Albert 0.

Hirschman

0. HIRSCHMAN was born in 1915 in Berlin. He left Germany in 1933 and studied economics in Paris, London, and at the University of Trieste where he received his doctorate in 1938. He served in the French army in 1939-40 and emigrated to the United States in 1941. After two years at the University of California (Berkeley) and three years in the U.S. army, he joined, in 1946, the Federal Reserve Board where he worked on the financial problems of postwar reconstruction of Western Europe. From 1952 to 1956 he lived in Bogota, Colombia, first as Financial Adviser to the National Planning Board and then as private consultant. In 1956 Hirschman went to Yale University, and then taught at Columbia (1958-64) and Harvard (1964-74). Since 1974 he has been Professor of Social Science at the Institute for Advanced Study in Princeton, New Jersey. His early books remain influential: National Power and the Structure of Foreign Trade (Berkeley: University of California Press, 1945; expanded edition, 1980); The Strategy of Economic Development (New Haven: Yale University Press, 1958); and Journeys toward Progress (New York: Twentieth Century Fund, 1963). Among his numerous other books and articles, the following titles convey some notion of his innovative and wide-ranging contributions: Development Projects Observed (Washington, D.C.: Brookings Institution, 1967); Exit, Voice and Loyalty: Responses to Decline in Firms, Organizations and States (Cambridge, Mass.: Harvard University Press, 1970); A Bias for Hope: Essays on Development and Latin America (New Haven: Yale University Press, 1971); The Passions and the Interests: Political Arguments for Capitalism before Its Triumph (Princeton, N.J.: Princeton University Press, 1977); Essays in Trespassing: Economics to Politics and Beyond (New York: Cambridge University Press, 1981); Shifting Involvements: Private Interestand Public Action (Princeton, N.J.: Princeton University Press, 1982); and "Rival Interpretations of Market Society: Civilizing, Destructive, or Feeble?" Journal of Economic Literature (December 1982).
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A Dissenter'sConfession: "The Strategyof Economic Development"Revisited

Ah, what happened to you, you my written and painted thoughts!Not long ago you were so colorful, young and malicious,so full of thorns and secret spices that you made me sneeze and laugh-and now? Already you have doffed your novelty, and some of you, I fear, are about to become truths: so immortal do they already look, so distressingly honorable, so boring!
-NIETZSCHE

WHEN I RECEIVEDTHE INVITATIONto participate in the symposiumas one

of the "pioneers" alongsideRaul Prebisch,Gunnar Myrdal, Arthur Lewis, and other such luminaries of development economics, my first reaction was one of surprise. Not that I doubted my status as a luminary;but, in my own mind, I still saw myself as a rebel against authority, as a secondgeneration dissenter from the propositions that, while being themselves novel and heterodox, were rapidly shaping up in the 1950s as a new orthodoxy on the problems of development. Had my once daring and insurgent ideas then become classic, respectable, that is, "distressingly honorable" and "boring" in the manner of Nietzsche's plaint? Perhaps. In any event, I must somewhat revise the picture I had of myself.Viewed in perspective,my dissent, however strong, was in the nature of a demurrer within a general movement of ideas attempting to establish development economicsas a new fieldof studies and knowledge.' My propositions were at least as distant from the old orthodoxy (later called neoclassical economics)as from the new. In retrospect, therefore, it is only natural that my work should be lumped with the very writings I had chosen as my primary targets.
1. There were other such demurrers. A striking case of convergence with my think-

ing is Paul Streeten'sarticle"UnbalancedGrowth," Oxford EconomicPapers,N.S., vol. 2 June 1959),pp. 167-90. His articleand my book, The Strategyof Economic Development(whoseworkingtitle was for a longtime"The Economics of Unbalanced Growth"),were writtenquiteindependently. PaulStreetentells me that the printingof his articlewas delayedfor severalmonthsby a printers'strike,otherwisehis defense of unbalancedgrowth might have come out before mine. 87

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2 I have written in the most objective way I could In an earlier essay, muster about the developmentof our discipline.To repeat myselfas little as possible I shall do the opposite in this paper, which will therefore be totally subjective and self-centered. First, I shall attempt to present the personal background and principal motivesfor the positions I took in The Strategy of Economic Development. Next, I shall look at the main propositions put forward in that book in the light of subsequent developments and present-day relevance.

Developing a Point of View

There is nothing quite like a good story to lend authority to a half-truth. For a long time, when people asked me how I came to hold the views I proposed in The Strategy of Economic Development, my stock answer was: I went to Colombia early in 1952 without any prior knowledgeof, or reading about, economicdevelopment. This turned out to be a real advantage; I looked at "reality" without theoreticalpreconceptions of any kind. Then, when I returned to the United States after four and a half years' intensive experience as an official adviser and private consultant, I began to read up on the literature and discovered I had acquired a point of view of my own that was considerably at odds with current doctrines. It is a nice line, and not notably untrue; but now I want to tell a more complex story. The Marshall Plan Experience and Other PersonalBackground I did go to Colombia without being well read in what development 3 But I had just been working, with intensity literature existed at the time. and occasional enthusiasm, on postwar problems of economicreconstruc-

2. "The Rise and Decline of Development

Economics"

in Essays in Trespassing:

Economics to Politics and Beyond (Cambridge, Eng., and New York: Cambridge University Press, 1981), chap. 1. There will be several references here to this book as
well as to The Strategy of Economic Development (New Haven: Yale University Press, 1958; and New York: Norton, 1978) and to A Bias for Hope: Essays on Development and Latin America (New Haven: Yale University Press, 1971). Their titles will here be shortened to, respectively, Trespassing, Strategy, and Bias. 3. I had participated in one conference on development, held at the University of

Chicago in 1951, which was notable primarily for the active participation of some eminent anthropologists and for the fact that this was the occasion for Alexander Gerschenkron to unveil his masterpiece, "Economic Backwardness in Historical Perspective." The proceedings of the conference were published as The Progressof Underdeveloped Areas, BertHoselitz, ed. (Chicago: Chicago University Press, 1952), to which I contributed a paper, "Effect of Industrialization on the Markets of Industrial Countries," a topic far removed from development economics as such. The conference stimulated my interest in the problems of development.

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tion and cooperation in Western Europe, as an economist with the Federal

Reserve Board, from 1946 to 1952. In particular, I was dealing with economicreconstructionin France and Italy, and with various schemes for European economic integration, such as the European Payments Union, that were central to the Marshall Plan concept. I came out of this experience with the following impressions or convictions: (1) Orthodox policy prescriptionsfor the disrupted postwar economies of Western Europe-stop the inflation and get the exchange rate right-were often politically naive, socially explosive, and economically counterproductivefrom any longer-run point of view.The advocates of orthodoxy seemed to have "forgotten nothing and learned nothing" since the days of the Great Depression. (2) The innovators who, to their lasting credit, proposed the creative remediesembodied in the Marshall Plan and, in justification, propounded novel doctrines, such as the "structural dollar shortage," soon became unduly doctrinaire in turn. These innovators exhibited a perhaps inevitable tendencyto take themselves and their ideas too seriously.This was particularly and understandably true for their balance of payments projections, for aid was given in proportion to prospectivebalance of payments deficitsso that the projection exercises assumed crucial economicand political importance. To be effective advocates within the Executive Branch and in relations with Congress we had to exhibit far greater confidence in those statistical estimates than was warranted by the meagerextent of our knowledge and foreknowledge, a "dissonant" situation leading to the development of a character trait known as charlatanism in some, and to active dislikeof the whole procedure and withdrawal therefrom in others. Moreover, in order to be disavowed as little as possible by emerging reality, Marshall Plan administrators attempted to make their estimates come true by taking a considerable interest in the domestic plans and policies that shaped the external accounts of the aid-receivingcountries. During my six years in Washington I sided in general with the innovators, but not without some reservations. From the French and Italian experiences I had lived through in the 1930s, I bad come away with a healthy respect (based on watching the misadventures of the French economy)for the efficiencyof the price system,particularly with respect to 4 and with a the effectof exchangerate changeson the balance of payments, correlative distrust (based on watching Fascist economic policy in the second half of the 1930s) of peacetimecontrols, allocations, and grandiloquent plans. Having studied the expansion of Nazi Germany's influencein Eastern and Southeastern Europe, the background to my first book,

4. See my paper "Devaluation and the Trade Balance: A Note," Review of Eco-

nomicsand Statistics, vol.21, no. 1 (February 1949),pp. 50-53, whichwasa late fruit of that experience.

