Worldly Philosopher: The Odyssey of Albert O. Hirschman (62 page)

This was hardly a gritty analysis gilded with practical recommendations. There were no numbers or tables, no flowcharts or process-tracing timelines; indeed, the data were largely kept in the vaults of his massive files. Hirschman chose a more elliptical set of narratives organized around morality tales with a common theme: have your eye open for unintended, positive side effects of projects, especially the ones that induce behavioral and institutional changes in the milieu. Try to spot projects with these potentials. At their harshest, Hirschman’s conclusions called for better monitoring. With a life of their own, long-term projects were the source of mysterious lessons that their planners could not always foresee, which meant watching them closely for the unexpected. So all investments should have “project evaluation” built into them. Compared to the intense heat that he would later train on the World Bank, Hirschman was polite if not solicitous. He could hardly be accused of bashing the bank.

Still, the World Bankers were ungenerous and churlish. Here was a chance for insiders to vent about the outsider’s findings—thereby exposing the divide between operations (which is what they thought of themselves conducting) and evaluations (which is what Hirschman was doing—and called for more of). Hans Adler found “that his conclusions have only very limited applicability.” He added that, to some extent, “we” have already improved appraisal techniques—and suggested, snidely, since Hirschman had relentlessly asked staff for their memos, that Hirschman have a look at “some of our recent reports.” Adler scorned Hirschman’s recommendation that the distributional effects of projects be considered in their design and evaluation. Public utilities, he announced without a trace of doubt, should “cover costs,” nothing more. Let distribution be the domain of fiscal and monetary policy. Beside, if there were adverse effects on distribution, this might help because the poor don’t save. The only point Adler could bring himself to agree with was the inclusion of social and political factors in the success of a project. But even here he could not resist a swipe: “This is easier said than done,” adding later that
“there is also the danger that we may allow for them too extensively.” Mario Piccagli, whose bailiwick included two of the evaluated projects, started his reply by noting that the project in Uganda “was an unfortunate selection as it was hardly representative of anything” (this, despite the fact that Hirschman was in extensive consultation with World Bank staff in the selection process). His second point was even more revealing of the ferocity: “While Mr. Hirschman appeared to have had 20/20 hearing for echoes from the other side [the critics, one supposes, or perhaps the “natives”?], he did not appear to have heard anything at all about the Bank’s viewpoints on these matters.” Piccagli thought distributional concerns “twisted reasoning.… I have lost any hope that anybody who feels this way can be convinced by reasoning that it is not so: this appears to be sort of a religious tenet: either you believe it or do not.” A.D. Spottswood, chief of the Public Utilities Division, referred acidly to Hirschman as “the Doctor.”
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Hirschman’s reactions are unknown. Endearance was unlikely.

A nerve was struck. The bank’s staff was not unaccomplished and had steered the organization into its new business, but they were a clubby bunch. There was a reason for Sandy Stevenson’s worries: large sums of money were going into projects whose managers were unaccustomed to letting outsiders be anything more than beneficiaries or, when things went wrong, blameworthy. Hirschman ran headlong into the kind of confident groupthink against which future critics, including former supporters, would hurl their dissent. Had World Bankers learned the art of listening, some of the clashing might have been averted. For the time being, Hirschman was alone in calling for more scrutiny and open-mindedness. He read the griping and returned to Washington in mid-October to meet with Knapp, Andrew Kamarck (head of the Economics Department), and Hugh Ripman (chief of the Industry Division). He was the picture of poise. Writing to Kenneth Bohr of the Economics Department (whom Kamarck had suggested as a high-level liaison), he said he was looking forward to Bohr’s role as his “general intellectual critic,” especially on the more controversial points. After the hazing he’d received from the staff, “the experience with the above mentioned memo has already shown that one cannot be too careful about these things.”
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By the scorching summer of 1966, Hirschman retreated to the comforts of his air-conditioned study on Central Park West, where he pored over his notes and the feedback (if it can be called that) on the provisional findings. By then, he knew what he wanted to say, and staying sufficiently above his project details, as with
Strategy
, he kept the prose general without being vague. He had long since given up formal mathematical measurements in favor of a lyrical style. But rather than tell stories about particular cases as he had in
Journeys
, this time he teased out general insights wrapped around an aphorism or an iconoclastic principle. “It turned out to be a strange product,” he mused as he sent it to the Brookings, “all these project stories were poured together into a quite ‘colorful’ system—the method is quite Marxist since I derive the ‘behavior’ of the projects to a big part from their technology.”
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Technology, he had realized, was one of the autonomous forces conditioning the life history of the projects he’d studied; railways, dams, irrigation pipes, and roads conditioned activity and performance. This nascent interest in the role of technology in development experience he filed away for future reference.

