Long is the journey issue 4 by A Colorni-Hirschman International Institute

AC-HII

LONG IS THE JOURNEY Dossier N.4, Fall 2020

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LONG IS THE JOURNEY Dossier n. 4 - Fall 2020 Editors: Luca Meldolesi, Nicoletta Stame Assistant editor: Roberto Celentano Translator: Michael Gilmartin Creative Director: Gennaro Di Cello (Entopan Company) Art Director: Brunella Chiodo (Entopan Company) Graphic Designer: Francesco Falvo D’Urso, Roberto Caroleo (Entopan Company) Web Developer: Salvatore Brosio, Ornella Leanza (Entopan Company) Images: Frederick Bloemaert, Wilhelmus Couwenberg, Jan de Bisschop, Pieter de Jode, Jean Lepautre, Paulus Pontius, Michael Snijders, Pieter van den Berge. Cover: Studie van een vrouwenhoofd met gevlochten haar, Leonard Schenk, after Michelangelo, 1710 - 1767.

TABLE OF CONTENTS

Introduction by Luca Meldolesi PART I - LEARNING FROM EUGENIO COLORNI

The Colornian foundations by Luca Meldolesi

A Colornian Decalogue à retenir by Luca Meldolesi

On Anthropomorphism in the sciences by Eugenio Colorni

PART II - LEARNING FROM ALBERT HIRSCHMAN

Introduction: Is there a methodological break between Hirschman’s pre and post-war work? 37 by Luca Meldolesi. PREFACE to Potenza nazionale by Albert Hirschman

A Few Excerpts from “Follow Events in France and Italy” by Albert Hirschman

Bibliography

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INTRODUCTION by Luca Meldolesi

Introduction

This introductory note was inspired by an observation of Nicoletta Stame’s concerning ‘La malattia filosofica’ ed altri scritti [“The philosophical illness” and other writings] by Eugenio Colorni, the (so far) concluding volume, specifically methodological, in a series I edited that brings together many of Colorni’s works. The book is currently being published by Rubbettino Editore (and to be published in English in New York by Bordighera Press). Nicoletta noted, in fact, that applying new insights in the theory of knowledge to Eugenio’s life allows a better understanding of Hirschman’s work as well. I believe this is true. Because the intimate satisfaction of having managed to “get to the bottom” of the philosophical question of Colorni — in particular with respect to his masterpiece “On Anthropomorphism in the Sciences” (cf. below) and to my own Colornian Decalogue (cf. below) — suggests that the way could be open for a new and important round of studies on Albert Hirschman’s extraordinary work. What have I understand and what haven’t I? To approach this question, my instinct (or temptation) is to begin “ab ovo.” As an economist Albert was one of a kind. My interest in his work was actually sparked by this peculiarity (which is nevertheless not easy to bring into focus). Furthermore, in one of his Ventotene Dialogues Colorni had gently taken issue with economics as a discipline (and with Ernesto Rossi).1 Evidently, the question of “Economics” had marked the 1937-38 discussions in Trieste between the two friends/brothers-in-law, and then, with time, had affected Hirschman’s own intellectual (and practical) experience. Conclusion: the question seems to have acquired two different characteristics in my mind — one we can call “why economics is what it is.” And the other: “why it is necessary to ‘complicate’ it” (as Albert suggested). Because Hirschman repeatedly supported very clear positions, both on the eighteenth-century birth of the discipline (the Adam Smith question), and on its nineteenth-century rediscovery (via general economic equilibrium). And because, starting from all this, I managed to reach conclusions that still seem reasonable to me today2. But I am much less certain that I fully understand the pars construens side of the matter, and this is where Nicoletta’s remark immediately struck me as appropriate. The fact is, Albert’s attitude toward economics proper never resembled that of the great economists I had encountered up to that time. He had not committed himself to rejecting it (like many of the French economists and social scientists of the nineteenth century). He hadn’t tried to build an alternative to the mainstream from within the discipline (like Keynes); nor had he sided with one current of economic thought (perhaps enriching it, like Sraffa etc.) as opposed to the others. Why? Why did Hirschman, who had always respected political economy in its various expressions, at the same time regard these products of human ingenuity as works to be reconsidered, restored, or even used as building materials to transform his own little ideas into “little castles” (“castelletti”)? To me, the most convincing answer is that such a position respected the commitment he had made to himself. Because after the tragedy of the war (and the genocide) Eugenio and Albert could not escape their cultural and political responsibilities, or think they could start again from scratch — from the simple “tabula rasa” of the previous culture; or join obsolete, partisan, or group ways of thinking. They had to

1 Cf. Colorni E.-Spinelli A. 2018, p. 157-92. 2 Meldolesi L. 1987, 1987a, 1988, 1990.

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think with fresh minds, reusing what was reusable and setting in motion a long-term cognitive project. Searching and searching, undoubtedly — even if Ursula Hirschman would later add, referring to herself, “but never finding”3… It is a hypothesis that needs testing — by comparing, for example, the epistemological approach of Eugenio’s ‘La malattia filosofica’ ed altri scritti with a broad anthological cross-section of Albert’s work, such as his Come complicare l’economia [How to complicate economics] (1988; forthcoming in English from Peter Lang Publishing).4 What can I expect to find? A closing of the circle? Eugene and Albert would have laughed. I expect the opposite. I expect the successive introduction of much specific knowledge that needs to be continually verified, built and rebuilt. And in this mental perspective, alongside new observations and new production lines to be gradually identified, the logic of self-subversion in the light of historical experience makes its debut. It is an endless commitment (and a process). From such a height it will perhaps be easier to descend gradually onto some specific topic such as “democracy and development,” the theme of the Bogotà “Fourth Conference on Albert Hirschman’s Legacy” that we are presently planning. By this I certainly do not mean to argue that we should mark time; or just switch on a few lights — now here, now there — that have no relation to each other. Parts of the Hirschmanian scaffolding can grow. And they can become like Michelangelo’s landmarks in Renaissance cities that I spoke about in Discovering the Possible: their cities can have main roads — like the Cardo and Decumanus of Roman memory5 — and many other secondary ones. But the work never ends. Indeed, just as in the case of our historic cities, at any moment in time it can be read from the obverse and/or the reverse. That is to say, from its genesis onward and/or from today into the past. All well and good, the reader will think at this point, but how is this characteristic way of proceeding being developed? We will examine it in part in the second section of this issue of Long is the Journey... And it seems useful, for introductory purposes, to briefly apply to Albert Hirschman the procedure I used with Eugenio Colorni6: that of observing his professional career through the lens of his wishes and concerns. At the time of Hitler’s arrival, Hirschman was a first-year economics student and was forced to flee abroad. He would have liked to study at “Science Po” in Paris but, dissuaded by Michel Debré, he then enrolled at the “École des hautes études commerciales,” a large “business” école that he did not like. In the U.K., he met Piero Sraffa and spent a year at the London School of Economics, where he (finally!) grasped the ubi consistam of the discipline of economics. He was probably a little afraid of it. He brought a copy of Keynes’ General Theory with him to Trieste (after briefly taking part in the war in Spain). And he claimed to be relieved to have discovered that he could do a decent job as an economist without having to decide beforehand whether the General Theory was entirely correct. Implied conclusion: having turned his back on business, Albert ruled out becoming a theoretical economist.

3 Hirschmann U. 1963. 4 Cf. also Meldolesi L. 1994; English tr.:1995; Spanish tr.: 1997. 5 Or “la calle e la carrera,” Albert added, in reference to Bogotà: cf. Ibid. 1995, p. 161. 6 In my Introduction to “La malattia filosofica” cit.

Introduction

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He focused instead on practical matters, on statistics and applied economics, and started a promising career as an economic journalist specializing in Italy7; but this was suddenly interrupted by the racial laws (and Eugenio’s arrest)8. This was in 1938. Albert had just graduated from university and had a good grounding in philosophy, literature and politics (we now know more about this than before9) and a decent background in statistics and economics. His encounter with Eugenio had set him on the right track and freed him of his obsession with systems (philosophical and economic) as well as pushing him into the arena of effervescent intellectual innovation. But he had to find a job that was within his reach, having excluded being a “company man” or a theoretical economist. In Paris he met John Condliffe and began working for the League of Nations. Understandably, he took advantage of what he already knew to put together a major report on exchange controls in Italy and to specialize (with a certain statistical skill) on problems of international trade.10 After various vicissitudes he arrived in California, resumed working with Condliffe, wrote National Power and the Structure of Foreign Trade in 1941-211 (as a theoretical-political contribution — the offspring of his interest in international trade, and as a calling card to the profession). After the war, with the support of Alexander Gerschenkron, he finally found the job he had been looking for with the Federal Reserve, working on the Marshall Plan in Washington — where he moved with his wife and daughters. But even there, as Sarah Hirschman later lamented to the present writer, he didn’t easily find a way forward. Was it a question of political mistrust?12 Was it the ideological resistance of his colleagues?13 Was it because (as he explained in 1998) he took a position for Europe and against the Treasury?14 Maybe a bit of all of these. What followed, finally, was his courageous Colombian adventure. Implicit conclusion: For 18 years — from 1938 to 1956 — Albert Hirschman threw himself into professional work, mainly public, without fully obtaining the sort of results he had hoped for. Only in the last two years (1954-56), working as a private consultant alongside George Kalmanoff, did his scholarly interests point him in the direction of academia — where he would in the end achieve extraordinary success. It is not possible to effectively understand Albert’s story, starting from his first masterpiece – The Strategy of Economic Development (1958) - without passing through his long pre-academic professional phase. And to give an idea of that, we refer here to a part of Hirschman itinerary — that of “Follow Events in France and Italy”: the first task assigned to him in the context of the Marshall Plan. Long time readers of Hirschman will find out that, actually, a number of specific indications, valid individually, but apparently sporadic and disconnected, become more and more telling once his previ-

Introduction

ous work is taken into account. See, for example, the 1961 “Preface to the Paperbound Edition” of The Strategy. “My book – the Author wrote in it (inter alia)15 – has not turned into grist for the mill of those who are hostile to development planning. It was, of course, never meant to be that; rather my hope was and is that it will contribute to making planning and programming activities more effective”. Now, if you look at “France and Italy: Patterns of Reconstruction” (1947: see below), you may read: “in spite of difficulties and possible departures from original schedules, the Monnet Plan will leave its mark on the economic structure of France and of Europe”16. That is that: no misunderstanding is possible. Besides, it is known that later Hirschman explained that, to contribute in making planning more effective, he had to revolt “against a Colombian assignment”; and that that recollection brought him back to his Marshall Plan struggle against old and new economic orthodoxies. More specifically, in 1984 he declared that he felt “a natural concern and aversion when Marshall Plan administrators were aggressively pressing their views upon appropriate domestic programs and policies upon countries such as Italy that were large scale beneficiaries of aid”17. There is more than that. In the 1987 “Preface” (see below) he declared that: “above all I worked hard to undermine the certainties of my colleagues (whether pro-market or pro-planning), many of whom saw no harm in using the fullest extent of their power in the service of their opinions and beliefs”. And, in doing so, - one may add - he started learning from local people: as it is clear from the excerpts of the essays – in particular from the one on Italy - quoted below. Therefore, when in 1984 he wrote that in Colombia “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”, that “natural inclination” was actually well rooted in the Marshall Plan experience18. Wasn’t it? All this said, a central aspect of the picture is however missing: Eugenio Colorni’s teaching that resurrects itself in Hirschman’s work. It is a way of thinking, a turn of the mind paradoxically at the heart of “A Singular Incomprehension” (as I called it19) with which The Strategy was received. It is something that one learns by studying and by doing it: in time. This is one of the reasons why, in our review on line, Long is the Journey…, we insist in connecting our “Learning from Eugenio” to our “Learning from Albert” (and viceversa).

15 Hirschman A. O. 1961, p. vii.

11 Subsequently published in 1945; third edition with a new introduction 1980.

16 Cfr. the excerpts below. “The Plan – Hirschman has explained already in the same article - is the result of a cooperative effort on the part of French Government, industry, and labor. It does not detail a rigid program for every branch of economic activity for the next four years, but rather sets goals for such aggregate magnitudes as national income, investment, labor force, and required foreign aid. It provides specifically, however, for considerable expansion and modernization of the French internal transportation system and of five fundamental branches of French industry. In these industries it is planned to attain by 1950 the following percentage increases in production over 1938: coal, 37; electricity, 79; steel, 77; cement, 255; and agricultural machinery, 371 per cent.” It is clear, moreover, that he was indeed grateful to Jean Monnet for his help in planning the American economy during the second world war military effort. Actually, he suggested me personally to read Jean Monnet’s Mémoires, 1976.

12 Cf. Adelman J. 2013, Ch. 9.

17 Hirschman 1984; now 1986, p. p. 7.

13 Hirschman A.O. 1984.

18 Hirschman 1987, 1998 Ch. 2; and Meldolesi 2013, Ch. 3.

14 Hirschman A. O. 1998, Ch. 2.

19 Meldolesi 1995, p. 61-7.

7 Hirschman A:O: 1938a; 1939, n. 15, 16 et 17. 8 Hirschman A.O. 1995, Chaps. 8 and 9. 9 Cf., for example, Fleck C. 2020; Hirschman A.O. 1984a. 10 Hirschman A.O. 1939a, 1939b.

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Part I - The classics

PART I / LEARNING FROM EUGENIO COLORNI

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Part I - Learning from Eugenio Colorni

This section draws from Luca Meldolesi’s Introduction to “La malattia filosofica” ed altri scritti by Eugenio Colorni (forthcoming: Soveria Mannelli, Rubbettino); and from Dialoghi by Eugenio Colorni and Altiero Spinelli 2018 (forthcoming in English in New York, Bordighera Press).

The Colornian foundations by Luca Meldolesi For Eugenio Colorni1, knowing a certain object meant knowing how to master it through processes of de-composition and re-composition. The object cannot be separated from the subject, who creates an interpretation of the encompassing world that includes the “deeds and misdeeds” encountered in his day-to-day experience. This representation is thus defined by a series of concepts held by the subject. If we say that time goes by, we are obviously talking about the passing of the hours as marked by our cuckoo clock. If we say that the size of an apartment is a certain number of square meters, it’s because it has been accurately measured. In both cases the idea we have is of an exact quantity that can easily be checked2. Einstein and his theory of relativity — the “curvature” of time and space by gravitational forces — doesn’t even cross our minds. For Eugenio, however, Einstein demonstrated

1 Eugenio Colorni (Milan 1909 - Rome 1944), friend of Albert Hirschman, was six years his senior. Colorni was Hirschman’s mentor: the person who had the greatest influence on his work. 2 Just as, before Copernicus, Galileo and Kepler, it was thought (following Ptolemy) that the earth was flat and that the sun revolved around it. Such ideas are still with us as figures of speech — for example when Pope Francis claimed to “come from the end of the earth”, or when, in meteorological language, we speak of the rising or setting of the sun... Not to speak of the Aristotelian-Christian vision of the late Middle Ages, which has left us still saying “I’m in seventh heaven” or using expressions such as “prime mover”, “heavenly vault”, “empyrean” etc...

the thesis of human attribution — that is, anthropomorphism — the set of concepts initially put forward by Kant (along with causality, substance, quantity, etc.). From this sprang the need for a close dialogue between literary-philosophical knowledge, on one hand, and mathematical-scientific on the other, that would allow the pursuit of this promising path to continue. The fact is, Colorni explains, every time humanity manages to identify the anthropomorphic aspect of a part of its representation of reality and to truly master it, the benefits are enormous. This is the often implicit rationale behind numerous discoveries. Hence his need — omnipresent in the last years of his life — to be constantly on the lookout for anthropomorphism (as well as auto-morphism). Hence his advice to restrain our own senses (keep them in a state of watchful waiting) in order to try as far as possible to capture how things really are, and to commit to an internal struggle to break free of this or that point of view, conception, way of thinking, etc. which, initially acquired to make sense of some aspect of the world, eventually become a series of impediments to its comprehension... Eugenio thus believed that human beings from all over the world, starting with those who were most enterprising, by intelligently and wisely implementing their wide-ranging yet interactive knowledge, would be able to open the way to an era of invention and accelerated technological progress — with important consequences for their concrete conditions, and their own prospects (and vice versa).

It is a point of view in a certain sense analogous to Carlo Cattaneo’s civilizing process, which also shows up in Colorni’s political theses and which today strikes us as incredibly topical. Indeed, all it takes is a moment’s reflection to see its meaning for the conflicted world we live in today. The great revival of nationalisms and their rivalries, although dangerously present in various areas of the world, has not yet degenerated into open conflicts; up to now, autocratic pressures (whether reactionary, or communist and fundamentalist dictatorial) have not succeeded in overwhelming liberal market-economy democracies; the ongoing re-establishment of hierarchies in many areas and dimensions of life faces various stumbling blocks; it appears that economic, military, civil and religious oppression, though widespread, is being held back by important counter-trends… In other words, the negative pressures, reminiscent of humanity’s violent past, coexist today with tendencies that oppose them: from Open Innovation research in every field to interest in the environment and the liberation of individual and social energy, from processes of development to those of justice and democratization that now come close to touching all of humanity, from the vast connectivity and shrinking of distances to the immense desire to know and be known, country by country, etc. If we make a great memory leap back to the conditions of the war and the post-war period, we get an idea of the huge change that has taken place and we can bring into focus the Colornian problem we still face — that of bringing to bear a series of possiblist imbalances, even seemingly incredible ones (small and large, local and general), which at the technological, cultural, political and social level will invert negative trends, encourage in actors of every kind the civilizing impulse

(spontaneous and cultivated), create hope and perspective, facilitate progress, draw the interest of others (the famous “magnet effect”) and thus begin to master and gradually tame the dangerous tendencies of the times in which we live. And open the doors to the future.

