Thriving societies or downward spirals? Some lessons from earlier times

co-operation 1Hope, Keynes taught us, is the elixir of a thriving society. In these times, when hope is in short supply, we urgently need to know more: How is hope evoked? Why is it sustained for a while, and then unexpectedly lost? How can hope be renewed?  These questions were explored brilliantly by the great twentieth century development economist and scholar of Latin American development, Albert Hirschman.  Here are three of his crucial insights.

First, Hirschman conceived of development as an unbalanced process, with leads and lags. Tolerance for imbalances, he argued:

“… is like a credit that falls due at a certain date. It is extended in the expectation that eventually the disparities will narrow again. But if the expectation does not occur, there is bound to be trouble and, perhaps, disaster…… Non-realization 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”.

Second, Hirschman conceived as the development process as involving two complementary tasks:

“The first of the two tasks is the unbalancing function, the entrepreneurial function, the accumulation function.  Increasing social and income inequalities are an important part of this picture…..In time, pressures will arise to correct some of these imbalances,  to improve the welfare and position of groups that have been neglected or squeezed, and at redistribution of wealth and income in general. This is the ‘equlibrating’ distributive, or reform function….”.

In an orderly universe, policymakers would alternate between the two functions, giving emphasis to the response which best fits the moment. But that is not how growth, Hirschman-style works in practice. Hence his third crucial insight:

The appearance of the reform function on the stage at the right time and with the right strength is not in any reliable fashion co-ordinated with the entrepreneurial function and its performance. In fact while the performance of both functions (in some proper sequence) may be ‘objectively’ essential for the growth process, their protagonists are more often than not determined adversaries….. When reformers enter the stage they may well be full of invective against the entrepreneurial groups, who will return the compliment….”.

As Hirschman underscores, a renewal of hope comes when societies embrace an encompassing, inclusive vision which transcends the invective between growth and reform champions that characterizes so much of contemporary discourse.

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For a more in-depth exploration of the above, here is a link to the paper I presented  in October 2018, at the Second Conference on Hirschman’s Legacy: A Bias for Hope. (The paper includes an application of the above ideas to the case of South Africa.)

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