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National Power and the Structure of Foreign Trade,' I had developed a special sensitivity to the propensity of large and powerful countries to dominate weaker states through economic transactions. I therefore felt a natural concern and aversion when Marshall Plan administrators were aggressively pressing their views about appropriate domestic programs and policies upon countries such as Italy that were large-scale beneficiaries of aid. They did so for the best of motives-they sincerely sought for Italy not only the "right" balance of payments deficits, but a more prosperous economy and a more equitable society. But it was perhaps because they felt thus unsullied by imperialist concerns that the aid administrators thought they were justified in pursuing their objectives in an imperious manner. Fortunately this phase lasted only a short time since Marshall Plan aid to Europe was terminated, in surprising accord with the original time table, after only five years-thereby putting an end also to much of U.S. leverage. Revolting against a Colombian Assignment So I went to Colombia with some preconceptions after all. During my first two years there I held the position of economic and financial adviser to the newly established National Planning Council. The World Bank had recommended me for this post, but I worked out a contract directly with the Colombian government. The result was administrative ambiguity which gave me a certain freedom of action. I was in the employ of the Colombian government, but obviously also had some sort of special relationship with the World Bank, which had taken an active part in having the Planning Council set up in the first place and then in recruiting me for it. My natural inclination, upon taking up my job, was to get myself involved in various concrete problems of economic policy with the intention of learning as much as possible about the Colombian economy and in the hope of contributing marginally to the improvement of policymaking. But word soon came from World Bank headquarters that I was principally expected to take, as soon as possible, the initiative in formulating some ambitious economic development plan that would spell out investment, domestic savings, growth, and foreign aid targets for the Colombian economy over the next few years. All of this was alleged to be quite simple for experts mastering the new programming technique: apparently there now existed adequate knowledge, even without close study of local surroundings, of the likely ranges of savings and capital-output ratios, and those estimates, joined to the country's latest national income and balance of payments accounts, would yield all the key figures needed. I resisted being relegated to this sort of programming activity. Having already plunged into some of the country's real problems, I felt that one of the
5. Berkeley, Calif.: University of California Press, 1945.

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things Colombia needed least was a syntheticdevelopmentplan compiled on the basis of "heroic" estimates.This was a repetition, under much less favorable circumstances(the quality of the numbers was much poorer), of what I had most disliked about work on the Marshall Plan. One aspect of this affair made me particularly uneasy. The task was supposedly crucialfor Colombia's development,yet no Colombian was to be found who had any inkling of how to go about it. That knowledgewas held only by a few foreign expertswho had had the new growth economics revealed to them. It all seemed to be an affront to the Colombians who were, after all, struggling or tinkering with their problems in many fields through a great variety of private decisionsand public policies.My instinct was to try to understand better their patterns of action, rather than assume from the outset that they could only be "developed" by importing a set of techniques they knew nothing about. True, this paternalistic mode of operation was given much encouragement by the Colombians themselves who were, initially at least, treating the foreign advisersas a new brand of magicians, and who loved to pour scorn on themselvesby exclaiming at every opportunity "Aqui en el tr6pico hacemos todo al reves" (Here in the tropics we do everything the wrong way around). But the foreignadvisers and experts took such statements far too literally. Many Colombians did not really feel all that inept. For at least some of them the phrase implied that, in the particular environment in which they operated, they mightwell have worked out by trial and error some cunning principles of action, of which they were themselveshardly conscious,that might seem perverseto outsiders, but have actually proven quite effective. Searching for Hidden Rationalities This was exactly what I thought worth exploring. I began to look for elementsand processesof the Colombian reality that did work, perhaps in roundabout and unappreciated fashion. Far more fundamentally than the idea of unbalanced growth, this search for possible hidden rationalities was to give an underlying unity to my work. It also gave it vulnerability. To uncover the hidden rationality of seemingly odd, irrational, or reprehensible social behavior has beenan important and quite respectable 6 If pastime of social scientists ever since Mandeville and Adam Smith. successful,the search results in those "typically counterintuitive, shock7 ing" discoveries on which social sciencethrives. My principal findingsof this kind were the possiblerationality ("uses") of (1) shortages, bottlenecks, and other unbalanced growth sequencesin the course of development (Strategy, chaps. 3-7); (2) capital-intensive
6. In the humanities, the tradition goes much further back, at least to Erasmus's Praise of Folly. 7. See "Morality and the Social Sciences:A Durable Tension," in Trespassing,chap. 14, p. 298.

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industrial processes (chap. 8); and (3) the pressures on decisionmakers caused by inflation and balance of payments deficits (chap. 9). 1 shall discusslater these key themes of my book. But I must say something right away about the vulnerability that comes with such discoveries. Once the discoveries were made and proudly exhibited, there arose, inevitablyand embarrassingly,the question: Would you actuallyadvocate unbalanced growth, capital-intensive investment, inflation, and so on? The honest, if a bit unsatisfactory, answer must be: yes, but of course within some fairly strict limits. There is no doubt that the unbalanced growth strategy can be overdone, with dire consequences.But I stand by the concludingparagraph of an article I wrote jointly with C. E. Lindblom to bring out the similarity of our approaches in different fields: There are limits to "imbalance" in economic development, to "lack of integration" in research and development,to "fragmentation" in policy making which would be dangerous to pass. And it is clearly impossible to specify in advance the optimal doses of these various policies under different circumstances. The art of promoting economic development, research and development, and constructive policy making in general consists, then, in acquiring a feelingfor these doses. This art . .. will be mastered far better once the false ideals of "balance," "coordination," and "comprehensive overview" have lost our total and unquestioning 8 intellectual allegiance. Another problem arises in connection with that embarrassing question about advocacy. Social scientists who discoverthe hidden rationality of a social practice should be aware that they frequently act as somethingof a spoilsport: once the uses of unbalanced growth or of inflation are discovered and explained, the attempt consciouslyto apply these notions and to replicate the earlier successesis likely to stumble for various reasons. For one, policymakers who up to then had merely backed into such devices will now tend to overdo and otherwise abuse the newly discovered 9 Moreover, various affectedparties will neutralize much of the knowledge. policy by acting in anticipation of it once it is expected, in line with reasoning made familiar by the rational-expectations argument. Thus the discovery of hidden rationalities clearly yields "dangerous knowledge." But, as is well known, knowledge is intrinsically dangerous. And this simple observation gives me a chance to turn the tables on my critics. As long as the findings I had come up with were dangerous there was at least some chance that they truly constituted new knowledge. This
8. "Economic Development, Research and Development, Policy-Making: Some Converging Views" (1962), reprinted in Bias, pp. 83-84. 9. I noted this previously for the combination of inflation and overvaluation which permitted the financing of import-substituting industrialization in many countries in the 1950s. See Trespassing, p. 110.

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is more than can be said for quite a few of the bland and banal pietiesthat have been paraded under the banner of either "principles of development planning" or "efficient allocation of resources!" Uncovering hidden rationalities permitted me to fight against what I perceived as two very different, yet interrelated evils. On the one hand, as already noted, I reacted against the visiting-economistsyndrome; that is, against the habit of issuingperemptory adviceand prescription by calling on universally valid economic principles and remedies-be they old or brand new-after a strictly minimalacquaintance with the "patient." But, with time, another objective was assuming even more importance in my mind: it was to counter the tendency of many Colombians and Latin Americansto work hand-in-glovewith the visitingeconomist by their own self-deprecatory attitudes. As I put it in another article written shortly after Strategy was published: "Some of my main contentions could serve to reconcile the Latin Americans with their reality, to assure them that certain ubiquitous phenomena such as bottlenecks and imbalances in which they see the constantly renewed proof of their ineptness and inferiority are on the contrary inevitableconcomitants and sometimeseven useful stimulants of development."'" BecauseLatin Americans were wont to issue blanket condemnations of their reality they became incapableof learningfrom their own experiences, so it seemedto me. Later, in detailed studies of economic policymaking,I even coined a term for this trait: the "failure complex," or fracasomania in Spanish and Portuguese." At this point, however, my bias for hidden rationalities might seem to harbor yet another danger. Was it not going to make me blind to the imperative need for change in societies where economic growth was frustrated at every turn by antiquated institutions and attitudes as well as by exorbitant privilege?Was my enterprise then going to end up as a giant exercise in apology for the existing order (or disorder)? This danger actually never bothered me much, for the simple reason that the hidden rationalities I was after were preciselyand principally processesof growth and change already under way in the societies I studied, processes that were often unnoticed by the actors immediately involved, as well as by foreign experts and advisers.I was not looking for reasons to justify what was, but for reasons to think that the old order was already changing. In this way I tried to identify progressiveeconomicand political forces that

10. "Ideologies of Economic Development in Latin America," first published in 1961 and reprinted in Bias, pp. 310-11. 11. See myJourneys toward Progress:Studies of Economic Policy Making in Latin America (New York: Twentieth Century Fund, 1963; Norton, 1973); and "Policymaking and Policy Analysis in Latin America-A Return Journey" (1974), reprinted in Trespassing as chap. 6. In both works, but particularly in the latter, I pointed out that fracasomania (the failure complex) could lead to real fracasos (failures).