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A Colornian Decalogue à retenir by Luca Meldolesi 1. What we have is an intellectual style, a construction of ideas based on an “essential balance” between the past and present, between the humanities (above all philosophy) and the natural sciences (especially physics); one that should be extended, in my opinion, to the social sciences and, more generally, to every area of life. 2. Its starting point is a “conventionalist” conception of knowledge based on the five senses and on the forms, categories, and the associative and interpretative criteria that we use (for science and for consciousness, without realizing it), “without which it is not possible for us to attempt or pursue anything.” 3. To be specific, under the pressure of historical circumstances Colorni determined his point of view by maneuvering between his initial subject, philosophy (Kant, positivism, idealism, irrationalism) and those that followed— physics, mathematics, geometry, psychology and psychoanalysis. 4. He argued for abandoning the use of capital letters as a way of progressively dethroning the anthropomorphic “idols” of contemporary views of the world (Space, Time, Causality, Number, Reality, Truth, etc.) in order to gradually achieve new, specific cognitive acquisitions. Knowing for Eugenio means taking possession of a certain phenomenon (human, natural, social, etc.)—it means knowing how to break it down and reassemble it so it can be used for one’s own ends. 5. Women and men can never get outside themselves, even in the process cognition. But the refutation of some aspects of their own theory

Part I - Learning from Eugenio Colorni

of knowledge allows them to simultaneously acquire new ways of seeing and therefore new types of proficiency. For this reason, it is necessary to relentlessly question past knowledge in the light of the evolutionary processes we experience and our own observations concerning our surroundings. That is to say—in addition to books, it is essential to learn from experience. 6. To successfully intercept stimuli that arrive from the external world it is useful to deploy our senses in a receptive position, reducing as much as possible our anthropomorphic projection onto the observed phenomenon. Furthermore, it is necessary to actually welcome messages that challenge what we have acquired previously. Indeed, we ourselves need to develop an acute sensitivity that will allow us to glimpse the openings through which this process of new understanding can manifest itself. 7. The aim is therefore to arrive, case by case, at an awareness (short and long term) that places the subject in a relationship that corresponds as closely as possible to “how things actually are.” Discoveries, innovations, and individual and collective changes concern every aspect of human life. For each event, positive or negative, the outcome depends on the circumstances, as well as on intuition, imagination, learning in other fields, and the ability to find an access point, along with mobility and the capacity of the person or persons involved to pull things together. 8. As this transformative process becomes better understood and more conscious, it can become commonplace, routine. But it can also suggest new stimuli both near and far, even far removed from the usual ones. It can engage and infect other subjects through love (as in “do unto

others what others would like”). It can spread, suddenly setting in motion unexpected economic, political, and social processes. It can inject into our societies, all at the same time, freedom, development, democracy, federalism, fraternity, social justice, peace, respect for the environment, art, beauty etc. It can promote a process of “becoming civilized”, a “magnet effect” that attracts the attention of peoples and promotes the evolution of humanity. 9. Awareness (with its consequences of discovery, innovation and change) can therefore emit a powerful individual and collective force capable of holding back (and gradually taming) the aggressive tendencies that have long bloodied humanity’s violent past—up to the appalling nationalist tragedy of the Second World War (and beyond). 10. On scales both small and large, the art of the posswible (possibilism) involves continuous efforts to widen the spectrum of opportunities and choices, along with “optimal imbalance” initiatives (intentional and/or incidental), both aimed at accelerating positive processes that can play a cutting-edge role in providentially correcting existing negative trends.

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On Anthropomorphism in the sciences1 by Eugenio Colorni COMMODUS (to Severus) – I will suppress the anger that your confused and bombastic talk makes me feel, first of all to point out that you have not even offered the beginning of a discussion of the two main points of our conversation—namely: (1) whether there is a qualitative difference between biology and physics; and in particular whether the fact that two half dogs are not equal to one whole one might be compared to the fact that two atoms of hydrogen and one of oxygen are not a water molecule. (2) What the characteristics of historical knowledge are and whether it has anything to do with scientific-natural knowledge; our having agreed that saying that historical knowledge is freighted with the future and the other kind isn’t, even if it were true (which it is not), would not be saying nearly enough. But you preferred to take refuge, like Gentile, in the self-creativity of the spirit, and in the process of self-formation; magic words, such that if you try calmly to clarify their meaning you become a science maniac. And clarifying their meaning immediately becomes—for the convenience of your argument—defining tautologically. And then after another half-dozen of these little games you maintain with utter contempt that this is all an empty discussion. This is the only thing we agree on. Your method is this: (1) Reduce what I say to trivial paradoxes. (2) Counter them with trivial 1 Colorni E. and Spinelli A. 2018, Ch. 6 (translated from Italian by Michael Gilmartin) Commodus is Eugenio Colorni, Severus Altiero Spinelli.

Part I - Learning from Eugenio Colorni

truths. (3) Nobly profess disgust with both positions. Now I would be prepared to support (1) if you didn’t answer me with (2). And the fact that you do shows me that perhaps even (1) wasn’t done correctly. CURIOSUS – Admit that all this ranting is to show that your debating weapons are just as sharp as Severus’s. COMMODUS – I admit it. But this takes nothing away from my arguments, which I stand firmly behind. Anyway, let me get to the point. I never said that life doesn’t exist. Nor do I deny that there may be forces that we cannot grasp. I say only that if they cannot be grasped, then we cannot say anything at all, and that we can only say something about them if and to the extent that they can be. And if they can be grasped it means that they fit into our patterns of regularity, prediction and reconstruction. And once they have fit into these patterns, they are in our power. And what is in our power we call matter or a dead thing. SEVERUS – This is the point. Is it really true that for us grasping something only means fitting it into our predictive frameworks, etc? Isn’t there a form of knowledge that such frameworks have nothing to do with? Historical knowledge, for example. Now that doesn’t consist of banal predictions, but of something much more alive. It is an extension of our personality into humanity’s past, to make it reach toward the future. History is not a hypothetical science that considers its subject matter as a means. It is active, full of what is to come. COMMODUS – Beautiful and holy words, but how much more useful if we were allowed, without incurring anathema, to see them closer up! SEVERUS – Here’s the prisoner of the intellect again. COMMODUS – Go to hell. Yes, of course, history is our knowledge of ourselves, and so on. But as a living and present activity of the mind, not as a

body of notions and facts encoded in books and collected in archives, and classified by statisticians and jurists. In this last sense it is just a collection of facts whose utility, if there is any, is actually hypothetical (if you want this end you must use this means)—that is, consisting of very uncertain predictions based on analogies. Now you cannot deny that history, for someone who doesn’t work with it currently and actively, history as a subject of study in the schools, as an organized body of doctrine, is nothing more than this. Another thing entirely is the case of someone who makes it the center of their own moral and spiritual life, who experiences it as their own past and makes it the basis and starting point for every action and goal (and everyone does this to a greater or lesser extent). But then you can say the same thing for the natural sciences, whose value is instrumental and goal-free only for those who consider them to be a codified and stable body of knowledge. But for someone who experiences science as the central drama of their own research (and here again more or less everyone does) it is something that extends its roots ever further into the surrounding world, always setting itself new goals, something that indeed dictates goals to the researcher, and in its own growth and development finds reasons to grow and develop even more. I believe, incidentally, that even the great Croce reaffirmed that the natural sciences are nothing other than history. And he is not a person suspected of sympathy for the sciences. SEVERUS – You have to recognize, though, that the goals of history are what you might call finalistic, and not so instrumental as those of science. It touches something more intimate in people, more categorical. COMMODUS – Perhaps, but this has nothing to do with our argument. And then, basically it’s a question of taste. There are those who feel a need

to expand their own communion with the world around them as actually categorical in itself. I would say in fact that this need is one of the essential needs of human beings. Even leaving aside that one of the great purposes that science sets itself is saving humanity from illness. As I said, however, our argument doesn’t touch on this. The fact is that whatever ends any kind of study or knowledge points us toward, the greater the predictive power science provides us with the more precisely we can reach them. And this word prediction does not necessarily indicate something mechanical or narrow. It can be viewed as something embodied in the very nature of man; a agility of movement, a control of the situation, a precision of reflexes that makes an action safe and fruitful. But reduced to its most intimate essence, it will still be that faculty of being able to see, to the greatest extent possible, that given certain facts about the present and the past, certain others will occur in the future. (I intentionally did not say that given certain causes, certain effects will follow). SEVERUS – Briefly then, you don’t admit that in certain cases, recognizing certain events as they unfold forces us to introduce causes that already potentially contain the effect in themselves, in the form of more or less confused tendencies? Final causes, that is? COMMODUS – I have never understood the nature of such causes. Nevertheless, I wouldn’t be at all averse to admitting it, specifically concerning causes. But I maintain that their level of suitability for contributing knowledge about the future depends on the degree of reliability with which they can predict an effect—that is, on the strength and necessity of the effect’s connection to them. The nature of causes, why a given cause should produce a given effect is, on close inspection, extraneous to the true interests of science. In general, the more finalistic and anthropo-

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morphic the causes, the less reliable they are—the less they are causes, that is, and the less useful they are to science. But basically there is nothing preventing you from saying that the north pole of a magnet is attracted towards the south pole and vice versa, if it is clear that this means that when the two poles are placed in each other’s presence, each moves in the direction of the other; or saying that phagocytes defend themselves against pathogenic germs by attacking them, if it is clear that a series of exactly predictable and calculable facts lies behind these words. In the economic and historical sciences it is often the very observation of human psychology and the phenomena of will that leads us to conclude that these modes of knowledge can be said to contain the future. But even here we’re talking about the aspects of the psyche and will that are permanent, recurrent and predictable; there is always a certain mechanism in these activities, that is, that allows us to stand on them (not too steadily, it’s true) in order to proceed further. CURIOSUS – Okay, and so? You’re not telling me anything new. I learned these things by heart from idealism. The static thought is nature, it is death—and so on. Is it really worth all this eloquence and combativeness just to produce this tired truism? COMMODUS – It’s worth it, I think, because the context here is different from idealism. I say these things not because I’ve deduced them from my philosophical readings, but because I’ve run into concepts such as life force, internal finalism, etc. in my scientific readings. It’s because I need to clarify the nebulous meanings of these terms to myself, it’s the suspicion that there is a yawning emptiness within them—this is what led me to the above formulation. And you see that, in the scientific context, these formulations that are so innocuous in a philosophy book take on such a

Part I - Learning from Eugenio Colorni

subversive and paradoxical force that a serious scientist apparently cannot even take them into consideration. Severus in fact opposes them not as truisms, but as banal paradoxes. And the fact is that this is where their strength lies, in being the two things together—obvious to the philosopher, paradoxical to the scientist, and irritating to both of them. And this in my opinion shows the lack of seriousness of both scientists and philosophers; one group is careless of the significance of the concepts they use, and the other is content that their discoveries fit harmoniously with their system of doctrines, but trust so little in their actual value that they don’t even bother to apply them in the fields they refer to. CURIOSUS – These attempts of yours to find higher authorities unifying science and philosophy, I find suspect. I believe it to be no coincidence that these two fundamental attitudes of mind have remained separate throughout history. There must be a fundamental autonomy in each of them that does not allow higher unification. COMMODUS – I agree in opposing the higher unification, but not about the autonomy. Actually, I think autonomy is the main disease of philosophy, and perhaps of the sciences as well. And I do not want to find any super-logic or superior authority which, precisely because it is superior, would sanction the autonomy of entities beneath it. I would, if anything, reject autonomy or, more modestly, take seriously discoveries made by thinking. This would mean not testing autonomous entities’ value in the easy circularity that they have within themselves, but rather expecting that there should be some activity in the field that they operate in, and if there isn’t, abandoning them. Therefore, if I manage to convince myself that the static thought is nature, and that the term life as used in the natural sciences has no meaning, my claim will be that this discovery

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applies to the natural sciences, and not to philosophy. And for the natural sciences it is no longer a truism, but a paradox—that is, it subverts their whole method. And if it does not find any application in the natural sciences nor help them move forward and solve any of their problems, then this alleged discovery will be worth nothing and we should abandon it. SEVERUS – What I can’t stand is your referring to everything that’s known as dead. COMMODUS – It’s about time! I can’t stand it either. But it’s just as bad to call everything that isn’t known alive. Indeed, I would eliminate the two words dead and alive, and replace them with known and unknown, or even better—predictable and unpredictable. Basically this is all I’m asking. SEVERUS – If all you want is to reform the nomenclature, master. COMMODUS – But words are evocative. Calling what is known dead is the symptom of hypostasis, of entitation; it is relating the set of known things not to a choice made by us as we look for what adapts itself to our grasping organs, but to a supposed body of facts and autonomous laws that stand alone (physics, the sciences, the material world) whose intimate structure is allegedly knowable, predictable. The entitation is all in this transposition of the known to the knowable. And this brings with it the analogous entitation of the unknown into something unknowable or free or spontaneous, etc. All I want to do is this: replace the suffix -n with the suffix -able. But I believe this simple shift would lead to a fair amount of upheaval in the natural sciences. And it is far from easy to do it seriously. SEVERUS [his reply is missing from the manuscript, but its drift is easy to deduce from what Commodus replies.] COMMODUS – This last objection of yours hits fairly close to home. But really I don’t know if I

Part I - Learning from Eugenio Colorni

should correct the defect you charge me with and which I surely have. With you it seems to me the moment has come to speak against what has been said up to now; and deep down you yourself feel this need, when you make an apology for resentment. Certainly with friends who are open, free and nimble listeners (the ones I like best), I often feel ashamed, limited and petty, selfish, aggressive, and much more Severus than Commodus. And their ironic smiles and shrugging shoulders affect me deeply, and I feel that they come from a higher world than the one I belong to, a world without fears, defenses and conquests. But in spite of this, I often think this meanness is basically necessary if you want to build something. It is the tribute you pay to getting things done. People who do things are necessarily more aggressive, less open, less available, and less free than those who do not. They must to a certain extent become deaf and blind to what lies outside what they are doing, which they must love with a love that is exclusive, concentrated, selfish, and mean. Therefore, if at a human level I feel great respect and affection for people who are completely disinterested and friendly, whose spirit is better compensated in living than in doing, I nevertheless cannot help finding the others useful as well. More useful? I don’t know, because the former have very great utility as friends, as conversationalists, as leavening. But the latter, in short—we need them. Their work is more conspicuous and this makes them more unpleasant. In the former category I know of only one who has become immortal: Goethe. But let’s get back to us. I want to try and translate what you say into my language. SEVERUS – I’ll help you. What you are doing, if I understand you correctly, is waging a campaign against anthropomorphism. You see it as the number one enemy of science, the primary cause of its failure to progress. To the extent that man is

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so in love with himself that he sees in himself the supreme purpose of the world, or a world made in his own image and likeness, to that extent science does not progress. And this anthropomorphism is often so subtle and inadvertent that it is difficult to flush out. For now you want to fight it in its expression as life force, internal finalism, etc. CURIOSUS – On the other hand it seems to me that you are the most ardent of anthropomorphists. Ultimately, all you’re trying to say is that everything we know we have reduced to our own image and likeness; and that we are the measure of all things. By the grace of anti-anthropomorphism! COMMODUS – It’s a question of interests. You are both right, but I see myself more in the description of Severus. Curiosus’s kind of anthropomorphism exists, of course, but it is something that is experienced, not desired. It is the recognition of a fact—that we are unable to get outside ourselves; for us, knowing can only be in the form of learning—which amounts to reshaping [what we intend to learn] to fit our grasping organs. But this is a necessity, a harsh necessity indeed, which we would gladly do without. It doesn’t address any of our needs… CURIOSUS – The word is requirements. COMMODUS – Any of our requirements. And from the time this restriction was discovered, twenty-five centuries ago, human thought has done nothing but struggle to get out of it. CURIOSUS – The word is escape from it. COMMODUS – I would say, in fact, that in a profound sense efforts to escape from it are themselves anthropomorphic, given that anthropomorphism means attributing a human aspect to things supposedly outside ourselves, but not attributing a human aspect to ourselves. Every time you want to escape from man as the measure of all things and try to discover the conformation of the actual laws of reality, you can’t help but ima-

Part I - Learning from Eugenio Colorni

gine in a more or less sophisticated way that these supposed laws include a set of tendencies, purposes and harmonies etc. that come from the world of our own desires and feelings. This is the anthropomorphism that I maintain is damaging to science and, I would say, all knowledge. It shows an irrepressible pride, a self-love that makes us blind to anything that is basically other, different. Curiosus’s kind of anthropomorphism is actually a correction of this. It shows how this supposed similarity between the external world and us is nothing but an illusory projection of ourselves into the external world. And when we recognize once and for all (with little satisfaction) that there is no getting outside ourselves, and that everything we take in will always be affected by our grasping organs, it may teach us to keep the organs relaxed, soft, without preconceived form, and ready to adapt themselves so as to engulf any stimulus that touches their semi-fluid suckers. It does not exclude an attitude of passivity and receptivity with regard to the data. The basic difference between one sort of anthropomorphism and the other is that one is an observation, or rather a necessity, which up to now we have not been able to escape from, while the other is a requirement. Now I hate requirements. Nor do I have any reason to like necessities, but I see no way of getting free of them except in illusion. CURIOSUS – A sort of experimental idealism, then. COMMODUS – If you like. But just speaking these words makes me angry and embarrassed. I only speak of these things to please you and because you dragged me into it. I’m not remotely interested in the initial conception, the method I use, or the system I am part of. What interests me is what I want to do; and what I want to do is to clarify the meaning of the concepts of life force and finalism within the sciences; and to demonstrate that they

are good for precisely nothing, except to satisfy our need to see in the world around us facts similar to those that we find in our own minds. SEVERUS – There it is. Here’s what I’ve been waiting to tell you: Supposing while not conceding that you could eliminate anthropomorphism in reckoning with the external world, there is at least one field from which you cannot eliminate it—the case where the object of your consideration is a person, or other people. In this case, if you don’t want to use anthropomorphic criteria you’re a fool. COMMODUS – And my fear of being taken for a fool is so great that I willingly concede these profound truths. If the object I am studying resembles me to a T, clearly I have to attribute to that object everything I attribute to myself—namely, goals, volition, free will, etc. There are these special and disconcerting objects called other people, in short, that we can’t consider only as objects precisely because we know or think we know that they are, for their part, subjects. It’s not so much the fact of the battle itself and this going back and forth trying to get the upper hand (something you [Severus-Altiero] are fanatical about) that stops us from subsuming them under scientific categories, but rather the fact that once this subsumption has taken place, you have to recognize that the other person also acts as a subsumer (interesting word) and therefore cannot be studied scientifically without the loss of something very important—just as the fact that when you study your own behavior in establishing scientific categories, you still need to study the behavior of studying the behavior, and so on. In brief, it is exactly this necessary anthropomorphism, this obligation to consider another person on an equal footing with yourself, that stops you from studying the other person; in the same way that you will never be able to study yourself, since the behavior

of studying oneself studying can never be studied. CURIOSUS – See how even you are forced to use idealist formulations. If I had used them this way you would have been all over me. COMMODUS – Let me be. I will use them when and as I please, without feeling that this means I have to build some system or Weltanschauung on them. I was saying that in the case of other people—yes, the only way of studying and knowing them thoroughly is by analogy with ourselves, and that this analogy can never give us a truly complete picture, not because our tools are insufficient, but because of an intrinsic contradiction. Am I right? SEVERUS – Absolutely. COMMODUS – Now for these cases, we are equipped with special intake organs, quite different from those that bring scientific knowledge—that predict, that is— but which nevertheless allow us to derive from their use a level of satisfaction at least as great as prediction would provide. They are what I would call, in a word, organs of loving. In using this word I mean something very wide-ranging, a generic affective attitude that includes things like hate, fear, hope, desire, pleasure, pain, etc. It is these organs of attachment that we use on objects that resemble ourselves. And this is fundamentally because in the end they are the same basic organs of attachment that we use on ourselves. I don’t want to dwell too much on this argument, since I imagine you are familiar enough with what I mean. SEVERUS – Yes. COMMODUS – Now it is precisely this attitude, this way of taking hold of things, that makes us set goals, these being nothing but rough sketches of acts of will, which themselves are no more than expressions typical of emotional attitudes. I hope this is clear and familiar to you; otherwise it would require a dialogue of its own.

