Michele Alacevich

The World Bank and the politics of productivity: the debate on economic growth, poverty, and living standards in the 1950s.

According to most reconstructions of development debates, poverty and social issues were not part of the development agenda until the late 1960s. In contrast, this article shows that development practitioners and institutions were already addressing poverty and social issues in the late 1940s and early 1950s. However, economic multilateral organizations soon marginalized those inclusive views and focused exclusively on economic growth. This article discusses those early policy options and why they were marginalized. It argues that this happened for ideological reasons, specifically because of the ideological anti-New Deal post-war backlash and the adhesion of Western countries and multilateral organizations to what Charles Maier defined as the politics of productivity. This ideological backlash explains the rise and early demise of Keynesian ideas in international organizations, and, conversely, their stronger influence in developing countries, where the direct influence of the US and Bretton Woods organizations was somewhat mitigated.

VISUALIZING UNCERTAINTIES, OR HOW ALBERT HIRSCHMAN AND THE WORLD BANK DISAGREED ON PROJECT APPRAISAL AND WHAT THIS SAYS ABOUT THE END OF “HIGH DEVELOPMENT THEORY”

Since its birth in 1944, the World Bank has had a strong focus on development projects. Yet, a project evaluation function was not made operational until the early 1970s. An early attempt to conceptualize project appraisal had been initiated in the 1960s by Albert Hirschman, whose undertaking raised high expectations at the Bank. Yet, Hirschman’s conclusions—published first in internal Bank reports and finally as a book in 1967—disappointed many at the Bank, primarily because they were found impractical. Hirschman attempted to offer the Bank a new Weltanschauung by transforming the Bank’s approach to project design, project management, and project appraisal. Instead, what the Bank expected from Hirschman was not a revolution, but rather an examination of the Bank’s projects and advice on how to make project design and management more measurable, more controllable, and more suitable for replication. The history of this failed collaboration gives useful insights on the unstable equilibrium between operations and evaluation within the Bank. In addition, it shows that the Bank was active in the development economics debates of the 1960s. These insights should be of interest for those development economists today who reflect on the future of the discipline and emphasize the need for a non-dogmatic approach to the study of development issues. It should also be of interest for the Bank itself, with its renewed attention to the importance of evaluation for effective development policies. The history of the practice of development economics, together with the use of archival material, can bring new perspectives that contribute to a better understanding of the evolution of this discipline.

Money Doctoring after World War II: Arthur I. Bloomfield and the Federal Reserve Missions to South Korea

We explore the foreign economic policy activities of Arthur I. Bloomfield, a prominent economist of the Federal Reserve Bank of New York in the 1940s and the 1950s. During the cold war, Bloomfield headed several missions to South East Asia, assisting local authorities in shaping new foreign exchange regimes and banking institutions. Bloomfields most successful mission concerned the constitution of a new central bank in South Korea, established in June 1950. In line with the Feds new strategy established by Robert Triffin, head of the Latin American section, Bloomfield moved away from the dogmatic style of Edwin Kemmerer that dominated U.S. overseas missions in the first half of the twentieth century; “Southern” economies, in fact, rather than benefiting from Kemmerers policies, had been increasingly hit by cyclical instability. According to Triffin and Bloomfield, U.S. overseas missions should loosen constraints on the activity of economic institutions and policy authorities, in order to increase their effectiveness as guarantors of financial stability and promoters of national development. We examine this episode in the light of the U.S. postwar foreign economic relations and the concept of “embedded liberalism.” The Bloomfield missions to South Korea show with great clarity the principal features of the Feds new foreign strategy and the need to examine the actual advisory activity of Fed economists during the 1940s: they were at the intersection between domestic and international political and economic systems. Ultimately, they played a major role in forging the actual foreign policy of the United States.

Postwar development in the Italian Mezzogiorno. Analyses and policies

Abstract As Manlio Rossi-Doria wrote, in the early postwar years, the Southern Question was primarily an agrarian one. The debate and policies that addressed the Southern Question, however, did not remain confined solely to the agrarian dimension. The transformation of Southern agriculture was inextricably connected to two additional features of the Italian Mezzogiorno: first, the huge demographic expansion, and second, the lack of an industrial sector able to absorb the excessive agrarian population and to lead a process of economic diversification and internationalization. Above all, the solution to the Southern Question was interpreted as a truly national task. The development of the Mezzogiorno was at the basis of the collaboration between Italy and the World Bank throughout the 1950s. That experience became the subject of an intense debate over development policies that went beyond the Italian borders and embraced the question of postwar development worldwide. The Italian experience turned eventually out to be a failure. One feature of that experience remained vital, though, and has been underscored by contemporary scholars: the solution to the Southern Question is to be found at the national level, not just regionally.

Albert Hirschman and the Social Sciences: A Memorial Roundtable

Albert O. Hirschman (1915–2012) is recognized as one of the most well-rounded and interdisciplinary social scientists of the postwar era. After fleeing Germany as a young opponent of the Nazi regime, he moved across countries, languages, and disciplinary boundaries. He was a pioneer of development economics and other social sciences, to which he contributed with exemplary analyses of the processes and mechanisms of political, economic, and social change. Following Hirschman’s own interdisciplinary approach, Nadia Urbinati, Ira Katznelson, Victoria De Grazia, Jeremy Adelman, and Michele Alacevich will explore the milestones of his incredibly rich intellectual journey.