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deservedrecognition and help. This position did put me at odds with those who judged that the present society was "rotten through and through" and that nothing would ever change unless everything was changed at once. But this utopian dream of the "visiting revolutionary" seemedto me of a piece with the balanced growth and integrated developmentschemes 1 2 of the visiting economist. A Paradigm of My Own? My basic concern with the discoveryof hidden rationality shows up in my first general paper on development, written in 1954 after two years in Colombia, for a conferenceon InvestmentCriteria and Economic Growth 3 Here I presented, besides a at the Massachusetts Institute of Technology." critique of what I called "The Myth of Integrated Investment Planning," two empirical observations which could qualify as investment critieria. One was about the superior performance of airplanes in comparison with highways in Colombia (the need for adequate maintenance and efficient performance in generalbeing far more compellingin the caseof airplanes), a point which later led me to a general hypothesisabout the comparative advantage less developed countries have in certain types of activities.The other observation dealt with what I then described as "the impact of secondary on primary production" and later named "backward linkage." Both observations served to justify investments (in case of airlines) or investment sequences (in the case of backward linkage) that seemedquestionable or al reves (the wrong way around) from the commonsensepoint of view. In 1954 these were isolated observations. But they remained key elements of the conceptual structure that I erected three years or so later in Strategy. I now searched for a general economic principle that would tie them (and several related propositions) together. To this end, I suggested that underdeveloped countries need special "pressure mechanisms" or "pacing devices" to bring forth their potential. In my most general formulation I wrote: "development depends not so much on findingoptimal combinations for given resources and factors of production as on calling forth and enlisting for developmentpurposes resources and abilities that are hidden, scattered, or badly utilized" (Strategy,p. 5). I presented this point as a special characteristic of the underdeveloped countries and implicitlygranted that the advanced countries continued to be ruled by the traditional principles of maximization and optimization, on the basis of given and known resources and factors of production. Actually, these principles were to be impugned in short order, or were

12. For some elaboration, see Journeys, pp. 251-56. 13. Reprinted in Bias, chap. 1.

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already being impugned, preciselyfor the advanced countries, by various important contributions of other economists. For the business firm, Richard Cyert and James March documentedthe importance of what they called "organizational slack," on the basis of Herbert Simon'spioneering work on "satisficing" as opposed to "maximizing." Adopting the concept of "inducement mechanism," Nathan Rosenberg showed how the pattern of inventions and innovations in the advanced countries simply does not follow the gradual expansion of opportunities as markets and knowledge grow, but has been strongly influenced by special "inducing" or "focusing" events such as strikes and wars. Finally,Harvey Leibensteinbuilt his X-efficiency theory on the notion that slack is ubiquitous and effort sporadic and unreliable, again in the absence of special pressure
situations."4

It appears, therefore, that the very characteristicson which I had sought to build an economics specially attuned to the underdevelopedcountries have a far wider, perhaps evena universal,range and that they define,not a special strategyof developmentfor a well-definedgroup of countries, but a much more generallyvalid approach to the understanding of change and growth. In other words, I set out to learn about others, and in the end learned about ourselves. As many anthropologists have discovered and taught us, this is by no means an unusual meanderingof social thought and knowledge.Nor does it come to me as a disappointment that I must give up the pretense of having discovered the distinguishing characteristic of underdeveloped societies. There always was some irony, not to say inconsistency, in the intellectualpath I had followed.First I rejectedthe old and new paradigms of others and stressedthe importance of steepingoneselfin the Colombian reality-from which I eventuallyemergedwith a triumphant paradigm of
my own! So I am quite happy at this point to renounce that claim,' 5

especially as long as some of my more specificfindings and suggestions (frequently generated only by means of my overall conceptual scheme) continue to lead an active life of their own. I shall now show that this is indeed the case.
14. H. A. Simon,"A BehavioralModelof RationalChoice,"Quarterly Journalof
Economics, vol. 69, no. 1 (February 1955), pp. 99-118; Richard M. Cyert andJames G.

March, Behavioral Theory of the Firm(Englewood Cliffs,N.J.: Prentice-Hall, 1963); NathanRosenberg, "The DirectionofTechnological Change:Inducement Mechanisms
and Focusing Devices," Economic Development and Cultural Change, vol. 18, no. 1

(October 1969), p. 18; and Harvey Leibenstein,"AllocativeEfficiency versus XEfficiency," AmericanEconomicReview,vol.56, no. 3 (June1966),pp. 392-415, and Beyond EconomicMan (Cambridge, Mass.: Harvard University Press,1976). 15. In order not to be misunderstood I must emphasize that I do not renouncemy basicidea (about theneedfor pacingdevices and so on),but onlythe claimthat withit I had hit upon the distinguishing characteristic of a certaingroup of (economically less developed)countries.

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The Life of Some Specific Propositions

Linkages If a popularity contest were held for the various propositions I advanced in Strategy, the idea of favoring industries with strong backward and forward linkages would surely receive first prize. The linkage concept has achieved the ultimate success: it is by now so much part of the language of development economics that its procreator is most commonly no longer mentioned when it is being invoked. A major battle I fought in Strategy was against the then widely alleged need for a "balanced" or "big push" industrialization effort; that is, against the idea that industrialization could be successful only if it were undertaken as a large-scale effort, carefully planned on many fronts simultaneously. To contradict this idea I pointed to the processes of industrialization that could in fact be observed in Colombia and other developing countries. Their entrepreneurs, domestic and foreign, had apparently hit upon a good number of sequential rather than simultaneous solutions to the problem of industrialization, but the more typical sequences were often unusual by the standards of experience in the more advanced countries. Precisely for this reason, these sequences were either not easily perceived or, once noted, were judged to be characteristic of an inferior, inefficient, or (according to a term that became fashionable in the 1960s) "dependent" industrialization. My approach was exactly the opposite. Following Gerschenkron, I saw originality and creativity in deviating from the path followed by the older industrial countries, in skipping stages, and in inventing sequences that had a "wrong way around" look. It was surely this attitude that permitted me to ferret out the backward and forward linkage dynamic and to acclaim as a dialectical-paradoxical feat what was later called, with disparaging intent,'" import-substituting industrialization: in its course, a country would acquire a comparative advantage in the goods it imports; for the "fatter" the imports of a given consumer good grew, the greater was the likelihood that, in Hansel and Gretel fashion, they would be "devoured" or "swallowed" by a newly established domestic industry (Strategy, chap. 7). My intent throughout was to underline the originality of these various dynamics, as well as the feasibility, then in doubt, of a sequential approach. As with unbalanced growth, there was of course danger that the dynamics I celebrated could be overdone, to the point of setting up a highly inefficient industrial structure. But is it not unreasonable to ask the inventor of the internal combustion engine to come up immediately with a design for pollution control and airbags?
16. Trespassing, p. 127, n. 39.

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Be that as it may, as an analytic tool the linkages have led an active life over the past twenty-five years. They have been particularly useful in orienting various historical studies of developing economies.17 It has been much more difficult to turn the linkage criterion (priority to investment in industries with strong linkage effects) into an operational device for industrial planning, with the help of input-output statistics. A great deal of 8 discussion about appropriate measurement has taken place." The most extensive and successful study of this sort to date has been undertaken by the Regional Employment Program for Latin America and the Caribbean 9 (PREALC) of the International Labour Office." It uses the linkage concept for the purpose of measuring employment creation, rather than industrial expansion in terms of value added. The idea is of course to help in devising an industrialization strategy that would maximize employment. One empirical finding of the study deserves special notice: once the indirect employment effects (via backward and forward linkages) are taken into account, investment in large-scale (capital-intensive) industry turns out to be just as employment-creating as investment in small-scale (laborintensive) industry for the industrially advanced countries of Latin America. The linkage concept was devised for a better understanding of the industrialization process, and initially most applications were in this area. Fairly soon, however, the concept caught on even more in the analysis of the growth patterns of developing countries during the phase when their principal engine of growth was (or is) the export of primary products.2 0 Very different growth paths were traced out by countries exporting copper rather than coffee, and these differences were difficult to explain by the traditional macroeconomic variables. The linkages permitted a more detailed look, yet stopped short of the wholly descriptive account that had been practiced by Harold Innis and other practitioners of the so-called staple thesis.
17. Albert Fishlow, American Railroads and the Transformation of the AnteBellum Economy (Cambridge, Mass.: Harvard University Press, 1965); Judith Tendler, Electric Power in Brazil: Entrepreneurship in the Public Sector (Cambridge, Mass.: Harvard University Press, 1968); Michael Roemer, Fishing for Growth: Export-led Development in Peru, 1959-1967 (Cambridge, Mass.: Harvard University Press, 1970); Scott R. Pearson, Petroleum and the Nigerian Economy (Stanford, Calif.: Stanford University Press, 1970); and Richard Weisskoff and Edward Wolff,"Linkages and Leakages: Industrial Tracking in an Enclave Economy," Economic Development and Cultural Change, vol. 25 (July 1977), pp. 607-28. 18. See the symposium on linkage effect measurement in Quarterly Journal of Economics, vol. 90, no. 2 (May 1976), pp. 308-43. 19. Norberto E. Garcia and Manuel Marfan, "Estructuras industriales y eslabonamientos de empleo" [Industrial structures and employment linkages], Monograffa sobre empleo 126 (Santiago, Chile: PREALC, December 1982), processed (to be published in Spanish and English, with a preface by the present author, by the International Labour Office). 20. For a more extensive treatment of this topic, see Trespassing, chap. 4, "A Generalized Linkage Approach to Development, with Special Reference to Staples."

