Sacrificing Development Needs for Prestige

China, a country where 4 per cent of the population are still living in poverty (following the rather rigorous definition of the World Bank), is about to spend billions of dollars to enable a few Chinese astronauts a flight to the Moon by 2025. There is hardly a tangible benefit to be found in this project – except some kind of international prestige. Meanwhile, the resources (we are talking here about much more than just money, e.g. time, skills etc.) required for its successful carrying out might well be sensibly invested in development projects that would yield a high social return. China’s Moon project seeems to be a particular variation of the positional goods problem described by Fred Hirsch in 1976 – on the national rather than individual level. And it seems to be even more profound than the difficulty originally identified by Hirsch.

In his insightful and much quoted 1976 book Social Limits to Growth Fred Hirsch argued that when people have their basic needs satisfied, they start engaging in the consumption of what he called positional goods. These are goods whose consumption generates utility (or welfare) by comparison with others. A common example are cars: most people are likely to agree that, seen individually and in isolation, a car like, say, Opel Astra or Toyota Avensis or Peugeot 307 is comfortable enough for most purposes. However, there is an astonishingly high demand for luxurious automobiles – Mercedes, Audis, Porsches, SUVs of different brands etc. The reason for that is that cars are positional goods – one does not buy them only for locomotion purposes, but also as a status symbol. It is meant to show that one is better, or at least not worse off than one’s neighbour. Hirsch argued further that most goods consumed in advanced economies have, at least partly, the character of positional goods, and saw this as the source of a social limit to growth.

So far the individual level Hirsch dealt with. Now let’s turn to the level of nations. Projects like the Moon landing by the Chinese have been common for years, especially among so-called global players. Just think of the competition between the Soviet Union and the United States during the Cold War – a part of it were quite productive (although sometimes rather by chance), much was only about proving the other that one was stronger, better, richer, more advanced, more “right” etc. Similar positional behaviour is reflected today by vast infrastructural projects like to Three Gorges Dam, military spending (just think of Greece) and so on.

However, there is an important and far-reaching difference between the original problem as identified by Hirsch, and its large-scale variation as exemplified by China’s space programme. Individual people engage in positional consumption mostly after they have satisfied their basic needs (although one can observe examples to the contrary in lower layers of today’s rich societies). This does not hold for nations. As I pointed out in the beginning of this post, China still has large development needs and it might well be expected that it invest most of its resources to ameliorate poverty and deprivation. Of course, you may point out that China is a dictatorial state, so if it were not the problem would likely disappear. This argument doesn’t appear convincing to me for at least two reasons. First, China is not a totalitarian state like, say, North Korea – the Communist Party must take at least some account of what the people want (although it has been particularly successful in steering the wishes and desires of the Chinese). It wouldn’t engage in vast, costly projects if the majority of the population would oppose them. In this particular case, the Communist Party must only rely on the people’s desire for their nation to be powerful. Since prestige objects, like a Moon landing, are seen internationally as demonstrations of power, the Chinese are ready to make a sacrifice to enable their country such a demonstration. Secondly, even if my first argument about the Chinese people’s attitudes were wrong, there are democratic countries as well that waste valuable resources for the sake of international prestige. India is a prime example, having its own space programme and displaying other symptoms of the positionality disease, while still a developing country with needs even greater than China.

So, should emerging economies and other developing countries be blamed for the wasteful positional behaviour? I would argue that at least a part of the blame should go to the whole world community, or, even more broadly speaking, to human nature. Since people exhibit positional behaviour and, at the same time, are social animals, it is no wonder that they endorse and even expect positional behaviour by their nations. In the richer parts of the world the national positioning disease is also present. The difference is, as I tried to emphasize, that developing countries must sacrifice more “prosaic” development needs to engage in this hopeless race for position. The irony of it all is that people seem to often welcome that.

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