Worldly Philosopher: The Odyssey of Albert O. Hirschman by Jeremy Adelman

Conversation – Strategies vs Theory and Causes

Chapter 11. Following My Truth                                                                

                                               

by

 

Howard Adelman

 

Why did Jeremy call the U.S. 1952 election in which Adlai Stevenson ran against General Eisenhower for president “one of the most appalling in modern American history”? (p. 325) Was it because Eisenhower’s Vice-Presidential running mate, Richard Nixon, ran such a dirty anti-communist crusade? Was it because Dwight Eisenhower himself in his famous Wisconsin election speech not only did not defend his old colleague, Secretary of State George Marshall, against Senator Joseph McCarthy’s rants against Marshall as part of a communist conspiracy, but himself engaged in outlandish anti-communist rhetoric, picking up McCarthy’s line that communists had infiltrated the nations schools, unions, media and government? In Jeremy’s biography, the depiction merely set the stage to explain why it was not a propitious time for AH to return to America.

 

Suddenly, without plans or forethought, an unexpected invitation arrived four years later inviting AH to become a research professor at YaleUniversity for all or part of the 1956-7 academic year. “As Machiavelli instructed his prince, it is equally important to seize opportunities and align the forces of virtŭ and fortuna on one’s side in order to convert an opportunity into achievement. It was with this Machiavellian esprit that Hirschman relocated once more.” (p. 327) As a research professor, he was not expected to teach but he was expected to use his time to write a book.  He wrote The Strategy of Economic Development (1958). Further, when unable to finish the book within the year – a dubious proposition to begin with aside from his decision to engage in extensive re-writes after attending a conference in Brazil – he managed to get a Rockefeller grant to extend his appointment for an extra year.

 

Jeremy sets this against the backdrop of the new North American orthodoxy of development theory that I discussed in the last blog – balanced growth designed both to offset chokepoints to insure against over-production with too little demand as well as infuse capital that would be strategically distributed to ensure there were no shortages in countries with surplus labour and severe capital shortages. In contrast, Latin American economists (Roberto Campos and Alexandre Kafka) argued that growth itself produced disequilibrium and imbalances spawning both greater inequalities and inflation. Change was the problem, not inertia. These influences on AH, supplemented by Edmund Burke and Friedrich von Hayek, pushed a thesis about disequilibrium as central and the possibility of strategies to manage that disequilibrium rather than chimerical theories to do away with it. AH also picked up the notions of frustration, aggression and anxiety from Erich Fromm to add a psychological dimension to his analysis.

 

His methodological approach matched what he saw as the approach of agents in history – in particular, entrepreneurs – who tackled problems, not events, who dreamt up ways of overcoming obstacles rather than envisioning the absence of any obstacles whatsoever. Stress and tension were healthy as long as they were used to transform a situation into a creative solution rather than simply being allowed to eat away at oneself. Once again, the cunning of reason worked through paradoxes and problems to unleash new contradictions and new problems. More practically, do not start with large megaprojects like dams and ports to eliminate bottlenecks before the demand had even sufficiently developed. Rather invest in industries and agriculture, in entrepreneurs and businesses. Invest in productive people and not plans and planners. The key was creative decision making – the same creativity that invented money itself in the first place.

 

Piecemeal planning was offered in opposition to comprehensive and coherent general plans. What Jane Jacobs would offer to urban planners three years later with her classic (1961) The Death and Life of Great American Cities, Albert Hirschman was offering to the theorists of economic development on a larger scale. The same premises were at work. Instead of big planners of dams and ports, Jacobs had to contend with big planners of roads, such as Robert Moses, and huge housing estates with no eyes on the ground at street level to keep the passageways safe through the many eyes looking about.

 

In the sixties, the zeitgeist favoured writers like Hirschman and Jacobs and the revolt against liberal master builders. In the sixties, Ike might not have been given the opportunity that he had in the fifties to build his system of interstate highways that allowed the creation of suburban America, the car culture that paradoxically facilitated the eventual destruction of Detroit as a city.

 

Why was AH’s answer inadequate as Jeremy suggests through the criticisms of Amartya Sen and others at the end of the chapter? I want to use an example from a related field much more au courant today than development theory or urban planning – resource economics and the unintentional spoliation of the commons. More particularly, I want to examine Elinor Ostrom’s book, Governing the Commons, that came out just over three decades after AH wrote The Strategy of Economic Development. Ostrom’s book helped her earn her 2009 Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel, the Economics Nobel Prize.