It was the paradoxical features of economic change that he wanted to reveal, which led to the book’s most famous metaphor. He began with the premise, confirmed over and over in his managerial testimonies, that World Bankers would have nixed projects had they known in advance all the difficulties they would encounter. But they didn’t, and many projects turned out to yield their share of benefits, many of which were not intended. To capture this dynamic, the first chapter coined a term, the Hiding Hand, to convey the elusive dynamics behind the process of “stumbling into achievement” that so fascinated him. Adapting Adam Smith, whose Invisible Hand was a metaphor contrived to represent the mysterious, behind-the-scenes working of the marketplace, Hirschman wanted to draw attention to agentic aspects of the hand’s workings. This was especially clear in Third World development, where humans were actively intervening in the course of events in the name of effecting change and promoting development. Hirschman happened upon the idea in Thailand, where he had gone to look at a big irrigation project. After stomping about the fields and listening to his witnesses, it became clear that advocates
of the project had overstated its benefits and understated its costs. They simply found it too hard to resist claiming wonders such as being able to “make the desert bloom.” So, to promote the venture, they low-balled the expenses; “undercosting” could take the place of “overselling.”
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Whereas the Invisible Hand was casually deceptive, the Hiding Hand was actively so—and stimulated people into action. While a project manager might wind up with ulcers because someone’s original calculus was wrong, there were all kinds of benefits, public and private, many of which escaped the trained eye of the cost-benefit calculator because they balanced costs only against planned, expected, rewards. This kind of gaming induced people to do things they otherwise wouldn’t. To the developer, the point was not to try to restrain this kind of operation but rather to be open to its effects. What he did not do was signal its perils.
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The other big effort of the work was to draw attention to development projects’ “traits,”many of which were inherent in their techniques. Did they require skills, ease social conflict, or aggravate regional differences? A project capable of changing the constraints surrounding it could be a “trait-maker.” If not, they were “trait-takers.” Hirschman had been scratching his head over how best to characterize the ways in which some projects induced changes in behavior and institutions while others did not. Price theory gave him the cue, where the distinction between price-taking and price-making, between competitive and collusive conditions, helped explain how buyers and sellers behaved. Transplanted to projects, trait-taking applied to situations where a project fit into a cultural and institutional setting and molded to it; trait-making changed the setting and more actively changed the institutional landscape. The message to developers was to consider these forces, especially in evaluating a project’s trait-making potential. Unfortunately, here, too, he tended to presume that trait-making was positive. In Nigeria, however, the truck was a taker and fit better into the complex interethnic milieu and regional rivalries. The train, by contrast, more actively changed its milieu. As he would later see, trait-making in this kind of context was hazardous.

Combined, these observations made the pitch for the “centrality of side effects.” This was an amplified earlier recommendation to look out
for unexpected rewards from projects. But the gist was, more or less, the same: widen the lens when evaluating projects and look out for those unplanned and hard-to-quantify dividends.

