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Jun 22, 2021
31 Min read time
For economist Albert O. Hirschman, social planning entailed creative experimentation rather than theoretical certainty.
Albert O. Hirschman
Albert O. Hirschman: An Intellectual Biography
Columbia University Press, $35 (cloth)
This spring the United States embarked on a grand experiment. The American Rescue Plan, signed into law on March 11, appropriated $1.9 trillion in public spending—on top of $2.2 trillion for the CARES Act a year prior—to accelerate recovery from the dramatic economic shock of the pandemic. Combined, these measures amount to a fiscal stimulus of unprecedented scale.
Economists in the Biden administration and the Federal Reserve are bullish that this intervention will enable a rapid return to the boom times—or at least what passed for them—that preceded March 2020. They believe that running the economy “hot,” without much slack in unemployment, will extend the fruits of recovery to historically marginalized populations in the labor market and stimulate greater productive investment. Meanwhile, prominent skeptics like Larry Summers, himself a former Treasury secretary, have sounded the alarm about what they see as the significant risks and early signs of inflation, as existing capacity strains to meet the torrent of renewed demand. Implicitly, these admonitions conjure up the specter of the wage-price spirals of the 1970s.
One of the basic affects of our bewildering present is systematic and pervasive doubt. As far as Hirschman was concerned, so much the better.
Given the economic landscape since 2008—ultra-low interest rates, reduced worker power, low labor force participation rates—the prospects of this scenario seem rather dim. But the truth is that we don’t really know what will happen. The scale of the experiment and the sheer number of moving parts conspire to make forecasters even more uncertain than usual. Every new piece of economic data is scrutinized for augurs of the future, and entire news cycles turn on the finer points of microchip and lumber supply chains or used car sales.
Although uncertainty presents a persistent headache for central bankers and investors, it has a longstanding place in economic theory. Frank Knight, progenitor of the Chicago School of economics in the 1920s, famously distinguished between risk and uncertainty. While risk could and should be priced in to routine economic activity, Knight thought, only the heroic entrepreneur could steer his business through the shoals of uncertainty in economic life. Profits—otherwise hard to explain within neoclassical theory—were the entrepreneur’s reward. Two decades later, Knight’s friend Friedrich Hayek made a similar argument from the other end of the stick: given the deep imponderables and complexities of economic affairs, the government had better stick to the sidelines. The unifying message was that economic experimentation should be left to private actors, who alone could assume the personal responsibility of uncertainty.
John Maynard Keynes, by contrast, suggested that it was precisely this inescapable uncertainty that led market participants to favor liquid assets, tilting economies against what neoclassical theory held was a “natural” tendency toward full employment. Correcting the distortion, Keynes thought, required state-led management of aggregate demand, not least for the stability and predictability it would provide. Even in Keynes’s case, though, uncertainty was a disquieting reality to be soberly accommodated rather than embraced.
There is one economist from the last century who would have felt rather at home in our moment of uncertainty, however. If any life’s work could be summed up by the mantra “We don’t know, but let’s give it a try,” it was that of Albert O. Hirschman, one of the most prominent and original social scientists of the second half of the twentieth century. The subject of a new biography by Italian historian Michele Alacevich, Hirschman theorized a uniquely pragmatic approach to economic management that took surprises for granted—quite unlike the macroeconomics of today. In an era when “crisis” rather than “equilibrium” seems the more obvious tendency of the system, the fascinating experiments of both his life and work may yet have something to teach us.
• • •
A cosmopolitan, German-born Jewish refugee to France, Britain, Italy, and eventually the United States, Hirschman became a specialist in Latin America and found a wide international audience for his work. Although an economist by training and pioneer of the nascent field of development economics in the 1950s, from practically the outset of his career he pushed against disciplinary boundaries, bringing in tools and concepts from political science, anthropology, the history of ideas, and above all from chance encounters in the field. A onetime Republican volunteer in the Spanish Civil War, undercover fixer in Marseilles for refugees escaping the Nazis, and interpreter at the first Allied war crimes trial, Hirschman completed his peripatetic career by becoming a founding member of the School of Social Science at the prestigious Institute for Advanced Study in Princeton, from 1974 until his death in 2012 at the age of 97. For all this, his intellectual legacy presents something of a paradox: he is, in a sense, both everywhere and nowhere.