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Part I - Learning from Eugenio Colorni

SEVERUS – Go ahead. Don’t worry about me accusing you of introducing new categories (love, etc.) in the place of the old. COMMODUS – What a relief. Now, the way of love proceeds along many paths—but if there is one that it is incompatible with and that indeed kills it, it is prediction. Loving in the true and non-degenerate sense of the word means seeing your own object of love as supremely other and therefore always new, always a mystery, every time met with surprise as if for the first time—in a word, unforeseen and alive. And this once again is by analogy with ourselves, because what we love best in ourselves, what we consider most intimately ours, is our freedom of will—the intimate and essential possibility in us that we can be different every time from what would have been predictable. SEVERUS – I’m not saying this is wrong, but it’s tendentious. You could probably say very different things, almost the opposite of this, about love that could also claim to be right—to represent, that is, the true and non-degenerate sense of love. COMMODUS – Just grant me one thing—that when we find before us something in which we suppose there is a life-center similar to our own, our mode of attachment is always emotional. Or is there some other possible way of behaving? SEVERUS – There are no others in plain sight. COMMODUS – Allow me one other thing—that this emotional mode of grasping exists nowhere except in beings that are or are presumed to be alive—that is, where there is presumed to be a life-center similar to our own. SEVERUS – This I concede more easily. COMMODUS – And this leads us to think that the emotional mode of attachment is precisely the transposition to others of feelings that we initially have toward ourselves. Here again the important thing is not to be anthropomorphs, or

rather in this case, auto-morphs. For this reason I don’t much care for your description of the two men trying to overpower each other and taking turns using each other. The way you experience contact with another man as a collision, a struggle, an effort to overwhelm or not to be overwhelmed is to me the worst aspect of everything you do and think. For you a relationship with another hub of life is always in some way a need for self-assertion. SEVERUS – Don’t start again with your preachy tone and your gospel of meekness. I took that example, but I could just as well have taken some other one. COMMODUS – But to me it’s interesting that you took that one. The tongue probes where the tooth is sore. And I think the topic will be very useful to us. The mode of attachment to apply with someone who doesn’t want to be used but who wants to use you is, I believe, to give up the fight and let yourself be used. SEVERUS – Good heavens, where will we end up! COMMODUS – Never fear, we will end up in another place entirely. What I mean is that the true manner of emotional attachment to other people is to let them exist—not to transform them the way I want, but to enjoy their being different from me. That is what I call loving and understanding another person. Not ‘don’t do unto others as you wouldn’t have them to do unto you’ but ‘do unto others what others would like done to them.’ Not ‘to know others look inside yourself’; but ‘to know others, look at others.’ And notice what they have that is theirs and is peculiar, different from you. Don’t look for points of contact, least common denominators, universal categories, etc. Try to learn their language without always using yours as a basis of comparison. And so on with a series of precepts and metaphors, which I will leave you

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to work out as an exercise. SEVERUS – Why not? I have nothing against it. Indeed, I was the one, if I’m not mistaken, who spoke first about understanding, giving up preconceptions, letting others live. And I’m the one who practices it most consistently. SEVERUS – Quite. Although this is the opposite of ‘resentment’ and not letting yourself be overpowered. But let’s move along. The emotional mode of attachment, we have seen, is identified with the attitude that sets goals. On the other hand it necessarily presupposes in its object an anthropomorphic character. This means that in it there is also a kind of sui generis prediction. It predicts, that is, that its object will behave in an anthropomorphic and therefore unpredictable way. It foresees the unforeseeable. SEVERUS – And you get angry at being called paradoxical. COMMODUS – It’s a paradox only in its external formulation. It is an incontestable fact that we expect an object that we consider alive and treat as alive to respond in a way that makes us feel its autonomy, its independence as a center of life endowed with liberty. It is precisely this basic unpredictability that offers the greatest incentive to our emotional grasp. When it is missing, when the response is too regular or mechanical, our affect subsides and we seem to be dealing with something that’s dead. SEVERUS – And so? I wasn’t saying anything different. COMMODUS – I know that. But I want to use this to show that my argument against the concept of life was not out of place. I am also prepared to recognize that you are basically right about the instrumental nature of science—as long as you recognize that all science is instrumental, historical science as well as natural; and that there is no room for speaking of two types of science: instru-

Part I - Learning from Eugenio Colorni

mental and finalist. SEVERUS – It’s a matter of words—of what you want to define as science. COMMODUS – But for our purposes it’s very important to see how we construct our definitions, because it is precisely on the basis of them that we form the basic groupings of intellectual activity—the recognized professions, university faculties, topics of treatises, scientific and historical societies, and philosophical systems. I would say we can label as science any and all activities involving research and knowledge that try to construct, by any means (mechanical, mathematical, statistical, probabilistic, philosophical, etc.), systems of predictability. We can refer to finalistic activities as those in which an emotional element comes in, directed toward other people, ourselves, past and future generations or what have you. SEVERUS – I wonder if it was worth it to you to get so angry over my initial rebuttal. What you have just said is the best justification of it. COMMODUS – No. Thanks to the usual graphic way it was expressed, your rebuttal tended to extinguish the discussion—since it exposed the weakness of its logic, which was nothing more than a skillful arrangement of definitions. I would say on the contrary that it is just here that the conversation starts to get interesting—because what it has come down to is determining the boundaries within which a concept like ‘life force’ makes sense. Depending on how you define history and philosophy, for example, you can think of them as related to the natural sciences or to art or to something else. And to set this or that definition, therefore, is the same as saying that a certain activity must be carried out in this or that way. SEVERUS – Okay. Having established the definitions the way you have, which I am ready to accept, I don’t deny that history falls under the category of behavior you have called finalist. Now

if you want to deny that history can be characterized as knowledge, you can do so by defining the concept of knowledge the way you want. But it seems to me that without some kind of construct you will just confuse your ideas. COMMODUS – I don’t think so. One of the results of this discussion might be understanding more clearly what we mean by history. SEVERUS – You certainly wouldn’t be doing anything new. For the last century and a half it’s all that’s been talked about. COMMODUS – Well, I don’t know anything about it, or else I’ve forgotten all this research you’re talking about. And I haven’t read Croce’s latest book on History as thought and action. So I risk either talking nonsense or saying things everyone knows. But at least I would be saying them with a certain naivety, unburdened by traditional frameworks. And it’s this that I am most interested in right now—since in any case I’ll always have you to correct whatever nonsense I come out with, and for the rest I don’t care so much about saying new things, as about saying things that are free of systematic preconceptions. SEVERUS – But don’t you ever get tired of these methodological polemics? Get to the point. COMMODUS – History, it seems to me, can mean three different things: 1) Analyzing events for the purpose of establishing in them systems of constants, laws that repeat, relations of causes and effects that, as they say, account for what has taken place. This way of thinking is more or less consciously scientific—aimed, that is, at establishing a system of predictability. Essentially, researching the causes of things that happened always has the aim of predicting things to come whenever these causes appear to be approximately the same. Vico’s cycles, the Hegelian dialectic, and historical materialism are after all meant to be keys for understanding history. Whether or not

they reach this goal is not what I want to investigate. But it is clear that their interpretation of the past would not make sense if it couldn’t also be presented as an investigation aimed at explaining the present and moving into the future. In this sense, and in spite of appearances to the contrary, history is a typical hypothesis-based science of the type you described. Given these conditions, these consequences follow; a given situation of this type will develop in such and such a direction. Now you’ll have your say about the link between premises and consequences being animate; that the situation develops due to free and spontaneous acts of will, etc. etc. The fact remains that your historical investigation led you to observe certain constants, which you still have the right to call spontaneous and animate only because they are not fully realized and to the extent that they are not. In brief, you use the word animate for something you are unable to get hold of, something that irritates you and disturbs your effort to construct your law. Do you agree? SEVERUS – For the moment, yes. But I don’t think I can concede all of this. Let me think it over; in the meantime, go on. COMMODUS – This first way of practicing history, though very different from science in appearance, is in many ways related to it. The second is instead very similar to science, but does not identify with it. It is the simple search for the facts that have occurred, and the objective assessment of them. The procedure in this type of history is very similar to that of the experimental sciences— it sets great store by precision and objectivity. But it is missing that push toward the future, the inductive element and the formulation of laws. It is odd that while in the experimental sciences the search for facts is always oriented toward the formulation of laws, in history this doesn’t happen. What is more, scholars of the first type of hi-

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story are quite distinct, as a human type and in their mental attitude, from those of the second type, who could be compared rather to the manufacturers of microscopes and telescopes, to those in short who provide us with tools that broaden, organize and increase the strength of our senses. The former organize our memory, allowing us to remember, one might say, even things we have never seen. SEVERO – Okay; and the third way? COMMODUS – The third way, finally, is the good and true and right one, the one in which you bask and revel—true history as experienced, living and working history, in which the past is your past, and precisely for this reason it is articulated toward the future, not as prediction, but as a tendency, a push, a positioning of ends. The history that is Life… SEVERUS – I don’t see what there is to make fun of. COMMODUS – Neither do I, to tell the truth. But still, I have the urge to make fun of it, maybe because of the obstinacy and violence you put into your love of history, which is to me, as always, a bit suspect. I sense behind it personal ties and grudges; I can see you holding on by inertia to the road once taken, wanting at every turn to convince yourself that it is still the best—the most just and glorious. Anyway, this teasing isn’t aimed at the thing itself, but at the way you practice it, which ought to please a noble and disinterested spirit such as yourself. SEVERUS – And it would, if I didn’t suspect that you, deep down, were indeed making fun of the thing itself. And this, I have to tell you, disgusts me. To me it looks like the most petty and selfish thumbing your nose at everything, and delivered with that patronizing, blase tone, that air of being au dessus de la mêlée. COMMODUS – I honestly don’t think that’s

Part I - Learning from Eugenio Colorni

what this is about—especially considering that your accusation doesn’t bother me at all. But in any case, this last way of doing history, seeing it as humanity’s past, in which our own past is implanted, clearly does not include prediction, but it does to a very large extent include affection (in the broad sense of the word). In short, it is a question of setting goals, of initiating actions dictated by the feelings and relationships that exist between us and ourselves and between us and other people, present and past. History allows us to expand this affection and these relationships, to extend them to what was and to what is to come, to have feelings and sketch out actions in the context of a broader horizon, one which potentially embraces the totality of our fellow beings. SEVERUS – This is exactly what I meant. Let me repeat, if I may, what I said a while ago: “in relations that concern people, experience (history) requires that we view them, become aware of them and know them, if it doesn’t upset you too much, as other creators of goals and their fulfillment.” COMMODUS – I’m not too comfortable with the expression know them, which might lead to misunderstanding since it’s used in the sense of know scientifically, based on prediction, as well as for this emotional knowing, based on attributing finalistic behavior to other people. Go ahead and use the word, if you like, even in this case, as long as it’s clear that when know means to let finalistic behavior exist in in the object, the only way open to us is to apply goal-directed behavior to the object ourselves—that is, to cause the other person to react and pit his goals against ours. SEVERUS – All right. Now we agree; but it seems to me that we’ve agreed right from the start and that this discussion hasn’t been worth having. COMMODUS – It’s been worthwhile for two reasons: (1) It has been clarified that historical knowing has nothing to do with scientific knowing.

(2) It has become clear that the notion of life only exists where goals are set and the setting of goals is presumed; and that in these cases the interpretation of this finalism as a force, an action, a law that can be used in a scientific way—makes no sense precisely because such use involves a predictability that is in open contradiction to finalistic activity. For this reason we can talk about life, but not about a life force, and we can talk about finality, about end positions, but not about final causes. SEVERUS – Having got to this point I would have no problem saying you’re right. But I don’t know objectively whether you are or not. Have you read [Kant’s] Critique of Judgment? COMMODUS – I had another look at it for the occasion. But I think it should be rejected—what he wanted was to turn these formulations upside down. We can talk more about it some other time, because it seems to me that the topic runs up against every sort of relationship between natural law and experience. And now, to finish up, we can have a little fun. Write your age on a piece of paper. SEVERUS – Done. COMMODUS – Now write the age of your firstborn child, the year when you were born, the year of your marriage, and then the number of years between your marriage and the birth of your first child. SEVERUS – Done. COMMODUS – Now put all the numbers in a column and add them up. SEVERUS – Done. COMMODUS – Is the total 3880? SEVERUS – How did you know that? COMMODUS – It’s a law of nature that I have recently discovered. Using the statistical sample of all the married men with children in southern Calabria (a region in many ways typical in that its racial composition approaches that of the global average) I found that this law is corroborated

97% of the time, which fits quite easily within the margin of uncertainty due to possible errors of observation. Indeed, I think we find ourselves in the presence of a new universal constant—that is, to echo Max Planck, of one of those mysterious messages that Nature sends us from the heart to reveal to us the intimate structure of its fabric. I’m now extending the research to women. SEVERUS – And doesn’t an observation like this in some way bring you closer to a certain finalism within nature? COMMODUS – Yes, o worthy one—and indeed I say that faith in internal finalism grows in my soul to the same degree that my wonder grows at the mysterious message Nature has sent us by way of the married men of southern Calabria. RITROSO (addressing Severus) – I confess that I cannot fathom how a serious person such as yourself can stay with conversations like this for such a long time. What good do you get from it? This man paints himself as an anti-philosopher, but this is simply a pose, a demagogue’s habit. I haven’t said much, it’s true, but I don’t much want to talk to him. One look at his discussion arguments is enough for me—typical philosopher stuff. The presumption of re-examining the principles of all the sciences without ever having practiced them; the self-delusion that he has in his hands the key to every door... COMMODUS – I believe there is a key that opens lots of doors in the field of the sciences based on reasoning—but this has nothing to do with a philosophic system. It is within everyone’s reach and not exclusive to the priesthood of a specific science. It is just common sense and the calm, peaceful, unprejudiced examination of starting points and initial definitions. RITROSO – And isn’t this what you call philosophy? COMMODUS – No, because the aim of this exa-

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mination is scientific rather than philosophical. It’s not at all a question of justifying these principles before an instance of universal validity, or in relation to a circular or self-sufficient line of reasoning, or a dialectic of the spirit, or what have you. It’s a matter of seeing how suitable such principles are for fulfilling the purpose assigned to them in the restricted sphere of each science. The research therefore has a pragmatic character, and can only be justified by success in a scientific field—that is, by some actual discovery and explanation it can carry out within a specific science. RITROSO – Don’t be offended by my question, but how long have you been doing science? COMMODUS – Around two years. RITROSO – Then you won’t mind if, just to clarify my ideas about scientific principles, I consult people who have been at it a bit longer. COMMODUS – Of course I don’t mind; and I can’t compel you to listen to me. But it seems to me, o Ritroso, that you are too attached to professional authority. Are you so sure that going to an official school and reading a lot of papers and having long experience with the tools of the trade are absolutely necessary conditions for understanding something about the basic principles of a science? RITROSO – Frankly, yes, I do believe it, petty and pedantic as it may seem. I have too much experience with the upheaval and disorder that amateurs and outsiders bring, at least in my science… COMMODUS – Pareto was an outsider, if I’m not mistaken. But that isn’t what I wanted to say. I wanted to make an observation, limiting myself to physics, that I think may be allowed even though I’ve had only two years experience. And that is that belonging to the professional category of physicist entails such close contact with physics and such direct dealings with the specific moment-by-moment problems of research that there

Part I - Learning from Albert Hirschman

is scant possibility to re-examine initial problems and fundamental principles. These first principles are rooted in the memory of the first years of study; they were, you might say, sucked up like mother’s milk in a form that is now stable and accepted. Continually going back over them would be impossible—it would mean disrupting the entire construction of one’s knowledge. RITROSO – But there are physicists who did just that: Mach, Poincaré. COMMODUS – Mach wasn’t a physicist, and Poincaré did it with philosophical intentions at the end of his life, independently of his work in physics. But you will never find a physicist who, faced with an intractable problem, goes back and questions whether the initial definition of mass or force or length or velocity was properly set out. The only one who did this, in his youth, with a certain scandal-mongering and unorthodox zeal—as something of an outsider, that is, was Einstein. And the outcome was that trifling little discovery you may have heard of. But all the others, even the greatest of them, at best limit their revisions to a correction of classical principles, in the face of a new experience that otherwise cannot be justified (Heisenberg, Schrödinger). RITROSO – Well, if they don’t do it there must be good reasons, and I trust them more than I trust you. And besides, in many cases it may be helpful for research purposes to make use of concepts that are not well defined, that serve as a scaffolding, a temporary structure that helps the investigation move forward. COMMODUS – Agreed. And I wouldn’t have any objection either, if I knew that this lack of clarification of principles was the result of a reasoned analysis and that there were valid reasons for deciding to keep some as they are, even if not clearly defined. But this is not the case. You hear vague expressions like the ‘idealization of daily

experience,’ or ‘generalization of sensory data.’ In other authors, like one that I have in front of me now, you read that ‘all sciences have their roots in metaphysics’ and therefore first principles are not worth bothering with. Do you know, I couldn’t find any book, not even the one by Einstein and his students, that contained a non-puerile definition of a rigid body? Everyone has decided to say: a rigid body is what everyone knows it is. Except that then, after hundreds of pages of abstruse calculations, they declare that in the present state of science we do not know precisely what a rigid body is. And note that the rigid body is the basis of the definition of the meter and of two equal lengths. If you don’t believe me I can show you the text. RITROSO – This may be the case in physics. But in economics? COMMODUS – In economics, my friend, I’m ready to concede that everything is going as well as it could possibly go.

