The Wrong Way Round

Geoffrey Hawthorn

  • Rival Views of Market Society, and Other Recent Essays by Albert Hirschman
    Viking, 197 pp, £18.95, November 1986, ISBN 0 670 81319 2
  • Development, Democracy and the Art of Trespassing: Essays in Honour of Albert Hirschman edited by Alejandro Foxley, Michael McPherson and Guillermo O’Donnell
    Notre Dame, 379 pp, $25.95, October 1986, ISBN 0 268 00859 0

‘The 20th century,’ Charles Sabel remarks in his essay in the collection in honour of Albert Hirschman, ‘has been a gigantic lesson in the transformability of theories, political programmes and institutions through their recombination in new contexts.’ It is a revealing remark. For although most of what now goes on in the ‘advanced’ societies – in what since the Bandung Conference of 1955 have sometimes been thought of as the First and Second Worlds – has indeed turned out to be very different from what was once expected; and although there is now also an even more varied Third World; that’s to say, although almost everything, event and context, has confounded expectation and will no doubt continue to do so – nevertheless the theories we have with which to understand, expect and direct it all are increasingly antique.

There is a heroic response to this, and a constructive one. The first is to persist. Orthodox theoreticians retreat to refine the theories; post-modernists retreat into a refined theorisation of the impossibility of doing so; a few apocalyptically despair. Politicians and planners resort to slogans and grand gestures; they have to say something, and since the rhetorics in which the world recognises itself are as antique as the theories, they are constrained.

The constructive response is more rare. It is to accept that the only general theories we have are the grand and narrow schemes of the 19th and early 20th centuries; to accept that the associated notions with which those in public affairs try to find their way around their world and shape it are similarly simple and dated; but then to steer between defiance, despair and a more or less defeated pragmatics; to uncover the twists and turns and hidden rationalities in things; and thus, to reveal the possibilities that lie in the improbabilities of the world itself. This, as Michael McPherson makes clear in his essay in the Notre Dame collection, is Hirschman’s way.

As Hirschman explains in the first essay in his own latest collection, he started his present career by working – ‘with intensity and occasional enthusiasm’ – for the Federal Reserve Board on the problems of post-war reconstruction in Western Europe. He had left Berlin in 1933, studied economics in France and England and Italy, served for a year in the French Army, enjoyed a short picaresque moment in Marseilles, and sailed to the United States in 1941. His first book was prompted by the Nazis’ economic expansion in Eastern and South-Eastern Europe. That event, he says, gave him some sense ‘of the propensity of large and powerful countries to dominate weaker states through economic transactions’. What he had seen of the mess in France in the Thirties gave him respect for the price system. And what he had seen in Italy encouraged ‘a correlative distrust of peacetime controls, allocations and grandiloquent plans’. He admired the Marshall Plan itself, but was uneasy at its international innocence and the hint of new dogma.

Hirschman was thus already wary when he turned to the question of the ‘development’ of the hitherto poor societies. As he says, and as John Sheahan elaborates in his essay in the other volume, the new development economics had from the beginning been critical of existing economics. It resisted what was then, and has once again become, the orthodox insistence on caution, on the need to limit demand to productive capacity, to restrain government protection and intervention, to restrict public spending and the money supply against inflation, and to hold real wages and consumption down in order to free resources for investment. It looked instead for ways in which potential – the potential, for instance, in the often enormous amounts of unused labour – could be released. But it soon produced an orthodoxy of its own. Protection, the new development economists argued, might at the start be essential. Behind it, growth should be balanced and promoted in one large and concerted push. The protectionism was prompted by the memory of the effect that the Depression in the North had had on the South American economies; the enthusiasm for a planned push was encouraged by the recently realised successes of the Soviet Union; to the English who were involved, there was also the stirring example of wartime planning in Britain. And there were the newly devised instruments of programming: feed in the figures, enthusiastic economists now believed, and the rational course of action would be plain.

Hirschman’s own first experience with a poorer economy was in Colombia in the Fifties. A National Planning Council had been set up in Bogota, and the World Bank sent him there to advise it. But he soon realised that ‘one of the things that Colombia needed least was a synthetic development plan compiled on the basis of “heroic” estimates.’ The Colombians themselves were only too willing to concede that ‘here in the tropics we do everything the wrong way round.’ And that had to be their advantage. Indeed, the Columbians’ self-deprecating excuse became the basis of what he agrees to have been his most celebrated thought: that rather than start with everything at once, or start at the theoretically-appointed place, with iron and steel and machine tools, and work forwards, one might start at the front and work back.