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At this point the linkage concept proliferated. In analogy to backward and forward linkage, consumption linkage was defined as the process by which the new incomes of the primary producers lead first to imports of consumer goods and then-in line with the "swallowing" dynamic-to their replacement by domestic (industrial or agricultural) production. Similarly, fiscal linkage is said to occuI when the state taxes the newly accruingincomes for the purpose of financinginvestmentselsewherein the economy. Suchfiscallinkages are either direct, as when the state is able to siphon off a portion of exporters' profits through export duties or royalties, or indirect-in this case the various incomes earned through exports are not tapped directly, but are allowed to generate a flow of imports which are then made to yield fiscal revenue through tariffs. Once the various ways through which exports of primary products can give rise to further economicactivitieshad come into view,it becameclear that some of the linkages are usually to be had only at the cost of doing without some of the others. In this manner, typical constellations of linkages could be identifiedfor differentkinds of primary commodities;as a result, it became possible to differentiatewhat had long been designated "export-led growth" and treated as a unified and transparent process. More important still, this approach almost compels one to consider the interaction between the social structure and the state, on the one hand, and the more narrowly economic factors, on the other. Latitude in Performance Standards While the linkages, in their increasinglynumerous varieties, help us understand how one thing leads to another in economicdevelopment, an even more basic inquiry is how one firmr or productive operation can be made to endure as an efficientlyperforming unit of the economicsystem. The answer to this question yielded what was, in my opinion-and, once again, in that of any market test-the other major find I made in Colombia. It had its origin in the already noted observation about the comparative efficiency(and maintenance) of airplanes and highways and was developed in Strategy (chap. 8) into the much more general pointsometimes called the Hirschman hypothesis-contrasting machine-paced with operator-paced machinery, and process-centered with product2 ' An implication was that a certain type of centered industrial activities.
21. The hypothesis lent itself to testing by empirical data; if it were true, the productivity differentials between advanced and less developed countries would be larger in certain types of industries than in others. A large number of attempts at testing have been made and are reviewed in Simon Teitel, "Productivity, Mechanization, and Skills: A Test of the Hirschman Hypothesis for Latin American Industry," World Development,vol. 9, no.4 (1981), pp. 355-71. Seealso M. ShahidAlam, "Hirschman's Taxonomy of Industries: Some Hypotheses and Evidence," Economic Development and Cultural Change, vol. 32 (January 1984), pp. 367-72.

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capital-intensive, advanced technology could be more appropriate, in a country with little industrial tradition, than the labor-intensive technology and "idiot-proof" machinery-contrary to some of the most frequent, automatic, and insistent advice proffered by visiting experts. I became fascinated with this point for several reasons. First, it permitted me to indicate another hidden rationality: the widely noted preference of developing countries for advanced technology and capital-intensive industry with a flow process was perhaps not in all cases a damaging bias, based exclusively on misguided prestige-seeking. Second, I had come upon a concept or criterion that was helpful in understanding a number of social and economic processes: the greater or smaller extent of latitude in standards of performance (or tolerance for poor performance) as a characteristic inherent in all production tasks. When this latitude is narrow the corresponding task has to be performed just right; otherwise, it cannot be performed at all or is exposed to an unacceptable level of risk (for example, high probability of crash in the case of poorly maintained or poorly operated airplanes). Lack of latitude therefore brings powerful pressures for efficiency, quality performance, good maintenance habits, and so on. It thus substitutes for inadequately formed motivations and attitudes, which will be induced and generated by the narrow-latitude task instead of presiding over it. Here, then, was another promising "wrong way around" sequence. Ever since Max Weber, many social scientists looked at the "right" cultural attitudes and beliefs as necessary conditions ("prerequisites") for economic progress, just as earlier theories had emphasized race, climate, or the presence of natural resources. In the 1950s, newly fashioned cultural theories of development competed strongly with the economic ones (which stressed capital formation), with Weber's Protestant Ethic being modernized into David McClelland's "achievement motivation" as a precondition of progress and into Edward C. Banfield's "amoral familism" as an obstacle. According to my way of thinking, the very attitudes alleged to be preconditions of industrialization could be generated on the job and 22 "on the way," by certain characteristics of the industrialization process. The emphasis on latitude in performance standards as a variable influencing efficiency also had a bearing on approaches that regard certain economic institutions as necessary conditions for development. For many economists, competition is the all-powerful social institution bringing pressures for efficiency. Strangely and somewhat inconsistently, some of these economists seem intent on granting competition a monopoly in this endeavor. But with competition being so often quite feeble and with the battle against inefficiency and decay being so generally uphill, why not search and be grateful for additional mechanisms that, to paraphrase
22. Alex Inkeles and David H. Smith, Becoming Modern (Cambridge, Mass.: Harvard University Press, 1974).

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Rousseau, force man to be efficient? In Strategy, lack of latitude seemed to me to hold considerable promise in this regard. Twelve years later I stressed another such mechanism: protests, complaints, and criticism by consumers and, more generally, by members of organizations when the quality of the organization's output deteriorates. This I called "voice," and the interaction of voice with competition, called "exit" for greater generality, involved me in the writing of another book.23 One matter I notice only now, with much surprise over the underlying unity of my thought: there appears to be a real affinity between these two mechanisms, which I developed quite independently one from the other. Narrow-latitude tasks will, if performed poorly and (ex hypothesi) disastrously, give rise to strong public concern and outcry-to voice. This is obvious in the case of airplane crashes and was specifically noted in Strategy for another concrete example of a narrow-latitude task, road construction using a certain technology. I cited the opinion of a highway engineer who favored low-type bituminous surfaces on relatively lowtraveled routes, rather than gravel and stone surfaces, for the reason that "local pressure would be applied to the Ministry of Public Works to repair the deep holes which will develop in cheap bituminous surfaces if maintenance and retreatment is delayed, and that such pressure would be greater than if a gravel and stone road is allowed to deteriorate." 2 4 Maintenance of cheap bituminous surfaces is therefore a narrow-latitude task that, if neglected, is likely to give rapid rise to strong voice (the results of poor performance being intolerable). It could be argued that, in this case and in that of airplanes, voice is the only available mechanism since these are instances of natural or institutional monopoly (in the case of air transportation being reserved to one national airline). This is not so, however; even when competition is lively for narrow-latitude products or services-for example, pharmaceuticals-public regulation is generally present, testifying to the presence of public concern and to the feeling that, because of the possibly disastrous consequences, the assurance of the "right" level of quality cannot be left to market forces. I had earlier pointed out that voice is likely to come to the fore when there is a strong public interest-for example, because of 25 concerns for health and safety. The narrow-latitude criterion leads to the same conclusion. If there is a strong affinity between narrow-latitude and voice, one would expect a corresponding association between exit (that is, competition) and wide-latitude goods and services. These are items that can be and are produced and marketed to very different quality standards, without lower quality having disastrous effects. It is indeed correct that, with
23. Exit, Voice, and Loyalty (Cambridge, Mass.: Harvard University Press, 1970). 24. Strategy, p. 143. This passage is part of a letter to me from a highway engineer who was then working in Colombia as a consultant to the World Bank. 25. Trespassing, p. 217.

