Hope, as always, is the crucial ingredient if we are to get beyond this populist moment in a way which avoids a deepening downward spiral. And to understand hope’s ebbs and flows there’s no better place to begin than with the great development economist Albert Hirschman. Here’s how he depicts the intellectual malaise in which many of us find ourselves a quarter century after the exuberance of the early 1990s:
“A drastic transvaluation of values is in process in the study of economic and political development. It has been forced upon us by a series of disasters that have occurred in countries in which development seemed to be vigorously under way…… As a result one reads with increasing frequency pronouncements about the bankruptcy of development economics…[But] the intellectual enthusiasm for development reflected elements of real hopefulness that were actually present. What was not correctly perceived was the precarious and transitory nature of that early hopeful and even exuberant phase…”
Their current resonance notwithstanding, Hirschman actually wrote these words in 1973. (He died in 2012, and had stopped writing more than a decade before then.) He had been a major thinker and chronicler of Latin American development, and was writing about the loss of hope and rise of authoritarianism that swept through that continent from the late 1960s onward. More than that, as his biographer Jeremy Adelman documents, his ideas were profoundly shaped by his childhood and adolescence in Germany. (A youthful progressive activist, in the fall of 1932 he was an entering student at the University of Berlin; by early 1933, he had gone into exile.)
Hirschman’s writings continue to inspire my own efforts to make sense of our times, and to seek out creative ways of revitalizing a bias for hope. (More on that in forthcoming posts, and via my twitter feed, @Brianlevy387). In this post, I provide an overview of some of Hirschman’s core ideas, focused on his classic article “The changing tolerance for income inequality in the course of economic development”. In a related post, I highlight the ways in which some of the ideas might usefully be applied to South Africa (here’s a link). The material here is organized the material into seven themes:
I: Short-run tolerance, long-run hazard
“It can happen that society’s tolerance for increasing disparities [may initially] be substantial… To the extent that such tolerance comes into being, it accommodates, as it were, the increasing inequalities in an almost providential fashion. But this tolerance is like a credit that falls due at a certain date. It is extended in the expectation that eventually the disparities will narrow again. If this does not occur, there is bound to be trouble and, perhaps, disaster…… Nonrealization of the expectation that my turn will soon come will at some point result in my ‘becoming furious’ that is, in my turning into an enemy of the established order…… No particular outward event sets off this dramatic turnaround….”
II: The ‘tunnel effect’
“Suppose I run into a serious traffic jam in a two-lane tunnel. After a while the cars in the other lane begin to move. Naturally, my spirits lift considerably…. Even though I still sit still, I feel much better off than before because of the expectation that I shall soon be on the move. But suppose that expectation is disappointed…..”
“An individual’s welfare depends on his present state of contentment (or, as a proxy, income), as well as on his expected future contentment…. The tunnel effect operates because advances of others supply information about a more benign external environment; receipt of this information produces gratification; and this gratification overcomes, or at least suspends, envy……”
III: Sudden reversals
“As long as the tunnel effect lasts, everybody feels better off, both those who have become richer and those who have not….”.
“Providential and tremendously helpful as the tunnel effect is in one respect (because it accommodates the inequalities almost inevitably arising in the course of development), it is also treacherous; the rulers are not necessarily given any advance notice about its decay and exhaustion…. On the contrary, they are lulled into complacency by the easy early stage when everybody seems to be enjoying the very process that will later be vehemently denounced and damned as one consisting essentially in ‘the rich becoming richer’ ”.
IV: How dissatisfaction manifests – some paradoxes
(i): the upwardly mobile
“As de Tocqueville noted, the upwardly mobile do not necessarily turn into pillars of society all at once, but may on the contrary be disaffected and subversive for a considerable time. The principal reason for this surprising development is the phenomenon of partial and truncated mobility: the upwardly mobile who may have risen along one of the dimensions of social status, such as wealth, find that a number of obstacles, rigidities and discriminatory practices still block their continued ascent, particularly along other dimensions, as well as their all-round acceptance by the traditional elites, and consequently they feel that in spite of all their efforts and achievements, they are not really ‘making it’. Only as social mobility continues for a long period, and the traditional system of stratification is substantially eroded as a result, will the upwardly mobile become fully integrated – or ‘co-opted’.”
(ii): those left behind
“The dynamic of those left behind is the reverse…the nonmobile see only the improvement in the fortunes of the mobile and remain totally unaware of the new problems being encountered by them.
(iii): second phase
“In a second phase there may take place a symmetrical switch: the upwardly mobile become integrated, whereas the nonmobile lose their earlier hope of joining the upward surge and turn into enemies of the existing order….It is quite unlikely however that the beginning of the second phase will coincide for the two groups….The nonmobile may experience the turnaround from hopefulness to disenchantment, while the mobile are still disaffected. This last situation clearly contains much potential for social upheaval.”
V: What determines the extent of polarization?
“For the tunnel effect to be strong, the group that does not advance must be able to emphathise, at least for a while, with the group that does. In other words, the two groups must not be divided by barriers that are or are felt as impassable…..”
“If, in segmented societies, economic advance becomes identified with one particular ethnic or language group or with the members of one particular religion or region then those who are left out and behind are unlikely to experience the tunnel effect: they will be convinced almost from the start of the process that the advancing group is achieving an unfair exploitative advantage over them.”
“A further possibility is that the success of others is attributed not to their qualities, but to their defects. One often rationalizes his own failure to do as well as others in the following terms: ‘I would not want to get ahead by stooping to his (ruthless, unprincipled, servile etc.) conduct’ “.
VI: Growth and equity – sequential or simultaneous?
“If growth and equity in income distribution are considered the two principal economic tasks facing a country, then these two tasks can be solved sequentially if the country is well supplied with the tunnel effect. If, because of existing social, political or psychological structures, the tunnel effect is weak or nonexistent, then the two tasks will have to be solved simultaneously, a difficult enterprise and one that probably requires institutions wholly different from those appropriate to the sequential case.”
“Development disaster occurs in countries in which [a sequential] strategy is nicely abetted for a while by the tunnel effect, but where ruling groups and policy makers fail to realize that the safety valve, which the effect implies, will cease to operate after some time.”
VII: The tunnel effect in the contemporary USA
“After a revolution, and because of it, society will have acquired a high tolerance for new equalities if and when they arrive.…. The egalitarian or, rather ‘born equal’ heritage of the United States – the collective leaving behind of Europe with its feudal shackles and class conflicts – may have set the stage for the prolonged acceptance by American society of huge economic disparities.”
“Could A come to feel under certain circumstances that an advance on the part of B is likely to affect his own welfare negatively?…. this sort of prediction is likely to be made in a society whose members are convinced that they are involved in a zero-sum game because resources are available in strictly limited amounts….”
“It may well be that when B advances, this makes A unhappy not because he is envious, but because he is worried; on the basis of his existing world view, he must expect to be worse off in short order. In other words, A is unhappy not because of the presence of relative deprivation, but because of the anticipation of absolute deprivation.”