An Orthogonal Development Theory

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

Conversation – Instalment 12: An Orthogonal Development Theory

Chapter 10. Columbia Years                                                                       

                                               

by

 

Howard Adelman

                                                                         A

 

 

 

 

 

 

 

 

 

 

 

                                                           

 

   C                                                                    B                                                             D

The lines AB and CD are orthogonal to one another.

If CB and BD represent two oppositional development theories, then AB, at right angles to both theories and illustrated as perpendicular to both, makes the third theory mathematically orthogonically related to the other two theories. On p. 322, Jeremy describes AH’s thinking as so “orthogonal”. (p. 322) By explicating and clarifying the key characteristics of AH’s development “theory”, I want to show that it is indeed a theory –contrary to Hirschman’s (and Jeremy’s) protests otherwise. As Jeremy put it, AH “began to think about development in Columbia from the ground up – with a style but with no theory.” (p. 303) As AH worded it, “I looked at ‘reality’ without theoretical preconceptions of any kind.” (p. 297)

This is correct if “theory” is exclusively restricted to sets of statements or principles which are abstract and in terms of which events or actions are explained and even can be predicted. But theory also applies to principles that guide action or a set of practices by means of which judgments can be made. So although AH never had a theory of development in terms of a general abstract model, he certainly did have a theory about interpreting the phenomenal world of experience.

The problem goes back to the Greeks, and Aristotle in particular, where theoria was contrasted and seen as wholly other than practice. This is one reason his theory of health and the humours was so messed up and his theory of humours was so misleading for health practitioners for centuries. Diagnosis of disease begins with identifying four sets of key variables: a set of symptoms or indicators, anatomical location, physiological functions and an interpretation of the aetiology of the disease. The theoretical designation of a disease is then modified in each of these categories in accordance with experience and actual practice. There is no abstract model of the disease. AH developed a theory of development in precisely these terms.

Beginning with a quote from Franz Kafka as usual, Jeremy begins his chapter on Hirschman’s work in Columbia, the country to which he went when his career in Washington was still encountering roadblocks. “You can hold yourself back from the sufferings of the world, that is something you are free to do and it accords with your nature, but perhaps this very holding back is the one suffering that you could avoid.” (p. 295) The quotes from Kafka are always very pointed, but this one I found to be particularly poignant. When Jeremy was still in high school during the seventies, he took a year off to serve as a volunteer with Canada World Youth and served that year in a very remote part of Columbia living with a poor peasant family and assisting them while, at the same time, he gained his mastery of Spanish, albeit with a Colombian accent.

While Jeremy was with the family, the mother gave birth. When the infant was very young, he contacted me from this remote part of Colombia. The infant was very ill. The family lacked the resources to travel some distance and take the infant to the nearest nursing station or infirmary. He felt helpless because the ideology of Canada World Youth ran on a doctrine of non-interference in the local situation other than providing volunteers. Infusions of wealth from outside would deform the local economy, introduce distortions and such interventions were actively prohibited by volunteers. Jeremy wanted to ask me for the money to help out but was conflicted since he felt bound by the principles he had accepted when joining Canada World Youth. He was deeply torn. The issue was clearly not the amount since it would have been a relative pittance even if the health fees were added to the travel costs. Instead of insisting on sending him the money and persuading Jeremy that, “To save one child is to save the world,” I also practiced non-intervention and did nothing. I felt terrible. He felt very much worse as he watched the infant die in front of him. I am convinced that we both acted improperly at the time. I believe, to this day, that this event scarred Jeremy, though I believe it instilled in him his first suspicions of abstract doctrine and his attraction to dealing with the present and the immediate demands of the moment. The event certainly scarred me.

Development theory has very direct consequences on the lives of ordinary families. AH arrived in a country torn by civil war (La Violencia). Jeremy characterizes AH’s years in Colombia as the best of his and Sarah’s lives, a place of adventure and cultural stimulation where Albert was intellectually reborn. The World Bank had already reinvented itself in the aftermath of the Marshall Plan as the vehicle to save the Third World from communism and ultra-ambitious state planning. Colombia was to be its first test case. AH brought a scepticism of abstract ideological formulations, an attraction to direct observation of small things and routine practices combined with the opportunity and continuity over time to make those observations, and a belief in learning by doing reinforced by Eugenio Colorni and his readings of Montaigne.