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regard to such goods and services,comparison shopping and competition in general come peculiarly into their own. The attractiveness of Milton Friedman's proposal for introducing competition into primary and secondary education may preciselyderive from the wide-latitudecharacteristic of education. It is a fact that the quality of education varieswidely and that this variability is both inevitable (because of varying teacher quality, for one) and tolerated by the public, howeverdisastrous the individualand social effectsof poor education may in fact be. On this score, then, I must grant that education seems to be a task whose performance might be improved by competition. For reasons I have discussed elsewhere ,21 however, the maintenance and improvement of quality in education still seem to me to require, on balance, a strong admixture of voice. Even before I came to write on exit and voice, the concept of lack of tolerance for poor performance continued to yield dividends. In Develop27 ment Projects Observed a major chapter, entitled "Latitudes and Disciplines," deals with a large variety of pressuresfor performance stemming from various characteristicsof the project: spatial or locational latitude, temporal discipline in construction, tolerance for corruption, latitude in substituting quantity for quality, and so on. These categoriesproved quite useful in understanding the specific difficulties and accomplishments of different projects. Yet later I found that I was by no means the inventor of these concepts of latitude or discipline and of their uses, but that I had some illustrious predecessors, such as Montesquieu and Sir James Steuart! These thinkers were evidently not concerned with the functioning of developmentprojects or the efficiencyof industry; they had more portentous matters on their mind-their overriding concern was the more or less tolerable performance of the state. But here their reasoningwas very closeto mine; they were looking for ways of constraining the latitude of the state, of repressing the "passions" of the sovereign, and they thought they found a solution in the expansion of the "interests" and the market. I shall not retell this tale here, but merely meant to indicate the straightforward connection between my interest in the comparative performance of airlines and highways in Colombia and the principal theme of The Passions 2 8 Here also, I came up against the limits of latitude and the Interests. concept, but that is another story. Views on Inflation and Balance of Payments Problems One of the pleasant experiencesin writing a book rather than an article is that the ideas one starts out with are given enough breathing space so they can fully unfold and expand in all kinds of originally unanticipated
26. Trespassing, pp. 219-22.

27. Washington,D.C.: BrookingsInstitution, 1967. 28. Princeton,N.J.: PrincetonUniversity Press, 1977.

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directions. This is what happened with Strategy. The book's basic theses on unbalanced growth and sequential problem-solvingeventuallyyielded positions of my own on the problems of inflation, balance of payments disequilibrium,and population pressures (chap. 9), as well as on regional development(chap. 10). In the followingI shall limit myselfto just two of 29 these topics.
INFLATION. With its shortages and bottlenecks, the unbalanced development path I had described as most typical, "conveys an almost physical sensation of inflationary shocks being administered to an economy" (p. 158). Relative price rises, so I argued,play an important role, via more or less elastic supply responses, in overcomingthe imbalances.In the process, however, "with any given level of skill and determination of [the] monetary and fiscal managers" (p. 158), the general price level will be subjectto upward pressure, especiallyif supplyresponsesare weak or slow in some key sectors such as food and foreign exchange (pp. 162-63). In this manner, I put forward a view on inflation that was just then being elaborated within the U.N. Economic Commission for Latin Americaas the "structuralist," as opposed to the "monetarist," approach. That very view came to the fore in the North, without any reference to its Southern antecedents of course, under the name of "supply-shock inflation" during 30 the oil crises of the 1970s and their monetary repercussions. In presenting inflation as the unfortunate, but to be expected side effect of a certain type of growth process, I had in mind the comparatively moderate inflations-in the 20 to 30 percent range-that Colombia and Brazil were then (in the 1950s) experiencing. I advocated implicitly a greater comprehension on the part of the advanced countries and the international financial institutions (the International Monetary Fund and the World Bank), which at that time considered any two-digit inflation as evidenceof profligatefiscaland monetary policies that had to be corrected before further developmentfinancewas made available.Particularly in the Brazilof the Kubitschekyears this policy seemedto me highly ill-advised,

29. At the time my book appeared, my most "scandalous" position was the one I expressed on population pressures. I maintained that, in certain circumstances, such pressures could be considered as stimulants rather than as depressants of development. I do not wish to return to the argument here, except to point out that my position was later given considerable support through the influential writings of Ester Boserup, who stressed the effects of population growth on the introduction of new agricultural techniques. Seeher books, The Conditions of Agricultural Growth (New York: Aldine, 1965), and, more recently, Population and Technological Change (Chicago: University of Chicago Press, 1981). 30. An extended retrospective treatment of these matters is in my survey article, "The Social and Political Matrix of Inflation: Elaborations on the Latin American Experience," in Trespassing, chap. 8.

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and I still believethat it bears some responsibility for the tragic "derailment" of Brazilianpolitics from 1958 to the military takeover in 1964.31
BALANCE OF PAYMENTS PROBLEMS.

This brings me to the balance of

payments problems of developing countries. Once again I analyzed pressures on a country's international accounts as "part and parcel of the process of unbalanced growth" (Strategy,p. 167) rather than as primarily the reflectionof macroeconomic disequilibriumbetween domesticsavings and investments.In this perspective,the needs of developingcountries for international financial assistance do not arise so much from the fact that they are too poor to save the amounts needed to achieve some growth target-this was the then current rationale for foreign aid-as from some disproportionalities that arise in the growth process. At some stage the need of the expanding economy for imported inputs outpaces its ability to increaseexports, unless the country is lucky enough to produce some items that are in rapidly expanding demand on the world market. In other words, the need for financial assistancefrom abroad would by no means be greatest when the country is poorest, but would be liable to bulgeperhaps several times-in the course of development as certain initially import-intensive economic activitiesare being put into place. The point was once again to get away from the excessive simplicitiesof certain growth models and to argue that balance of payments pressures, like inflation, are not necessarilyreflectionsof profligate fiscaland monetary policies. So much for the effect of growth on the balance of payments. How about the equally important inverse relation-the effect of foreign exchange abundance or stringency on growth? Here I put forward an idea 3 2 It was that I have since used in a number of increasinglybroad contexts. based on a simple observation: after a period of comparative foreign exchange affluence that causes certain consumption habits, based on imports, to take root, the experience of foreign exchange shortage has often set in motion industrial investments designed to produce the previously imported goods that are now sorelymissed. It thereforelooked as though some alternation of good and hard times (with regard to foreign exchange availability)could be particularly effectivein fosteringindustrial development. Still in Strategy, I made a similar point with regard to
31. For a critical evaluation of World Bank policy in Brazil during the 1950s, see Edward S. Mason and Robert E. Asher, The World Bank since Bretton Woods (Washington, D.C.: Brookings Institution, 1973), pp. 660-62. 32. The idea was originally expressed in a discussion paper written for a conference of the International Economic Association held at Rio in 1957. SeeHoward S. Ellis, ed., Economic Development for Latin America (New York: St. Martin's Press, 1961), p. 460; and Strategy, pp. 173-76.

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regional development (chap. 10). I saw certain advantagesin an underdeveloped region (such as northeastern Brazil) being closelyintegrated with the country's more advanced provinces, whereas other kinds of development stimuli would arise from withdrawal and insulation. Later on, I wrote about the virtues of some oscillationbetween contact and insulation 33 in connection with both foreign trade and investment. This thesis was not going to make me popular either with the advocates 34 Once again, moreover, of delinking or with their neoclassicalopponents. it was sure to disappoint those looking for operational policy advice:first, the optimal width of the oscillation between foreign exchange affluence and penury is impossible to define; second, such ups and downs are generallynot subject to a single country's control. If it is correct, my point has nevertheless important implications: it makes policymakers aware that each situation brings with it its own set of opportunities (and of possible calamities). The principle of oscillationis obviouslya close relative of the strategyof unbalanced growth which, in spite of the commandingposition it occupies in my book, has not yet been discussedhere as such. SinceI have somenew thoughts on this topic, I left it for the concluding section. The Politics of Unbalanced Growtvh To write in praise of lack of balance is evidentlya provocation for which a price must be paid. The worst penalty is not inflictedby the critics, but by those who proclaim themselvesdevoted disciplesand commit all kinds of horrors in one's name. Here is a striking example of this sort of occurrence. On a visit to Argentina around 1968, shortly after the militarycoup that toppled the civilianregime of Illia and brought to power General Ongania, I was told by a high-ranking official, "All we are doing is applying your ideas of unbalanced growth. In Argentina we cannot achieve all our political, social, and economic objectives at once; therefore we have decided to proceed by stages, as though in an unbalanced growth sequence. First we must straighten out the economic problems, that is, restore economic stability and stimulate growth; thereafter, we will look out for greater social equity; and only then will the country be ready for a restoration of civil liberties and for other political advances." I was of course appalled by this "application" of my ideas. It seemed quite preposterous to me on various counts. After all, the imbalances I had written
33. See Bias, pp. 25 and 229-30.
34. An excellent survey of the pros and cons of delinking is in Carlos F. Diaz Alejandro, "Delinking North and South: Unshackled or Unhinged?" in Albert Fishlow and others, Rich and Poor Nations in the World Economy (New York: McGraw-Hill, 1978), pp. 87-162.

