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In Praise of Possibility

Like most disciplines, the field of development economics came into being not because of disinterested intellectual curiosity but rather due to pressing contemporary events. In the late 1960s, one prominent international civil servant and development economist reflected that:

the cue to the continual reorientation of our work has normally come from the sphere of politics; responding to that cue, students turn to research on issues that have attained political importance. Theories are launched, data collected, and the literature on the ‘new’ problems expand.

In the case of development, the cue was the new postwar international order characterised by the demise of empires, the onset of the Cold War, and the birth of several new independent states, the so-called Third World. While the new discipline had a good dose of Cold War hawks, it also attracted many talented economists enticed by the prospect of contributing to the advancement of less developed countries, and to a more balanced and peaceful international outlook.

One such figure was Albert O Hirschman, a German-born émigré to the United States who from 1946 had worked as an economist with the Federal Reserve Board on problems of economic reconstruction and cooperation in western Europe. In 1952, Hirschman moved to Colombia on a World Bank assignment to assist the country’s National Planning Council to implement development policies. The book that distilled that experience, The Strategy of Economic Development (1958), was immediately recognised as one of the most important contributions to development economics, and it made Hirschman famous as a pioneer of the discipline (as well as earning him tenure at Columbia University).

The book’s success rested on its original and stimulating analyses, as well as on Hirschman’s rhetorical strategy of presenting them as a completely novel and dissenting view on development, entirely different from the fashionable orthodoxy of grandiose but unrealistic development plans. Hirschman wrote:

How many a Western traveller to an underdeveloped country has been bewildered and dismayed by the ubiquitous poverty and inefficiency, by the immensity of the task, and by the interlocking vicious circles! The temptation is strong then to leave all this backwardness alone and to dream of an entirely new type of economy where, in the words of the poet [Charles Baudelaire in Les Fleurs du mal (1857)], tout est ordre et beauté [there all is order and beauty].

Instead of focusing on comprehensive plans ‘compiled on the basis of “heroic” estimates’, Hirschman posited, less developed countries should focus on the hidden mechanisms – ‘hidden rationalities’ in his parlance – that were already at work, even though perhaps in ‘roundabout and unappreciated fashion’. Development depended not so much on discovering the optimal combinations of given resources and their correct use as on understanding the sequences, pressure mechanisms, and technological and investment linkages that activated processes of change. Crucial for Hirschman was understanding ‘how progress can at times meander strangely through many peripheral areas before it is able to dislodge backwardness from the central positions where it may be strongly entrenched’. The Strategy of Economic Development was devoted to the study of these economic mechanisms, with sophisticated discussions of investment sequences and complementarities, the pros and cons of prioritising social overhead capital or directly productive activities, the role of imports, and that of capital-intensive technology.

Read entire article at Aeon