Worldly Philosopher: The Odyssey of Albert O. Hirschman (26 page)

Despite the hardship and the restrictions on foreigners, Hirschmann cast some professional lines. At first, he picked up odd jobs as a tutor to French economics students preparing for the
aggregation
exams to become school teachers. They would receive their questions twenty-four hours in advance and have to cobble together oral presentations. Hirschmann was their coach.
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More and better opportunities came along. He sought to capitalize on his expertise on the Italian economy as the demand for insight, thanks to the looming war, was growing. His knowledge of what was going on behind the fascist curtain brought him to the attention of Charles Rist and Robert Marjolin, the editors of a quarterly economic bulletin of the Rockefeller Foundation–backed Institut de recherches économiques et sociales of the Sorbonne. Rist, the senior of the partnership and a more conservative economist, aligned with Lionel Robbins and the anti-Keynesians. Marjolin, only four years older than Hirschmann, had studied sociology and economics at Yale with a fellowship from the Rockefeller Foundation and would go on to a storied career after the war; he became something of a mentor to Hirschmann.

Writing for the Institut bulletin was a thrill. For the first time Hirschmann was paid for work he enjoyed and for which he had prepared. What emerged was a series of reports on the state of the Italian economy focusing on the hidden disequilibria of Mussolini’s autarkic industrialization and militarization. Carrying over his earlier work, Hirschmann explained how state spending was leading to inflation and budget deficits. “We might ask,” he wrote, “why the Government has revealed this year that the ordinary budget has a considerable deficit while last year they had tucked it all away in the extraordinary budget. The reason is probably that it wants to prepare the public for future sacrifices.” It was this kind of shrewd analysis of Rome’s deceptive handling of the economy that drew, in particular, Marjolin’s attention. He was also keen to place Italy into the context of a more open economy—and tracked the ways in which the despot’s fiscal habits and protectionism had the perverse effect of worsening the country’s balance of payments, making it more dependent on imports of crucial raw materials, especially energy, and machinery. The invasion of Abyssinia, Hirschmann argued, was not just a political gambit;
expansionism was driven by Italy’s perceived need for more colonies to make up for its dependency on imported raw materials and petroleum. “With these measures
la mise sur pied
of war by the entirety of the Italian economy has made more advances,” warned Hirschmann.
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The bulletin essays reveal some early traits. The first is his ingenuity in using sources. To gauge the level of gross domestic economic activity beyond the dubious official figures, Hirschmann kept a careful record of monthly freight shipments on Italy’s rail system; he tracked the imports and exports of particular commodities, such as cotton or olive oil, rather than rely on the government’s aggregated figures. When it came to discussing Felice Guarneri, the fascist technocrat who rose to become the minister of foreign trade, and his claims that the Italian economy’s commercial balances were in fine shape, Hirschmann tallied the declining occupancy of beds in Italy’s hotels to show that tourism was in crisis, raising basic questions about the veracity of the official line. He sought the economic story behind the story. A “freelance economic journalist” is how he later thought of his first forays into publishing.
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There was more to Hirschmann’s developing style. He also now had the time to reconcentrate his attentions on squaring Keynes’s
General Theory
with his interest in international economics; by now the book had been lugged back and forth between France and Italy, and his concentrated work for Rist and Marjolin afforded the time to figure out his own position. Hirschmann began to see himself more and more in an area ignored by Keynesians, though not by Keynes himself. If many Keynesians tended to think of national economies as closed entities, Hirschmann saw them as open ones—and the intersections of foreign trade and national policy, which first came to light in his study of the franc Poincaré, was looming ever larger as a compelling field of research interests. His kind of analysis, and the regard from his mentors, relieved him from the pressures of figuring out whether Keynes had all the right answers. Hirschmann drew readers’ attention to the fact that Mussolini’s model of autarky meant that it had to cover its dependence on imports from some places by accumulating and forcing surpluses from others, notably its “colonies.” Second, Hirschmann emphasized the need to understand an economy against the
background of a political system; “macroeconomic” policy making could not be so easily severed from the ideological commitments of a regime—a right-wing dictatorship, a socialist government, or a pluralist liberal one. From the start of his thinking about economics, Hirschmann never let his eye stray much from underlying political concerns—less because he had his own ideological agenda than because ideology stamped the decisions of policy makers in ways that escaped the attention of much economic analysis.