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about were far lessgrand than those referredto by my Argentineinterlocutor. They had been confined to the economicsphere and were concerned with disproportionalities between sectors, such as industry and agriculture, and even more with interactions between much more finely subdivided subsectors. Because of the interdependence of the economy in the input-output sense, the expansion of one sector or subsector ahead of the other could be relied on to set forces in motion (relativeprice changes and public policiesin response to complaints about shortages) that would tend to eliminate the initial imbalance. As I put it in a letter to Andre Gunder 35 Frank, who had written one of the more perceptivereviews of my book (this was before his "development-of-underdevelopment"phase): If one wants to move [straight] from one equilibrium position to the next, then, becauseof the discontinuitiesand invisibilitiesthat I take for granted, the "big push" or "minimum critical effort" is indispensable. But if we assume that intermediate positions of developmentstimulating disequilibrium are sustainable at least for limited time periods, then we can manage to break down the big push into a seriesof smaller steps. In other words, I am in favor of utilizingthe energywhich holds together economicnucleiof givenminimumsize in the buildingup of these nuclei. (Letter of August 18, 1959; emphasis in the original.) In addition to making clear my position as dissent from a dissent (without a return to the original orthodoxy), this passage well illustrates my conception of the unbalanced growth process as something fueled and justified by the "energy which holds together" the various sectors and branches of the economy and which would ensure that the various imbalances would be approximately self-correcting. Even for intersectoral imbalances, my principal concern was not so much to praise imbalance in general as to draw a distinction between "compulsive" and merely "permissive" sequences. On the basis of this distinction, I was critical of the then prevailing emphasison investmentsin infrastructure (Strategy,chap. 5). Further, I noted that in regional development the process of unbalanced growth is fundamentally different from unbalanced growth in the sectoral sense because of the weakness of the forces making for restoration of interregionalbalance (chap. 10). Hence,it is illegitimate to invoke the unbalanced growth idea when there are no compelling reasons why an advance in one direction and the ensuing imbalance should set countervailing forces in motion. In the Argentine case I have cited, it was impossibleto detect any such forces unless one trusted the self-proclaimedintentions of the new regime (that came duly to naught) or the dubious correlations between economic growth and
35. "Built-inDestabilization: A. 0. Hirschman'sStrategyof EconomicDevelopment," EconomicDevelopmentand CulturalChange,vol. 8, no. 4 July 1960),pp.
433-40.

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the growth of democracy adduced by the more sanguine politicaldevelopment theorists of the time. But there is another, perhaps more interesting,way in which the Argentine sequence differed from the one I had talked about. My Argentine interlocutor conveniently failed to mention that the military had just ordered severe curtailments of political freedoms. Whatever economic advance the new regime would bring was being achieved at the cost of previously political and civil rights of the citizens. Later on these rights were to be restored-perhaps, in turn, at the cost of some of the previous economicadvances?This sort of (implicit)sequenceis again very different from the one I had had in mind: in my schemeone sector, say, manufacturing industry, was to move ahead without any simultaneous expansion in power or transportation or agriculture, but certainlynot at the expenseof these sectors. Nevertheless,there is here some scope for reflectionand, at long last, for self-criticism.Is it really true that the process of unbalanced growth, as sketched in Strategy, never impliesactual retrogression for any economic agents? Probably not. When industry advances and uses the existing power and transportation facilities,then, in the absenceof excess capacity, there are fewer such facilities availablefor the traditional users who will therefore be worse off. The sarne is likely to hold, with rather more serious consequences, for an isolated advance of industry while 36 agricultural output remains stationary. It appears therefore that, for some of these purposes, I have to redraw the diagram by which I have attempted to portray the unbalanced-growth 37 The comparativelyinnocuous pattern of figure 1 is transformed process. by the preceding considerations into the more problematic pattern of figure 2, where at each stage in the sequential growth processthe incomereceiversof one of the two sectors are gaining at the expenseof those of the other sector. As drawn, to reflect the eventual all-around increases in output, the incomes received in both sectors are growing in the course of the process as a whole, but at any one point Sector A is gaining at the expense of Sector B or vice versa, making for what might be called an antagonistic growth process. Note that antagonistic is very differentfrom zero-sum since all-around growth is in effect being achieved.
36. This matter could obviously be elaborated at considerable length. The effect of unbalanced growth on sectoral incomes in a two- or three-sector economy depends on the intersectoral terms of trade, and it is conceivable that the incomes generated in the expanding sector would decline rather than expand. Harry G. Johnson's classic article, "Economic Expansion and International Trade," is still a good starting point for the analysis of the various possibilities. See Manchester School of Economic and Social Studies, vol. 23, no. 2 (May 1955), pp. 96-101. 37. The most straightforward such presentation is in the already cited article, co-authored with C. E. Lindblom, "Economic Development, Research and Development, and Policy Making: Some Converging Views," p. 65; in Strategy, a similar, but more complex diagram is on p. 87.

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Figure 1. Balanced and UnbalancedGrowth

BG

UG

Sector B (output)

SectorA (output)

Figure 2. Antagonistic Growth

SectorB
(income)

SectorA (income) I had not noticed that my unbalanced growth path had these antagonistic implications. Had I done so I might have inquired into the political consequences and prerequisites of the process. For it to unfold, a certain level of tolerance for increasing inequality in the course of growth appears to be required. This matter was later investigated in my article, "The Tolerance for Income Inequality in the Course of Economic Development,"3 " but only after the antagonistic potential of the development 38. First publishedin 1973 and reprintedin Trespassing, chap. 3.

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process had led to civil wars and various other disasters. Along with my fellow pioneers, I thus stand convicted of not having paid enough attention to the political implicationsof the economicdevelopmenttheories we propounded." But perhaps it was not altogether unfortunate that we were myopic and parochial. Had we been more far-sighted and interdisciplinary,we might have recoiled from advocating any action whatever, for fear of all the lurking dangers and threatening disasters. Take my own case. In the hopeful 1950s I found it quite daring and paradoxical enough to advocate a growth pattern correspondingto figure 1. I just had to repress the thought that the process depicted there implies to some extent the antagonistic process shown in figure 2. Twenty-five years later we have learned so much, alas, about the enormous difficulties and tensions that come with any social change that the antagonistic growth process portrayed in figure 2 no longer looks as gratuitously harrowing as would have been the caseearlier. In fact, I now want to argue that the process of antagonistic unbalanced growth-it could be called "sailing against the wind"-is far more common than one might think. In figure 2 we are free to make the two coordinates represent not the incomes of two important social groups, such as workers and capitalists, but more generally two important social objectives such as economic stability (internal and external) and growth, or growth and equity (a less unequal distribution of income and wealth), or, for that matter, equity and stability. As soon as we do so we realize that sailing against the wind is actually how Western societieshave frequently been traveling when they were moving forward at all. I have two reasons to suggest.First, each of these objectivesis so difficult to achieve that progress with just one of them requires the utmost concentration of intellectualenergies and political resources. The result is neglect of other crucial objectives,a neglectwhich subsequently comes to public attention; the resulting criticism then leads to a change in course, to a new concentration-and a new neglect. Second, I want to argue that the sailing-against-the-windpattern is congenial to the democratic form of government, and particularly to the two-party system of democratic governance. If, in such a system, each of the two parties retains a characteristic physiognomyor ideologicalconsistency of its own, then each party will givevery distinct priorities to such social objectives as growth, equity, and stability; with the parties alternating in power, society is likely to move, in the best of circumstances, as 40 though it were sailing against the wind.
39. For an early critique of this sort, see Warren F. Ilchman and R. C. Bargave, "Balanced Thought and Economic Growth," Economic Development and Cultural Change, vol. 14, no. 4 (July 1966), pp. 385-99. 40. An empirical study and verification for twelve Western European and North American nations during the postwar period is in Douglas A. Hibbs, Jr., "Political