Hirschman theorized a uniquely pragmatic approach to economic management that took surprises for granted—quite unlike the macroeconomics of today.
On the one hand, Hirschman has few disciples today, and almost none at all in his own field of economics. Some of this might be attributed to the zigzag nature of his scholarly trajectory, and even, as he knowingly put it himself, to his “propensity for self-subversion.” But much of it comes down to the incompatibility between his style of thinking and the formal methods that took hold in postwar economics, which increasingly made his ideas marginal or even incomprehensible to initiates of the discipline. In 1995 economist Paul Krugman looked back at the crossroads of the 1950s, in which Hirschman rejected the adoption of strict modeling in development economics which had become practically mandatory everywhere else in the discipline. As he forlornly remarked, “Hirschman didn’t wait for intellectual exile: he proudly gathered up his followers and led them into the wilderness himself. Unfortunately, they perished there.”
On the other hand, despite this lack of standard-bearers, Hirschman bequeathed a set of concepts, especially in books like the classic Exit, Voice, and Loyalty (1970), that now amount to something like common sense within much of modern social science. He was a self-consciously public intellectual in his later years, and the remarkable details of his life and his voracious range of interests have kept his ideas in the public eye, as evidenced not least in the wide reception given to Jeremy Adelman’s lively biography, Worldly Philosopher: The Odyssey of Albert O. Hirschman (2013).
An asset in his role as public intellectual, if possibly a regrettable one for the reception of his work as whole, was Hirschman’s persistent, aphoristic habit of elevating deceptively simple, counterintuitive observations as grand principles of the human condition. The most famous of these, the “Principle of the Hiding Hand” (a knowing nod to Adam Smith’s invisible hand), states that in large human undertakings—dam construction, say—we tend to underestimate the difficulties involved. This makes us likelier to get going than we otherwise would have been, had we known all the problems in advance. We also underestimate our creativity in solving problems as they arise, which makes us likelier to succeed than a sober assessment might have determined at the outset:
The secret of creativity is then to place yourself in situations where you’ve got to be creative, but this is done only when one doesn’t know in advance that one will have to be creative. This, in turn, is so because we underestimate our creative resources; quite properly, we cannot believe in our creativity until we experience it; and since we thus necessarily underestimate our creative resources we do not consciously engage upon tasks which we know require such resources; hence the only way in which we can bring our creative resources into play is by similarly underestimating the difficulty of a task.
Distilled from Hirschman’s discussion of major World Bank projects in Development Projects Observed (1967), the Hiding Hand was a stimulating provocation, yet on its own it can become little more than a truism. Plucked from their original context, these “Hirschmanisms” have floated freely through the intellectual atmosphere, all too often landing in the pages of national magazines and bestselling airport books. (It is no accident that two of the most prominent and enthusiastic reviewers of Adelman’s biography were Malcolm Gladwell and Cass Sunstein.) Further watered down and redigested, they become the kind of chestnuts masquerading as insight duly repeated by the dinner party bore.
Alacevich’s new book departs from this fluff Hirschmania to present a compelling, holistic portrait of his scholarly life. His chosen genre of intellectual biography, announced in the book’s subtitle, is particularly appropriate for his subject, who treated his career as something like a grand detective novel, letting clues and instincts take him where they may. Essays and even entire books sprouted up from scattered observations in previous research, and conversations with informants on the ground produced additional sets of questions and new, but always provisional, theories. Doubts and unexpected discoveries—all the more delightful because not anticipated—produced loops back to earlier assumptions that fueled his trademark and immensely fertile, if sometimes maddening, self-subversion.
Though an economist by training, Hirschman brought in tools from political science, anthropology, the history of ideas, and chance encounters in the field.
