Worldly Philosopher: The Odyssey of Albert O. Hirschman (34 page)

If flexing trade muscles was a way to subordinate partners and fueled “economic aggression” that could not be explained away as bad cultural habits, greed, or the entrenched interests of landowners (Gerschenkron’s Junkers) or bankers seeking opportunities to invest overabundant capital (a prevailing Marxist theory) but rather was a property
of
the global trading system as long as there was basic asymmetry between trading partners, what was to be done? Hirschman was aware that German aggression was partly a response to the punitive terms of the peace after World War I, although he urged readers to see that it had older origins that the Treaty of Versailles merely helped bring to the fore. There was in fact a larger challenge. “The Problems of Reconstruction,”
National Power
’s fourth chapter, argued forcefully against the temptation to see Germany as an aberrance, an exception to a more general rule about trade. Economic aggression had to be seen in more systemic ways—as woven into the very fabric of national sovereignty. A real peaceable order required a drastic overhaul of the multilateral system. It had to confront the source of the problem—a contradiction from which liberal, democratic regimes were not immune. If there was a “natural temptation” to use trade as “an instrument of national power,” Hirschman felt it was therefore obligatory to sacrifice the means of national power holders’ access to commercial weaponry. The core of his injunction came down to this: “Nothing short of a severe restriction of economic sovereignty” would preserve a world that wanted peace with the gains from trade. The lesson of 1919 was that restraining one side, the Germans, had simply sharpened national antagonisms and created additional opportunities for an even more viral and dangerous form of nationalism.

Hirschman was taking on big figures, though the full extent of this challenge was not so clear, in part because the author rushed his final product without expanding on its conceptual ambitions. He may not even have been fully aware of them. Adam Smith wanted new coordinates for thinking about wealth—not as the purview of states, but rather as the product of societies. Ridding the old doctrine would free the world of “power temptations.” In a sense, Hirschman was restating the Smithian formula with data and an eye to a concern about peace. So long as state power depended on control over trade, economics would serve despots.
But what Smith missed, Hirschman felt, was the recognition that there would always be
temptation
so long as there were small and big countries, rich and poor. Hirschman, who pored over the Doe Library’s edition of
The Wealth of Nations
, felt that Smith ascribed the problem to a failure to see wealth differently—not to basic inducements and incentives. So long as there was an underlying disparity in scale and income around the world, states—mercantilist, capitalist, or communist—would be vulnerable to the kind of predatory activity that careened the world into war. It would not help just to preach a different conceptual gospel, even though it had more virtues. In this sense, the world economy was always subject to a basic “power disequilibrium.”

But there was more to Hirschman’s argument. Greater global integration did
not
check predation by making countries more interdependent and, therefore, more cooperative. There was an equal risk that unmanaged, interdependence could aggravate relations and yield to tit-for-tat bullying by the wealthy and the big. Hirschman’s endless tables illustrated how countries became more dependent on one or fewer markets and more dependent on one or a few commodities as they specialized and reaped the gains from trade—countries would be prone to dependence
with
power temptations.

The only way out, to achieve peace with welfare, was a wholesale break from the formula that had governed global trade since Machiavelli: “This can be done only by a frontal attack upon the institution which is at the root of the possible use of international economic relations for national power aims—the institution of national economic sovereignty.” For its time, this was an audacious argument. But he went further, arguing that “the exclusive power to organize, regulate, and interfere with trade must be taken away from the bonds of single nations” and turned over to “consular services,” “chambers of commerce,” “export-import banks,” international transportation companies, and a list of civic and private agents involved in global commerce, rescuing trade from states whose leaders could not resist the temptations to empower themselves at the expense of others. He threw the whole model of national sovereignty into the air, advocating “the internationalization of power” by giving real teeth
to Article 16 of the Covenant of the League of Nations, which gave it direct control of state trade policies. Roosevelt’s “freedom from fear” and “freedom from want” could be reconciled only with a dramatic change in the way we think about the international political economy (p. 81). Hirschman’s prescriptions grew increasingly unmoored from his analysis and went from the audacious to the Utopian, a move that would lose the sympathy of some of his reviewers and would prove an exception to his preference for small, close-to-the-ground, analysis.

By the time Hirschman reached his final pages, he was boiling down all his convictions about how policy makers might think about their place in history. He reminded readers that they should not presume that any global division of labor was ordained. Many outcomes—good and bad—were possible. The search for covering laws was destined to take explanations from particular times and places and universalize them. One can see a grain of his Hegelian past, and his bow to the cunning of reason, through the lacquer of his economics: it is “highly improbable that any
particular
pattern of the international division of labor will last forever.” His readers needed to be reminded that they were living in just one of History’s moments. This did not lead him, however, to more meta-laws. Rather, one hears the echoes of Eugenio Colorni. It was how people chose to perceive the world that guided their choices—though it did not determine their options. All transitions in history, therefore, create challenges, but these challenges can be aggravated by the illusion that they are permanent conditions. His final words were reserved for the pessimists. While the nineteenth-century “free trade” moment had passed, and the classical political economy which derived to explain it was now frayed, there was no need to fall prey to “flights of the imagination at the start of which we find a real lack of imagination” (p. 151) Colorni could not have been far from his thoughts when he accented a practical, Utopian turn, a centerpiece of his reformist principles; when he emphasized the role of the imagination in history; and when he cast his eyes beyond the present to formulate policies for the future; the lack of imagination was simply “an incapacity to conceive of a state of affairs radically different from that with which we have been acquainted” (p. 151).

The final, moving, pages anticipated much of what would later flow from Hirschman’s pen.

