Albert O. Hirschmann’s The Passions and the Interests

Albert Hirschmann – economist, contemporary of Hannah Arendt, happy exile – read everything, so you don’t have to.

In The Passions and the Interests he tells how avarice was transformed from a sin to “interest”. To take his book’s subtitle, this transformation and how it came about is one of the “political arguments for capitalism before its triumph”. On whether it is a useful change, he suspends judgement. While having also having my doubts, the coda points to its role in creating a modern political economy which deliberately replaced the dangers of national sovereignty with free trade and free movement based on the dubious presumption that as individuals we act in our own best interests.

Skeleton

  1. One Sin to Rule Them All
  2. From the Love of Money, Peace, Liberty and Good Government
  3. But, the People versus the People of Nowhere
  4. We all have our doubts, even Adam Smith
  5. But, hey, whatever …
  6. And so …
  7. Even Keynes bought it!
  8. Coda: “Who cares which government delivers the mail?”

 

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Carte d’identité française d’Albert Hirschman, délivrée en 1940. | The Shelby White and Leon Levy Archives Center

 

One Sin to Rule Them All

… how [affections] disclose themselves, how they work, how they vary, how they gather and fortify, how they are inwrapped one within another, and how they do fight encounter one with another, and like other like particularities; amongst which this last is of special use in moral and civil matters; how (I say) to set affection against affection and to master one by another: even as we use to hunt beast with beast and fly bird with bird … For as in the government of states it is something necessary to bridle one faction with another, so it is in the government within. – Francis Bacon, The Advancement of the Learning (1605)

An affect cannot be restrained nor removed unless by an opposed and stronger affect. – Baruch Spinoza, Ethics (1677)

Fortune has decreed that, as I do not know how to reason, either about the art of silk, or about the art of wool, either about profits or about losses, it befits me to reason about the State.  – Nicolo Machiavelli, Letter of April 9, 1513

What holds for Machiavelli is true for many others who forged important links in the chain of reasoning here described. In general the story told up to now illustrates how unintended consequences flow from human thought … no less than from human actions. In the numerous treatises on the passions that appeared in the seventeenth century, no change whatever can be found in the assessment of avarice as the “foulest of them all” or in its position as the deadliest Deadly Sin that it had come to occupy toward the end of the Middle Ages. But once money-making wore the label of “interest” and reentered in this disguise the competition of the other passions, it was suddenly acclaimed and even given the task of holding back those passions that had been thought to be much less reprehensible. – Albert O. Hirschmann, The Passions and the Interests: Political arguments for capitalism before its triumph (Princeton: 1977)

We must … distinguish betwixt a calm and a weak passion; betwixt a violent and a strong one. – David Hume, Treatise of Human Nature (1738-40)

It is an infallible consequence of all industrious professions, to … make the love of gain prevail over the love of pleasure. – David Hume, “Of Interest” (1742)

From the Love of Money, Peace, Liberty and Good Government

… these violent operations could not take place in our time; a prince would fool himself, and would not fool anybody. Foreign exchange operations have taught bankers to compare coins from all over the world and to assess them at their correct value. These operations have done away with the great and sudden arbitrary actions of the sovereign or at least with their success. – Montesquieu, De l’esprit des lois (1748)

… the natural effect of commerce is to lead to peace. Two nations that trade together become mutually dependent: if one has an interest in buying, the other has one in selling; and all unions are based on mutual needs. – Montesquieu, De l’esprit des lois (1748)

Trade and industry … owed their establishment to the ambition of princes … principally with a view to enrich themselves, and thereby to become formidable to their neighbours. But they did not discover, until experience taught them, that the wealth they drew from such fountains was but the overflowing of the spring; and that an opulent, bold, and spirited people, having the fund of the prince’s wealth in their own hands, have it also in their power, when it becomes strongly their inclination, to shake off his authority. The consequence of this change has been the introduction of a more mild, and a more regular plan of administration.
When once a state begins to submit by the consequences of industry, there is less danger to be apprehended from the power of the sovereign. The mechanism of his administration becomes more complex, and he finds himself so bound up by the laws of political oeconomy, that every transgression of them runs him into new difficulties.

… [A] modern oeconomy, therefore, is the most effective bridle ever was invented against the folly of despotism. – James Steuart,  An Inquiry into the Principles of Political Economy (1767)

But, the People versus the People of Nowhere

All the possessions [of commercial societies] consisted of scattered and secret securities, a few warehouses, and passive and active debts, whose true owners are to some extent unknown, since no one knows which of them are paid and which of them are owing. No wealth which is immaterial or kept in people’s pockets can ever be got hold of by the sovereign power, and consequently will yield it nothing at all. This is truth which should be consequently repeated to the governments of those agricultural nations which take such pains to school themselves to become merchants, i.e. to plunder themselves. The wealthy merchant, trader, banker, etc., will always be a member of a republic. In whatever place he may live, he will always enjoy the immunity inherent in the scattered and unknown character of his property, all one can see of which is the place where the business in it is transacted. It would be useless for the authorities to try to force him to fulfill the duties of a subject: they are obliged, in order to induce him to fit in with their plans, to treat him as master, and to make it worth his while to contribute voluntarily to the public revenue. – François Quesnay and Mirabeau, Philosophie rurale (1763)