Unlike Adelman’s lengthy and colorful page-turner, Alacevich breezes past the many extraordinary episodes of Hirschman’s early life in order to focus squarely on his writing. Indeed the book was originally conceived as a primer to the extensive Hirschmanian oeuvre. What it loses in flair it makes up in comprehensiveness and utility: covering each chapter of his intellectual trajectory in a relatively trim 266 pages, the book serves as an excellent introduction and exegesis, yet also situates each episode of Hirschman’s career within a broader, life-long stream of investigation. The drawback of this approach, however, is to lose focus on the wider context in which Hirschman worked: aside from a few mentors, fellow economists, and reviewers of his books, the ideas of others are largely pushed to the margins. Given his fairly astonishing biography, however, readers will likely forgive the attention devoted to the man himself.
• • •
Born in 1915 to a bourgeois family of assimilated Jews in Berlin, Otto Albert Hirschman was steeped in German Bildung from an early age, although one increasingly overshadowed by the steadily building atmosphere of insecurity enveloping German Jews in the interwar years. Presented with a copy of Marx’s Capital at the age of fourteen by his teacher in the summer of 1930, the young Otto Albert and his sister were Ursula were already involved in the Social Democratic Party’s radical youth wing as teenagers. It would be a speech that winter at the Berlin Sportspalast by Austrian socialist leader Otto Bauer on no less a weighty subject than Kondratiev long cycles—the idea that the world economy was shaped by half-century long cycles of technological development—that first captivated Hirschman’s interest in economics.
The situation in Berlin had so deteriorated by 1933 that, after his father’s death in the spring, he set off to study in Paris. In the years to come, the rest of his family inexorably scattered across the continent. For Hirschman, however, this was only the beginning of an Odyssean set of travels throughout the 1930s and 1940s. After a year at the École des Études Commerciales in Paris he moved to the London School of Economics in 1935–36—just in time to catch the explosive reception of Keynes’s General Theory (1936). Only there, Hirschman later recalled, did he “really discover what economics actually is.” Alacevich adds that Hayek’s LSE lectures on the limits of knowledge in economic processes “struck a chord.”
Following a period in the Spanish international brigades in the summer of 1936, fighting in Asturias and Catalonia (a psychologically scarring experience), he traveled to Trieste to rejoin Ursula and her now husband, the Italian liberal philosopher Eugenio Colorni, who became a close friend and mentor. It was at the University of Trieste that Hirschman graduated with a thesis in 1938 on recent French monetary policy—an appropriate beginning for a research career in which the political and the economic were always inextricably intertwined. Hirschman secretly joined the antifascist resistance in Italy, smuggling documents across the French border in a false-topped valise. But following the arrest of Colorni (who was later killed by the Nazis in May 1944), and tailed by the Italian political police, Hirschman escaped once again to Paris, finding a position as an economic analyst. With the outbreak of World War II in September 1939, Hirschman enlisted with an émigré company of the French army, but the success of the German Blitzkrieg led to its rapid disbandment.
Whether it was the direct experience of violent dogma, or something deeper in his temperament, Hirschman tended to reject -isms of all kinds.
Slipping south on a stolen bicycle to unoccupied France, Hirschman was recruited in the summer of 1940 by Varian Fry, an American journalist in Marseilles as an undercover representative of the Emergency Rescue Committee (ERC). Defying both the Vichy and often the American authorities, the ERC sought to smuggle anti-Nazi and Jewish refugees out of southern France to Portugal and onto ferries bound across the Atlantic. A polyglot and general débrouillard (as he later described himself), the twenty-five-year-old Hirschman, operating under a pseudonym, became Fry’s right-hand-man, procuring visas, buying passports, establishing contacts and escape routes. With the gendarmerie asking after him (again) in the winter of 1940, he crossed the Pyrenees himself in December—forgoing most of his belongings except “an extra pair of socks and his copy of Montaigne’s Essais,” writes Adelman—and successfully reached the Lisbon ferry for New York. Over roughly a year, the ERC successfully spirited away Hannah Arendt, Jean Arp, André Breton, Marc Chagall, Marcel Duchamp Max Ernst, Arthur Koestler, Max Ophüls, Franz Werfel, and thousands of others.
Hirschman’s expertise in European economic policy eventually landed him a job in 1946 at the Western European desk of the Federal Reserve Board in Washington, D.C. This fortuitous placement and his connections across the Atlantic saw him closely involved in the postwar European reconstruction, and the Marshall Plan in particular. It was in this hands-on role that he began to develop a set of coordinates that remained with him throughout his career: a reformist and public-spirited ethos; a skepticism of total planning, but not accompanied by any commitment to laissez faire; and a celebration of creative pragmatism in economic policy.