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PART II / LEARNING FROM ALBERT HIRSCHMAN

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This section draws from a book in the making: “Follow Events in France and Italy”, and Beyond by Albert Hirschman (Essays from the “first assignment” attributed to A.O.Hirschman by the International Sections, Division of Research and Statistics, of the Federal Reserve Board at the Marshall Plan: edited by Luca Meldolesi). The book will include all the essays written by Hirschman for this assignment. The excerpts of these essays chosen for this anticipation cannot but give a first idea of the wealth of these writings.

Part II - Learning from Albert Hirschman

Introduction: Is there a methodological break between Hirschman’s pre and post-war work? by Luca Meldolesi. “According to our judgment, — Pier Francesco Asso and Marcello de Cecco wrote in 1987 on Albert Hirschman’s work1 — in the last few years that elapsed from the writing National Power and the essays on Italy [of the Marshall Plan period] the methodological break that the latter writings witness came to happen”.

“Follow Events in France and Italy”, and Beyond - by Albert Hirschman Proposed table of contents. “Introduction” by Luca Meldolesi. 1987 “Preface” by Albert Hirschman. Schuman’s Devaluation Paradox, RFD, Dec. 31, 1946. Exchange Control in Italy, RFD, Mar. 11, 1947. Exchange Control in Italy II, RFD, May 6, 1947. France and Italy: Patterns of Reconstruction, Federal Reserve Bulletin, n. 4, Apr. 1947. British-Italian Financial Settlement (with F.M. Tamagna), RFD, May 1947. Public Finance, Money Markets and Inflation in France, RFD, July 29, 1947. French Exports and the Franc (with C. Lichtenberg), RFD, Sept. 2, 1947. French Foreign Trade: Customs vs. Exchange Control Statistics (with C. Lichtenberg), RFD, Dec. 2, 1947. 9. Italian Exchange Rate Policy, RFD, Dec. 16, 1947. 10. The French Monetary Move, RFD, Feb. 10, 1948. 11. “Franco Valuta” Imports in France, RFD, Mar. 23, 1948. 12. Credit Restrictions and Deflation in Italy, RFD, Apr. 20, 1948. 13. Inflation and Deflation in Italy. American Economic Review, n. 4, Sept. 1948. 14. Some recent Developments in French Finance and Credit Policy (with R. V. Rosa), RFD, Oct. 1948. 15. Economic and Financial Conditions in Italy, RFD, Dec. 14, 1948. 16. Credit Controls in the Post-War Economy of France (with R. V. Rosa), RFD, Feb. 1949. 17. Relaxation of Exchange Controls in Belgium and France (with R. S.), RFD, Mar. 1949. 1. 2. 3. 4. 5. 6. 7. 8.

“There is nothing quite like a good story to lend authority to a half-truth”. - wrote Albert Hirschman retrospectively in 1984 in “A Dissenter’s Confession”2. “For a long time, - he added3 - when people asked me how I came to hold the views I proposed in The Strategy Economic Development, my stock answer was: I went to Colombia early in 1952 without any prior knowledge of, or reading about, economic development. This turned out to be a real advantage; I looked at reality without theoretical preconceptions of any kind. Then, upon returning to the United States after four and a half years’ intensive experience, […] I […] discovered that I had acquired a point of view of my own that was considerably at odds with current doctrines”4. “It is a nice line, — Hirschman concluded (pro-

bably with a captivating smile)5 — and not notably untrue”. But in 1984 he felt that that story should be supplemented by a new “disclosure”. That is that, on the back of those Colombian outcomes “a more complex story” lied: “The Marshall Plan Experience and other Personal Background”6. Actually, – he recalled - “I joined the international division of the Federal Reserve Board, initially assigned to ‘follow events’ in France and Italy”7. As soon as May 1987 however, in his “Preface” to Potenza nazionale e commercio estero. Gli anni Trenta, l’Italia e la ricostruzione (see above and n. 1), Hirschman wrote a decisive addendum to his “Confession” an excerpt of which is published below - translated into English for the first time. Indeed, it was the dialogue with that interesting book edited by Pier Francesco Asso and Marcello de Cecco; it was the discussion unleashed by the latter ones on the “methodological break” between Hirschman’s pre and post-war work; and it was the very process of piece-meal explanation of his démarche by Albert himself that intrigued me. That is that, it suggested me this peculiar research on the final phase of a surprising metamorphosis that occurred to Hirschman – as a young, promising economist who became also a social scientist: the bewildering and influential Author we have learned to know, and appreciate.

5 Actually (see Varian Fry 1945, second edition 1992), his nick-name in Marseille 1940 was “Beamish” (hilarious and radiant) for his capacity “to get through” with a smile. 6 Hirschman A.O. 1984, now in Hirschman A.O.1986, p. 5.

1 Pier Francesco Asso and Marcello de Cecco, “Introduzione” 1987, p. 35. [If not indicated otherwise, the translations from Italian into English that follow are by Luca Meldolesi) 2 Hirschman A.O. 1984, now in Hirschman A.O. 1986, p. 4. 3 Ivi, p. 4-5. 4 Ivi, p. 5.

7 Hirschman A.O. 1987, p. 41-2. The reader may have noticed two peculiarities. That Hirschman has been able of telling a rather baffling and amusing half-truth, and that in revealing now “a more complex story” he did not take responsibility for telling the whole truth. Actually, he had a special sensibility for speaking or not speaking; and obviously for a long time he thought handy not to talk about his story. But, in so doing, he also developed, it seems to me, some trouble in telling his story whole-heartedly. So it happens that the “more complex story” told here looks inevitably a partial one. And a friendly problem remains of making the picture of Albert’s “Developing a Point of View” more understandable, convincing and complete.

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Part II - Learning from Albert Hirschman

“‘Follow events’ in France and Italy” was Albert Hirschman first assignment within the Marshall Plan. He received it when he started working in Washington for the International Division of the Us Federal Reserve Board: as a young economist “on tap” and not “on top” - he remembered jokingly later on8. The 16 essays he wrote between Dec. 1946 and Mar. 1949 (some excerpts of them are presented herewith) are the complete outcome of that assignment (its “universe” - a statistician would say)9. Most of them, so far unpublished in English, appeared in Review of Foreign Developments, an internal bulletin of the Board. Together with other contributions, those essays were given me by Hirschman himself (as a xeroxed copy of his personal file of around 350 pages) sometime in the late Eighties of last century, when I was busily working on, with and around him10. Of course, I realized immediately the importance of that gift. But, taken by the study and editing of so many writings by Albert Hirschman, I was able to scratch only the surface of his Marshall Plan production. And, subsequently, in my long friendship and colla8 Hirschman A.O. 1976, now 2010, p. 32. 9 Other Hirschman’s writings of that period are not taken into consideration here. (That is: “Bilateralism and Proportionalism – Two Aspects of Trade Structure”; “Conditions and Tests of Successful Devaluation”; “Swiss Foreign Economic Policy”; “Trade and Credit Arrangements between the Marshall Plan Countries” – with M. J. Roberts; “Trade Structure of the Marshall Plan Countries”; “Types of Exchange Rate Discrimination” – with F. Nixon; “Note on Offshore Procurement in Europe”; “Payments and Trade between ERP Countries in 1947”; “Inflation and Balance of Payment Deficit”; Dollar Shortage and Discrimination”; “Disinflation, Discrimination and the Dollar Shortage”; “Proposal for a European Monetary Authority”; “The OEED Interim Report on the European Recovery Program. A Summary”; “Devaluation and the Trade Balance – A Note”; “Intra-European Payments: A Proposal for Discussion”; “Movement toward Balance in International Transactions of the United States”). 10 I. e.: writing an article (Meldolesi L. 1987, French tr. 1993) and a books on him (Meldolesi L. 1994, English tr. 1995 and Spanish tr. 1997); editing some of his books in Italian (Hirschman A.O. 1987a, 1988, 1990, 1990a), and planning to apply some of his ideas to the Italian Mezzogiorno (Meldolesi L. 1992). See also Meldolesi L. 2014, Spanish tr. 2017.

boration with him, I did not have the opportunity to come back (professionally) to that part of his work. Hence, it is only now, after his departure, that my reflection on his trajectory pushes me vigorously to reconsider the written outcomes of his early assignment11. Perhaps - I should add - if I feel confident now, it may be due to the greater knowledge I acquired in time on the early intellectual, professional and political experience of him, and of his extraordinary close friend, mentor and brother-in-law, Eugenio Colorni12. Because only recently, when I had been able to immerge myself into the tragic conditions of the Fascist and Nazi time, of the War and of the Holocaust, of what it meant risking own life (and sometime losing it as Eugenio Colorni did) for a noble cause that eventually the personal and intellectual evolution of Albert Hirschman in the immediate post-war time appeared to me really understandable: daring, subtle, creative, and plausible. 1. “How did Albert Hirschman became as he was?”, “How did he make it?”, “How did he become that extraordinary social scientist we knew (or heard of)?” For years, even decennia, surprised and perplexed vis-à-vis the extraordinary originality and practical relevance of Hirschman’s work, intellectuals all over the world asked themselves that sort of questions13. Albert did not answer. He used - as I recalled already - half-truths “pour se debrouiller”. He 11 Actually, Albert told me “to think what to do with them”. At the time, I simply divided them into analytical contributions and proposals: Hirschman 1990, p. xv, n. 4. Perhaps I was looking for further instructions, that however never came. Therefore (ironically) only now, after more than thirty years, I am able to make up my mind and do something... 12 Colorni 2016, 2017, 2017a, 2019, 2019a; Colorni e Spinelli 2018. 13 Our work, Hirschman was used to say, “should be good and new”. Because there is no point of writing something that is good, but is not new; or something that is new, but is not good...

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was a reserved man14. Before answering he had to decide if, how and how much to tell (or not to tell). Paradoxically (silently, and largely unintentionally), that peculiar attitude of his mind attributed a considerable task to the critique – particularly to the one favorable to him: that of working hard for locating and understanding correctly who he was, how his unmatchable work came to life… On the other hand, however, that question of asking oneself “how Albert Hirschman became as he was” may look, at first sight, unreasonable. Actually, all his life straight from the beginning,- one may suggest - produced that result: the time he lived through, Berlin in the Twenties and early Thirties of last century, his family of origin, the special complicity he had with his sister Ursula, their encounter with Eugenio Colorni, their expatriation to Paris, the vicissitudes that followed etc. But after sometime, when one has considered all that (and much more) entering slowly and deeply into that question, one realizes that there are some key points, some knots in Hirschman’s life and work that may be relevant to a greater understanding of Hirschman’s story, and that, in part, may be loosened. For the First Conference on Albert Hirschman Legacy (Boston Oct. 6th-7th 2017) I dwelled on “infinitely naïve”15 – the criticism that in 1978 Hirschman addressed to himself as a young economist, and to a key political proposal that motivated National Power and the Structure of Foreign Trade. Now, in a similar vein, I discuss

Part II - Learning from Albert Hirschman

Pier Francesco Asso and Marcello de Cecco thesis on the existence of a “ methodological break” (coupure methodologique, cesura metodologica) between Hirschman’s pre and post-war work that they proposed successfully in their “Introduzione” to Albert Hirschman: Potenza nazionale e commercio estero. Gli anni Trenta, l’Italia e la ricostruzione – Bologna, Il Mulino 198716. This is because, in accepting that idea17, Hirschman - it seems to me - did not fully clarify that issue. I will enter, therefore, cautiously into that opening - in the hope of shedding some additional light on Albert Hirschman life and work. I will do that slowly, listening to him step by step, trying to remember what he told me and what he implied (but did not tell me); using as much as possible his own writings and words. True, after so many years18, I still perceive his voice, from time to time, into my ears – as if he was sitting on the back of myself…

politically naïve, socially explosive and economically counterproductive from any long-run point of view. The advocates of orthodoxy seemed to have ‘forgotten nothing and learned nothing’ since the days of the Great Depression. And second, the innovators who, to their lasting credit, proposed the creative remedies embodied in the Marshall Plan, and, in justification, propounded novel doctrine, such as the ‘structural dollar shortage’20, soon became unduly doctrinaires in turn”21. Of course, these “impressions” remained central in Hirschman’s remembrances throughout his life. But after three years, writing his “Preface” to Potenza nazionale, he felt that a new element should be added: his attitudes vis-àvis his colleagues (and the “undeserved weight and resonance” that were attributed to his and to their opinions)22. “My reaction, perhaps

2. From the Marshall Plan experience — Albert Hirschman wrote in his “A Dissenters’ Confession”19 — “I came out […] with two major impressions or convictions. First, orthodox policy prescriptions for the disrupted postwar economies of Western Europe — stop the inflation and get the exchange rate right — were often

20 In his “Tribute to Charles P. Kindleberger” (1990b), Hirschman wrote retrospectively that his theory about the ‘structural dollar shortage’ represented “an inspiration to those of us whose hearts were all on the side of a substantial transfer of wealth from the richest country to the then downtrodden Europeans, but whose minds felt nevertheless the need to justify that transfer by technical economic reasoning, rather than purely ethical considerations”.

16 This book witnessed the encounter of two Italian economists and economic historians (who, starting from Economics, were looking for new interpretive roads on that epoch) with Albert Hirschman, who wanted (instead) to reconsider his own early work by understanding and emphasizing its political aspect. 17 In his 1987 “Preface”: see below.

14 He spoke slowly, pronouncing a few words. But often those words were accurately chosen and thought about in advance - so that some of them became unforgettable. One might think to them afterwards, months and years.

18 During the second part of his long illness, the one that worsened at the beginning of this century, my wife Nicoletta S tame and I used to take a car in Boston and drive South to Princeton for our “yearly visit” to Albert and Sarah Hirschman – as the latter were saying wittingly. Obviously, however, it was already a different story…

15 Meldolesi L. 2017.

19 Hirschman A.O. 1984, now in 1986, p. 5-6.

21 “During my six years in Washington – Hirschman added (1984, now in 1986, p. 6) – 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 had come away with a healthy respect (based on watching the misadventures of the French economy) for the efficiency of the price system, particularly with respect to the effect of exchange rate changes on the balance of payments [“Devaluation and the trade Balance: A Note”, Review of Economics and Statistics, February 1949 (…) was a late fruit of that experience], and with a correlative distrust (based on watching Fascist economic policy in the second half of the 1930s) of peacetime controls, allocations and grandiloquent plans”. 22 More precisely, as you could ascertain by yourself from his “Preface” (see below), Hirschman cleverly assembled here a constellation of circumstances, a number of convergent and interacting causes (that we will slowly consider one after another in this Note), that, on the whole, had became in his mind a strong levy for change and had finally helped him in finding his new “methodological habit”.

excessive at times, - he wrote23 - was to suppress the use of whatever power I had; but above all I worked hard to undermine the certainties of my colleagues (whether pro-market or pro-planning), many of whom saw no harm in using the fullest extent of their power in the service of their opinions and beliefs”. The colleagues innovators – already Hirschman had written in his 1984 essay24 – “exhibited a perhaps inevitable tendency to 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 prospective balance of payment deficits […]. To be effective advocates within the executive branch and in relation with Congress [of the Us], we had to exhibit far greater confidence in those statistical estimates than was warranted by the meager extent of our knowledge and of our fore-knowledge”25. Psychologically, Hirschman himself suffered that uneasy condition. But not some of his colleagues who “in order to be disavowed as little as possible by emerging reality […] attempted to make their estimates come true by taking a considerable interest in the domestic plans and policies that shaped the external account of the aid-receiving countries”26. It is the interventionist (or imperialist) attitude of those colleagues, their lack of respect for the people, personnel and institutions of the country they were supposed to help that became

23 See below. 24 Now in Hirschman A.O. 1986, p. 6. 25 Ibid. A rather delicate, “‘dissonant’ situation – he added leading to charlatanism in some and to active dislike of and withdrawal from the whole procedure in others”. Undoubtedly, Hirschman had some specific cases in mind. 26 Ibid.

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unbearable for Albert Hirschman. Here a personal, cultural and political problem came to the fore. “Having studied the expansion of Nazi Germany’s influence in Eastern and South-Eastern Europe, the background of my first book, National Power and the Structure of Foreign Trade (1945) – he wrote27 – 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”. This is, indeed, the strong motivation that (together with other specificities we will discuss later) lies behind Hirschman decision to undermine the certainties of these colleagues; and that pushed him, rather half-consciously28, toward a new horizon. That is to say, a preliminary conclusion emerges here: the discovery of Hirschman’s analytical point of view was due to both the circumstances in which he operated, and his passionate, competent and courageous reaction to them. 3. To explain this very kernel of our story a set of additional aspects may, however, be added. First of all: in his “Preface” to Potenza nazionale (see below), Hirschman inserted a few biographical notes on his early odyssey that “may help to explain of the differences between the 27 Now in Hirschman A.O. 1986, p. 6-7. 28 Indeed, what came out of that was already an unintended consequence of human action (a well known category which, later on, Albert Hirschman fell in love with). But for long time it was a hidden one. Actually, 40 years had to elapse before Asso and de Cecco proposed their thesis of “a methodological break” between Hirschman’s pre and post-war work; and the latter was openly discussed by Hirschman himself.

Part II - Learning from Albert Hirschman

prewar and postwar writings, perceptively observed by Marcello de Cecco and P. F. Asso in their introduction”29. Later, Hirschman himself (together with a few theoretical and historical researchers) added further elements and explanations to the overall picture from which one may draw30. Albert Hirschman was used to say that he was essentially a “self-thought” economist. He had had no thorough, systematic upbringing in the discipline. As I wrote already, he studied initially in Berlin and in Paris31. But only in the academic year he spent at the London School of Economics he realized what Economics “was all about”. Later, after a direct, brief participation to the Spanish civil war, he reached Trieste (Italy), where he developed a special relationship with his friend, mentor and brother-in29 Marcello de Cecco, a close friend of Nicoletta Stame and myself, was a well know economist, particularly gifted on Italian monetary and economic history. To him Albert turned therefore to edit a part of his work of pre and post-war on Italy. He was very happy of the result; and thought that Marcello’s introduction was also a good opportunity to clarify further – in his “Preface” to the book - what he had started explaining in his 1984 article. It is true, however, that de Cecco’s and Asso’s observation on a ‘coupure methodologique’ on Hirschman s work reflected also their own experience and desires. Because Marcello appreciated Albert s ability in overcoming the strict upbringing of the economist to learn other aspects of reality and interact with them. But, he wanted to apply that point of view to money and monetary history. Albert did not follow Marcello on this; probably considered that démarche beyond his research interests: he left to his friend l’onore (the honor) e l’onere (the weight) of such kind of undertakings 30 Hirschman A.O. 1998 Ch. 3; Meldolesi L. 1987, 1994 Ch. 1; Adelman J. 2013 Ch. 1-8. 31 Actually, in both capitals the influence of what we now consider standard Economics was very weak at the time. Berlin had the tradition of the German economic history school to cope with, while in Paris a French economic school following the work of François Simiand was indeed desired. Therefore the disciplinary atmosphere that Hirschman breathed a first year as freshman at Humbold Universitet in Berlin and then in L ècole des hautes etudes commerciales (Paris) – was not favorable for learning economics proper (cfr. Hirschman A.O. 1995, p. 113-16). It was, I think, a starting point that eventually (and paradoxically) turned out the other way – that is to be more useful and creative than one may have expected.