We all have our doubts, even Adam Smith

Another bad effect of commerce is that it sinks the courage of mankind, and tends to extinguish martial spirit … A man has … time to study one one branch of business, and it would be a great disadvantage to oblige every one to learn the military art and to keep himself in the practice of it. The defence of the country is therefore committed to a certain set of men who have nothing else ado, and among the bulk of the people military courage diminishes. By having their minds constantly employed on the arts of luxury, they grow effeminate and dastardly. – Adam Smith, Lectures (1763)

For what purpose is all the toil and bustle of this world? What is the end of avarice and ambition, of the pursuit of wealth, of power, of preeminence? From whence … arises the emulation which runs through all the different ranks of men and what are the advantages which we propose by that great purpose of human life which we call bettering our condition? To be observed, to be attended to, to be taken notice of with sympathy, complacency, and appreciation, are all the advantages which we can propose to derive from it. It is vanity, not the ease or pleasure, which interests us. – Adam Smith, The Theory of Moral Sentiments (1759)

But, hey, whatever …

It is thus that the private interests and passions of individuals naturally dispose them to turn their stock towards the employments which in ordinary cases are most advantages to the society. But if from this natural preference they should turn too much of it towards those employments, the fall of profit in them and the rise of it in all others immediately dispose them to alter this faulty distribution. Without any intervention of the law, therefore, the private interests and passions of men naturally lead them to divide and distribute the stock of every society, among all the different employments carried on in it, as nearly as possible in the proportion which is most agreeable to the interest of the whole society. – Adam Smith, The Wealth of Nations (1776)

And so …

Another ill effect of the exclusion [of serving presidents from re-election] would be the temptation to sordid views, to peculation [embezzlement], and, in some instances, to usurpation. An avaricious man, who might happen to fill the office, looking forward to a time when he must at all events yield up the emoluments he enjoyed, would feel a propensity, not easy to be resisted by such a man, to make the best use of the opportunity he enjoyed while it lasted, and might not scruple to have recourse to the most corrupt expedients to make the harvest as abundant as it was transitory; though the same man, probably, with a different prospect before him, might content himself with the regular perquisites of his situation, and might even be unwilling to risk the consequences of an abuse of his opportunities. His avarice might be a guard upon his avarice. Add to this that the same man might be vain or ambitious, as well as avaricious. And if he could expect to prolong his honors by his good conduct, he might hesitate to sacrifice his appetite for them to his appetite for gain. But with the prospect before him of approaching an inevitable annihilation, his avarice would be likely to get the victory over his caution, his vanity, or his ambition. – Alexander Hamilton, Federalist 72 (1788)

Even Keynes bought it!

Dangerous human proclivities can be canalized into comparatively harmless channels by the existence of opportunity for money-making and private wealth, which, if they cannot be satisfied this way, may find their outlet in cruelty, the reckless pursuit of personal power and authority, and other forms of self-aggrandizement. It is better that a man should tyrannize over his bank balance than over his fellow-citizens; and whilst the former is sometimes denounced as being but a means to the latter, sometimes at least it is an alternative. – John Maynard Keynes, The General Theory of Employment, Interest and Money (1936)

___________

Coda: “Who cares which government delivers the mail?”

LM-ST-Malo-boot-940x640
Lee Miller, St-Malo, France, 1944. Europe’s liberation from the Nazis depended on the allied bombardment with napalm of Saint-Malo. This took two weeks and the use of napalm. The town, like many others, was almost totally destroyed. Or, Le Harve, which in its current form stands on a meter of rubble, as do we all.

HIS MAJESTY THE KING OF THE BELGIANS,
THE PRESIDENT OF THE FEDERAL REPUBLIC OF GERMANY,
THE PRESIDENT OF THE FRENCH REPUBLIC,
THE PRESIDENT OF THE ITALIAN REPUBLIC,
HER ROYAL HIGHNESS THE GRAND DUCHESS OF LUXEMBOURG, HER MAJESTY THE QUEEN OF THE NETHERLANDS,

DETERMINED to lay the foundations of an ever-closer union among the peoples of Europe,

RESOLVED to ensure the economic and social progress of their countries by common action to eliminate the barriers which divide Europe,

AFFIRMING as the essential objective of their efforts the constant improvement of the living and working conditions of their peoples,

RECOGNISING that the removal of existing obstacles calls for concerted action in order to guarantee steady expansion, balanced trade and fair competition,

ANXIOUS to strengthen the unity of their economies and to ensure their harmonious development by reducing the differences existing between the various regions and the backwardness of the less favoured regions,

DESIRING to contribute, by means of a common commercial policy, to the progressive abolition of restrictions on international trade,

INTENDING to confirm the solidarity which binds Europe and the overseas countries and desiring to ensure the development of their prosperity, in accordance with the principles of the Charter of the United Nations,

RESOLVED by thus pooling their resources to preserve and strengthen peace and liberty, and calling upon the other peoples of Europe who share their ideal to join in their efforts,

HAVE DECIDED to create a European Economic Community

Treaty of Rome, 1957

In the confines of a small and heavily populated continent, people do not always agree on the boundary between one nation and another—or even on what counts as a nation. Is Kosovo a nation? Scotland? Catalonia? Corsica? The Flemish-speaking parts of Belgium? By opening borders, Europe has been able to avoid these questions and maintain peace. As a German government official once remarked to me, noting the contemporary irrelevance of the Alsace-Lorraine dispute, which cost France and Germany so much blood between 1870 and 1945: “If a German wants a house in Alsace, he can buy one. Who cares which government delivers the mail?” – David Frum, “Trump’s Plan to End Europe”, The Atlantic, (May 2017)

 

 

 

 

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