• • •
“A priori deductions,” Hirschman wrote in an assessment of Italian reconstruction in 1947, “while instructive, can only yield extremely rough guesses and are not able to replace as yet the method of trial and error.” He added, in a sentence that could just as well have been written by heterodox analysts of post-pandemic recovery, that looking for the “correct” aggregate volume of investments in reconstruction was a “futile search.” Instead, “one should concentrate upon locating those investments which permit the breaking of important bottlenecks and will thereby lead to increases of output and improvements of performances out of proportion to the investment itself.”
For all of Hirschman’s radical political engagements and his lifelong antifascism, his intellectual and political outlook was far more idiosyncratic than this record might suggest. Whether it was the direct experience of violent dogma, or something deeper in his temperament (or both), he tended to reject capital letter -isms of all kinds. Ultimately he became suspicious of bold, structural theorizing altogether, despite the early influence of Marxism in Berlin. “If Marxism was huge, solid, and imposing intellectual edifice,” Alacevich argues, “Hirschman developed instead a predilection for petites idées,” or little ideas. Or in the favored, playfully oxymoronic phrase of Colorni, “castelluzzi”—little castles. Other, less generous assessments are possible, of course. “The fifties effectively smothered him,” writes the essayist George Scialabba, “as they did all but a very few academic social scientists.” Still, Hirschman’s broadly social-democratic outlook, pragmatic reformism, and lack of any interest in anticommunism put him at some distance from the emerging Cold War liberal consensus. As he had done in the Pyrenees, here as in many other respects he found himself blazing a trail alone.
Development economics lent itself to unconventional methods. It was a perfect domain for Hirschman.
Hirschman’s trademark intellectual style became evident within his work in development economics, a field he entered practically by accident after preemptively leaving his Fed position to become a financial advisor the National Planning Council of Colombia in 1952, in the justified fear that his antifascist past would expose him to anticommunist repression at the height of McCarthyism. It would be The Strategy of Economic Development (1958), written after receiving an appointment at Yale in 1956 and based on reflections on his time in Colombia, that made his reputation.
The contours of development economics had emerged in the late 1940s, as economists sought to apply the lessons of postwar European reconstruction to the broader question of growth and development in the “backwards” areas of what was becoming known as the Third World. Dealing with complex, messy realities, with stubborn political and sociological factors, and primarily with long-run growth as opposed to static equilibrium, the field lent itself to unconventional methods quite at odds with the formal models already becoming standard elsewhere in economics—and it led to conclusions about the role of state investment and coordination that broke sharply with received laissez faire opinion in the profession. It was, in other words, a perfect domain for Hirschman.
By the 1950s, a rough consensus had emerged among pioneering figures such as Paul Rosenstein-Rodan, Ragnar Nurske, and W. Arthur Lewis, in what Krugman has called the period of “high development theory.” The general view held that breaking out of the “trap” of low growth under conditions of economic “dualism”—in which the low-wage “traditional” sector failed to generate sufficient demand for a modern, industrial sector—required a central plan of major investments, precisely synchronized to establish a tight network of industries that could sustain a market for each other. A coordinated “Big Push” was therefore necessary to kick-start a self-sustaining, virtuous cycle of investment, but it required a careful approach of “balanced growth” to avoid the risks of particular sectors outgrowing the basis of demand elsewhere in the economy.
Although operating within the same basic framework, Hirschman’s Strategy was distinctive in several ways. First, and perhaps most influentially, it insisted on what we might call a “bottom-up” approach to the problem, as opposed to the lofty mountaintop view of the comprehensive plan. In Hirschman’s telling, close, on-the-ground observation of successful agricultural or industrial ventures—of “the dynamics of the development process in the small”—would yield more insight than “theories dealing with aggregates only or through statistical manipulation involving the division of every conceivable economic variable by the National Income.” This approach distilled Hirschman’s experience with project investment in Colombia and his suspicions of the rhetoric of planning he heard repeatedly from World Bank economists on the ground—rhetoric he felt was little more than a smokescreen. “The pretense of total, integrated economic planning,” he had observed earlier in 1945, “could and often does coexist quite amicably with, and may serve to cover up, unregenerated total improvisation in the actual undertaking and carrying out of investment projects.” The point now was not to give up on public coordination but rather to embrace the improvisation.