Working for the Institut de recherches économiques et sociales gave him his first taste of success. It also opened more doors. Henri Piatier, one of France’s leading statisticians read the essays, met Hirschmann, and brought him to the attention of John Bell “Jack” Condliffe.
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It is likely also that the Rockefeller Foundation’s contacts with the Institut also helped, for Condliffe was also a grant recipient. Condliffe, a New Zealander who’d studied economics at Cambridge, had become a leading figure in the Institute for Pacific Studies, based in Honolulu, and from there joined the economic secretariat of the League of Nations in 1931, where he wrote the first
World Economic Survey
. He was a vocal proponent of policies that favored a liberal, multilateral trading system as a necessary bulwark for global peace. As far as he was concerned, protectionist responses to the Depression were a return to the dark ages. One scourge was the tendency for countries to resort to “bilateral” deals favoring signatories at the expense of everyone else: the end of the gold standard and the cycle of competitive devaluations compelled more and more countries to two-way clearing systems and exclusive trade pacts.

To economic liberals, this was a menace. The intellectual crusade to reveal its dangers afforded Hirschmann his first opportunities for paid research—and commissioned writing. They came thanks to the coattails of the practical, easy-going, and well-connected Condliffe, an important figure at the International Committee on Intellectual Cooperation, a fund-starved network of academics who were committed to working across national borders toward solutions for global conflicts, and an intellectual arm of the League of Nations. While it never lived up to its architects’ hopes of creating a global class of scholars committed to pooling
their talents to solve problems, it did sponsor meetings and research. Some of these sowed the seeds for later partnerships. One meeting was the Conférence permanente des hautes études internationales, dedicated to the study of “economic policies of peace,” which was scheduled to meet in Bergen, Norway in 1939. The Rockefeller Foundation set aside funds to support research in areas of public policy that Condliffe considered as hurdles to peaceable international economic relations. One such hurdle was the controls slapped on exchanges of currencies, a device relied upon more and more since the collapse of the gold standard. In this practice, Mussolini’s policy makers had been creative artists since their exchange control system was devised in 1934. Condliffe asked Hirschmann to prepare a report for the Bergen meeting to analyze Italy’s policies and its consequences as well as a statistical profile on the tendency toward bilateralism. Delighted, he plunged into his research and drafted the memoranda. For the first time, he was receiving a regular, and not unsubstantial, paycheck. “I have found good work preparing something for the Conférence des Hautes Etudes Internationales,” he gushed to Ascoli. In the meantime, “my article on Abyssinia has just appeared just as I was not expecting any more from the
Europe Nouvelle
. Too bad because it would have certainly yielded ten times more in
The Nation
.” This was a little far-fetched but reveals a young economist already setting his heights very high in the world of letters. But these were not the only reasons for pride; Condliffe’s request for a profile of foreign trade allowed Hirschman to build his first statistical simulation of foreign trade, using his training in Paris and Trieste and applying it to international economics. “Étude statistique sur la tendance du commerce extérieur vers l’équilibre et le bilatéralisme” was the prolegomenon to what would eventually become his first book. It represented the fulfillment of Barrett Whale’s prediction about Hirschmann’s inclination to economic intelligence.
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The looming war forced the Bergen organizers to cancel the event, but for Hirschmann the report was an opportunity to display his talents for Condliffe and to explore further the thorny relationship between foreign trade and economic policy making in a fascist country. Managing foreign exchange favored the importation of only certain kinds of industrial
products. It also drove private domestic spending into state coffers. It was a system, Hirschmann showed, that worked. The lira stopped its slide and scarce reserves flowed into the military-industrial project of the government. But there was a price. The model did not solve the underlying riddle of how to square massive militarization and public-works spending when the export sector was too weak to sustain them. And the price was rising. Inflation rose, consumer shortages worsened, and Italy was solving more and more of its imbalances by relying on “clearing” systems (like special notes—
bollettos
—usable only to pay a trade partner its dues) that fostered trade blocs that shut out third countries. At the heart of Hirschmann’s analysis was a basic insight: exchange controls were not just technicalities or neutral responses to economic pressures, but also part of a more general tendency to “corporative control by the fascist government to submit all sides of the Italian economy to the State and its multiple para-state organizations.”
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His conclusion echoed Condliffe’s reasons to convoke the conference, to show that the model was sustainable at the expense of Italy’s trade partners, especially its colonies—which only bent Italy more toward expansionism and aggression. Autarky “inspires, in the first place, military considerations;” economic policy making furnished a premise for empire.