‘Backward linkage’ was the idea, and it had two parts. In the first place, there might be an advantage in starting with capital-intensive industries, even those for consumer goods, which generate other activities to supply and service them. (Without generalising the idea, economic historians had already suggested something like it in their accounts of how different staples – for instance, furs and fish and timber and wheat in Canada – had had such effects. A more recent and notorious counter-instance has been oil, which generates few linkages, even in transport, but a great deal of mere revenue, with which, in previously undeveloped places, hastily constructed state apparatuses have attempted concertedly and often very uneconomically to plan.) Second, there might also be an advantage – for developing countries, a comparative advantage – in activities, whether capital-intensive or not, in which there is little or no performative latitude: activities which have to be done well or not at all. One of Hirschman’s own first examples was an airline, then much derided as a vanity for economies like Colombia’s. Airlines have to be good, or people die; they have a narrow latitude.

It perhaps says nothing against the argument that even into the early Seventies, Venezuela’s internal government airline, Aeropostal, was known to its riders as ‘Aeromortal’. It may even say nothing against the argument that in the later Seventies, more than twenty years after Hirschman had had the thought, it was still the case that there were more ‘black star’ airports, as the International Airline Pilots’ Association denotes them, really dangerous ones, in Colombia than in any other single country. (But that should in turn be set against the fact that two of the others were those at Boston and Los Angeles.) Indeed, it’s important that such examples do say nothing to Hirschman’s idea. For his ideas are ideas: neither theories in the more usual sense of the word, intended to cover all seemingly similar cases, nor – as many, to his dismay, have taken them – recipes for a plan. (An official in Ongania’s military administration in Buenos Aires said to him in 1968 that in putting investment first, social equity second, and civil rights last, that administration was proud to be practising ‘unbalanced growth’.) And some of the most arresting of Hirschman’s ideas have been those which the supercilious have sometimes said are the most obvious. Thus with Exit, Voice and Loyalty in 1970, a book in which he elaborated on these three options as those we have in the face of almost any organisation that we belong to, work for or do business with. Thus with Shifting Involvements in 1982, in which he suggested a recurring cycle of satisfaction and dissatisfaction with private and public commitments. And thus also with his inversion of the usual wisdom on what economists and others often think of as ‘instrumental’ and ‘non-instrumental’ action.

There are two connecting and – to social scientists – far from obvious threads in these thoughts. One, congenial to modern intellectuals, is that ideas are often as important as interests. The other, rather less so, is that in ideas, and driving interests, is passion. Economists have been used to reflecting on economies: but they have been disinclined to accept that those involved in economies themselves reflect. They have accordingly taken an exceedingly parsimonious view of what propels ordinary agents. They have tended to see them, in Harry Frankfurt’s word, as ‘wantons’, driven by unreflective material desire. Hirschman, as he says in one of his new essays, is against such parsimony. This is in part because, as the other economists would say, he has a ‘taste’ for complication. But it is also because he believes that too much parsimony explains too little of what the economists themselves want to explain.

An example is love. This is not a persistent preoccupation in the economic journals. (And those economists who have raised it have tended at once to evade it. In his unintentionally hilarious model of marriage, Gary Becker, a fiercely neoclassical theorist from Chicago, agreed that after doing all the sums on the costs and benefits of taking the step – its pros and cons for meals and mortgages and insurance – there might also be a wanton preference, he called it ‘X’, at the bottom line.) For as Hirschman reminds us, ‘love’ was Dennis Robertson’s famous Cambridge answer to the question of what it is that economists economise on. ‘Progress,’ as Alfred Marshall had put it earlier, ‘chiefly depends on the extent to which the strongest and not merely the highest forces of human nature can be utilised for the increase of social good.’ The thought was that ‘love’ – or benevolence, altruism, concern for the collective good – was a ‘scarce resource’. But this austere moral economy, Hirschman argues, is not only unhappy: it is also wrong. It confuses the use of a resource with the practice of an ability. And unlike most resources, abilities improve with use and in use enhance their attraction and strength. This is why collective action occurs. Up to a point, sometimes as ‘loyalty’, sometimes as ‘voice’, it generates its own momentum. Up to that point, the cost is not – as the more orthodox have said – in engaging in it, but in not doing so. (In the essays on Hirschman, Guillermo O’Donnell makes a distinction between a ‘vertical’ voice, which is what Hirschman was originally talking about, and a ‘horizontal’ one. This, the murmuring of the people, is a condition of the other, which is why, as they did in Argentina, tyrants try to stop it. Alessandro Pizzorno and Amartya Sen extend the idea and its connection to individual and collective identities.)