Strategy coined the concept of forward and backward “linkages” to focus attention on the upstream and downstream consequences, both expected and unexpected, of development projects. If you invest in a shoe factory, for example, what activity is generated by the heightened demand for leather and by reduced prices for shoes, and what do workers with fatter wage packets choose to spend it on? Simple enough as it may sound to modern ears, this kind of empirical work was not at all common within the grand development theories of the time. In contrast to the “new orthodoxy,” Hirschman advocated what he cheekily called “unbalanced growth.” Planners, he argued, should focus investments on sectors with strong linkages, observe the disequilibrium generated as a consequence, direct the next round of investment to the sector that now needed a push—and then rinse and repeat. One shouldn’t plot the entire course of development in advance so much as surf the wave.
Hirschman thought one shouldn’t plot the entire course of development in advance so much as surf the wave.
Likely the most provocative statement in Strategy was that developing areas were characterized by “one basic scarcity”: not scarcity of factors of production like capital (a common refrain in development theory), but scarcity in the ability to make development decisions themselves. Given institutional and economic constraints, the main problem was getting the ball rolling at all. (This was not intended as a cultural comment on “backwardness”: indeed, any close observer of infrastructure projects anywhere today will report similar frustrations.) Backward and forward linkages, Alacevich points out, were about preserving scarce decision making resources: sequential rather than synchronous investment decisions distributed those resources over time. One decision required another in turn, leaving space for contingency and adjustment. Or as Hirschman succinctly put it: “development is essentially the record of how one thing leads to another, and the linkages are that record.”
This attention to decisions themselves as both a scarce resource and a catalytic force was the clearest statement of Hirschman’s distinctively optimistic and pragmatic brand of reformism. It resonated with what he later called his “possibilism”—his interest, as Alacevich puts it, in “the possible mechanisms through which the process of change could advance—sometimes through inverted, nonlinear, and otherwise unorthodox sequences.” As the title of a latter collection of his essays put it, Hirschman indisputably had, for better and for worse, a “bias for hope.”
Within a few years of the publication of Strategy, talk of linkages became standard in the field. Indeed the backward linkage approach was fundamental to the import substitution industrialization (ISI) strategies pursued by many Latin American countries through the 1950s and 1960s. Landing a professorship at Columbia in 1958 on the strength of Strategy, Hirschman embarked on a series of works building on its approach. Based on the study of policy problems in Chile, Colombia, and Brazil, his next work, Journeys Towards Progress (1963), sought to deconstruct mechanisms of decision making in a Latin American context, in which change often happened through “highly disorderly sequence.”
Against prevailing functionalist theories of modernization that stressed the disharmonious role of social conflict in periods of industrialization, Hirschman charged, for instance, that in societies characterized by lack of effective communication between people and government, mass disruptive protest actually served a useful function of directing attention to neglected problems. He further concluded that failed episodes of reform weren’t cause for permanent resignation. Utopian principles that became dead letters, such as those in many Latin American constitutions, could be and often were revived as the basis for new demands decades later. Hirschman slyly likened the book to a “reformmonger’s manual,” a guidebook to staunch reformists seeking to hack a path through the thicket, offering “some competition to the many handbooks on the techniques of revolutions, coups d’état, and guerilla warfare.”
Hirschman’s follow-up, Development Projects Observed (1967), was based on research he and his wife Sarah conducted in assessing thirteen World Bank projects in Latin America, Asia, and Africa. Although overshadowed by the attention accorded to his Principle of the Hiding Hand, the book embodied Hirschman’s earlier injunction to understand the dynamics of development “in the small.” Focusing on three types of development projects—highways, hydroelectric plants, and industries—to understand the distributional and political effects of lending, it was filled with surprising findings. Highway projects, for instance, enhanced the possibility of smallholder, trucking-based entrepreneurship, yet this “means political power, which in turn means the ability to change the rules of the transportation game decisively in favor of the highways.” Future decisions to develop other modes of transportation might thus become impossible. A highway also opened up new lands for agricultural exploitation, pushing questions of land ownership higher up the agenda, and could even heighten the risks of ethnic tensions. Yet other types of projects similarly came with their own unique benefits and drawbacks, which could not be captured in the rigid process and arbitrary assumptions of traditional cost-benefit analysis.