The World Bank formed a survey mission led by the Canadian-born economist from Nova Scotia, Lauchlin Currie, whom I met briefly at SimonFraserUniversity in the late sixties when I participated in developing a plan for student housing for the university. I regret that I never got to know him, especially since, in retrospect, he had developed, I believe, the theory of money similar and far more profound than the one I espoused. He also showed that he had an intimate acquaintance with cooperatives. He had attended St. of X (FrancisXavierUniversity) where he was undoubtedly infused with its Catholic teachings of social service and cooperation. Currie went to LSE and then earned his PhD at Harvard writing his thesis on banking and the money supply. He was an ardent Keynsian New Dealer adviser to FDR during WWII, a close adviser to Harry Dexter White at Bretton Woods and had been involved in the secret VENONA Project decrypting Soviet cables where he (inadvertently?) became a source to Soviet intelligence. He ran the World Bank Colombian Survey Mission from 1949 to 1953 and stayed on in Colombia when the USA refused to renew his U.S. passport.

For Currie, the object of economic planning was to raise the standard of living in Colombia and directly tackle the problem of poverty.  In one year, starting in July 1949, a team had been assembled, a comprehensive plan developed and a National Planning Institute initiated to implement the plan, The Basis of a Development Program for Colombia. The plan envisioned “aggressive and coordinated improvements on all fronts simultaneously to avoid distortions, bottlenecks, and lags.” (p. 300) The plan was based on the developmental conception of “balanced growth” and the “big push” only to have the grandiose expectations crash against “inconvenient realities”.

One of those very inconvenient realities was the clash of personalities and approaches. AH was hired as advisor to the National Planning Council. Currie, through the machinations of Emilio Toro, the Colombian member of the Board of Executive Directors of the World Bank, returned as an “adviser” to the Council so the Council now had two advisors though Hirschman was the one charged with overseeing implementation but, unlike Currie, did not have a Board member in his pocket to push his views. AH had left Washington’s skulduggery for Bogota’s. “Currie liked big plans, especially when they made administrative reform the condition for everything else; Hirschman preferred projects, even big ones – but the more specific, the better. Aligned with the Liberals, Currie tended to create animosity between the Council and the Conservative government; Hirschman eschewed partisanship and wanted to focus on problem solving.” (p. 301)

If Hirschman was burdened with the Currie-Toro duo undermining his authority and ability to act, the Council hired another outside economic adviser from Belgium, Jacques Torfs, who approached the problem of development from his own idiosyncratic abstract esoteric theory of minimizing capital-to-output ratios. In addition to rival abstract theorists posing problems, AH took seriously the principle of being an adviser to facilitate and advance local expertise and authority, while Currie believed that detachment as well as true expertise gave foreigners an advantage. AH did not have the same reverence for detachment. He preferred experience and close observation. He wanted to concentrate on what the country was doing right and not its grand pathologies. However, his proposed study on successful businesses and successful entrepreneurs and managers and their methods and means of financing never took place.

When General Rojas Pinilla’s military coup in June of 1953 quickly developed into the usual predatory military capitalism compounded by a slide in coffee prices, Colombia’s economy slipped quickly down hill. At the same time, austerism, the other end of the abstract theoretical economic spectrum, took command. Currie went off to raise prize Holstein cattle. AH determined he was now impotent. He resigned just when Senator Joseph McCarthy was at the pinnacle of his power heading the Senate Permanent Subcommittee on Investigations in 1953 and 1954. Prudently, AH went into private practice as an economic consultant in Bogota to help investors identify opportunities and solutions to problems. Opportunism (AB) had been developed as a counterpoint to both Keynesian master large scale planning and stimulus for a broad approach to balanced growth (BD) as opposed to austerism (BC), a policy advocating restrictions on money supply and reductions in deficits just when a country needed a stimulus.