The essay thus pointed to a direct connection between the economics of the Italian dictatorship and expansionism into Africa. It appears in his first articles, but here Hirschmann took his analysis a step further, to argue that Italy was not exceptional. The invasion of Abyssinia was part of a more general propensity for industrial dictatorships to solve their economic problems by oppressing trading partners near and far. In this sense, policies were more than technicalities “provoked by some kind of endogenous tendency for trade controls, [they] were controls to serve as an instrument to realize policies decided outside and above them (
en dehors et au-dessus de lui
).”
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This analysis of Italy’s exchange management system contained kernels he would develop in future years about the monopolies in international trade, national democracies, and world peace—parts of an intellectual bridge between economic thinking and political practice. We also see the early elements of a style—the pursuing of trails of
small yet revealing indicators, an affinity for an experiential and practical economic analysis that was never far removed from political and ethical moorings.

None of this took place in a vacuum. With his family scattered in different corners of Europe and harder and harder to reach, political events were hard to miss. In September 1938, when the concessions of the Munich Pact (which allowed Germany to take the Sudetenland from Czechoslovakia) were announced, a pall descended over Paris. At the time, Hirschmann was working out of an office supported by the Carnegie Endowment for International Peace near Vincennes, close to an army installation. Hirschmann remembered listening to Premier Daladier’s voice crackling over the radio as he announced the Munich provisions. Outside, the French army seized Hirschmann’s office building and ordered all employees to leave. Hirschmann had to sweet-talk an officer to allow him to retrieve his coat, briefcase, and materials; he was then escorted from the premises. As he returned to the center of Paris by train, he gazed out the window wondering what awaited Europe.
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The inevitability of war marred the pleasures of personal success. But it was also a development he found fascinating and that pushed Hirschmann to broaden his observations about the economics of dictatorship. The spring of 1939 filled Parisian radios and newspapers with news of spreading fascism. Governments of the Intermarium (the lands between the Baltic and the Adriatic) tried to create a counterweight. The alignment of Poland, Romania, and possibly Yugoslavia could represent an economic and commercial zone that linked the Baltic to the Adriatic, in an alliance of Polish armies, Romanian wheat and oilfields, and Czech and Yugoslav patriotism, to cut Hitler off at the German-speaking frontiers. It was futile. Betrayed by Hungarian expansionists, in late February Hungary negotiated the Anti-Comintern Pact, which included Germany, Italy, and Japan. The Royal Hungarian army invaded Ruthenia, and on March 15, German motorized infantry swept into Prague and barreled on to the Slovakian border. While it snowed on the Reich’s invaders, Hirschmann went out in the Parisian rain to buy his newspapers. He was concerned about peace, but he was also watching carefully the unfolding
struggle for European trade and commercial power in the middle of continent; as the fate of an economic Intermarium buffer collapsed under the weight of fascist imperialism, the commercial and territorial struggle for the region intensified. Poland became the next target. To reintegrate the Baltic port of Danzig into the Reich and to make room among non-German lands for Hitler’s
Lebensraum
, the Führer declared “Danzig or War!” In May, Stalin dropped his long-time foreign minister, Maxim Litvinov, and replaced him with Vyacheslav Molotov. On August 24, Stalin shocked the world and announced a nonaggression pact with Hitler. Included was a protocol dividing northern and eastern Europe into German and Soviet spheres of influence. While the full details would not come out until after the war, the partition of Poland between the two signatories only redoubled Hirschmann’s growing interest in the entwined relationship of trade, diplomacy, empire, and dictatorship. It also confirmed his suspicions about Moscow.