For Hirschman, failed episodes of reform weren’t cause for permanent resignation. Utopian principles could be revived later.
Unsurprisingly, the World Bank, which had commissioned the study, was not pleased with these arguments. Hirschman had strayed quite far from economics in any conventional understanding, opening up something like a constructivist theory of social action. “Upon inspection, each project turns out to represent a unique constellation of experiences and consequences, of direct and indirect effects,” he wrote. “This uniqueness in turn results from the varied interplay between the structural characteristics of projects, on the one hand, and the social and political environment, on the other.” One can almost picture the desk officer in D.C. reading the manuscript tearing his hair out.
Development Projects Observed indeed marked a parting of ways, in which development economics was becoming something like an applied field of the mainstream discipline—with all the formal, quantitative methods this implied—while Hirschman became an increasingly uncategorizable social theorist. Despite his statistical and mathematical acuity, Hirschman refused to turn his insights into testable models. Krugman, a fair representative of mainstream disciplinary opinion today, writes that development economics was rescued by adopting “exactly the intellectual attitude Hirschman rejected: a willingness to do violence to the richness and complexity of the real world” by constructing “controlled,” simplified models that nevertheless “illustrate key concepts.” From this vantage, Hirschman is “not villain in this story so much as a tragic hero.”
The idiosyncratic thrust of Hirschman’s project was most strikingly illustrated in the famous Hiding Hand, with its practically Deweyan faith in the creative powers of human action—in doing as a kind of thinking. But by the time Development Projects Observed was published in 1967, it struck a dissonant note. Confidence in rapid development had begun to ebb worldwide, and many of the Latin American countries dear to Hirschman’s heart gave way, one by one, to authoritarian dictatorships. Dramatic social mobilization transformed the political landscape in both the global North and South. Indeed, there was something about Hirschman’s small-scale vignettes and mild-mannered reformism that appeared to countenance an accommodation with the status quo, no matter how untenable or unjust. As he wrote elsewhere the same year:
Underdevelopment having been diagnosed as something so multifaceted, tangled, and deep-rooted, it was often concluded that the situation called for revolution, massive redistribution of wealth and power from the rich to the poor countries, or at least coordinated attack on pervasive backwardness through highly competent central planning.
But what if none of these dei ex machina are available to take matters properly in hand? What if the fortress of underdevelopment, just because it is so formidable, can not be conquered by frontal assault? In that unfortunately quite common case, we need to know much more about ways in which the fortress can be surrounded, weakened by infiltration or subversion, and eventually taken by similar indirect tactics and processes.
That Third World revolutionaries might reject this counsel for patience is understandable enough. Hirschman’s pragmatics of hope could shade into the pragmatics of defeat, and winsome optimism could conceal disillusionment under the surface. Just when Hirschman insisted on thinking small, reformers in the global South sought to think big, turning to large-scale structural accounts—dependencia, world-systems theory—and attempts at global solutions like the New International Economic Order. Within the new turbulent context of the late 1960s and 1970s, Hirschman become an increasingly isolated figure, and his work became more searching and reflective as a result.
• • •
The landmark Exit, Voice, and Loyalty (1970) crystallizes this trajectory. Although inspired by observations made during the research for his previous books, the book abstracted away from his field notebooks to produce a model at a new level of generality.
In schematic outline, the book’s famous argument runs as follows. In cases of deteriorating service—potholes in a road, say—users are presented with only three options. They can choose loyalty by simply sticking it out. They can choose exit, for instance by choosing another road or mode of transportation. Or they can choose voice, by demanding road repair, say. The abstract concept of voice not only introduced a level of complexity not typically captured by standard microeconomic accounts of behavior, which tended instead to model a binary of loyalty or exit, buying or not buying. It also invited wide application: to “the two-party system, divorce and the American character, black power and the failure of ‘unhappy’ top officials to resign over Vietnam,” as Hirschman put it. In dealing with an adulterous partner, for example, you can put up and shut up, talk it out, or simply leave.