Opportunism focussed on the openings for entrepreneurs, focussed on civil society initiatives rather than grand government policy of either the austerists or the Keynesians. The theory, in the second sense I specified at the beginning, stressed initiatives from the bottom rather than grand views from the top. This was precisely when Walt Whitman Rostow’s The Stages of Economic Growth: A Non-Communist Manifesto was published by Cambridge University Press and became must reading when I was an undergraduate. In spite of all Rostow’s bended intellectual knee to the uniqueness of each nation’s experience and the somewhat arbitrariness of the stages-of-growth and its limitations, his book offered a very positive law-like approach to understanding economic development that built on and went beyond Croce’s Historical Materialism and the Economics of Karl Marx in providing both a grand theory of economic development as well as a grand theory of history in terms of dialectics without Marx’s romantic revolutionary spirit. Rostow had proposed a grand theory of modernization depicting the worship of sustained long-term economic growth itself as a central part of the doctrine and the key determining forces at each stage of economic development.

Rostow’s treatise would soon be followed by Max Millikan’s 1963 volume, The Political Case for Economic Development and his 1966 even more influential book as far as I was concerned, Equity versus Productivity in Economic Development. Liberals had their antidote to Marxism and their own romantic versions of how to rescue impoverished countries from the debilitation of stagnant economic circumstances.

To a conference in October 1954 on the new theories and their implications for policy, AH brought the message that the emperor was naked and that the empirical date behind the theories were almost entirely lacking. The abstraction of balanced and comprehensive planning hit the shoals not only of a complete lack of sufficient evidence and too high a degree of abstraction, but a belief that the future was predictable and could be managed whereas AH had been too deeply steeped in the Hegelian dictum that we can only understand by looking backward. As Hegel wrote in the Preface to the Philosophy of Right, “One more word about giving instruction as to what the world ought to be. Philosophy in any case always comes on the scene too late to give it… When philosophy paints its gloomy picture then a form of life has grown old. It cannot be rejuvenated by the gloomy picture, but only understood. Only when the dusk starts to fall does the owl of Minerva spread its wings and fly.”

During this period in the philosophy of history, two major theories were in contention,. One was the positivist views inherited from Benedetto Croce of Carl Hempel who was then at Princeton. For Hempel, history should be akin to a science and explain events and actions by subsuming them under general laws that could be verified by their predictability. Opposed to the grand theories of the positivists were the theories of the verstehen school then led by the University of Toronto philosopher, William Dray, who thought that history was about re-enacting the thought processes of historical agents and, as I wrote in my PhD thesis, subsuming decisions about which actions to take under more general hypothetical imperatives to guide human conduct. Was history a subject matter for pure scientific reasoning or for hypothetical imperatives and practical normative reasoning? I, like Albert Hirschman, opted for neither. Both theories never even met the conditions of satisfying the cases each side cited. We do not explain historical actions by subsuming them under general scientific laws or subsuming them under normative imperatives. Further, we do not even explain actions or events; rather, we explain incongruencies. We deal with puzzles that face us and focus on problems not on actions abstracted from the context of the inquirer.  

Why do I call this orthogonal approach a theory when it so stridently disavows abstract modeling? Because it does not! It only disavows extending any generalization into the future without irrefutable solid evidence. In the interim, analysis can reveal patterns of contradictions and ways of resolving them, but the dialectical pattern revealed cannot be applied to futurology for the very essential dynamic of the model depends on innovation and re-inventing itself thereby creating new but unpredictable opportunities that will be taken advantage of on the ground while those actual innovations are entirely missed by the theorists rooted as they are in extrapolations from the past.

In sum, AH did have a theory of development, one not based on either supposedly scientific laws of explanation and prediction nor on empathetic re-enactment to reveal the moral imperatives governing agent’s choices and actions. The theory, loosely referred to as Opportunism or, more awkwardly, Possibilism, had the following characteristics.

1. Focus on problems or incongruencies;

2. Use detailed case studies and focus on acute observation of fine details and distinctions;

3. Establish concrete and routine practices that can be continued over time to test efficaciousness – learn by doing;

4. Try to locate and identify initiatives that will be game changers;

5. Bureaucracy, whether in a state or a private firm, inherently wears blinders;

6. Evaluations of development projects should not simply be about cost-effect studies but about assumptions, capacities, priorities and unintended as well as intended effects.