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law, the Italian philosopher and socialist leader Eugenio Colorni32, studied statistics33, had to take courses and exams on various subjects. And, as far as Economics was concerned, he felt rather lonely34. At the same time, he entered, however, into the profession of economic journalism by writing reports on the Italian economic situation for a Paris review35. Albert Hirschman graduated in economics and commerce at the University of Trieste, discussing a thesis – Il franco Poicaré e la sua svalutazione36 – drawn from a manuscript written originally in U.K. in French and then translated into Italian, completed and submitted in Trieste. The day Colorni was incarcerated as Jew and antifascist by the Fascist regime, Albert Hirschman escaped the

32 As Hirschman was used to say, Eugenio Colorni has been the very person who had the greatest influence on him. Eugenio was six year older than Albert and considered his friend as a sort of younger brother (Colorni E. 2019a, p. 150) to be encouraged in his spontaneous ingenuity. Among the two, a lively cultural effervescence sprung up. Hirschman wanted to demonstrate to himself that he was becoming able in manning appropriately Statistics and Economics. He told me, for instance, that in studying statistics he tried to invent beforehand, by himself, some demonstrations. Once upon a time, he succeeded. But then realized that that scientific proof of a specific theorem had been discovered already. He did not feel depressed, however. On the contrary: he was happy because that episode meant that he had been learning by himself… how to do it (Meldolesi L. 2013, Ch. 2). 33 He collaborated with prof. Paolo Luzzatto Fegiz director of the Institute of Statistics at the University of Trieste. His first articles are indeed in statistics (and written in Italian): 1937 (unpublished) and 1938. 34 That is to say: by and large, Hirschman became competent in Statistics and Economics by his own efforts: following different trajectories vis-à-vis traditional ones. 35 “I enjoyed – he later commented (Hirschman A.O. 1995, p. 118) – the detective work involved, and whatever success I could claim in outwitting the Fascist authorities” who increasingly restricted the publication of official statistics to hide the real economic conditions of the country: Hirschman A.O. 1938a. 36 Now edited and published by of the University of Trieste: Hirschman A.O. 2004.

Part II - Learning from Albert Hirschman

police by pure chance37. In mid-1938, he went back to Paris where he established himself as an expert on the Italian economy;38 and started working with John Condliffe for the League of Nations39. So that, after military, conspiratorial and political vicissitudes that cannot be recalled here40, in December 1940 he sailed for the Us, and reached Berkeley (Cal.) - where, helped by Condliffe, planned writing National Power and the Structure of Foreign Trade. At that point41, he decided to have in it, as a central chapter 2, a theoretical re-elaboration of the Marshallian “gains from trade” - a well-known “topos” in Economics. 4. Along with some writings on pre and post-war Italy, “Part One: Theoretical and Historical Aspects” from National Power was published in Italian in the (already quoted) anthology by Hirschman edited by Asso and de Cecco 42. That 37 Actually, he told me, he had taken a day off in the mountains surrounding the town. 38 Hirschman wrote quarterly reports on “Italie” for L activité économique: January 31, April 30 et July 31, 1939. “In September of 1939 – he recalled in his“Preface” (see below) - the war put an untimely end to this promising career”. It is telling to me that, in this passage, an unusual pain (for a reserved man as he was) emerged. 39 Hirschman A.O. 1939a, 1939b came out from that collaboration. Both papers were written for the 12th session of the “Conference generale d’études sur la politique economique et la paix”. Conference permanente des hautes etudes internationals. Institut International de cooperation Intellectuelle, Société des Nations, Paris, to be held in Bergen (Norway) in June 1939, that unfortunately could not take place. At the time, Italy had an elaborated system of exchange controls, second only to the German one. Presently, the “Mémoire” a small book by itself (now published in Italian in Hirschman A.O. 1987), remains a leading contribution on the subject. 40 Cfr. Fry V. 1945; Meldolesi L. 1994 Ch. 1; Adelman J. 1913, Ch. 5. 41 Probably after a talk in Chicago with a friend and teacher from the London School of Economics: the well-known economist Abba P. Lerner. Actually Hirschman stopped by in Chicago, on his way to Berkeley by train: cf. Adelman J.2013, p. 121 and 189-90. 42 Moreover, one may keep in mind that, to answer in quantitative terms some of the questions raised in part one of the original book

text included that famous Chapter 2: “Foreign Trade as an Instrument of National Power”. Actually, in so doing, the editors wanted to “present a contemporary interpretation of that period capable of inspiring an analysis of current international economic history on the basis of hypotheses ‘alternative’ to the theoretically orthodox ones that continue to permeate the study of economic reality”43. But, they added44, “we have to say that the texts offered here strike us as important because they transcend their immediate historical climate. What mainly interests us, and we hope will interest the reader, is their methodological message” – that is, Hirschman’s decisive stance (vis-à-vis important episodes of international economic history he is dealing with) “concerning three analytical-methodological pillars of political and economic theory dominant at the time: the orthodox analysis of gains from trade; the over-use of the logical-deductive method and the connected losses in heuristic value; the identification of economics as an end in itself and not as an instrument of statecraft”. However, – Asso and de Cecco further noticed45 – prewar Hirschman “was not a subversive agent of orthodox analytical methods yet. As Keynes, he seems, at that time, to be (1945), its second part presents three statistical inquiries into the structure of foreign trade – “The Preference of Large Trading Countries for Commerce with Small Trading Countries”, “Concentration upon Markets and Supply Sources of Foreign Trade of Small and Weak Nations”, and “The Commodity Structure of World Trade”. Finally, in two articles published in 1951and 1952, Hirschman revised the final analyses of the book to reflect his emerging interest in underdevelopment (Meldolesi L. 1994, English tr. 1995, p. 25-8). 43 Asso P.F. and de Cecco M. 1987, p. 8. At the same time, this worthy intention was put into practice in “Bilateralism, Trade Agreements and Political Economists in the 1930s: Theories and Events Underlying Hirschman’s Index” by Pier Francesco Asso - 1988. 44 Asso P.F. and de Cecco M. 1987, p. 8. 45 Ivi, p. 33.

mainly focused on showing that with the same instrument of Marshall a very different music may be played, and that that music is not typical of the German folklore, but pertains to the common tradition of modern states”. “In fact, in this work – they added46- the main desire [of Hirschman] seems to be the discovery of stable relationships among magnitudes, so as to crystallize economic analysis into a conceptual model alternative to the traditional one, but still a simple mirror image of it”. “Up until the final defeat of Fascism and Nazism, - Hirschman answered in his 1987 “Preface” (see below) - everything I wrote was in some way made to fit into that struggle” – meaning, indeed, that his re-elaboration of the so-called ”pure theory of international trade”, interesting (as it is) theoretically47, was, indeed, politically motivated. An arresting explanation – it seems to me - because it implies that the clue to that famous chapter should be found more in Politics than in Economics (though, obviously, Hirschman, as a young economist, needed to be technically recognized as such)48. True: a careful exploration of the text shows that the very “reason” behind the Hirschmanian analytical exposition of the commercial domination of the great powers over the small and weak ones is not to be sought in an interesting re-working of economic theory as such 46 Ivi, p. 34 and 35. 47 A contribution that continues to be recognized in the literature (on dependencia and imperialism included), and to be useful to explain the world we live in. 48 Actually, he preferred to write National Power instead of being enrolled in a Phd course in Economics (as, reputedly, he was advised to do). Ingeniously working in the interstices among cultures, he even said currently (and continued to say so throughout his life) that the degree he earned in Trieste was a Phd. Another half-truth. Because the content of it was serious and implied, as I said, the writing of a thesis; but, actually and legally, it was a simple Ba.

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- leading to certain political conclusions. But rather the contrary: it was his anti-Fascist and anti-Nazi political choice that prompted this illuminating theoretical-economic exercise (illuminating in itself, and for economists49). And thus it is the “federalist” proposal to limit drastically the sovereignty of states and place postwar foreign trade under international control that “rules the roost” of the book50. As unexpected – if not downright far-fetched – as it may seem in retrospect, there can be no doubt that in the eyes of Hirschman, his re-working of the pure theory of international trade and of the gains from trade fits perfectly into the struggle going on at the time51. Actually, if we re-read the text with this explanatory key in mind, it immediately becomes clear that this is a pet theme of Hirschman’s – as in the introduction, for example, when he points to the end of the first section where “we arrive at the conclusion that nothing short of a severe restriction of economic sovereignty can […] prevent the use of foreign trade as an instrument of national power politics”; or at the end of the first chapter, where he states, “we believe that by a theoretical analysis we may

arrive at a fundamental diagnosis and ultimate cure of the ills which under the name of ‘economic penetration’ and ‘bloodless invasion’ have repeatedly afflicted recent history”52. This political side of the matter is an overall clue that should not be overlooked. Because, as I said already, when I dwelt in depth on what Hirschman did and wrote before and during the war; when I came across the kind of complicity that linked him to Eugenio Colorni53 and the political perspective urbi e orbi of the latter that Hirschman shared54; when I gathered the ideas and the personal vicissitudes of the two brothers-in-law: only then I felt that I was able to explain properly Hirschman’s post-war work. Because, in the changed postwar conditions, it is anyway the tragic experience he was coming from that, as we will see, gave to Hirschman the stamina for swamping in himself intimately (but cleverly) traditional “economism”. Actually, it seems to me, pre and post-war works by Hirschman, albeit corresponding to different conditions, respond to the same (or an analogous) political logic. The miracle of acquiring a new methodological habit is strictly connected to that.

49 Generally, proud, as they are, of their profession, the economists want to verify the reasoning of a model through the theoretic-economic logic they know, perhaps accompanied by corresponding tables and figures. 50 Viewed from this perspective, the analogy with Keynes’s procedure in the General Theory proposed by Asso and de Cecco loses some of its critical and heuristic weight. It is true that both Keynes and Hirschman proceed with their re-workings in order to reach a determined result; but it is also true that, to that end, while Keynes works in strictly economic terms, Hirschman speaks openly of politics and economics. 51 And precisely for this reason – it is worth noting – he ended up falling into a well-recognized type of thinking. With an intellectual archetype that can be traced back to Saint-Simon and Marx, “Hirschman used economic analysis here as a platform for stating a political thesis” (Meldolesi L. 1994, English tr. 1995, p. 16 and n. 23; and Meldolesi L. 1982).

52 Hirschman A.O. 1945; now 1980, pp. xvii and 12. 53 See n. 32 above. 54 Colorni E. 2016, 2017, 2017a, 2018, 2019, 2019a; Colorni E. and Spinelli A. 2018.

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5. “Most social scientists – wrote later Hirschman, in his 1971 “Introduction” to A Bias for Hope55 conceive it as their exclusive task to discover and stress regularities, stable relationships, and uniform sequences. This is obviously an essential search, one in which no thinking person can refrain to participating. But in the social sciences there is a special room for the opposite type of endeavor: to underline the multiplicity and creative disorder of the human adventure, to bring out the uniqueness of a certain occurrence, and to perceive an entirely new way of turning an historical corner”. Moreover, in 1978, Albert Hirschman criticized a central political aspect of his early viewpoint in a well-known article56. He considered “infinitely naïve” the quest of National Power to the international community for reining in national sovereignties on foreign trade; and explained that the economic subordination through foreign trade of small and poor countries to great and rich ones can be counteracted by an opposite relationship in political attention and initiative – a fitting observation on interactive relationships of domination, that opens up an entire field of possible outcomes57. “From the profound acumen of this critique that Hirschman addresses to himself of some decennia back – Asso and de Cecco wrote – aro-

55 Hirschman A.O. 1971, p. 27; quoted by Asso and de Cecco in Hirschman A.O. 1987, p. 34. 56 Hirschman A.O. 1978. Later, that essay was used as “Introduction” of the paperback edition of National Power (1980). In so doing, Hirschman himself – once again proving to be “his own best critic” (Asso P.F. and de Cecco M. in Hirschman A.O. 1987, p. 34) – initiated a characteristic process of correction and re-affirmation of his own point of view, which he later called his “propensity for self-subversion”; that ultimately (1995) led to an interesting development in his own reasoning. (See also Hirschman A.O. “Introduction” 1971; and Meldolesi L. 2017). 57 Meldolesi L. 2017.

Part II - Learning from Albert Hirschman

se the fascination of proposing to the [Italian] reader the post-war writings by Hirschman on Italy. According to our judgment, in the last few years that elapsed from the writing of National Power and the essays on Italy [of the Marshall Plan period] the methodological break that the later writings witness came to happen”. It is a key quote that I have (partly) used as “epigraph” to the present introduction. To be properly understood, however, this important Asso and de Cecco thesis requires, it seems to me, some further observations. Because Hirschman’s shift, as we have just acknowledged, cannot be grounded on Economics alone. Because, to check the “cesura metodologica” thesis, the 1946-49 essays on Hirschman first assignment: “‘Follow Events’ in France and Italy” should be carefully examined. Because, inevitably, prewar and postwar writings by Hirschman suggest continuities58, as well as discontinuities. Because his 1984 “Dissenter’s Confessions” article should be read keeping in mind that background…59. “After 1945 - Hirschman explained in his “Prefazione” to Potenza nazionale - the tension had dropped, with consequences of various kinds. First of all, there was no longer the same necessity as before to subordinate all thought to a single goal, always coming to definitive conclusions capable of inspiring action”. 58 Of course, many personal, social, cultural, psychological, political aspects of Hirschman simply evolved (including some of those I already hinted at). But, as I have suggested, on top of those dimensions there is a continuity particularly important: the political inspiration that came from his early experience that developed in time in a general attitude against domination and subordination - from Europe to the world. 59 To paraphrase Asso and de Cecco: my initial desire to learn directly what was all about developed later on into an intimate “fascination” of proposing to the English-speaking reader a set of mostly unpublished 1946-49 essays on France and Italy by Albert Hirschman of which the present issue of Long of the Journey. is an anticipation.

A revealing passage because it implicitly calls in a long intellectual tradition, started in early XIXth century by Saint-Simon, according to which the economic realm determines the political one60. That is to say: by refurbishing the Marshallian theory of gain from trade, National Power determined de facto analytically the political thesis of the book that at the time Hirschman considered correct, useful, and expedient for his political goals. Moreover, after 1945 the new conditions required instead, as we will see, the exploration of different relationships between economics and politics. It is that research that pushed Hirschman to become “a subversive agent of orthodox analytical methods” in Economics – to use Asso and de Cecco words. Actually, - Hirschman added in his 1987 “Preface” – “in my new role in postwar Washington I found myself in an ironic position. If until quite recently I had been a political refugee with no power at all who had criticized the political use of economic power in what was then my most ambitious work [National Power], I could not now fail to recognize that the economic power of the country [the Us] I was by now a citizen and representative of gave undeserved weight and resonance to my opinions and those of my government colleagues” – some of whom had the attitudes we have already considered. He sailed therefore for a different journey. 6. Albert Hirschman studied at the Franzosische

60 See n. 51.Though proposed in different forms and variations, this tradition - popularized by Marx as a one way relationship - is undoubtedly at the origin of many people’s decision of studying Economics (myself and Albert Hirschman included). Also relevant, to understand Hirschman’s evolution after the writing of National Power (1941-42), was his reading in 1944 of The Road to Serfdom by Friedrich von Hayek (cfr. Adelman J. p. 237-38).

Gymnasium of Berlin. He was fluent in French. His obvious choice to escape the Nazis was Paris. He “fell in love” with French moralists of the 17th century, as Pascal or La Rochefoucauld, that he found as deep, but much more understandable than Hegel61. French culture have been a constant point of reference of him and of his wife, the expert and critic of French literature Sarah Chapiro of Russian-Lituanian origin62. In the post-war Italy, people generally assumed that Albert Hirschman was coming from Paris and going back to it. But if you go through these papers on France and Italy he wrote during the Marshall Plan, it is immediately clear that those dedicated to Italy are not secondary in importance: by all means. Of course, he had that early specialization on the prewar Italian economy to draw from. But perhaps more than that he had the families of his sisters Ursula and Eva in Rome, the recollection of his partnership with Eugenio Colorni, many friends at the Bank of Italy and elsewhere, the harsh conditions of the country at the time, and also a special solicitude he felt, analogous to the one he had expressed in National Power, for Italy that was coming out of the war so much weakened and impoverished. It is a perception of reality that later will fuel his well-known passion for development. Let us come briefly to Hirschman’s essays on France and Italy of the Marshall Plan period. “Schuman’s Devaluation Paradox” (Dec. 1946) inaugurated a theoretical line of thinking that 61 Hirschman A.O. 1984a, mimeo. 62 They even spoke French at home, until the switch to English suggested by a practical need: the teaching of Albert at Columbia University in the early Sixties. All his life long, Albert looked to France for intellectual and artistic stimulation – e. g. starting from literary interests of his wife and of himself (for beloved authors like Montaigne and Flaubert)

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through “Conditions and Tests of Successful Devaluation” (Jan. 1947) brought Hirschman to publish “Devaluation and the Trade Balance – A Note”, in the Review of Economics and Statistics (Feb. 1949)63. “Exchange Control in Italy” (Mar. 1947), on the other hand, is a highly informative essay64. In its first part, it is devoted to “the 50 per cent system” according to which Italian exporters had to surrender only half of their hard currency proceeds to the Italian exchange control agency at the official rate, so that they retained the other half: an ingenious measure that favored exporters, had a set of positive consequences and contributed greatly to Italian economic recovery65. “British-Italian Financial Settlements” (May 1947, written with F.M. Tamagna) deals with three agreements: one on current payments, one on wartime account, and one on prewar assets and debts. “Public Finance, Money Markets, and Inflation in France” (July 1947) is a typical essay of the “follow events assignment”: Hirschman draws here from his expertise (as economic journalist, applied economist, functionary, sta63 See n. 21 above. Before that essay, Hirschman had already contributed to the Review of Foreign Developments (RFD - a daily bulletin of the Federal Reserve) with another interesting essay: “Bilateralism and Proportionalism – Two Aspects of Trade Structure” (Dec. 1946) - a statistical assessment of that subject to be read as a complementary (and/or alternative) statistical solution to the one he produced before the war for the League of Nations (see above n. 40) and recalled by Condliffe in 1940 (p. 282-84). Taken together, the respective stories of “Schuman’s Devaluation Paradox” and of “Bilateralism and Proportionalism” show already some of Hirschman’s propensities: a certain “trust” in Economics and Statistics that he de-emphasized later on; an already developed ability in elaborating the bundles he had been able to catch; and an extraordinary persistence in developing an observation in time, right to the end – that will become one of his “trademarks”.