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It does seem, at first blush, an odd and even perverse way of moving forward-a course in which some important social group is constantly aggrieved and attacked and some primary social objective constantly disregarded and even set back. Yet this may be the characteristic, eventhe only availablepattern, of progress in a societywhich livesby the canons of competitive politics. Such a society is necessarilydivided into "ins" and "outs," with the interests and aspirations of the latter being neglecteduntil it is their turn to take over and to turn the tables on their opponents. In sum, the art of moving society forward in a democracy is to do so in spite of substantial and justified discontent on the part of some important groups, followed by similar discontent on the part of others. At any one point in time, there is always not only strife and clash and conflict,but also loss of some valuable terrain previously gained. Yet it is possible that all-around progress is being achievedbehind the back, so to speak, of the parties and groups in conflict. Democracy is consolidated when, after a few alternations of the parties in power, the various groups cometo realize that, strangely enough, they have all gained. There can of course be no certainty that the antagonistic moves here described will actually have this happy outcome. They can just as well do the opposite-in figure 2 the movement would simply have to be visualized as taking place in the direction opposite to that of the optimisticarrow there shown. In such circumstancesdemocracywill be proclaimed to be in crisis and to be involved in playing zero- or negative-sum games. "Fundamental" solutions will now be sought, such as an end to the "destructive" party struggle and a national accord on basic objectives, so that society can move forward along a "balanced" path with simultaneous progress being made toward each and every one of the agreed-upon objectives.Such is the ever present corporatist and authoritarian temptation that arises when a pluralist regime puts in a poor performance. Our antagonistic, sailing-against-the-windgrowth pattern makes it clear that another solution might also be available, one that has the considerable merit of not jettisoning the pattern of competitive politics. By now my self-criticismof unbalanced growth has obviously taken a strange turn. I started by faulting myselffor not having recognized,in the course of my advocacy of unbalanced growth, that such growth could imply for a while an actual decline in the incomes of the initially nonexpanding sector. But then I established a connection between this antagonistic growth model and the awkward way in which a democracytypically movesforward. Thus my self-blamesoon ran out of steam, and I ended up presenting this growth model as a remarkable social invention by means of which pluralist politics and the achievement of multiple social objectives can be reconciled.

Parties and Macro Economic Policy," American PoliticalScience Review, vol. 71, no. 4 (December 1977), pp. 1467-87.

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What I have done, once again, is to show that the unbalanced growth model of Strategy, originally intended exclusivelyfor the better comprehension of processes in developing countries, has its uses, after a slight transformation, in dealing with problems of political economy in the advanced countries. And this demonstration gives me considerable satisfaction: in the end, the advanced countries too are forced into awkward solutions to their problems, they too do things seeminglyal reves, the wrong way around!
Conclusion

Our instructions from the organizers of these lectures said-in effect, though not in these exact terms-that we should both celebrate and criticize (in the light of intervening events and experiences)our ideas of yesteryear. Like my distinguishedfellow pioneers, I have found it difficult to be evenhanded in this dual task. Moreover, what started out here and there as a confession of sins tended to end up, curiously enough, as a confession of faith. It is probably a futile exercise to go back to a work, some twenty-five years later, and to pronounce some ideas as still good, others as disproven; some as having had a wholesome influence,others as having been harmful-and then to strike a balance with a bottom line. It makes more sense to attempt what BenedettoCroce pointed to with one of his titles that read What Is Alive and What Is Dead in Hegel'sPhilosophy, that is, to evaluate 4 ' There too, of course, the what is alive and what is dead of our work. authors themselves are poor judges, and all they can do is to try to convince the reader that there is quite some life left in those old "written and painted thoughts" and that they continue to evolve in interesting ways. One last remark, on the impact of new ideas. Since my thoughts on developmentwere largely dissents, critical of both old and new orthodoxies, they have led to lively debates, thus helping, together with the contributions of others, to make the new field of development economics attractive and exciting, back in the 1950s and 1960s. I rather think that this was the major positivecontribution of my work as well as its principal impact. Perhaps there is a general point here. The effect of new theories and ideas is much less direct than we often think: to a considerable extent, it comes by way of the general impetus that is given to a certain field of studies. As a result of a few contributions, that fieldsuddenly comes alive with discussionand controversy and attracts some of the more intelligent, energetic, and dedicated members of a generation. This is the indirect, or
41. Ci6 che e vivo e ci6 che e morto nella filosofia di Hegel(Bari: Laterza, 1907).

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recruitment, effectof new ideas, as opposed to their direct, or persuasion, effectwhich is usuallythe only one to be considered. It happens frequently that the recruitment effect is far more significant and durable than the persuasion effect. The importance of the recruitment effect explains, among other things, why the influenceof new ideas is so unpredictableand why it is so difficult-and often ludicrous-to assign intellectualresponsibility for actual policy decisions, let alone for policy outcomes. The fieldof development studies is a remarkable case in point. After the successof the Marshall Plan, the underdevelopmentof Asia, Africa, and Latin America loomed as the major unresolvedeconomicproblem on any "Agenda for a BetterWorld." At the same time, various contendingviews came forward on how best to tackle that problem. The recruitmenteffect of this combination of circumstances was notable. As the problem turned out to be tougher and more hydra-headed than any of us had anticipated, this was most fortunate. In this manner, we, the so-called pioneers, can take pride, not in having solved the problems of development, but in having contributed to attracting into our field a large number of people who will carry on.

Comment
Carlos F. Diaz Alejandro

His paper gives us generous clues: the France of the 1930s taught him to suspect both gold standard practical orthodoxy and populist simplicities, as one hopes young Chileans have learned from the excesses witnessed in their country during the 1970s. Hitler and Mussolini warned Hirschman about planning. Even during the slack 1930s he could observe the power of the price system and the dangers of thoughtless interventionism; he became, if not an elasticityoptimist, at least a devaluation-optimist, in the sense of discovering that the worse the current account situation was, the more likely was its improvement following devaluation. Marshall Plan experiences reinforced his doubts about planning exercises in which "if you give me the intercept, I will give you the slope." From these origins, Hirschman went on to search for "hidden rationalities." This crucial methodological decision puts him in the middle, or rather in the vanguard, of mainstream economics. Young 1980s economists, schooled in choice-theoretic models with uncertainty, imperfect information, and missing markets are likely to find Hirschman not so much a heterodox rebel but rather a forerunner and a rich source of ideas and testable hypotheses. Hirschman himself notes how recent industrial organization literature emphasizes a number of notions found in his early writings. One is even tempted to point out similarities between Hirschman and conservative economists associated with the old Chicago School: suspicion of planning, faith in the rationality (hidden or otherwise) of the peasant and other private agents, skepticism about foreign aid and bureaucratic "experts" administering it, a delight in shocking, counterintuitive results, and an optimism and bias for hope many critics of mainstream economics find so offensive. But there are important differences. Searching for inducement mechanisms, Hirschman explores beyond the market; hence government is not viewed as intrinsically stupid and inefficient. Early exposure to Hegel, Marx, and other Continental thinkers
WHAT HAS HIRSCHMAN REBELLED AGAINST?

Carlos F. Diaz Alejandro is Visiting Professor of Economics at Columbia University,

on leave from YaleUniversity.

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gave Hirschman not only a taste for standing things on their heads, but also an admirable willingness to trespass outside the market and to pretend that there are no boundaries among the social sciences. Furthermore, aware of the substance of what today would be called moral hazard, asymmetric information, and costly supervision of effort (as in the classic example of airplane maintenance as opposed to road maintenance), Hirschman displayed, in contrast with "old Chicago," a greater skepticism regarding the efficiency of the invisible hand. So Hirschman has been a rebel and a dissenter not so much against the major traditions of mainstream, academic economics, but against the simplifications, banalities, and limitations of practical orthodoxy and heterodoxy, and against the charlatanism of practitioners impatient with subtleties and the "pale cast of thought." The Hirschman rebellion has been at its finest when fighting vulgar recipes imposed on the weak or the vanquished. Let me now turn to criticisms of the Hirschman style. He notes in his paper an early objection: what is the operational content of his work; what exactly is his policy advice; did he really mean that imbalances should be deliberately engineered? Hirschman's kingdom is no longer of that world; he replies, basically, that this is not his business. In a profession characterized by excess supply of aspirants to positions in councils of economic advisers and an unseemly eagerness to peddle nostrums in the mass media, I find his answer quite satisfactory and refreshing. The ex-practitioner has become a shining example of scholarly defiance, responsible only for generating mind-expanding ideas and maintaining academic pulchritude. What about the "idiot disciple" syndrome? Are not the Hirschman paradoxes a joy when spun by the master, but dangerous in the hands of mediocre followers, hence to be labeled poison? Traditional academic immunity would also be enough to dismiss this charge, but perhaps this and the previous criticism deserve a more Hirschmanian exploration. Hirschman's results typically involve the conclusion that a little bit of something is a good thing, but too much of it is bad. Timing and intensity matter a good deal, but his analysis remains qualitative. Formalization and quantification, without which optima cannot be pinned down, are absent. This is a pity, not so much because the policymaker is left without a recipe for action, but because the scientific validity of his propositions are left not quite ready for testing. Furthermore, his style of analysis, like laborintensive techniques in the tropics, may be said to have too many permissive sequences and too wide a tolerance for sloppy imitation, in contrast with the narrow tolerance and somewhat mechanical pacing generated by analytical styles relying more on capital-intensive quantification and formal model-building. Could we devise curricula and inducement mechanisms so as to produce two, three, more Hirschmans? It is both a tribute to his style and a criticism

