimistic blindness to the social and historical conditions of market realities has its advantages, it also has a cost: the moral aspects in other areas of life, which could at first be taken for granted by the classical economists, also became increasingly neglected until now it is assumed that pure self-interest, acting in a moral vacuum, is sufficient to produce economically good results and is at least socially benign. Historical capitalists point with pride to the past successes of capitalism but fail to understand that over the past two hundred years we have been living off the moral capital of earlier centuries. As Hirsch writes: “The social morality that has served as an understructure for economic individualism has been a legacy of the pre-capitalist and pre-industrial past. This legacy has diminished with time and with the corrosive contact of the active capitalist values—and more generally with the greater anonymity and greater mobility of industrial society.”
The philosophical force behind this corrosion is pragmatism. Pragmatism is the philosophy that claims the test of a truth or belief lies exclusively in its practical consequences; beyond this our beliefs and conceptions have no meaning. The American author William James is most prominently associated with this view. Ultimately, this has led to an emphasis on a narrow conception of “consequences” to the point that what counts is what can be manipulated and controlled and with that has come the natural reliance on quantification as the touchstone of “truth.” Despite James’ personal refinement and sophistication and his railing against the “goddess” of success, the bottom line of American pragmatism is the material success of the individual; if it works, in this crass sense, it’s true. In the Vietnam War, for example as Hirsch writes, to avoid the red-tape and subjective judgments of the bureaucracy, the evaluation of military units’ effectiveness was finally reduced to the simple but gruesome reliance on mere “body counts” instead of the broader understood military objectives which included qualitative aspects. As a second example, he cites the case of public education teachers who are evaluated by the number of students passing easily quantifiable tests. A third, more ordinary example, is familiar to sales clerks in retail markets who are awarded extra pay based strictly upon their volume of sales.
What does this mean morally? It tends to eliminate, as Hirsch writes, reliance on internalized moral standards and turns our reliance on those things that give immediate tangible or material rewards. Those internal moral checks become another name for character which, it has been said, is what a man does when no one is looking. But pragmatism, which places strict emphasis on “consequences,” encouraging us to do only what people see us do and get paid for, leads to easily foreseeable abuses: leaders of military units ignored other military aspects and focused only on the body counts, and sometimes fudged these. Hirsch cites this effect as playing a role in the My Lai massacre. Teachers also ignored other aspects of teaching—for instance, personal attention to an interested student—and merely “taught the test” because that’s all they were evaluated on. Because they are rewarded on sales only and not on other aspects, the most aggressive sales clerk who gets the highest commission is often the one who most neglects the other aspects which must be taken care of by others, if at all, such as cleaning the merchandise and the store, or displaying products tastefully. Anything that broadly involves taking extra time or qualitative aspects are understandably neglected. In all three cases the larger objectives of the war, of education, of good service, suffer. All three cases show a bias for proxy methods: body counts, multiple choice tests, and number of sales. In a pragmatic world, doing right because it is right doesn’t count; character doesn’t pay.
And this pragmatism is seen not only in economic theory, in the doctrines that are taught in economics classes, in the way economists think professionally, but also in the way people behave in the actual market. “It is important to be clear,” says Hirsch, “that the distortion with which we are here concerned arises from the essence of the market process itself.” The one thing you can’t do, according to modern economic theory, is not to maximize your self-interest by looking out for the other guy or the common good. “Efficient allocation of resources through the market demands that individuals always try to get the best deal, and then use the resources for whatever objective they happen to have, provided only that this is not the objective of not getting the best deal in the specific transaction.” Can we really be surprised a society totally devoted to this “principle” of individual self-interest is starved for sociability and friendliness—items which people can’t get as individuals but only collectively as communities that believe in more than a me-first lifestyle or greed?
This is not an exaggeration. Consider George Mason University economist Walter Williams writing in a magazine that claims to be conservative and favorable to Christian values. He states: “If you were to ask me, what is the noblest of human motivations, what is the motivation that gets good things done, I would say, greed. Some people try to temper that a little bit. They say, instead of using a word like greed, why don’t you say ‘enlightened self-interest.’ When I say greed, I don’t mean taking things away from people by force; I don’t mean fraud. I mean trying to get more for yourself. That’s what gets good things done.” (Vision and Values; August, 1994) It is difficult to see that in Walter Williams’ view people have much room in their lives for more than immediate material benefits. Greed will not admit of any inner necessity in work but only allow money-wages or profits, the economist’s pragmatic proxy for what is economically sound or healthy, and this then becomes absolutized into the be-all and end-all of economic activity.