Part II - Learning from Albert Hirschman

tistician) to discuss demand and supply side inflation in post-war France, financial crisis, budget estimates, financial measure, private vs. public credit needs, capital markets and private savings, future of Monnet Plan. “French Exports and the Franc” (Sept. 1947, written with Carolyn Lichtenberg) discusses the disappointing performance of French exports visà-vis various degrees of overvaluation of the Franc with respect to France main customers’ currencies. “French Foreign Trade: Customs vs. Exchange Control Statistics” (Dec. 1947, with Lichtenberg as well) is devoted to a comparison between those two sets of data, and to the connected readjustment of French import statistics. As a young economist working in Washington at a job highly desired, Hirschman followed obviously what he was required to do, by utilizing his experimented knowledge and abilities66. He knew the two countries very well and was already an expert in foreign trade – as it is clear for instance in “Schuman’s Devaluation Paradox” and in “Exchange Control in Italy”. From here his ingenuity developed both on the evolution of France and Italy and on of the inter-European exchanges (an important subject that will need an ad hoc research). That is to say, Hirschman’s immediate reaction to Marshal Plan conditions, we hinted at above, was that of developing a fine, patient, articulated analysis of various aspects of themes, problems and places he knew (in part) already. And, in so doing he experienced something he discussed (jokingly) later on67: from the need of understanding what local protagonists were

64 On a subject that Hirschman knew very well: see above n. 39. 65 In its second part (May 1947), this essay deals with “franco valuta imports” – that is to import without asking the exchange control authorities for foreign exchange (which implies, obviously, that it is matched by a transfer of capital or a gift of the same amount).

66 See n. 21 and 35 above. 67 Hirschman A.O. 1984, now in 1986, p. 7-9.

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doing (and learn from them) to the miserable vacuity of the “tourist economists”. But, at a certain point, he started to go beyond. It means inevitably that he was encouraged (and allowed) to do so: it probably meant that his intellectual reputation was already on the rise68. In April 1947, in the official Federal Reserve Bulletin, he published “France and Italy: Patterns of Reconstruction”, a very thorough essay. Indeed, its subtitles provides already a summary of that overview: “Revival of Output” (Industrial production, Coal shortage, Manpower problems, Agriculture and food production), “The Course of Inflation”, “The Intractable Deficit”, “International Financial Position”, “Foreign Trade and Exchange”, “Plans and Goals”. This is a convincing picture of the economic conditions of the two countries; that, moreover, is surprisingly concluded by the following observation that suddenly overcome the Hercules Columns of Economics. “In France parties bitterly opposed to each other in the political field have rallied around the Monnet Plan […]. It may be that the idea of a national economic goal appeals strongly to the French people because of the frustrating lack of direction from which they suffered during the interwar period. Italy, on the contrary emerged cruelly disillusioned from a long period of excessive 68 Was it the beginning of a successful career at the center of the American system? Of course his family was hoping for that. But we now know that FBI had already opened a file on Hirschman (see: Adelman J. 2013, Ch. 9); that in the further development of the Marshall Plan Hirschman set on the side of the Foreign Office on (and for) Europe, and that, on the other hand, his choice “infuriated” the Treasury, from which his job depended (Hirschman 1998, Ch. 2). Conclusion: while the Marshall Plan was ending, Hirschman looked for a new job in Southern Italy. “First of all, - he wrote to the agrarian economist and family friend Manlio Rossi-Doria on July 13th 1951 (see: Rossi Doria M. 2011, p. 64) - I would like to come and live in Italy for a while”. Later, however, he changed his mind and landed in Colombia…

Part II - Learning from Albert Hirschman

‘dynamism’, and the considerable progress achieved in Italian reconstruction has resulted largely from the confluence of individual ventures, with or without the encouragement of the State. Notwithstanding these differences in approach […] both countries now face largely similar tasks of achieving continued expansion of output, of halting inflationary process, and of balancing their international accounts”. It is a perceptive, interdisciplinary and thoughtful conclusion69. 7. Did (and how) that démarche evolve in the following texts on France and Italy? To answer this question, I have found expedient considering the two countries separately. Because, at first glance, Hirschman’s 1948-49 essays on France are simply grounded on professionalism. In some of them, however, a greater interest for the creativity and ingenuity in the measures adopted can be detected70. “The French Monetary Move” – the differentiated devaluation of the Franc – (Feb. 1948) is a well documented and elaborated discussion of it vis-àvis external criticisms. “‘Franco Valuta’ Imports in France” (Mar. 1948) is a proper assessment of that measure, that had a broader base than

69 “When science is in a condition of acquiring full consciousness both of its methods and of the necessary premises of every construction of her, – had written Eugenio Colorni in his 1938 “Program” (now in Cerchiai G. 2018, p. 113) that Albert Hirschman may have discussed with him in Trieste – she obtains from that the impulse to overcome that necessity and to build new premises. That spiritual work is not only intellectual. […] It is a violent effort against ways of considering things that block us, a propensity for liberation, a jump outside the world we belonged to. One looks for a ‘new mentality’, for new eyes, for coming back to simplicity, for refuting constructions already made. One trusts his imagination, invention, intuition, to figure out worlds different from the one we used to see”. 70 And/or perhaps gradually, in reading Hirschman’s essays, one has become more able in detecting that emerging attitude.

the successful Italian one71. “Some Recent Developments in French Finance and Credit Policy” (Oct. 1948, written with R.V. Rosa) dwells on the contrast between the physical recovery (due to good weather, aid, successful devaluation and other financial measures) and the renewed outbreak of inflation in France; and sets the ground for a systematic report - “Credit Controls in Post-War Economy of France” (Feb. 1949, with R.V. Rosa) – that accurately reconstructs the evolution of this subject: from qualitative to quantitative controls and to other innovations72. Finally, “Relaxation of Exchange Controls in Belgium and France” (Mar. 1949, with R.S.) explains that kind of adjustment on different grounds: paying for exports in Belgian Franc notes by Belgium; and capturing the tourist’s foreign exchange by France. If we turn now our attention towards Hirschman’s essays on Italy, we find of course the same inspiration. But their content is often unexpected and their style is more daring, as if Hirschman had more interesting stories on Italian economic policies to tell; and felt freer in telling them. “The least that can be said about

71 See n. 65 above. “By relaxing previous restrictive regulations – Hirschman wrote – the Italian Government, in the fall of 1947, caused a large inflow of franco valuta imports of fats, meat and sugar which was one of the principal factors in the fall of Italian prices after October 1947. The French move certainly was largely inspired by that successful experience”. 72 “A form of ‘reserve’ requirement – it asserts – was introduced for the first time in French history, but the influence of this innovation is somewhat jeopardized by the fact that the reserve is to be held in marketable Treasury securities. Unless the Treasury effectively ‘sterilizes’ the proceeds of any reserve funds which it receives directly, and unless banks are prevented from acquiring securities for their reserve account from the existing portfolios of other holders, the money market effect of the reserve requirement will be negligible. Of much greater effect […] is the new system of rediscount ceilings. Relatively low limits have been set individually for each bank, thus curbing the use of outstanding discounts for the banks in obtaining new reserve funds”.

postwar Italian exchange rate and control policies – he wrote for instance, in the opening of “Italian Exchange Rate Policy” (Dec. 1947)73 – is that they have displayed remarkable inventiveness. Italy took the lead in providing various incentives to exporters and in permitting free markets in certain types of foreign exchange transactions” followed on that by Germany, France end Greece. From here a recapitulation of the original fifty per cent system starts, followed by an analysis of its shortcomings, and of its modifications, until its recent substitution with a new system. Conclusion: “Italy’s attempt to feel its way toward a realistic exchange rate will be watched with keen interest by all countries with overvalued rate”. Moreover, an analogous “knack” emerges in “Credit Restrictions and Deflation in Italy” (April 1948), from which Hirschman developed a well known article for the American Economic Review: “Inflation and Deflation in Italy” (Sept. 1948). Particularly relevant was Hirschman’s explanation of how orthodox credit restrictions were introduced by the Budget Minister Luigi Einaudi to tame a run-away inflation that unfortunately unleashed a deflationary movement. But fearing a collapse of Italian industry, the government increased public expenditure in favor of the badly hit basic industry fist, and then to industry in general. Did that mean – Hirschman asked himself – that the Ministry of Industry was undoing what the Budget Ministry has done? Form a macroeconomic point of view that could not be denied. But the truth was that the government was channeling scarce resources toward specifically selected in73 This essay unfolds from “Exchange Control in Italy” (Mar. 1947): see par. 6 above.

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dustrial enterprises that were most in need of restructuring and modernization74. Finally, “Economic and Financial Conditions in Italy” (Dec. 1948) is an extraordinary essay that, starting from the comparison between the French and the Italian economy, enters in depth in the diagnosis and in the suggested, reasonable cure of the latter. It also represents a key text for understanding what Hirschman did at the time, and what (in part un-consciously) he had already in the pipeline. From a double perspective - on the on hand “various schemes for European economic integration, such as the European Payment Union, that were central to the Marshall Plan concept”75 (the new assignment he received within the Plan); and, on the other, Hirschman increasing concern and familiarity with development issues76. 8. To come back to a central thread of our discussion, one may ask at this point whether a “methodological break” between Hirschman’s pre and post-war work actually exists. I am inclined to answer: yes and no. “Yes”, because, as Asso and de Cecco have suggested and Hirschman agreed upon, a significant change in his analytical attitude occurred. But at the same time “no”, because of the many continuities in his thinking; and especially in his political inspiration and motivation. Actually, one should provide a “fil rouge” to illuminate what it seems to be the less understood part of Albert’s story. And this is, in my view, the immense tragedy Hirschman and the young people of his generation went through. 74 Hirschman was received by the then President of the Italian Republic Luigi Einaudi. 75 Hirschman A.O. 1984, now 1986, p. 5. 76 Meldolesi L. 2013, Ch. 3.

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It is something that people raised in a different context has no direct recollection of and, therefore, has to reflect on and learn to grasp it. Actually, Ursula and Albert Hirschmann met Eugenio Colorni in Berlin before Hitler and since then their life, all vicissitudes notwithstanding, was marked by the need of doing whatever possible to dethrone Fascism and Nazism and to build a world in which sovereign nationalisms, imperialisms and their rivalries where put under international control. They needed an alternative to that world, that, in Colorni’s and his friends’ view, was called federalism at a European and world level. They were looking for a structural overall transformation starting from Europe (that at the time was still the center of the world economy) - in which the traditional domination of great powers should be substituted in time by federalist fraternity and collaboration. My contention is therefore that this aspect of the story is essential in Albert’s “Developing a Point of View”: in his first book, in his work at the Marshall Plan and in Colombia. Everywhere I see Hirschman’s lonely struggle against domination as an essential ingredient of the intellectual attitude that allowed him to become the extraordinary human being I met. One may notice in Hirschman a continuous “refurbishing” of one’s identity and “raison d’etre” in changing conditions77. Here I see continuity. More: I think that Hirschman’s trajectory and outstanding intellectual discoveries are indeed really understandable only if one keeps 77 Hence it happened that Hirschman passed from his struggle against Fascism and Nazism to his struggle for Europe, and later on to his work for Latin American emancipation. Hirschman “had often said he was ‘grateful’ to Latin America for having kept up or ‘rekindling’ the ‘ardors’ of his youth” (Rodwin L. and Shon D.A. eds. 1994, p. 321).

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clear in mind his continuous propensity “for a better world” – as he was used to say; even when it is simply implied… During his Marshall Plan experience, Hirschman realized that passionate discussions with colleagues economists produced more harm than good. Hence he transformed his shyness and ingenuity into an alternative ways of combat. He realized that economic operators at the national and local level had in their hands pills of wisdom in statistics, applied economics, policy, policy making etc. connected to their own reality that could be used against the foolishness of theoretical, imperialist economists. He worked hard therefore on the side of down-to-earth colleagues in reconstructing economic events and explanations with a wealth of information and analyses that were speaking by themselves; and started also considering sideline observations as well. As Paolo Baffi at the time head of the research center (and later Governor) of Bank of Italy recalled78 – Hirschman “was used to guard observations and reflections coming from his visits in Europe to extremely lucid documents, to be circulated inside the Board [of the Us Federal Reserve], that were transmitted to us. Remember, in particular an internal document of February 1947 on the exchange control in Italy and a first, stimulating comparative analysis on reconstruction in France and Italy”79 9. Hirschman was already aware of the historical studies of Alexander Gerschenkron he later praised80. And this also, in my view, helps

Part II - Learning from Albert Hirschman

explaining why - as Asso and de Cecco noticed81 -“in his writings on Italy much more marked […] is the presence of Hirschmanian possibilism. That is, of the propensity to study an experience in its evolution, leaving completely ‘opened’ imaginable conclusions, and focusing on the dialectical phases of the experience itself. Hirschman is particularly interested in showing how many variations can have initially very similar situations, and how much the result of a policy can be influenced by the reaction to its implementation”. Mainly, they observed, Hirschman wanted to show “how diverse can be the dynamics of situations apparently similar at the beginning, and how the outcome of a policy can be influenced by the reaction of the reality with which it wanted to interact”82. Actually, that professional exercise within the Marshall Plan, repeatedly reproduced in different forms, to cope with the ever changing economic outlook of the countries observed, helped Hirschman discovering hidden, non-considered or undervalued economic aspects of the overall picture; and the latter in turn introduced him in other, non economic dimensions. So it happened that in time Hirschman’s decision of working hard to undermine ex-ante certainties of many of his American colleagues gradually freed him from the typical psychological subjection to Economics interiorized by economists all over the world, and opened up new horizons. helped him later to get his job at the Federal Reserve Board for the Marshall Plan. See Adelman J. 2013, pp. 205 and 258.

Though well equipped in Economics, Hirschman has never been a highly specialized theoretical economist. Indeed, economists know that a clarification on that point is needed. Because Economics, by its stiff specialization, is normally secluded vis-à-vis other social sciences. It is set aside from the latter - as Albert explained in Exit 83 - by its own “severe initiation”. In the sense that, once his know-how is acquired, the economist finds it hard and even un-surmountable to overcome it. Marcello de Cecco knew too well (as I do) that intellectual asperity, and, I think, intentionally provoked Albert Hirschman to reflect further on his own experience. But while Hirschman had a special gift for going right to the bottom to his own observations, he had also a special, personal difficulty (as I hinted at already) in saying the whole story about himself84. “See ready to seize special opportunities as they arise – Hirschman said later on85 - and learn to recognize the gestalt of when there is such an opportunity”. If you compare this point of view with Marcello de Cecco (and my) keynesian up-bringing in Cambridge UK of the early 1960s (directed by Joan Robinson, Kaldor, Kahn, Sraffa, Dobb, Meade etc.), it is immediately clear that the perspective discovered by Hirschman was far away from our minds. Not because we overlooked adaptations and applications of economic theory to practical realities and needs. But because economic theory had a first place anyway, a dominant position vis-à-vis whatever we found and/or invented. It may seem a too subtle, if not secon-

81 Asso P.F. and de Cecco M. 1987, p. 35. 78 Baffi P. 1985. 79 See par. 6 above. 80 Hirschman A.O. 1984, now 985, p. 15-6. Gerschenkon had met Hirschman in California while both were working for Condliffe; and

82 Ibid. Consequently, he developed an attitude of following cautiously, step by step, effective evolutions of development, instead of superimposing on them a theoretical scaffolding of any kind. This point of view became essential for him. See: Hirschman’s well-known “Introduction” to A Bias for Hope, 1971.

83 Hirschman 1970, p. 92-8. 84 And this is why I feel that the present note… is largely overdue – for Albert Hirschman, and also for Marcello. 85 Quoted in Rodwin L. and Shon D.A. eds. 1994, p. 315.

dary, point. But it is not. Because our “severe initiation” kept ourselves prisoners of what we learned. We could move under strict limits; and we were recognized as economists only within those limits. What is really extraordinary in Albert Hirschman is that his dis-homogeneous upbringing in Economics, important political and field experiences and the tragic events he passed through taught him to be knowledgeable in the discipline, but (contemporaneously) to rely basically on his understanding, and judgment (even the artistic one). From that he was able to build extensively in social science - while keeping Economics at arm-length. In his Marshall Plan experience, Hirschman had realized that economic theory can be utilized dogmatically, as an ideology, with disastrous consequences. But this discovery did not bring him to pit an economic theory against another, or work on specific characteristics and coherence of some theories (classic, neoclassic, keynesian, institutionalist etc.), or build an alternative one. Moreover, his disenchantment did not occur abruptly through a sort of repudiation of the discipline that Hirschman always respected. Rather, he developed an intellectual attitude that keeps in touch with the teaching of Economics, while, at the same time, invests heavily in finding appropriate solutions in the observation of reality, and in its elaboration. From here new foray, trespassing, mixing of disciplinary ideas, new theoretical concepts and constructions came. The attraction of the excerpts assembled in the following pages consists, in my view, in understanding the relevance of each text in its own terms, for the specific scope it was written; while perceiving

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the evolutionary process that unfolded trough it, and behind it. Hirschman will not use Economics in the traditional sense any more. He will resist economists (like Paul Krugman) or business strategist (like Michael Porter) who wanted, one way or another, to bring his work back to traditional analysis. Indeed, he will call in his future work many aspects of Economics - as equilibrium growth (in The Strategy of Economic Development), competition (in Exit, Voice, and Loyalty), or consumption (in Shifting Involvements); but to complement and transform them with other aspects of human life, generally not dealt with by the profession – as unbalanced growth, voice, private and public disappointment. And, later, he will reinterpret part of his work as an overall journey on How Economics Should be Complicated86. One may even say that a key fascination of his work is inextricably linked to that decision of following his way.87 “Such an attitude [acquired struggling within the Marshall Plan] - Hirschman suggested in his typically modest style as a closing sentence of his “Preface” to Potenza nazionale - perhaps explains the ‘break’ noted by de Cecco and Asso, which may even have become a methodological habit underlying a great part of my successive work”. Indeed: a striking conclusion88. 86 Come complicare l’economia is indeed the title of an anthological book by Albert Hirschman I edited in 1988 under his guidance. 87 By and large the economic profession is still the one we have been discussing. But Hirschman’s example has shown that evolving differently is possible. And this means also that other roads may be at hand. Think, for instance, to Eugenio Colorni (Colorni E. and Spinelli A. 2018, p. 188-89), who wanted to work the other way: instead of learning economics as such, he wanted to raise questions to Economics, in order to learn from the economist answers, and develop, at the same time, a process of discussions on various key issues.