Hirschman refused to turn his insights into testable models, becoming instead an uncategorizable social theorist.
The book was an instant classic. It was reviewed in journals across all of the social sciences and has spawned a still burgeoning secondary literature, a cottage industry of academic work all of its own. This promiscuity owed in part to the book’s plasticity: it offered a conceptual vocabulary that could easily—perhaps too easily—be marshaled to make sense of practically any social dynamic. (To be fair, Hirschman was careful to delineate various subtle gradations of “voice” and even “exit” in the book, but these nuances were not what travelled.) As if to signal the culmination of this progressive abstraction, Hirschman was appointed to the rarefied IAS in 1974.
Reflective distance is also one way to read The Passions and the Interests (1977), Hirschman’s masterpiece of erudition. A brilliant and immensely compelling foray into the history of ideas, Hirschman explicitly acknowledges the book’s origin “in the incapacity of contemporary social science to shed light on the political consequences of economic growth and, perhaps even more, in the so frequently calamitous political correlates of economic growth whether such growth takes place under capitalist, socialist, or mixed auspices.” Why, Hirschman implicitly asked, had modern social science assumed a direct causal connection between economic and political development? Set against the backdrop of the deepening crises of the 1970s, the book returned to a set of early modern debates—long preceding the disciplinary division between the political and the economic—to discover, as the book’s subtitle put it, Political Arguments for Capitalism before its Triumph.
In this lively essay of just 135 pages, Hirschman uncovered a rich debate of among moral philosophers in the seventeenth and eighteenth centuries in response to the problem of human nature posed forcefully in the Renaissance. Newly unsentimental consideration of man-as-he-is—rather than moralizing homilies of man-as-he-should-be—led to doubts about the unruly and violent “passions” that governed behavior. If, as David Hume succinctly put it, reason was merely the “slave of the passions,” by what mechanisms could men be steered toward virtuous, public-minded conduct? By the eighteenth century, Hirschman argued, philosophers began to emphasize the role of countervailing passions—an idea at work, for instance, in the notion of checks and balances in the constitutional debate of the United States. These thinkers fastened on “interest,” the cool and rational pursuit of self-benefit, as the best hope for a countervailing force against wilder and more destructive impulses. In the mature, Enlightenment-age version of this argument, most explicitly articulated by figures like Montesquieu and James Steuart, the advance of commercial society, in which peace was a more stable environment for doing business, would guarantee the predominance of interest over passion. Hence the idea of doux commerce: more than merely economic arrangements, markets would themselves act as civilizing forces.
It its charm and lucidity, the book remains as stimulating as it was when first published. Yet, Alacevich notes, “one might wonder whether this retreat into the history of ideas was not also an act of denial”—leaving behind the failures of development in the present to discover hopes deep in the past. Alacevich adds that reviewers, dazzled by the thesis Hirschman had uncovered, missed the irony pervading the text. The whole starting point of his inquiry had been that such ideas turned out to be totally wrong. At the same time, the reviewers could perhaps be cut a little slack. For despite a few cryptic remarks in the final section, Hirschman mostly refuses to reflect on the implications of these failed predictions, much less spell out an alternative theory. The end of the book simply remarks that “speculations about the salutary political consequences of economic expansion were a feat of imagination in the realm of political economy, a feat that remains magnificent even though history may have proven [them] wrong.” This leads to the rather deflating conclusion that “all one can ask of history, and of the history of ideas in particular” is “not to resolve issues, but to raise the level of debate.” A new level of reflective distance, indeed.
Incoherence, Hirschman counseled, is also an opportunity.
Had the book been written a few years later, Hirschman might have taken a different tack. Prophets of the age of Reagan like Milton Friedman had no qualms about trotting out a substance-free version of the doux commerce thesis as and when it suited them. (If this was tragedy, the bargain-basement approximations of this argument associated with the likes of Thomas Friedman are surely farce.) Disturbed by the rise of the New Right and its intransigence in the face of state intervention, Hirschman, still a social democrat at heart, responded belatedly to this moment with The Rhetoric of Reaction (1991).