But a similar story is true for us collectively in our elevated dependence on GNP statistics. This, too, erodes our reliance on internal moral checks, on doing what is right because it is right, not because it brings immediate consequences, material or otherwise (save perhaps internal satisfaction). It detracts from the broader, humane aspects of the economy, focusing instead our attention and our efforts on the quantifiable. The statistical measures such as the GNP, kept since about World War II, have themselves contributed to the rising demands and expectations. Hirsch observes: “In a sense, the renewed interest in economic growth that took place following World War II was itself a product of the statistics. A run of numbers, showing a decided tendency to upward movement, demonstrated a pattern of growth of a regularity that might not otherwise have been discerned….Statistical measurement of national income and product, through its direct influence on economic and political expectations held by individuals and groups, has taken on a substantive importance of its own.” E.J. Mishan says something very similar: “Owing to improved statistical techniques and to the employment of high-speed computers—owing also to the spread of news media and to the post-war surge of material expectations, itself inspired by the growth gospel and encouraged by government pronouncements—workers in all occupations have now become hypersensitive to movements in their real wages and to their position in the pay structure.”
The same emphasis on the quantifiable explains why historical capitalism is biased in favor of material goods (and services) as opposed to those aspects of life that are hard to package and impossible to quantify: neighborliness, solidarity, community, and altruism or more simply friendliness and sociability. In this way, if statistics and numbers are the official form of economic pragmatism, GNP is the body count of the economy and “unlimited growth” its Vietnam.
The libertarian arguments for ever more individual freedom and consumption (growth) are flawed on logical grounds. “Because some growth is good, unlimited growth is better” seems to be the proposition form of their thinking, committing the familiar “fallacy of composition.” But what’s good or rational for the individual is not necessarily good or rational for society. What’s good in the short run is not necessarily good in the long run. If more freedom and growth benefit individuals pragmatically pursuing private ends but undermine those social structures and values which such action presupposes—the family, community, those “internal moral checks,” etc.—the argument isn’t even sound economically.
For instance, increased specialization, another name for economic growth, reduces market coordination giving us the business cycle instability, the boom and bust of the capitalist system. As Roepke argues repeatedly, growth in the division of labor renders coordination among the various firms more difficult. And as workers specialize in narrower and narrower fields, and as new jobs are generated, it is harder for the price mechanism to coordinate investments and expanding credit properly; the “harmonizing” or “coordination” comes in a recession to correct economic over-expansion. And these effects are worsened by the individualistic (greed) ethic, for as the horizon of coordination is shrunk proportionately by growth (from technical specialization, that is, more new jobs with narrower fields), the harmony is reduced further by the encouragement to focus on self: each individual investor or consumer is concerned only about what’s in it for him. There is no thought to the common good and even if there were, it taxes individual effort to try to comprehend how all these different parts hang together. More broadly in the course of the business cycle, some employers lay off workers, which leads to the laying off of other workers, and which eventually leads to still more employers firing workers elsewhere and so on, till the result is a depression which no one wanted but which all helped bring about.
This same complexity obscures the relation between effort and reward. My additional hard work will not prevent me from being unemployed by automation, and if I re-train that will only delay another round of unemployment. Why should I work harder? This then also heightens the fear of economic loss (unemployment). The effect is to strengthen reliance on the individualistic ethos (what’s in it for me now?): I want higher wages regardless of my productivity. I deserve the rewards of any increase in output no matter where they come from. This can be seen as a way of protecting oneself from the fallout of growth: the complex effects of the interlocking economy encourage me to act in my own self-interest: these effects will probably be negative on my job and future income and when this is coupled with the individualistic ethos, the result is the belief that all must share, indeed have a right to whatever growth there is (redistribution). It is not hard to see from this how special interests also dominate politics, which is treated like a personal market, and budget agreements are painfully difficult to achieve.