This ran headlong into another orthodoxy—one which Hirschman had in his sights. While the quest for scientific determinants for policy making (like the Planning, Programming, and Budgeting System, which Robert McNamara and the “Whiz Kids” had brought so confidently to Washington) was beginning to take a beating as the Vietnam War escalated, it was still the rage among developers. Hirschman warned, prophetically, that overconfidence in these techniques spawned blind spots to the side effects of big projects. Either projects were condemned to fall short of inflated expectations or failed to appreciate what they did accomplish even if they were not planned. When W. Arthur Lewis, one of Hirschman’s alter egos in the debate over balanced versus unbalanced growth, published
Development Planning: The Essentials of Economic Policy
in 1966, he laid out the fundaments of the “arithmetic of planning” and linear programming. Hirschman reviewed the book politely. But some of his words barely conceal his quarrel. He praised the “heroism” of the effort. But Lewis’ treatment of “political realities” as intrusions that the economist must get used to was simply “unhelpful.” Lewis occasionally got carried away “by his penchant for proclaiming sweeping, universal laws or for issuing precise rules-of-thumb.” Hirschman was less restrained in his blast against input-output gurus in a short essay written for
Encounter
magazine eight months after the 1964 coup in Brazil, where he decried “the permanent orgy of misinterpretation and misunderstanding” that was now “heightened by a disparity in thinking about economic development.” What applied to Washington also held for multilateral institutions like the World Bank.
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The book was not, however, practical. Sandy Stevenson was a bit disappointed. From the start, he wanted to change not just the way his colleagues were thinking but the way they were practicing. “I was sorry to hear that you will not be putting into the published edition a chapter which, I think, would have made it considerably more helpful to practitioners in the field of economic development. I am afraid that, somewhat
selfishly, I am most concerned about whether or not they take into account any of the factors you emphasize.” But the “gentle push” had no effect.
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The reception got worse as the document moved down the World Bank ranks. Part of the problem, as one member of the Economics Department suggested, was exaggerated expectations from one of the great figures in their field. “It is a bit like the frustrations you describe in your section on excess demand.” “You may wish to consider,” noted Herman G. van der Tak, “whether you could provide a more operational ‘summary and conclusions,’ possibly as a separate paper, which would provide practitioners with guidelines on the side effects that they should look out for.” Kenneth Bohr found that creative responses “induced by difficulty in project execution may be of particular value for development is intriguing.” But he also found it “a bit disconcerting.… The question that arises immediately is what sort of guidance can we get from it for making investment decisions?” This was fair enough; the bank had to choose between investments, and
Development Projects Observed
gave no guidance. While the book was fascinating, it was also “somewhat disappointing.” He wanted more summary statements throughout the text and for the “general speculations on projects’ behavior” to be brought down to earth with some advice. Hirschman did not think this was a bad idea. It was just not an interesting one. The task fell to a staffer who braved the manuscript to come up with “50 Points” as principles or tools for project appraisal. It was not an easy task—“I found it impossible,” noted the junior economist anointed with the job, “to confine myself to the enumeration of operational questions from the point of view of project appraisal (as is usually understood in the Bank) because the picture of a precise construction of methodology for refining the tolls of ‘cost-benefit’ analysis … is simply missing.”
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It was true: this book was short on text for the practitioners. There was a deeper reason for this. A how-to-do-it manual for project managers presumed the kind of ex ante certainty that Hirschman was calling into question to help people take risks and
do
things. In this sense, as he came to see it in the course of writing,
Development Projects Observed
was the
third volume of a trilogy. He was moving along a continuum from principles (
Strategy
) to policy (
Journeys
) to projects (
Development
), getting closer to the ground all the while, even as he was expanding his range from a single country (Colombia) to a region (Latin America) to a global sweep. This ambition, hidden to readers, only became clear to himself in the course of writing. This was precisely one of his arguments: projects have to be open to follow leads and directions that could not have been foreseen, and monitored to enhance the beneficial ones and thwart the malign ones. Seen in this broader context, the trilogy had a latent but “overriding common intent to celebrate, to ‘sing’ the epic adventure of development—its challenge, drama, and grandeur.” Of course, it was hard for the practically minded reader to appreciate the lyrical qualities. As he complained to Tom Schelling, he was tired of the comments that his exercise was different from what was once “expected.” This, after all, was one of the goals of development itself. “This book is an exploration, an experiment, and I need a critic someone who can understand that in the first place, and
then
tell me where I may have gone wrong.”
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