Both right wing monetarism and the stress on entrepreneurs, and left wing or liberal Keynesians stressing wide scale government economic interventions in bad economic time, are both correct, but monetarism must give up its vision of an ideal balancing point in a system at equilibrium, when, by its nature as an innovative enterprise, it is inherently unstable, and Keynesians must not allow stimulus and intervention to be transmogrified into “permanent revolution” and continuing governance (as distinct from regulation). AH provided the most important antidote to the excesses of both theories when applied to development.  

Detachment & Commitment — Keynes versus Hayek

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

Conversation – Instalment 5: Detachment & Commitment — Keynes versus Hayek

Chapter 5. The Hour of Courage                                               

by

Howard Adelman

 

Every culture has a rite of passage, a type of initiation ritual that allows an individual to transit from one level of social status to another. Such rites generally entail a test of courage. Victor Turner, a Scot who taught at the University of Virginia, wrote a seminal essay, “Betwixt and Between: The Liminal Period in Rites of Passage” which depicts the innate predispositions of the human psyche in handling this transition so that the variations in response can be better understood. Certain practices are common whatever the culture or race. The dynamic takes place both within an individual psyche as well as between an individual and his environment.

As Jeremy makes clear, between 1935 and 1938 AH was certainly betwixt and between – between four different cultures, between four different languages, between different ideological pulls, between different loyalties, between radically alternative ways of understanding economics (Hayek versus Keynes), between studies steeped in mathematics to wide ranging readings in the humanities and social sciences, and most of all torn between thought and action. Between London and Trieste, his courage was tested in the “searing political experience in the Spanish Civil War” where he proved he could be a man of action but where the proof remained hidden from others, even his most intimate ones.

How do you exercise praxis? How do you apply thought to action without that thought and reflection making you impotent to act? A rite of passage is a demonstration that one has potency, that one can act. What happened in that heroic journey, that call to adventure, that has summoned men such as Ulysses or adolescents such as Huckleberry Finn, my favourite traveller on an individual odyssey in all my reading? AH went to Spain on a vision quest. What happened? Previously, he seemed to be in constant search for a guru for both thought and the principles of life. In this area, for whatever reason, and whatever respect he retained for his father, Carl Hirschmann had failed him. AH was about to fall down a black hole and then re-emerge resurrected from the dead. Before he did, it would be well to probe the intellectual and other forces that were tearing at his mind and soul.

Jeremy tells us that at LSE, AH fell under the spell of Abba Lerner whom I first encountered in 1959 as a speaker at a cooperative conference in Washington when he was teaching somewhere in Chicago. Lerner had written an essay on the Swedish middle way that I had read in a Canadian journal. I then read his book on The Economics of Control. I believe he wrote this book all through the thirties when AH took his course of lectures. I reacquainted myself with that book for this blog for I had largely forgotten it and the plethora of readings I explored when I was very deeply involved in the cooperative movement and searching for a middle way between capitalism and socialism. Lerner, as a former socialist, now influenced by both Lionel Robbins and Frederick Hayek, and exposed to the revolutionary theories of John Maynard Keynes (The General Theory of Employment, Interest, and Money was published in 1936), he had moved away from exploring a price mechanism for a socialist society that would be fully democratic and not be obsessed with the abolition of private property.  Lerner had become convinced, as I was, that ownership by the state of all property could never be democratic. Lerner had written on the economics of control even in a laissez faire economy that would be directed to serving the common weal. The economy could be a collectivist one or one that emphasized and supported private enterprise. However, I never knew anything and still know nothing about Lerner’s work on concepts of international trade and price equalization theory.

Lerner had been a missionary of the thesis that socialism was about the democratic control of economic life and not about the abolition of private property. As it is today, the emphasis of social democrats was on full employment, preventing capitalist cabals and fostering a more just distribution of benefits of economic growth. For Lerner, the middle way permitted the reconciliation between liberalism and capitalism on one side and democracy and a more just distribution or true socialism on the other side. Lerner’s complicated formulas on determining the optimum way to ensure distribution and rewards were both just and under democratic control went beyond my skills.  I would later give up the idea that cooperatives were the answer to democratic socialism but I could identify with Jeremy’s account of how AH came under Lerner’s spell and could avoid the Scylla of Hayek’s methodological individualism and Marx’s collectivism.

