Albert Hirschman spent four years in Colombia, 1952-56, advising the World Bank on a big loan programme. This resulted from the Bank's decision to organise its first ever comprehensive country mission. This was to Colombia in 1949-50 and led by Lauchlin Currie.
Mason Gaffney (see below) has asked me for Currie's (1902-93) views on Hirschman.
Their relations during these years were very strained. The most detailed discussion of this episode, and its significance for the history and evolution of post-war development economics, is by Michele Alacevich: The Political Economy of the World Bank: The Early Years (Stanford U.P., 2009). I also cover it in my biography, The Life and Political Economy of Lauchlin Currie: New Dealer, Presidential Adviser and Development Economist (Duke U.P., 1990).
After the publication of his Report in 1950, the Colombian government contracted Currie to sit on a commission charged with implementing the mission's main recommendations, and to advise on the World Bank's and Hirschman's subsequent involvement.
In brief, Hirschman and Currie clashed on many issues, but a very significant one concerned the World Bank's decision, against Currie's advice, to finance a small but fully integrated steel industry. Colombia had coal and iron ore deposits in a very poor but isolated region. It was physically possible to build a plant there, but in Currie’s eyes it was an economic nonsense. Instead he favoured continuing the import of high quality scrap iron from Venezuela for processing in Colombia at much lower cost than could be possible from her own resources and market potential. For Hirschman, however, this case was a major stimulus for his renowned "theory of unbalanced growth” together with import-substituting industrialisation. For the steel industry was a wonderful candidate for the maximisation of “backward and forward linkages”. Hirschman also insisted that in developing countries the scarcest resource was "decision-making capacity", so let us deliberately create bottlenecks and shortages to stimulate investment (as if there are not already enough of these).
Currie lambasted this approach as one in which sectors favoured for relatively rapid growth would be selected according to the extent of their technical linkages - a physical supply-side approach divorced from links with actual and potential real demand. If this meant advancing faster than unsubsidised demand, threatening bankruptcy, Hirschman’s solution was “The Principle of the Hiding Hand”: get civil servants to exaggerate the benefits and conceal the true costs to private investors investing their own (not the civil servants' or Hirschman's) money. Currie rightly regarded this as very bad economics and perhaps even worse ethics.
- Roger Sandilands
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From: mason gaffney [[log in to unmask]]
Sent: Thursday, December 13, 2012 2:19 AM
To: Roger Sandilands
Subject: FW: [SHOE] Albert Hirschman (1915-2012)
Fyi. The I.A.S. press release is most thorough. I suspect you may not
share all its canonization of A.H. What was Currie's view?
Mason
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From: Societies for the History of Economics [[log in to unmask]] On Behalf Of Pedro Teixeira [[log in to unmask]]
Sent: Wednesday, December 12, 2012 11:30 PM
To: [log in to unmask]
Subject: [SHOE] Albert Hirschman (1915-2012)
Dear Colleagues,
you may already know of the sad news that Albert Hirschman has passed away yesterday. He was an insightful economist, a fascinating intellectual, and an admirable citizen.
The obituary from Princeton's IAS can be found here: http://www.ias.edu/news/press-releases/2012/12/12/hirschman
Kind regards,
Pedro Teixeira
Pedro Nuno Teixeira
Director - CIPES, Centre for Higher Education Policy Studies
Rua 1ş Dezembro, 399, 4450-227 Matosinhos; Portugal
+351 - 22 9398790 (phone); +351 - 229398799 (fax)
Associate Professor - Faculty of Economics, University of Porto
Rua Dr. Roberto Frias, 4200 Porto, Portugal
+351 - 225571100 (phone); +351 - 225505050 (fax)
Visiting Fellow, OxCheps, New College, Oxford University, Oct 2012- Feb 2013
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