 

Like AH, Ostrom loved case studies. She also loved paradoxes. Though suspicious of theory based on an inadequate collection of empirical data, she did not have a knee-jerk antithetical approach to theory in the sense of abstract modelling. Further, she suspected metaphors as dangerous. Her book begins with an explication of the tragedy of the commons as illustrated by the total depletion of the fishery off the Grand Banks (her resource, my location). State regulation not only did not prevent its destruction but exacerbated it. Would it have been destroyed without state control? Undoubtedly! The tragedy of the commons and the free rider problem illustrate that if individuals are left to pursue their own best self-interest in the use of the commons where the long term delayed costs are deterioration which is against each individual’s longer term self interest, the propensity will be to effectively destroy the commons.

This example can be illustrated all over the world and reaches tragic proportions in cases where the depletion of natural resources is exacerbated by climate change, such as in the desertification of the Sahara region. In Darfur, the human population exploded by 500% over a century and the animal population by almost double that amount at the same time as the resources to support the nomadic populations shrunk. The clash with the settled agriculturalists with whom the nomads had lived in a symbiotic relationship previously was almost inevitable. The result could not have been worse – the ethnic cleaning (sometimes misnamed a genocide) of the non-Arabic agricultural tribes to the south, the Fur, Zaghawa and Massalit tribes through an alliance of Arab nomads and the state government of Sudan.

 

Everyone’s property becomes no one’s property and the cost is the private property of others. As the users exceed the capacity of the commons to support them, the resources withdrawn will be larger than those needed to renew them. It is but an illustration of the prisoner’s dilemma where individual rational strategies lead to collective irrational outcomes that betray those same individual interests. Why? Because there will always be individuals who cannot be excluded from the general benefits available to everyone who will choose to withdraw more and contribute less. They are free riders whether they are sharing a bathroom with other students (my very mundane example in my book, The Beds of Academe arguing why domestic washrooms were preferable and much cheaper to build in residences than institutional washrooms) or sharing a huge grazing and agricultural field the size of France.

 

So the question arises of governance – how to manage a commons? The two dominant models have been state control (governance by the Leviathan) versus assigning the management to private enterprise as in the case of keeping the commons clean through waste management. There is a third model based on joint collective management by the users themselves, a cooperative versus private or state models, but it easily breaks down when subjected to strong external pressures (climate change and corrupt central governments) and internal pressures (population growth).

 

AH’s answer, as was also Ostrom’s, – the solution is situation specific. The state option presumes the state has complete or at least adequately comprehensive information, can fairly assign capacities, monitor use and has an effective justice system for sanctioning non-compliance to generate an optimum equilibrium. This utopian premise was at the heart of the weakness of balanced growth economic development theories. As AH showed, a serious error in information, unfair assignations, inadequate monitoring or meting out justice, let alone a combination of them, inevitably led to disastrous consequences, sometimes (or often) worse than if the individuals were allowed to operate in a strictly laissez-faire way.

 

What about those who say that the answer is to convert the commons to private ownership. How can this take place with grazing land already used by an excessive number of herders let alone when applied to water or fisheries? Ostrom illustrated through a number of cases how cooperative solutions often worked much better than either the laissez-faire or the state governing model. AH concurred. Better solutions were often developed through the initiatives of the users themselves based on the recognition that the information available was far from optimum, continued decisions re assigning capacity would have to be made, continuing monitoring conducted and penalties enforced for non-compliance. However, one of the problems of the cooperative model is that over time it tended to develop either into a quasi-state with all its problems (the Canadian Wheat Board for marketing Canadian wheat) or a private corporation (such as Sunkist Oranges).

 

The reality is that the solutions vary over different situations and, as situations change over time, the model solution applicable may change as the institution changes and adapts. No one type of solution is universally applicable. I recall when Fidel Castro, before he had fallen out with the United States by openly advocating communism, made a speech to the association of cooperative farmers in Cuba in 1959. In a speech that lasted almost four hours he explained how members of cooperatives are inherently selfish since they are only concerned with the well-being of the members of the cooperative and not with everyone in the country. Since the state had a shortage of seeds, he would have to allocate those seeds to state owned farms that had everyone’s interest at heart. The cooperatives voted to convert to state owned farms and, miraculously, all state farms, including the former cooperatives, were able to get seeds. Ideologues, particularly communist ideologues, are blind to their own self-contradictory positions and the evidence that falsifies their own convictions – in this case, the ability of state owned farms to adequately satisfy demand.

 

Ostram provided reams of evidence to suggest that self-organizing and self-governing forms of collective action, based on empirical findings, could, in some situations at some times, offer a more effective answer to governance of the commons. AH offered a more general thesis on the same topic about the category of development itself. Yet he never received the Nobel Prize for Economics.