Tracing the rise of reactionary ideas following the French Revolution, in a rather eclectic mix of thinkers from Edmund Burke to Charles Murray, Hirschman sought to delineate three basic responses to any proposed reform: the perversity thesis (it will achieve the opposite of its intent); the futility thesis (it won’t work at all); and the jeopardy thesis (it will put other accomplishments at risk). But in a moment of characteristically acrobatic self-subversion, Hirschman then turned this analysis right around onto progressive proponents of reform to detail three mirror theses of apparently equal intransigence: the counter-perversity thesis (this reform is needed or we face total ruin); the counter-futility thesis (the laws of history demand the reform, so opposition is futile); and the counter-jeopardy thesis (only this new reform can save older achievements). Each of these moves is still recognizable in the present. Understanding these structures of argument, Hirschman suggested, might clear the ground for mutual disarmament of the rhetorical arsenal. Yet while an interesting exercise, the symmetry may look to many readers today like an inert plea for dialogue and compromise couched in criticism of “both sides.”
• • •
What are we to make of this complex legacy? There remain a few Hirschmanian figures still scattered across the academy (the probing economist Dani Rodrik comes to mind). But in retrospect, ambitious balanced and unbalanced growth programs had more in common with each other than with the ideas that succeeded them: consider the socially devastating “reforms” imposed on developing countries by the IMF’s structural adjustment programs in the 1980s. Ironically, given the abeyance into which they fell in that period, many foundational insights of high development theory have now been reincorporated since then—in appropriate mathematical form—into the models of development economics in recent decades. The great inflation debate of 2021 makes it clear, however, that no matter how sophisticated or powerful they may be, models remain a highly contested feature of contemporary economics. Given the theoretical rigidity, mathematical formalism, and fierce professional hierarchy of the mainstream discipline today, Hirschman’s early skepticism of these trends looks more prescient than tragic.
Today radicals and reformers alike may need to embrace the uncertainty of the present, to make a virtue of improvisation.
Perhaps the more interesting question is whether we find ourselves in what economist Ilene Grabel has called a “Hirschmanian moment.” She coined the term to describe the “productive incoherence” of post-2008 global financial governance, in which “many emerging markets and developing economies have escaped the straitjacket of a commanding theoretical orthodoxy” and the “prescribed menu of institutional forms.” But the metaphor could be further extended to our broader political economic conjuncture. Within the rusty carapace of the neoliberal order, old rules increasingly appear to no longer apply. At the same time, what comes next is exceptionally difficult to predict. But incoherence, as Hirschman counseled, is also an opportunity.
To many, Hirschman’s ebullient miniatures will appear dated and inadequate in the face of concatenating crises—economic, ecological, epidemiological, political—that cry out for ambitious structural explanation and major social transformation. And yet something in Hirschman’s pragmatism may be worth holding on to in coming to terms with what they require. We lack detailed, tried-and-tested blueprints for the truly massive scale of social, economic, and technological change required for transition to a zero-carbon economy, for instance—or for a post-capitalist transition of any kind. If Hirschman is to be believed, however, we could never fully know these things in advance: the only way to figure them out would be to try. If the system does turn out to be too corrupt, exhausted, or inert to offer up any meaningful change, it may be that “exit” of some kind really is the only option. But what if that isn’t on the table, at least not in the foreseeable future? (Do we have any escape routes across the mountains left?) To storm what the Russian revolutionary Alexandra Kollontai once called the “beleaguered fortress of the future,” perhaps indirect Hirschmanian measures will be required.
Radicals and reformers alike may need to embrace the uncertainty of the present, to make a virtue of improvisation, to seek out the exasperatingly disordered, nonlinear, incoherent, and unexpected sequences by which the status quo is always and ever undermined. In the “creative disorder of the human adventure,” Hirschman wrote in A Bias for Hope (1971), “radical reformers are unlikely to generate the extraordinary social energy they need to achieve change unless they are exhilaratingly conscious of writing an entirely new page of human history.” One of the basic affects of our bewildering present is systematic and pervasive doubt. As far as Hirschman was concerned, so much the better.
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