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of it that it leaves behind no obvious foundation on which to build a school. But rather than lament that Mozart did not leave behind formulas on how to produce at least a few Mozarts in each generation, we should rejoice on having been graced by a one-of-a-kind visitation. Flirting with ungrateful perversity,one last criticismmay be considered. In his search for "hidden rationalities" in the tropics, has not Hirschman sometimesovershot, and justifiedpolicieswhich were reallyal reves?In his sympathetic attempt to understand, has he not forgiventoo much, indulging in a new kind of paternalism? Old debates cometo mind on the extent of import-substituting industrialization and on mechanisms for promoting it. Without reviewingthose controversies,I would concludethat there is a little, but not much, to this criticisrn. Let me close by remarking on some omissionsin the Hirschman paper and by reflectingon developmenteconomics.The Rojas Pinillainterlude in Colombian history appears to have had little impact on Hirschman's thinking about the interaction of politics and economicsin the breakdown of democratic government,a subject of compellingfascinationsto Hirschman and other social scientists interested in Latin America during the 1970s. Perhaps the other omission was motivated by a modest reluctance to say "I told you so": the Alliance for Progress is mercifullyignored. Hirschman notes in his paper that apparently deviant phenomena first observed and analyzed in the lush tropics have been, later on, also perceived in the cool regions of the world. Development economics, as created by pioneers like Hirschman, may be said to have been at its best as a School for Scandal, a frontier where the profession lowered its cognitive dissonance defenses and allowed itself to be surprised. Inevitably, many "discoveries" dissolved under closer scrutiny, while the robust ones were incorporated into mainstream economics. As long as the tropical periphery remains with us, there will be room for venturesome explorers willing to bear the phoenix-spangled banner of development economics. For having recruited us to serve under this multicolored flag, and for bearing it erect against petty and gross tyrants, we are grateful to rebellious Albert 0. Hirschman.

Comment
Paul P. Streeten

The princes of Serendip, who did everything badly with fortunate results, are outnumbered by the disciplesof the engineerMurphy, for whom anything that can go wrong will go wrong.
-CHARLES GOVERNMENT PRINCETON ESSAYS P. KINDLEBERGER, TRADE, FINANCE. AND INTERNATIONAL IN INTERNATIONAL

After reading Albert Hirschman's paper I was dazzled by its brilliance and by the unity of so many different ideas. "Only connect" and connect with connections! The world made sense and everything fell into place. But when the blinding glare of the dazzle fades, there are certain questions one would like to ask. First, there is a systematic asymmetry underlying Hirschman's analysis which he himself expresses in the title of one of his books: A Bias for Hope. Things turn out better than we have a right to expect according to a more unbiased analysis. It is, of course, true that unbalanced growth creates incentives for decisions, highlights signals, and mobilizes motivations. If the task is to create pressures for action, unbalanced growth is the way to do it. But surely it also creates opposition, resistances, and counterpressures. Import-substituting industrialization, as we now know, has created very powerful vested interests that resist the change to more outward-looking policies. What is needed is a policy that creates an excess of positive stimuli over negative ones, and this is one argument for balanced growth. Unbalanced growth can be understood as a process or as an objective. It makes better sense as the former, if that excess exists. In his diagram of antagonistic growth, Hirschman envisages the possibility that we lose something on one axis but gain more on the other, so that the direction is upward. He invited us to put objectives of policy on the two axes. Let these be full employment and price stability. Alas, the path has been downward to the southwest; we now have considerably higher rates of inflation and more unemployment, partly as a result of the
Paul P. Streeten is Professor of Economics and Director of the World Development Institute, Boston University. 115

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expectations and pressures that have built up through stop-go policies, a form of unbalanced growth. Since many countries have succeeded in combining high rates of inflation, high levelsof unemployment,and large balance of payments deficits,one would expect, in a symmetricaluniverse, the reversal of all government policies, like turning a stocking inside out, to produce a combination of all blesssings.But the universe does not seem to be symmetrical. Take another example. According to the Principle of the Hiding Hand people tend to underestimate the difficulties of the task they set themselves, but unexpected fortunate events that serve as challengesto human creativity can turn disasters or failures into successes.But can there not be also unexpected unfavorable events? The Principle of the Hiding Hand saysthat the underestimate of the difficulties is offset by the underestimate of our creative responsesto these difficulties.But creative responsespresuppose that there are opportunities on which to exercise the creativity. (Adam Smith thought that "the over-weening conceit which the greater part of men have of their own abilities, is an ancient evil remarked by the philosophers and moralists of all ages."' The San Lorenzo irrigation project in Peru suffereddelays,but these were compensated by its learning effects. Because the Aswan High Dam in Egypt prevented the rich sediment of the Nile from being deposited, however, manufactured fertilizer had to replace it, and much of the electricitythat was intended to improve the lives of Egyptian peasants was needed to make up for the damage. Could we not design the Principle of the Hiding Fist, which is related to Murphy's law, according to which "if anything can go wrong, it will." When insurance companies thought that paying patients to get a second opinion would reduce unnecessary surgery, the result was more surgery. Peoplewho had resistedthe knife on one doctor's word were persuaded by two. Reduced latitude may increase incentivesto good performance, as in the maintenance of Colombian airplanes, but increased latitude may reduce it. When cars were made more crash resistant, accidents rose because drivers took more chances. When, some years ago, Congress wanted to ensure that the big oil companiesdid not monopolize crude oil supplies, it set aside crude, at low prices, for small refineries.That produced a boom in tiny, inefficient refineries and a shortage of refinery capacity for unleaded gasoline required by the new cars. In Shifting Involvements,2 Hirschman argues that people require a taste for public activity for its own sake, but he ignores the fact that we may also come to dislike it for its own sake when the intrinsicpleasures disappoint us. And so on. Hirschman's bias would be justified if it were simply to counterbalance
1. The Wealthof Nations, Edwin Cannan, ecl.(London: Methuen, 1950), vol. 1, p.
109.

2. Shifting Involvements: Private Interest and Public Action (Princeton, N.J.: Princeton University Press, 1982).

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biases that normally go the other way. But as a full analysis of what happens, it does seem to me somewhat unbalanced, which of coursewould recommend it in Hirschman's scheme. Another defense would be that he points only to possibilities, not to necessitiesor even probabilities. But how illuminatingis this? If my aunt had wheels, she would be an omnibus. Is this a useful maxim for a minister of transportation? Hirschman says that there has been a proliferation of linkages. Indeed, there have been production, consumption, and employment linkages; horizontal and vertical linkages;forward, backward, and lateral linkages; fiscal, foreign trade, and investment/savingslinkages; and informational, technical, financial, procurement, locational, managerial, pricing, and other linkages. But the linkage concept does presuppose a ceilinglesseconomy. Not resources but decisionmakingis the bottleneck. The dispute over whether it is resources or decisions that impede progress underlies much of the controversy about development-indeed, about economicpolicy. Imagine two missions going to a country to make recommendations about taxation. The first mission believes resources are scarce and decisions will automatically follow the availability of resources. They recommend higher taxation in order to set free the resources for the priority objectives. The other mission believesdecisions are the scarce factor and resources will flow as soon as entrepreneurial talent is activated. They recommend reduced taxation, because this would conveythe signals and the incentives to the decisionmakers.Which is the right policy depends,of course, partly on the economy in question, but a basic dilemma between resources and incentives, between means and motives, between the will and the way remains. And a Bias for Despair could argue that whenever the will is there, there is no way, and wheneverthe way is there, there is no will, as in the case of the leaky roof that never gets repaired. As a more constructive suggestion,I should like to invite Albert Hirschman to apply his notion of unbalanced growth to the interaction between ideas and interests in the history of thought and action. Keynesthought that it was the power of ideas that is, for good and ill, more important than vested interests. Marx thought that it was class interests that determinethe superstructure of ideas. It would be consistentwith Hirschman's approach to say that there is a continuing interplay between interests and ideas. It might be worth pursuing this interaction in specific areas, such as the controversy over industry versus agriculture, the population problem, or the issue of migration and brain drain. Together with the Bias for Hope this approach would be a counterweight both to those who emphasize ignorance and stupidity as the principal obstacles to progress (like Count Oxenstierna) and to those who stress wickedness, selfishness, or cupidity as the barriers. We might see that progresshas beenmade and that the new problems in the sphere of ideas and of interests are often the result of the successfulsolution of the first generation of problems.

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There is something irresistibly attractive in counterintuitive results. Social scientists thrive on them. But we should not despise truisms simply becausethey are true. Certainly,the flushof discoveryof a new truth often has the appearance of the paradoxical. But in listening to Albert Hirschman, we are sometimestempted to reflect:"It is paradoxical but nevertheless false."