Visualizing Uncertainties, or How Albert Hirschman and the World Bank Disagreed on Project Appraisal and Development Approaches

Since its birth in 1944, the World Bank has had a strong focus on development projects. Yet, it did not have a project evaluation unit until the early 1970s. An early attempt to conceptualize project appraisal had been made in the 1960s by Albert Hirschman, whose undertaking raised high expectations at the Bank. Hirschmans conclusions -- published first in internal Bank reports and then, as a book in 1967 -- disappointed many at the Bank, primarily because they found it impractical. Hirschman wanted to offer the Bank a new vision by transforming the Banks approach to project design, project management and project appraisal. What the Bank expected from Hirschman, HOWEVER, was not a revolution but an examination of the Banks projects and advice on how to make project design and management more measurable, controllable, and suitable for replication. The history of this failed collaboration provides useful insights on the unstable equilibrium between operations and evaluation within the Bank. In addition, it shows that the Bank actively participated in the development economics debates of the 1960s. This should be of interest for development economists today who reflect on the future of their discipline emphasizing the need for a non-dogmatic approach to development. It should also be of interest for the Bank itself, which is stressing the importance of evaluation for effective development policies. The history of the practice of development economics, using archival material, can bring new perspectives and help better understand the evolution of this discipline.

The shaping of public economic discourse in postwar America: the 1947 meat shortage and Franco Modigliani's meat plan

Abstract This paper discusses the American debate over price controls and economic stabilization after World War II, when the transition from a war economy to a peace economy was characterized by bottlenecks in the productive system and shortages of food and other basic consumer goods, directly affecting the living standard of the population, the public opinion, and political discourse. Specifically, we will focus on the economist Franco Modigliani and his proposal for a “Plan to meet the problem of rising meat and other food prices without bureaucratic controls.” The plan prepared by Modigliani in October 1947 was based on a system of taxes and subsidies to foster a proper distribution of disposable income and warrant a minimum meat consumption for each individual without encroaching market mechanisms and consumers’ freedom. We will discuss the contents of the plan and its further refinements, and the reactions it prompted from fellow economists, the public opinion, and the political world. Although the Plan was not eventually implemented, it was an important initiative for several reasons: first, it showed the increasing importance of fiscal policy among postwar government tools of intervention in the economic sphere; second, it showed a third way between direct government intervention and full-fledged laissez faire, in tune with the postwar political climate; third, it proposed a Keynesian macroeconomic approach to price and income stabilization, strongly based on econometric and microeconomic foundations. The Meat Plan was thus a fundamental step in Modigliani’s effort to build the “neoclassical synthesis” between Keynesian and Neoclassical economics, which would deeply influence his own career and the evolution of academic studies and government practices in the United States.

Why Has Income Inequality Been Neglected in Economics and Public Policy

Commentators say that Trump’s victory has stimulated a wide debate about long-festering issues of class, race, gender, and democracy. The obvious question, then, is why these ‘long-festering issues’ have received limited attention before now. This chapter focuses on why income inequality, in particular, has been neglected by economists and policy makers even as it has risen in most of the West over the past three decades. We begin with the deep causes of neglect rooted in the shift of western capitalism from ‘control of capital’ in social democracy to ‘control by (highly concentrated) capital’ in oligarchic neoliberal democracy. We continue with why the middle classes have acquiesced for decades as income concentration rises; and go on to conservative neoliberal ideology, right-wing think tanks, and centre-left political tactics. Finally, we discuss professional economics, and the way that the paradigm of the neoclassical mainstream has occluded rising inequality as a social or economic problem.

Theory and Practice in Development Economics

After World War II, a new disciplinary field called “development economics” emerged, as economists began to shape specific theories in order to address the practical problems they were facing in less developed countries. Theory arose out of practice, in the sense that the shaping of development economics theories involved learning in the field and developing new analyses and concepts out of this experience, not just taking ideas from other fields and applying them in a different context. During the 1950s the discipline prospered but, by the 1960s, it faced a crisis, for it came to be recognized that the experience of developing countries did not fit the models of development that had been constructed, and many of the main policy prescriptions had clearly failed. The result was a complete reorientation of the discipline, in which “neoclassical economics”, hitherto believed irrelevant to developing countries, became central. The field started to apply, systematically, tools such as cost-benefit analysis and input-output analysis; it also became much more formalized than it was before. The result of this transformation was a much more conventional application of theory to the problem of development.This paper discusses the oscillating nature of development economics. The tension between theory and practice has never gone away.

Albert O. Hirschman and the Rise and Decline of Development Economics

Abstract This paper discusses the role of Albert O. Hirschman as a founder of development economics in the postwar years. Although Hirschman maintained a strong interest in development matters throughout his entire professional career, his major contributions to development economics took place between the mid-1950s and the late 1960s. The paper examines Hirschman’s innovative contributions to the new discipline. When, in the 1950s, development economics gravitated around the concept of “balanced growth,” Hirschman opened new vistas with a theory of “unbalanced growth.” In the early 1960s, Hirschman focused on reformist political approaches to development, against the opposed extremisms of reaction and revolution. Finally, in the late 1960s, Hirschman opened new perspectives on the importance of detailed analysis of development projects, against the theoretical drift of early development economics. The discussion of Hirschman’s development career is also an opportunity to observe the gap between theoretical debates and development policies. Whereas development economists often clashed on theoretical issues, their views were remarkably closer on practical questions. As a pioneer of development economics, Hirschman sought to establish it as a discipline theoretically distinct from mainstream economics. By the 1980s, this project had collapsed, and the development question was reabsorbed by the economic mainstream. This article, however, argues that current development debates remain deeply indebted to Hirschman’s contribution. His reformist vision, rejection of one-size-fits-all solutions, his insistence on the ineluctable role of uncertainty, and his search for country-specific, incremental, and evolutionary policies make his approach central to current development discourse.