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                                               


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.