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88 The methodological break aside, one may wonder what the essays here presented tell us on the formation of Albert Hirschman methodological habit. By jumping chronologically from one text to the next this question is not easy to answer. But one may supplement our reading with a different point of view. One may develop, for instance, an historical research on the Marshal Plan period (on the cultural, political and economic atmosphere in which Hirschman contributions were written); or may single out a theme and see how it was unfolded and developed in time by the Author. For example: “Exchange control in Italy” (spring 1947) had inevitably his roots on the expertise acquired in writing the “Mémoire sur le controle des change en Italie” before the war; then an evolution of the subject was interestingly suggested by Hirschman in his Dec. 1947 full-fledged text. It is a line of thinking that can be compared with the parallel evolution of the French one (form “‘Franco Valuta’ Imports in France” influenced by Italy even in its title, to “Some Recent Developments in French Finance and Credit Policy”, to “Credit Controls in the Post-War Economy of France”). Analogous procedures may be devised for other recurring subjects in Hirschman’s work - as foreign trade, inflation and deflation, development etc. That is to say: if one follows the evolving research interests of Hirschman, a considerable continuity in inspiration, and in writing, emerges. (Even in the sense that various subjects took somehow life of their own; and become demanding on their master. I remember, for instance, a curious discussion I had with Hirschman in the late ‘80s of last century, in which he told me that he had to work hard on exit and voice because of the discussion enlaced by his 1970 book, while he desired… to invent something else). Actually, one may notice that many of the numerous texts Albert wrote during the Marshall Plan period raise a point and then come back to qualify it. Later (Rodwin L. and Shon D.A. eds. 1994, p. 314), Hirschman “described his cognitive style as the habit of presenting a strong thesis at the outset and then qualifying it, by bringing in complications, which become ‘more interesting’ than the original theoretical assertion”. Actually, economic journalism with its evidences initially independent one from the other, economic history that, in Hirschman view, should be kept opened to all sorts of evolutions (the problem that interested Asso and de Cecco), and the enucleation of new concepts and theories of social science are intellectual processes (to whom some more may be added) not at all secluded one from the other. On the contrary, Hirschman was able to move rapidly from one to the next, to utilize wisely and gradually the cognitive potential he had in his hands – just because he felt and behaved as “a free man”, as sometime he was calling himself.

PREFACE to Potenza nazionale1 by Albert Hirschman […] At the beginning of 1943 I enlisted in the US army; this lasted almost three years, but luckily half the time was spent between Siena, Florence and Rome. Back in the United States at the end of 1945 I decided to look for a job as an economist in Washington. In the fall of 1946 I joined the international division of the Federal Reserve Board, initially assigned to “follow events” in France and Italy. The enormous economic power in the hands of the United States at that historical moment made even my position, apparently devoted exclusively to research, surprisingly influential both inside the American government and in economic relations with western Europe. Brief as they are, these notes may help to explain of the differences between the prewar and postwar writings, perceptively observed by Marcello de Cecco and P. F. Asso in their introduction. Up until the final defeat of Fascism and Nazism, everything I wrote was in some way made to fit into that struggle; after 1945 the tension had dropped, with consequences of various kinds. First of all, there was no longer the same necessity as before to subordinate all thought to a single goal, always coming to definitive conclusions capable of inspiring action. Moreover, in my new role in postwar Washington I found myself in an ironic position. If until quite recently I had been a political refugee with no power at all who had criticized the political use of economic power in what was

1 Excerpt from Albert O. Hirschman “Prefazione” to Albert O. Hirschman: Potenza nazionale e commercio estero. Gli anni Trenta, l’Italia e la ricostruzione, a cura di Asso P.F. e de Cecco M., Bologna, Il Mulino, 1987 (translated from Italian by Michael Gilmartin).

then my most ambitious work, I could not now fail to recognize that the economic power of the country I was by now a citizen and representative of gave undeserved weight and resonance to my opinions and those of my government colleagues. The result of this (from the perspective of my inter-temporal consistency) was a situation that was almost schizophrenic. My reaction, perhaps excessive at times, was to suppress the use of whatever power I had; but above all I worked hard to undermine the certainties of my colleagues (whether pro-market or pro-planning), many of whom saw no harm in using the fullest extent of their power in the service of their opinions and beliefs. Such an attitude perhaps explains the “break” noted by de Cecco and Asso, which may even have become a methodological habit underlying a great part of my successive work. Albert O. Hirschman Princeton, May 1987

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A Few Excerpts from “Follow Events in France and Italy” by Albert Hirschman 1. “France and Italy: Patterns of Reconstruction”, Federal Reserve Bulletin, n. 4, Apr. 1947. […] When Germany collapsed, both France, victim of German spoliation for over four years, and Italy, battleground of the opposing armies for almost two years, were economically prostrate. In 1945, national output in both countries was estimated at 40 to 50 per cent below the 1938 level. At the end of the war both countries were suffering from disruption of transportation and drastically lowered productivity in agriculture and industry owing to physical exhaustion of labor, destruction and under maintenance of capital equipment, and drastic reduction of supplies of raw materials and fertilizers. In addition, the swollen money supply, which was a heritage of war and occupation, was generating acute inflationary pressures. This, together with the general administrative disruption, led to a near-breakdown of the official allocating and rationing machinery. Old economic ills peculiar to each country were aggravated by the war: France’s manpower problem became more acute through the loss by agriculture and industry of one million workers between 1938 and 1946. In Italy, the dangerous economic and social cleavage between the relatively wealthy North and the rest of the country was accentuated by the concentration of war destruction in Central and Southern Italy […]. PLANS AND GOALS

Part II - Learning from Albert Hirschman

The Monnet Plan of Modernization and Equipment was published in December 1946 and adopted as the official program of the French Government in January 1947. But its outlines had been known for some time in advance, and had formed the basis for presentation of the French case in the loan negotiations with the United States last spring. The Plan declares that, in view of prevailing low productivity in France, extensive re-equipment and modernization is necessary to prevent stagnation and restrictionism from spreading gradually throughout the French economy. The French public is exhorted to postpone certain consumption expenditures and submit to regulations now in order to achieve a greatly increased flow of consumer goods and restoration of economic freedoms once the investment plan has been carried out. The Plan is the result of a cooperative effort on the part of French Government, industry, and labor. It does not detail a rigid program for every branch of economic activity for the next four years, but rather sets goals for such aggregate magnitudes as national income, investment, labor force, and required foreign aid. It provides specifically, however, for considerable expansion and modernization of the French internal transportation system and of five fundamental branches of French industry. In these industries it is planned to attain by 1950 the following percentage increases in production over 1938: coal, 37; electricity, 79; steel, 77; cement, 255; and agricultural machinery, 371 per cent. The execution of these programs is recognized to be dependent upon obtaining the necessary manpower through adoption of the 48-hour week, an active immigration policy, and transfers of French labor to industry from agriculture, government services, and the distributive trades.

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With the exception of agricultural machinery, the branches of industry toward which the main effort of the Plan is to be directed are either nationalized (railways, coal mines, electricity) or highly concentrated (iron and steel, cement). This as well as the nationalization of the major commercial banks and insurance companies should facilitate the channelling of investment funds toward their planned uses. Total net investment, inclusive of expenditures for reconstruction and deferred maintenance, is planned for the four years 1947- 1950 at the equivalent to about 19 billion dollars, of which 3.7 billion is scheduled for 1947. This outlay is expected to lead to an increase in the national income from 25 billion dollars in 1947 to 31 billion in 1950. If this objective appears somewhat modest, it should be remembered that agriculture will continue to play an important part in the French economy and that its contribution to the national income cannot be increased significantly. Of the total proposed investment about three billion dollars is expected to be financed through foreign credits (two billion) and liquidation of foreign assets (one billion), while the remaining 16 billion is to be provided by domestic savings. At present, difficulties are faced in both directions. The needed foreign financing is not yet assured, while the internal investment program is endangered by the unwillingness to save that is characteristic of inflationary conditions, as well as by the competition of other government expenditures for available savings. The recent decision of Finance Minister Schuman to reduce by 40 per cent the scheduled expenditures under the Monnet Plan, pending the balancing of the ordinary budget, illustrates the interdependence between the Plan and the achievement of monetary and financial stability. However, in spite of difficulties and possible departures from original schedules, the Monnet Plan will leave its

Part II - Learning from Albert Hirschman

mark on the economic structure of France and of Europe. Planning on the part of the Italian Government has so far been confined largely to the advance preparation and submission to Allied agencies of detailed import requirements. These programs aim at a general increase in economic activity, but no comprehensive attempt has been made to recast Italy’s industrial structure, which was seriously distorted by the self-sufficiency drive of the thirties. No decision has yet been taken with respect to nationalization of industry or to the future functions of the Institute of Industrial Reconstruction (IRI), the agency that owns a majority interest in many of Italy’s leading banking and industrial enterprises. Workers’ councils have functioned in many important Northern Italian factories since liberation, but their legal status remains undefined. A beginning of agrarian reform has been made by providing for allocation of uncultivated land to farmers and by introducing long overdue changes into the mezzadria (share-farming) contract. But, on the whole, the solution of this, as well as many other problems, remains in abeyance. It is well recognized that in Italy, which even before the war had one of the lowest standards of living in Europe, modernization of the economy and substantial raising of consumption levels are essential long-run requirements for economic and social stability. But political deadlock, incomplete sovereignty, and the very magnitude of the problems left as the legacy of Fascism, have prevented the Italian Government from developing an integrated economic and social program. Economic policy has thus been widely divergent in the two countries. In France parties bitterly opposed to each other in the political field have rallied around the Monnet Plan, doubtless with different ultimate aims in view, but with a unanimity and continuity that can hardly be explai-

ned by mere tactical considerations. It may be that the idea of a national economic goal appeals strongly to the French people because of the frustrating lack of direction from which they suffered during the interwar period. Italy, on the contrary, emerged cruelly disillusioned from a long period of excessive “dynamism,” and the considerable progress achieved in Italian reconstruction has resulted largely from the confluence of individual ventures, with or without encouragement from the State. Notwithstanding these differences in approach to the long-run problem of reconstruction, both countries now face largely similar tasks of achieving continued expansion of output, of halting the inflationary process, and of balancing their international accounts. The solution of these problems will require continued effort on the part of the peoples of both nations and continued cooperation from abroad. 2. Exchange Control in Italy I & II, Review of Foreign Development, Mar. 11, May 6, 1947. I […] Freedom for exporters to retain part of their foreign exchange proceeds as a means of stimulating exports was urged by the First National Meeting of Foreign Traders at Milan in March 1946. The demand was quickly met by two decrees, dated March 15 and April 13, 1946, which authorized exporters to utilize or sell 50 per cent of their “free” currency proceeds (i.e., excluding currencies of countries with which payments agreements were in force) within 90 days. For this purpose foreign exchange accounts were to be opened at authorized banks; to the second decree was appended a list A of commodities which could be imported simply upon proof of the availability of free foreign exchange and list B of commodities

the importation of which required in addition a regular license. The system got rapidly underway, possibly as a result of the experience which Italian industrialists, particularly in the textile field, had gained with a very similar system during the immediate pre-war years1. Since May 1946 “free export rates” for the United States dollar, the British pound, and the Swiss franc have been regularly quoted by the financial press. The system, as established in March/April 1946, went through two distinct phases. The first was one of extension and liberalization, the second one of gradual restriction. The first phase, which lasted through August 1946, was marked by an extension of the time limit to a maximum of four months (Decree of May 31, 1946); and by admission to the benefits of the system of proceeds from repairs of foreign ships and of freight receipts (August 1946). Soon thereafter, on September 3, 1946, the first restrictive measures were taken. These were intended mainly to prevent unduly slow turnover of the foreign exchange controlled privately under the system. The time limit within which utilization is mandatory was cut down to 60 days and a general limit of 120 days starting from the moment of acquisition of foreign exchange was set for the actual physical importation of the goods purchased. The most important further restriction was the shift, ordered on September 26, 1946, of cotton and wool from list A of freely importable commodities to the regime of ministerial license applicable to commodities on list B. The reason

1 Between 1937 and 1939 from 50 to 75 per cent of foreign exchange earnings were left to various classes of exporters of manufactured products. The economic implications of this policy were excellently analyzed by G. Demaria, “I rapporti di cambio manovrato in regime di autarchia corporativa,” Giornale degli Economisti, LIII (1938), 1-16, and by G. Boggio, “Contingentamenti e cambi specifici,” Rivista Italiana di Scienze Economiche, XI (1939), 970-996.

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for this step was probably that the Italian textile industry was then already at or near capacity and that the authorities intended to check an excessive building-up of raw material inventories. Finally, in October 1946, the 50 per cent system was largely abolished insofar as manufacturing for foreign account was concerned. This practice, particularly important in the textile industry, consists in importing raw materials from a foreign firm which keeps title to the material as it is being transformed into finished goods specified by and deliverable to that firm. In this way the Italian manufacturer has no initial outlay for raw materials and is paid only for “value added”. The restrictive legislation adopted in October allowed the exporter the benefits of the 50 per cent system when value added exceeded the value of the foreign raw material used. […] In attempting to appraise the Italian experiment in limited freedom of foreign exchanges, it should first be pointed out that the emergence of the experiment was greatly favored by the almost total absence of efficient State controls at the moment Italy recovered her sovereignty in matters of foreign trade from the Allied Commission on January 31, 1946. Furthermore, the UNRRA program guaranteed the most essential imports for the whole of 1946 and thereby reduced the risks inherent in the decision to leave allocation of half of the foreign exchange earned by exporters to competitive forces. These two conditions have now come, or are about to come, to an end and this alone makes the survival of the 50 per cent system precarious. But both friends and foes of the system agree that it has given Italian exports a powerful fillip during 1946. Its immediate effect was to transfer excess profits from importers (where they generally accrue in exchange control systems) to exporters, a shift which is certainly welcome when a country is struggling with fo-

Part II - Learning from Albert Hirschman

reign exchange difficulties. As a result of competitive bidding on the part of importers, exporters disposed of their foreign exchange at very advantageous prices. This actually stimulated exports to the extent of diverting many essential goods, particularly textiles, from home consumption and thereby increasing prices in certain sectors of the economy. An increase in the general price level, however, should result from this process only to the extent that the system permitted the creation of a foreign exchange reserve in the hands of exporters (which could easily be taken over by the State should it decide to abolish the “50 per cent system”) or the necessary rebuilding of raw material inventories. […] On the whole, the “50 per cent system” seems to have contributed greatly to Italian economic recovery in the past year; it has made Italian producers definitely export-conscious and has resulted in the allocation of certain imports according to efficiency of the producers rather than by reference to some fictitious base period or simply by favoritism. It has made underbilling of exports with the intent of accumulating foreign exchange abroad much less attractive than under conditions of strict exchange control. Finally, it has oriented Italian export trade toward the hard currency countries, a welcome development since the deficit of Italy’s balance of payments is primarily a hard currency and even a dollar deficit. Bresciani-Turroni, in an article published by the Corriere della Sera in Milan (January 16, 1947) has advocated the continuance of the system because of its proven elasticity and adaptability to cost and price changes, which in the present unsettled state of the Italian economy are inevitable and even desirable. […] The present system permits the monetary authorities to gauge the intensity of specific de-

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mands for foreign exchange at prevailing international prices through the device of adding to or subtracting from the list A of commodities which can be freely acquired abroad with the exporters’ free exchange, thereby increasing or decreasing the number of bidders in the free export exchange market. Gradual addition of even more commodities to the free list, coupled with a concomitant increase in the supply of free exchange through successive raising of the percentage of foreign exchange earnings retained by exporters, might actually be one answer to the baffling problem of how to achieve conditions of relative monetary freedom in an orderly fashion and without undue exchange rate fluctuations. II […] The present note will analyze another feature—or regulated loophole — of the Italian exchange control: the system of the so-called “franco valuta imports”. To purchase franco valuta means to import without asking the Exchange Control authorities for foreign exchange (and to enter a firm commitment not to do so once the commodities have been imported). This is, of course, possible only if the imports are matched against a transfer of capital (or a gift) from abroad. Except insofar as they are financed directly through credits granted by foreign exporters, franco valuta imports are therefore merely a variety, or an extension, of the concept of trade carried on through private barter or compensation. Although recent legislation has drastically curtailed the system, it remains an interesting episode in the history of exchange control. Franco valuta imports were authorized early in 1946, largely, as in the case of the 50 per cent system, upon the urgings of the Convention of Foreign Trade held in Milan in March 1946. Detailed regulation started in April. A list, identical with list

Part II - Learning from Albert Hirschman

A of the 50 per cent system2, detailed the commodities importable upon the sole commitment not to ask for foreign exchange, while the importation of other commodities required an import license in addition. Franco valuta imports were authorized only from free currency countries; this restriction excluded Continental European countries with which payments agreements had been concluded. The “free” list was amended subsequently, one of the most important changes being the permission, granted as of July 1, 1946, to import coffee and cocoa franco valuta without ministerial license. Subsequent legislation has gradually and severely restricted the system. On September 6, 1946, it was decreed that, in addition to the commitment not to ask for foreign exchange, proof was required that the imports were financed in one of three specified ways: a)Through transfer of capital from foreigners or Italians residing abroad. In this case, the importer paid the amount in lire due into an untransferable account in the name of the foreign resident, this account being subject to restrictive rules with respect to types and amount of expenditures authorized. b)Through repatriation of Italian holdings abroad which were not subject to surrender to the Government or which were subject to such surrender but were accumulated before March 26, 1946 (the date of the inauguration of the 50 per cent system). The latter undeclared holdings were to be repatriated through franco valuta imports within six months and for this purpose were granted immunity from penalties for failure to declare

2 See loc. cit.

and surrender them. The time-limit for this immunity has since been extended another six months, i.e., to September 6, 1947. c)Through gifts from abroad. Finally, on February 21, 1947, all franco valuta imports against transfers of foreign capital […] were prohibited since it was held that the extension of the 50 per cent system to foreign investments, which had taken place in January, provided foreign capitalists with a sufficiently attractive rate. As is generally true with respect to private compensations, the rates of exchange at which the franco valuta imports are financed are different for each transaction. All that can be said in this respect is that prices quoted in Italy for many commodities such as coffee and cocoa permitted an importer to pay a rate of exchange of 800 lire to the dollar and still make a handsome profit. In general, the rates at which the franco valuta transactions have taken place are believed to have exceeded the black market rates for dollar bank notes by a margin of about 150 lire. As to the importance of the transactions, various estimates have put them at as much as 15 per cent of commercial imports in terms of lire and at between $10 and $20 million during 19463. […] In general, it was pointed out, the imports which have taken place through the system were chiefly certain eagerly sought consumption goods of a semi-luxury character; the system therefore has catered to the few rich and possibly increased the internal stresses afflicting Italian society. 3 Because of the high rates of exchange applied, franco valuta imports occupy a larger share in total lire imports than in total dollar imports.