AH was helped by very good and close lifelong friends at LSE. His closest friend for the rest of his life was probably George Jaszi who would end up getting AH his first job in Washington in the Commerce Department, a job that threatened to bore him to death. Another good friend at LSE, Hans Landsberg, a fellow escapee from the Nazis who would later be a colleague in the OSS and much later one of the foremost experts on energy economics, particularly oil in the Middle East, was unable to save AH from the McArthy era machinations of the FBI. Both friends had fallen completely under the spell of Keynes. AH resisted and emerged more on the right, though, ironically, when he was in the OSS, the McCarthyite infection of his file had him pegged as a potential security risk and possible fellow traveller, a suspicion he seemed to refuse to face directly. AH did remain distrustful of any grand theory, whether centre, left or right, for the rest of his intellectual life but never learned to probe and unpack the sources of distrust that infected his own career. I will return to this issue in the next blog.

How were the precepts of left concerns with justice and the right emphasis on freedom to be reconciled without getting into the straightjacket of an absolutist grand theory? How was thought to be reconciled with commitment and action as exemplified by another temporary hero of AH, Piero Sraffa, the expert on David Ricardo?  After reading Jeremy’s entire book, I became convinced that the biggest influence in LSE had not been Abba Lerner but P. Barrett Whale who had researched the reasons the banks failed in Germany and the role of the central bank in regulating the economy that, at a deeper level, was rooted in a constructivist theory of money in contrast to the “naturalists” who were diehard supporters of a gold standard, and liberal absolutists committed the market as the determinant of the value of money.

I was very sorry that Jeremy had not written more on this for he did say that Whale’s teaching influenced AH`s first original paper on the weakness of the French franc and the process of economic detective work. Jeremy had obtained his Masters degree from LSE and I recall him doing research on Louis Rasminsky, the third governor of the Bank of Canada who played such an important role in forging the Bretton Woods Agreement that was so crucial to past WWII reconstruction. (See Bruce Muirhead`s 1999 UofT Press biography, Against the Odds: The Public Life and Times of Louis Rasminsky.) Perhaps it would have been too speculative, given the lack of written evidence, to write on the early formation of AH`s theory of money and his principles as discovered through the analysis of actual bad practices. So perhaps these are just the frustrations of a philosopher who does not feel as restricted by empirical evidence as Jeremy seems to be.

Jeremy does argue that AH was in a deep funk after finishing his studies at LSE in 1936, but the events of the break out of the Spanish Civil War determined his next course of action. I suggest `determined` is too strong a word. AH was in a black hole and needed to dive deeper into it. The Spanish Civil War in its chaos and simply gross horrible quality offered that opportunity. I believe the Spanish Civil War was the crucible that ultimately really taught AH how to really think with an independent voice and a degree of abstraction from the blood and gore of the real world. The Spanish Civil War gave him the standards that would serve him for the rest of his life acting as a form of immunization against idolatry and false gods. He was reborn as a new person by that process whereby he emerged as a man with clear commitments. After that rite of passage and initiation, he became entitled to join the ritual circle of true individuals.

AH went as a volunteer stripped of his intellectual skills, in the midst of the mire of battle but totally divorced from the powers elsewhere in Berlin, Rome and Moscow pulling the strings while the West reflected his own state as those capitals were mired in impotency. Reduced metaphorically and literally to the dust of the earth, AH had begun his real initiation into adulthood and took a vow of silence which he never broke, even with his wife Sarah. He could never tell or report on what he saw or what happened to him; only the scars on his neck and leg gave witness to the untold story. It is the one area in which he denied himself a right to have a voice.