There are many other common examples. If people in the first row of a football stadium stand up, they may see better at first but everyone else behind them has to stand up just to preserve the same view and not lose in the viewing of the game. If the city bus service raises its fares and loses some customers and so raises its fares again and then loses still more and so on until finally it goes out of business, each customer who dropped out helped contribute to the collapse of the service even though it was no part of his intention to do so. In the arms race in the cold war each side increased its level of weapons and escalated matters dangerously, which neither side wanted but which both helped bring about. In the early days of oil well drilling, all companies ran to pump out the oil as fast as they could before the other guy could get more oil out, thus wasting tremendous amounts of the resource—which nobody wanted but which everybody helped to bring about. If a few early capitalists compete with one another and generate families like the Morgans, the Rockefellers and the Carnegies, with large landed estates, portrait collections, yachts, etc., society and the economy can bear that, but if people are told that all of them can over time through economic growth live like this, the result is unmitigated frustration, the same as if all soldiers were told that with patience and hard work some day they could all be generals. In the nature of the case, this simply cannot be done. And until this is realized, we will continue to face economic and political frustrations.
In the case of the automobile, what started out as a rich man’s toy eventually became available to all. But by the time all could have a car, the environment had changed: the same mass production that makes it available to all now makes it a necessity in that alternative modes of transportation are eliminated or neglected; it becomes an embedded part of life, what you must have to get along, to live in society; an entire pattern of life emerges that is increasingly dependent on it. Also, various restrictions on the freedom of its use, which were unnecessary when a few rich folk had the car, become indispensable when many or all have it. The experience for the poor man today with the car is not the same as for the rich man at the turn of the century. In such cases, invention is the mother of necessity.
This problem has been more broadly illustrated by the figure of a marching column. While the vanguard of the column is always up front, to be the first to enjoy the fruits of economic growth, the rest of the column eventually arrives at where the vanguard was. In economic terms, this means that eventually most people can have tomorrow what the rich have today. The problem is this: by the very act of marching, the economic and social “turf” is so deteriorated by the time the end of the column arrives, what it gets is not the same thing as what the vanguard got. Like one middle class professional remarked, now that he could afford to go on a special tour, the place would be ruined.
Finally, the most easily seen cost of our obsession lies in the everyday problem of the “time crunch,” a problem addressed by Staffan Linder some time ago. Though we have produced more and our level of consumption has gone up, he notes, the amount of time we have to consume these products remains constant. The result is that we are “harried.” Linder pictures the harried consumer as “drinking Brazilian coffee, smoking a Dutch cigar, sipping a French cognac, reading The New York Times, listening to a Brandenburg Concerto and entertaining his Swedish wife—all at the same time, with varying degrees of success.”
The commitment to unlimited increases in personal consumption, growth, is ultimately counterproductive; the social and moral costs are greater than the economic benefits. In fact, the experience of people living in modern economies is really one of constraint rather than of freedom, of poverty more than abundance. Richard Weaver’s profound analysis of modern society decades ago stands even truer today: “One of the strangest disparities of history lies between the sense of abundance felt by older simpler societies and the sense of scarcity felt by the ostensibly rich societies of today. Charles Peguy has referred to modern man’s feeling of “slow economic strangulation,” his sense of never having enough to meet the requirements which his pattern of life imposes on him. Standards of consumption which he cannot meet, and which he does not need to meet, come virtually in the guise of duties. As the abundance for simple living is replaced by the scarcity for complex living, it seems that in some way not yet explained we have formalized prosperity until it is for most people only a figment of the imagination.”
That explanation has since been given to us in the writings of economist Fred Hirsch and others, and their technical analyses as outlined above dovetail nicely with Roepke’s own earlier concerns about modern capitalism. Their importance lies in the fact that we can understand quite precisely how a society based on modern capitalism can be prosperous materially but feel poor. Their technical studies explain how the free market system can whine and whimper its way along a path of growing decay; how the exercise of individual freedom, choice and rationality still will not produce a healthy or happy society. Man is a spiritual being foremost and his freedoms presuppose and are always circumscribed by moral and spiritual duties. When he neglects these latter, he may still have a kind of freedom, but it will not give him the satisfaction he really wants.
This essay appeared in The Legacy of Wilhelm Roepke: Essays in Political Economy by Ralph Ancil published in 1998. Copyright held by the Wilhelm Roepke Institute and reprinted by permission. Read the series introductory essay here.
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