All in all, it seems that the system may have served a useful purpose in the beginning as a temporary amnesty for exchange control violators during Fascism and as a means of reestablishing Italian foreign trade connections. But its usefulness would appear to have come largely to an end, and its harmful aspects have gradually outweighed its possible benefits. Recent restrictive legislation will practically terminate the system by September of this year. It remains to be seen, however, whether the plea of the latest Convention of Foreign Trade, just concluded at Milan, to abolish that legislation and to reauthorize franco valuta imports on a more liberal basis will be heeded by the Italian Government. 3. “Franco Valuta” Imports in France, RFD, Mar. 23, 1948. On February 13, the French Exchange Control Office issued a decree (Avis No. 299) introducing in France a special form of private barter or compensation system similar to that which had been developed since the end of the war in Italy under the name of “franco valuta” imports4. According to the decree, importation of a wide range of goods is permitted without licensing, provided that such imports “do not give rise to any financial settlement between France and abroad.” In other words, imports of certain commodities are authorized provided that they do not result in a foreign exchange outlay on the part of the Exchange Control Office, but can be financed independently from such sources as imports of foreign capital, repatriation of French capital held abroad, foreign tourists’ expenditures, etc. Only two categories of commodities are exclu-

4 See this Review, May 6, 1947 (and Ch. 3: above).

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ded from the benefits of such arrangements; these are commodities subject to international allocation and certain goods included in a special list B annexed to the decree. The goods on this list are in the main luxury goods, such as furs, passenger automobiles and all articles subject to luxury taxes. The admitted commodities also fall into two categories: those specified in list A which can be imported without import license, and all other commodities (except those in list B) for the importation of which licenses are still required. Licenses for these commodities will be forthcoming generously, according to official assurances. List A contains a wide range of food products (including such non-essentials as fruits, coffee, tea, pepper), practically all types of industrial raw materials, semi-finished products, and agricultural and industrial machinery. The goods for which licenses are required are therefore mainly finished consumers’ goods other than foodstuffs. By relaxing previous restrictive regulations the Italian Government, in the fall of 1947, caused a large inflow of franco valuta imports of fats, meat, and sugar which was one of the principal factors in the fall of Italian prices after October 1947. The French move certainly was largely inspired by that successful experience, but from the outset the French system has been placed on a scale broader than even the most liberal form of the oft-revised franco valuta system in Italy.[…] 4. Italian Exchange Rate Policy, RFD, Dec. 16, 1947. The least that can be said about postwar Italian exchange rate and exchange control policies is that they have displayed remarkable inventiveness. Italy took the lead in providing various incentives to exporters and in permitting free

Part II - Learning from Albert Hirschman

markets in certain types of foreign exchange transactions5. The measures adopted on November 28 are only the latest development of this policy[…]. New System Introduced. The unhappy experience with this phase, and the continued failure of Italcambi to capture foreign exchange income from tourist trade and remittances were among the main motives for the adoption, on November 28, of a new system which constitutes an interesting innovation in the field of foreign exchange regulation. Earlier, on August 2, 1947, the differential between the official and the free rate had been narrowed by raising the official buying rate for the dollar from 225 to 350 lire. Now, it was decided to eliminate this differential almost entirely by having Italcambi acquire the 50 per cent due to it at the average free rate of the previous month. It might have been possible to go one step further and have a single, fluctuating rate, the daily free rate determining at the same time Italcambi’s daily official buying rate, but the relative narrowness of the market and the desirability of having a foreseeable and moderately stable rate for payments agreements purposes induced the Italian exchange authorities to choose as the official rate the average free rate of the previous month. The average of the free rate for November having been 603, this is the official buying rate for December. Supposing that the free rate in December remains in the neighborhood of the November level, the new exchange rate represents a rise in the average rate at which exporters sell dollars from (350 + 603)/2 = 476,5 to 603, i.e., a devaluation of the lira by 21 per cent. This devaluation is not an incidental result of the new arrangement 5 For steps in the same direction, see for Germany, this Review, August 26, 1947; for France, this Review, September 23, 1947; for Greece, infra.

but was consciously aimed at since a considerable appreciation of the lira in the free market since May had endangered the capacity of Italian exporters to compete in world markets6. This appreciation, from around 900 lire in May to below 600, had taken place in both the free and the black market as a result of increasing confidence in the new De Gasperi Government and its Budget Minister Einaudi and the latter’s credit restriction policy which forced considerable dishoarding of accumulated foreign exchange funds. A steeper rise of the lira, particularly in the black market, probably was avoided by Foreign Minister Merzagora’s liberal authorization of franco valuta imports, i.e., imports of certain commodities financed by funds held abroad7. Many illegally held dollars that would otherwise have been thrown on the black market were thus repatriated in the form of commodity imports. Aside from the additional devaluation, the main results of the new rate system are: The elimination of the difference between buying and selling rates which discriminated against certain categories of exporters. The elimination of all privileged positions of exporters with respect to the foreign exchange quota that has not to be ceded to Italcambi. Article 6 of the new decree specifically forbids Italcambi to let any acquirer of foreign exchange retain more than 50 per cent of his earnings. Actually, with the differential between free and official rates practically eliminated, the pressure for the granting of preferential quotas is bound to subside. The official rate, i.e., the average free rate of

6 In addition, Italian imports into the U.S. will now be valued by the customs at the new official rate rather than at the previous official rate the application of which resulted in a high incidence of customs duties (cf. above). 7 Cf. this Review, May 6, 1947.

the previous month, is applied uniformly to all payments agreements so that in this field, too, discrimination has come to an end. Until now, the dollar note traded in the black market was at a slight discount with respect to the legal free market rates, a situation probably traceable to the fact that a dollar acquired in the black market cannot be utilized for imports as advantageously and conveniently as a dollar held in the private 50 per cent accounts. Because of this kind of connection between the free and the black market rates, these two rates may be expected to move at approximately the same levels — at least in the absence of large - scale flights and backflows of capital. The new rate system should, therefore, be able to achieve one of its avowed aims, i.e., bring foreign exchange receipts from tourist trade, remittances, and private foreign investments into legal channels. Italy will still be ineligible to use the normal procedure for drawing on the resources of the Fund. […] In a press release dealing with the new Italian exchange rate system the International Monetary Fund expressed, as a matter of principle, its aversion toward fluctuating exchange rates, but noted that Italy’s action brought the actual exchange rate nearer to its equilibrium level and did away with various discriminatory practices. While the Fund judiciously refrained from either blame or praise, Italy’s attempt to feel its way toward a realistic exchange rate will be watched with keen interest by all countries with overvalued rates.

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5. Inflation and Deflation in Italy. American Economic Review, n. 4, Sept. 1948. […] With wages, commodity prices, and stock market quotations resuming a rapid rise in 194647, Italy became the typical postwar example of “open,” as opposed to “repressed,” inflation8. Economic observers invariably related the crying contrast between the general misery and the free availability of luxuries for the few rich and deplored the resulting misuse of resources and social injustices; but they also noticed the profusion of new initiatives and the vigorous exertion of individual effort characteristic of an economic environment in which rewards for success are high and penalties for anything but success are severe. With a poor harvest in prospect and further American aid in doubt, the pace of the inflation reached a critical speed in the spring of 1947. In May, the dollar was quoted between 900 and 1,000 lire in the free and black markets as against a 1946 average of 450 lire; stock market prices had doubled within three months. A runaway performance of yet another European currency seemed imminent. This danger was averted by the appointment of a new Cabinet which for the first time excluded the communists and included Luigi Einaudi, previously Governor of the Bank of Italy and an outspoken advocate of strong anti-inflationary measures, as Vice President and Minister of the Budget. In immediate psychological response, the stock and foreign exchange markets 8 This dichotomy was suggested by Ropke in a report on German and Italian economic conditions in the Neue Zurcher Zeitung (October 26 and 27, 1946). It was later elaborated by him in two articles (cf. Kyklos, Vol. I [1947], pp. 57-71 and 242-53), and has since been widely used in the analysis of postwar monetary conditions (see, Committee of European Economic Cooperation, General Report [Washington, 1947], Vol. I, p. 26, and U.N. Economic Commission for Europe, A Survey of the Economic Situation and Prospects of Europe [Washington, 1948], pp. 81-88).

Part II - Learning from Albert Hirschman

declined. The rise in prices continued, however, though at a slower rate, for several months. The genuine reversal came in October. After having approximately doubled within the space of a year, wholesale prices fell steadily after that month and leveled off in March, 1948 at 15-20 per cent below the peak reached five months earlier. The cost of living decreased by around 12 per cent. The fall in prices experienced during this period was accompanied by many familiar symptoms of depression. Industrial production fell off in spite of constant or increasing raw material and energy supplies, the stock market crashed, and important firms went through financial difficulties and often avoided bankruptcy only by subsidies from the Treasury. […]The stage was thus set for a deflationary movement, particularly in the industries producing capital goods. To make the situation more critical, wages continued to increase because of their automatic but lagging connection with the cost of living9. But it was precisely because the danger of an abrupt collapse of large parts of Italian industrial activity became suddenly so real that the government started emergency and compensatory spending on a large scale. Almost immediately upon the onset of the crisis the Treasury came to the rescue of a number of threatened branches and firms, mostly in the sector of heavy industry. A 50 billion lire fund was set up for the reconversion and modernization of the mechanical industries; the Treasury advanced 10 billion

9 The connection was partially severed as soon as prices dropped. On November 28, 1947, the employers and the unions reached agreement to maintain wages intact as long as the cost of living did not drop by more than 8 per cent and to reduce wages less than in proportion to the cost of living for decreases of the latter between 8 and 20 per cent. See Cesare Vannutelli, “La scala mobile dei salari” Rivista di Politica Economica (March and April 1948), pp. 209-220 and 322-334.

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lire to the Institute for Industrial Reconstruction (IRI) and increased its capital from 12 to 20, and later to 60 billion lire10, subsidies were granted to domestic coal, lignite sulphur, and silk producers; special credit facilities and subsidies were given to artisans and to small- and medium-sized industries, as well as for the industrialization of Southern Italy. In view of these developments, it has been observed that the Italian government became involved in the inconsistency of having its Minister of Industry undo what had been done by its Minister of the Budget. It is certainly curious to notice how Einaudi’s “orthodox” policy actually led to more State intervention in, and greater State control of, Italian economic life. But aside from this point, the combination of a general deflationary policy with expansionist measures in specifically selected fields was a logical economic policy for Italy to follow after the violent inflation it had undergone. Initially, the “open” postwar inflation in Italy (as in France) probably permitted reconstruction to proceed more rapidly than might have been possible under conditions of monetary stability. But as the pace of the inflation quickened, individual savings declined sharply and an increasing portion of the investment (hoarding of inventories and foreign exchange, non-essential building, expansion of the distributive trades) was wasteful and often competed successfully with essential reconstruction and modernization activities. It thus became actually easier and possibly tempting to carry on these activities in a deflationary environment, i.e., in a situation where the universal scramble for raw materials, skilled labor, and foreign exchange resources would give place to a 10 The IRI owns for the Italian government large parts of Italy’s heavy, mechanical, electrical, and chemical industries, as well as majority interests in the three principal Italian commercial banks.

Part II - Learning from Albert Hirschman

relative abundance. In Italy the temporary recession had another consequence which may prove beneficial in the long run: it exposed the profound maladjustments in Italy’s industrial structure which had been left behind by the economic policy of fascism, but had remained hidden as long as prices rose. […] The Italian deflationary experience of October 1947-March 1948 — possibly the closest approximation yet in any country to a postwar recession — serves to illustrate a number of more or less familiar propositions: i. Once more it has been proven that it is possible to stop an inflation when there is a will to do so. ii. Bank credit restrictions have an important part to play in halting the inflationary process. On the other hand, the Italian experience shows that the achievement of balance or surplus in the budget is not always a necessary condition for ending an inflation (the United States demonstrating at the same time that it is definitely not a sufficient one). iii. It is almost impossible to arrest a violent inflationary process without provoking a deflation. The Italian anti-inflationary measures were anything but brutal since they had been carefully planned not to result in a general contraction of credit. They were not indiscriminate since deficit spending by the government, far from being curtailed, was actually increased. Nevertheless, a significant decline in general economic activity occurred. iv. While moderate inflation is compatible with, and may even assist in, the carrying out of planned investment activities, such activities are likely to fare better under mildly deflationary conditions than during a violent inflationary process which results in wasteful and

speculative investment, and in the annihilation of individual savings. v. Deflation arouses more fears and opposition from better organized interests than inflation. In Italy, the latter was allowed to proceed to the runaway stage before energetic measures were designed to combat it; at the first sign of deflation, public alarm was considerable and governmental action was immediately and powerfully forthcoming. In retrospect, however, the judgment of public opinion was quite different: in elevating Einaudi to the Presidency of the Italian Republic, the Italian people weighed fairly the temporary setback of production experienced during the winter 1947-48 against the breaking of the inflationary spiral and lowering of the cost of living achieved by Einaudi’s policies [...]. 6. Economic and Financial Conditions in Italy, RFD, Dec. 14, 1948. General Comment. Possibly the most interesting present day contrast in Europe is provided by a comparison between the Italian and French economies. The question most commonly asked with regard to the French economy is: Why does France, with its balanced economy and its manifold resources, continue to need amounts of outside assistance which seen quite disproportionate to the amounts received by most other recipient countries? With respect to the Italian economy, on the other hand, the following question is being put more and more insistently: How can it be explained that Italy, in spite of its fundamental poverty and its impressive array of unsolved economic problems, is not able to absorb and justify fully the relatively

modest allocation of aid which is destined for it? It may seem strange that one should have anything but praise for a country like Italy whose performance is better than anticipated, i.e., a country that utilizes its allocated aid at a slower-than-scheduled rate, exports more than expected and, as a result, accumulates a small dollar reserve. Unfortunately, the Italian case is not as straightforward as that. There are in Italy backward agricultural areas and distressed industries. There are large numbers of unemployed and underemployed workers. Thus, while the failure to use ERP aid to the full may reflect genuine progress toward stable balance of payments equilibrium, there are grounds for suspecting that it may also reflect inability to tackle the country’s basic economic problems. It must be remembered that the objective of the European Recovery Program is not to secure balance of payments equilibrium as an end in itself, but to produce eventual independence from extraordinary outside assistance at levels of consumption and of economic activity which are conducive to economic and social stability. At this point we touch upon another contrast between the positions of France and Italy which helps to explain the differences in foreign aid requirements of the two countries. In France, partly as a reaction to the long and disastrous deflation of the thirties, an ambitious investment program was mapped out immediately upon the end of the war. This program must be assigned a large share in the responsibility for the continuous inflationary developments. In Italy, on the contrary, there was little attempt to coordinate investment activity except for the portion that was undertaken directly by the State. During the first post-war years the natural outcome of this passivity was the inflation since even the most essential tasks of reconstruction

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required larger outlays than could possibly be forthcoming from savings. The necessity for an integrated investment program was felt even more acutely after the attainment of both economic and political stability had cleared the way for a basic consideration of Italy’s long-term economic goals. Continued indecision in this respect may be partly due to the uncertainty as to the phase of the business cycle in which Italy finds herself at present. A discussion is still raging in Italy about the question whether the recession which followed upon the Einaudi measures has been overcome. Economic policy makers find themselves confronted with the following paradox: Certain resources of the economy, even aside from manpower, are less than fully utilized; but if they were so utilized, the result might well be a renewal of inflation. A similar paradox is presented by Italy’s balance of payments position. ECA aid naturally exerts a deflationary effect, at least as long as the local current proceeds of the aid are accumulating in the counterpart fund. But the remainder of the Italian balance of payments has recently been characterized by a substantial surplus on current account and the resulting accumulation of foreign exchange reserves has led to an expansion of the credit base. Furthermore, even an increase in the effective absorption of foreign aid for investment purposes, may produce inflationary results since increased imports of raw materials and equipment could require so large a domestic use of previously unemployed or underemployed resources as to lead to inflationary pressure in the markets for consumer goods11. There are therefore many good reasons for proceeding with caution. The advantage of having 11 See “Inflation and Balance of Payments Deficit,” this Review, August 24, 1948.

achieved economic stabilization cannot be overestimated. At the same time, the remaining continuing task of the Italian economy is to lift itself to higher levels of economic activity and investment. Here as always, action implies the taking of certain risks. Even when the national accounts of a country are known with good approximation, it is not easy to indicate the “correct” amount of investment. In Italy a priori deductions, while instructive, can only yield extremely rough guesses and are not able to replace as yet the method of trial and error. While the diagnosis of Italy’s position is difficult, the therapy to be prescribed is thus quite likely to be unorthodox. The overshadowing and, in Europe, unique problem of excess of manpower requires investment programs which will differ considerably from such programs in countries which are mainly concerned about a deepening of their capital structure. The necessity to walk on a very narrow path between deflation and inflation may suggest new methods of using both foreign aid and counterpart funds. Finally, it must be realized that we cannot possibly hope to solve Italy’s problems within three or four years. ERP aid can avoid a deterioration in Italy’s position and point the way toward economic development. Unless the Italian problem is seen in this light much time may be lost in looking for a simple formula that will “set things right” […].

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LONG IS THE JOURNEY Dossier N.4, Fall 2020