But they also created a problem. It was not always clear with whom Hirschman was jousting. By then, trade pessimists were in the retreat, and the sentiment was swinging—as he no doubt knew from his conversations and work with Condliffe—to thoughts about a global regulatory framework. And while its postwar incarnation fell far short for many idealists, the basic norms—especially in the United States, which would play a decisive and leading role in restoring a multilateral trading system—had shifted decisively. Most of the citations to pessimists were to German writers, starting with Werner Sombart, who worried that German industrialization would lead to self-sufficiency, and commentators on the First World War. There is certainly a way in which he anticipated later criticisms of world trade, from later antiimperialist critics of the 1960s to globalization pessimists of the 1990s. But at the time, it was an odd note to strike and suggested that he was shadow boxing with an already vanquished opponent, and thus driven to advocate a concept of “the internationalization of power” that seemed, if not excessively idealistic, blind to the fact that a transition to thinking about a new global order was already beginning.

If Hirschman harbored any hopes for a cascade of enthusiastic reviews, they were dashed. By the time the book came out, it was read as being out of step with the times. Seeing the defeat of the Axis powers on the horizon, many economists were less concerned with empire and dictatorship, having moved forward to think about elaborate global trading regulations; it was a hot topic at the Allies’ financial moguls’ discussions at Bretton Woods, New Hampshire, where the postwar economic architecture was designed.
National Power
was almost instantly forgotten. Philip Buck of Stanford University praised the book’s “originality in devising a new method of analysis” and for illuminating a central puzzle of the twentieth century. He agreed with the general principle that world trade not be left to the governance of sovereign nation states. Another reviewer also lauded the technicalities of Hirschman’s indices. Indeed, in general, reviewers found the measuring devices impressive, but the applications
less so. Michael Florinski of Columbia University appreciated the “provocative” nature of the “compact study” and nodded to the “erudition, thoroughness and imagination.” The core of the volume on foreign trade as an instrument of national power was “penetrating” but “somewhat abstruse.”
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There was a more fundamental problem. It got little attention because it was—to many—already obsolete, and the final ruminative passage seemed, to some, downright obscure. If Hirschman advocated a “frontal attack” on “the institutions of national economic sovereignty” with a whole new architecture for managing global trade, one reviewer could not bite his lip: “This proposal, needless to say, has not the slightest chance of being acted upon within any predictable future, if ever.” Many years later, Hirschman himself conceded that the book carried the burden of “infinitely naïve proposals” whose ability to solve the world’s troubles rested on a deus ex machina of an entirely new order to wish away an “unpleasant reality” he’d uncovered instead—as would become a hallmark of later writings—of “scrutinizing it further for inner modifiers or remedies.” But this is the voice of the mature theorist of reform, looking back on the less ironic, youthful, idealist who had not yet developed his antennae for the dialectic of forces and their counterforces whose interstices were the spawning ground for “possibilities rather than certainties.”
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The result was that, as the few reviewers who dealt with it noted, the book’s recommendations were, at best, vague, too general, and had “nothing to offer” to those concerned with how to manage postwar commerce. The economic problems of the postwar years turned economists’ attention away from the war’s causes to its consequences. The book got pigeonholed as a study of “international relations” and was largely ignored by economists. It soon dropped from sight and went out of print as being prewar vintage; its relevance was already past.

This was not the work that Condliffe hoped would make the young German economist’s career; far from it. The deeper messages about the underlying dynamics of inherent tensions, disequilibria, and conflict were at odds with an age that clung to hopes that the world’s problems
had been temporary and were reducible to bad management, poor leadership, and venal tyrants. If Hirschman was drawing on the well of Marxism to say that there was something more fundamental at work in political economy, his tone was at odds with the struggle to anchor the coordinates of a new, liberal, postwar consensus.

One effect of the book’s poor reception was that the index over which he labored so hard disappeared with it. In itself, this might not have gotten under Hirschman’s skin. But it was when it got picked up and branded as someone else’s index that his frustration came to the surface. In 1950, O. C. Herfindahl published a study of the American steel industry that adapted Hirschman’s index, albeit footnoting him, to offer measures of concentration in this one business. It was soon picked up by statisticians and regulators concerned with an objective measure of market concentration for their trustbusting work and named the Herfindahl Index. This misnomer was recognized by no one—but it irritated Hirschman to such a point that he felt compelled to set the record straight in 1964 in a small entry to the
American Economic Review
called “The Paternity of an Index.” There he laid out the forgotten history of this technical exercise explaining that the measure was being mistakenly named after Corrado Gini, who did not invent it, or Herfindahl, who had simply reinvented it. But rather than lay claim personally, he ended with a laconic and imperfectly disguised index of his feelings about the years as a forgotten figure: “Well, it’s a cruel world.”
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We have gotten slightly ahead of the story. Whether Hirschman was aware of the risks he was running as he frantically wrote, we do not know. What we do know is that the book was a calling, the result of many years of reflection and a determination to prove himself in a new setting. By the time he was applying the final touches, however, an older calling resurfaced. One must remember that he was trying to explain the structural origins of Hitler’s empire. The political reality of its extent eventually reached the shores of California’s Bay Area. By early 1942, while Hirschman was presenting his initial draft to his officemates, Roosevelt and Hitler were enemies. In the ensuing months, the war dissolved Condliffe’s little fraternity in the Doe Library. One by one the fellowships ran
out. Gerschenkron went to work as a stevedore in the shipyards. Stevenson followed Condliffe to New York to work at the Carnegie Endowment for International Peace. Ellis went to Washington to work for the Federal Reserve Board.

Albert O. Hirschman enlisted in the US Army.

A stair that has not been deeply hollowed by footsteps is, from its own point of view, merely something that has been bleakly put together with wood.