He entered into the well of blackness by leaving behind both the world of books associated with his father and the world of his domestic ties with his mother and sisters. Into the cauldron of hell he went, carried away by the Zombies, the white clay men of empty rhetoric and slogans manipulated by the puppeteers abroad. AH would be immersed in a world full of evil spirits, a world totally alien to his past experience even as he watched the first manifestations of such a world with the rise of Nazi thugs. In the battle along the Aragonese Front, where the volunteers were outnumbered and outgunned but held on, the casualties were enormous. But the loss of his innocence in the face of the cruelty and cynicism as internecine fighting broke out as the Communists strived to achieve control, was far worse. In making a pact with Stalin, the supporters of the government had made a Faustian bargain. For Albert, the death of Mark Rein at the hands of the communists “brought an end to any faith or trust in Communism”. More painful than the physical wounds, more painful than watching the thuggery of the Nazis, was the experience of communist betrayal in Spain. “To see people whom one expected to contribute to one`s own struggle turn into the opposite was in some sense worse.” (118) The spiritual wounds were much deeper than the physical ones.

The reunion with Ursula, Eugenio and Sylvia in Trieste was a triumph of rebirth. AH was now ready to complete his education with his true mentor who would end up dying so that AH could be reborn as a fully independent human intellectual, independent in heart and independent in spirit. Who would have thought that after his magnificent performance in guiding refugees to safety he would then have to spend another few years in an intellectual wilderness in the OSS cursed by a betrayal from the right rather than the left? But we are getting ahead of ourselves.  AH was not only re-united with his sister and brother-in-law but with their loveless marriage bereft of romance or affection and afflicted with sexual frustration. But they had made a beautiful child. AH pessimistically declared the natural law drawn from the story of Adam, the propensity of adults to project onto nature (and their children produced by nature) their own dreams and hopes. “Nature, believe me, is like a mirror that reflects the image of him who scrutinizes it. And man, the most intelligent of all animals, substitutes his own image for the mirror.” (140)

In Italy, Albert produced his first truly original work and had mastered the conduct of the most basic element in science, accurate counting, in his study of Italian fascist fertility policy that resulted in the paradox of higher child mortality rates as well as higher rates of reproduction. It reminded me of a study in Uganda where Bill Gates` generous policies on AIDS in Uganda led both to significant reductions in deaths from AIDS as well as incidences for contracting the disease, but also a significant rate of increase in infant mortality because the higher wages paid to AIDS health workers sucked away the health professionals from the care of pregnant and birthing women. This was an early example of the paradox of the unintended effect of translating good intentions into policies.

That examination of Italian fertility policy was not the study that would be the foundation stone of his academic career after he emerged from the hell of Spain. It was his study of Italian public finances, monetary policies, prices and commercial trade that unveiled the hidden stresses beneath the Italian fascist economy. AH, while resolute and unbending in keeping the secret of his rites of passage and initiation into manhood, had also become a master detective astute in exposing the façade of a crafty use of reserves, bank borrowing and monetary controls to contain consumer prices. At the age of twenty-one, AH had proved that he had been an astute pupil of both Lerner and Whale. The side benefit was that he earned the equivalent of a PhD. The combination of his intellectual training and the fiery crucible of Spain had produced a scholar totally emancipated from the ideological curses and debates of the left, just as Jeremy`s own studies at Oxford for his PhD would instil in him the greatest respect for both careful empirical observation and refined intellectual analysis to free him from a romantic student attachment to Gramsci.  

All of this was enhanced by his readings in the humanities, his love of aphorisms, especially his deep passion for le mot juste, and his lifelong affair with Michel de Montaigne. It is a love affair I understand perfectly. In my own study I have two vey large framed posters hanging on the wall announcing a conference on the author in Bagni di Lucca, Italy where my wife and I found ourselves on the occasion of the four hundredth anniversary of his birth. Montaigne is the only philosopher whom I have read but never commented upon. Montaigne understood humans. He most understood that our capacity for empathy was not abstract but a product of physical and historical proximity that would undermine any quest for abstract cosmopolitanism every time. For Montaigne, all solutions to social problems had to enhance both survival (Hegel`s Life) and man`s highest aspirations (Hegel`s Desire or Albert`s passions). Montaigne imbued Albert Hirschman with a deep understanding of constructivism and how an ironic detachment could serve as an antidote to the propensity to be obsessed with eternal truths about the social world even though he carried the haunting sense imbued in his earlier education that the absence of a full-fledged Weltanschaung was a defect. AH would remain haunted for the rest of his life, especially by the arrest and death of Eugenio Colorni, but he had learned in Spain how to keep his ghosts at bay.