But for the unheroic, as Hirschman adds, there are dangers in too much public passion. Ten years ago, in a book on The Passions and the Interests, on the ‘political arguments for capitalism before its triumph’, he recalled the 18th-century insistence on those dangers. The early political economists had suggested that there might be more than merely economic advantages in abandoning the destructive self-deceptions of collective virtue, and the aristocratic blather about honour and militant defence that went with them, in favour of a sober and prudential – as the 19th century came to think of it – bourgeois attention to individual interest. In the light of more recent, romantic criticisms of capitalism, it was, as Hirschman said, an ironic suggestion.

But the irony rebounded in economic development itself. In the perceptive essay with which he began his previous collection,[*] Hirschman observed that what all the economists of post-war development, himself included, had underrated was the pervasive passion in the new nations; and the passion to be independent. ‘The underdeveloped countries were expected to perform like wind-up toys and to “lumber through” the various stages of development single-mindedly; their reactions to change were not to be nearly as traumatic or aberrant as those of the Europeans, with their feudal residues, psychological complexes and exquisite high culture ... Like the “innocent” and doux trader of the 18th century, these countries were perceived to have only interests, and no passions.’ In the early years, therefore, no one thought them likely to have the reactions to market society that he charts in the title essay of the new collection.

‘Rise and Decline’ was a characteristically self-critical essay, but an uncharacteristically gloomy one. Hirschman wrote it in 1980, when in the southern cone of the South America which has always been his own first passion, authoritarian governments were in power and economies in very poor shape. (The reasons for the last are beautifully explained in what must have been one of Carlos Diaz-Alejandro’s last essays, ‘Some Unintended Consequences of Financial Laissez-Faire’, in the Notre Dame collection.) But by 1986, Hirschman’s irrepressible ‘possibilism’, as he calls it, had re-asserted itself. In his new collection, he chides a sociologist for reiterating the tired old truth that the more rigid autocrats are, the more likely is it that their subjects will turn to revolution; and the more rigid the autocrats, the more likely is it that the revolutionaries will be rigid too. What then, Hirschman asks, are places faced with autocracy supposed to do? Get themselves a different élite? Or forgo change?

The mistake is to believe that there is one answer, certainly one answer delivered by theory, even one answer from past history. The theory may, as always, be running behind. And history changes. In countries like those in Latin America in which there is a democratic tradition, or at least, an enduring democratic aspiration, it is perfectly possible to imagine an intransigent élite which after its revolution makes some structural changes that, democratically, would never be agreed to. And then to imagine that élite being voted or perhaps booted – perhaps, given the propensity in such entities to division and disarray, even booting itself – out of power, and a more moderate one being elected in its place. (One thinks, although Hirschman does not himself mention them, of the Attlee Government’s use of emergency wartime controls in Britain after 1945, and of events in Portugal after 1974. One thinks similarly but more sadly of what may already be the missed chances for land reform in Brazil and the Philippines now.)

In an essay on the more recent moves to democracy in South America, Hirschman makes a similar point. To throw the conventional theory of ‘the prerequisites of democracy’ at such countries before the event is, he says, a ‘pernicious’ act. It is to tell them – as an embassy official actually did once tell me – that ‘they will just have to wait for three hundred years of steady social evolution.’ (And then get Mrs Thatcher, that ‘tyrant surrounded by mediocrities’, as Lord Stockton described her?) It is also to say, which is now clearly mistaken, that Japan at the end of the Forties and Venezuela at the end of the Fifties had no chance; that despite what there is already some reason in fact to hope, Argentina, Brazil, Uruguay, the Philippines, even South Korea have no chance now. Of course, Hirschman is careful to add, if the chance for some sort of democracy is to be taken and preserved, those involved must accept uncertainty in events, and improbability also. They must not listen too closely to the false certainties of the more orthodox theoreticians.

Hirschman would be the first to say that they should not listen too closely to him either. But they should. And it isn’t only in Latin America that they do. In their exceptional interest and also their attentiveness to the world, the essays which his friends and pupils have put together for him are testimony to that. He has now retired. That is what has in part prompted the retrospectives at the start of Rival Views. But at the end, he is off again, responding to events and relishing the possibilities that even the most unlikely of these events suggest. And he continues to travel and write. It may still be thought sophisticated, in the gloomy science, to be gloomy. But it is incomparably more sophisticated, certainly more unusual, to be so consistently sensitive, sceptical and humane, and in a world where everything is, more often than not, ‘the wrong way round’, to retain what Hirschman himself once described as ‘a bias for hope’.

[*] ‘The Rise and Decline of Development Economics’ in Essays in Trespassing: Economics to Politics and Beyond (1981).