American Economic Association

The On-and-Off Connection Between Political and Economic Progress

Author(s): Albert O. Hirschman
Source: The American Economic Review, Vol. 84, No. 2, Papers and Proceedings of the
Hundred and Sixth Annual Meeting of the American Economic Association (May, 1994), pp.
343-348
Published by: American Economic Association
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The On-and-OffConnection Between Political

and Economic Progress
By ALBERT 0.

HIRSCHMAN*

If a country'smovement toward democracy is viewed as the essence of political

progressand its advance toward a just and
prosperous society as economic progress,
then our session's subject is, simply and
bluntly,the relationbetween economic and
political progress. This relation has often
been visualized in a very few alternative,
functionalforms such as the following:
(1) "All good things go together"-economic progressbegets political progress
as well as vice versa:the two go harmoniouslyhand in hand.
(2) Next, there is the opposite pessimistic
view that "everythinghas a cost" or
"there is no such thing as a free lunch"
-meaning in the present context that
economic progress necessarily exacts a
cost in the politicaldomainor vice versa:
political advances are bound to jeopardize economic progress.
(3) A third, intermediate, case might be
labeled "per aspera ad astra":duringa
first period, economic progress goes it
alone while political progress must be
held back or is even put into reverse
gear, sacrificedfor the sake of the growing economy;during a second period, a
rewardis reaped for the temporarysacrificeas politicalprogressis catchingup.
The opposite process, with economic
progressbeing sacrificedtemporarilyfor
the sake of political advance, has been
less frequentlyarticulated,but also has
a realistic ring. Here the two variables
evolve in a slightly more complex pattern, as in Simon Kuznets's (1955)
proposition about the curvilinearrelation between economic growth and in-

* Institute for
Advanced Study, Princeton, NJ 08540.

equality, or as in my own models of

unbalanced growth and of "sailing
againstthe wind" (Hirschman,1992 pp.
26-33).
I. FromEconomicsto Politics:
The RatchetEffectand RelatedMetaphors

In attemptingto establishthe true nature

of the connectionbetween politicaland economic progress,these variouspatternshave
been found to prevailin some countriesfor
some periods, but it is now fairlyclear that
none can claim to be predominant.This is
convincinglyshown in the recent article by
Adam Przeworskiand Fernando Limongi
(1993) on "PoliticalRegimes and Economic
Growth."Their careful and comprehensive
review of the literatureis in the end thoroughlyand discouraginglyinconclusive.Under the circumstances,there is an almost
cruelly mocking ring to the article's last
sentence: "Clearly,the impact of political
regimes on growth is wide open for reflection and research."
One reactionto this difficultyin establishing a solid connection between economic
and politicalprogressis to revertto the idea
that economics and politics are two wholly
separatedomains.As StephanHaggardand
Robert Kaufman(1992) noted, political scientists analyzedthe recent wave of democratizationin LatinAmericaand Asia largely
in such autonomous terms. This may well
reflect disappointment over certain once
popular, but by now discarded analyses of
political events in the 1960's and 1970's
which representeda last-ditcheffort to understand those events-in particular, the
turn to authoritarianismduringthat period
-in termsof "underlying"economicforces.
However, this reversion to proclaiming
the autonomyof politics and economicsmay
be an overreaction.The two domainsdo exhibit many linkages that are quite intimate

343

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344

AEA PAPERS AND PROCEEDINGS

at one point, only to evaporate later. The

troubleis that researchershave been unwilling-or that the model builders have been
unable-to think in terms of on-and-off
connections, or of couplings and uncouplings,
or of alternations between interdependence

and autonomy.I would like to review here

some already availableways of thinking in
such terms.For this purposeit pays to scrutinize ordinarylanguageas well as the world
of myth. As on-and-off connections have
been experiencedtime and again,myth,language, and occasionallysocial thought have
come up with a series of stories and expressions that gesture effectivelytowardwhat is
to be understood.
Let me first recall a metaphorfrom hand
tools that entered the language of economics over 40 years ago. I refer to the
"ratcheteffect." James Duesenberry(1949)
created this term to describe the behavior
of consumptionin relationto income during
the business cycle: consumptionis a rising
function of income as long as income increases but will resist following income on
the downwardpath, as in a recessionpeople
will dig into their savingsto maintaintheir
accustomedstandardof living,at least for a
time. Here is precisely the idea of uncoupling (or unyokingor unhinging),that is, of
a functional relationship which ceases to
operate at some point.
Some time ago I came upon a similar
situation in a growth context. During the
1980's, when indexes of economic performance leveled off or declined in some Latin
Americancountriesunder the impactof the
debt crisis, importantsocial indicators,such
as infantmortality,illiteracy,and the extent
of birthcontrolcontinuedshowingimprovement (Hirschman, 1987 pp. 11-12). Such
improvementshad occurred earlier in response to rising incomes, but they had apparentlyassumed "a life of their own." At
some point they were no longer narrowly
tied to the "vagaries"of income. To the
extent that these social advanceswere due
to learning processes they became irreversible and started diffusion processes of
their own. Such processes are essential to
understandinggrowthand development.

MAY 1994

That a behavior which is originally resisted and acquired only under the influence of extrinsic (positive or negative) incentives can become irreversibleis also well
renderedby the expressionthat the behavior eventuallybecomes "second-nature."A
good deal of learningconsists in fact in this
mysteriousprocess throughwhich a behavior acquired under duress (because it goes

against "first-nature") becomes secondnature.It has not been widely realized that
this process-the replacement of extrinsic
incentives toward a certain behaviorby intrinsic ones-is the exact opposite of the
"crowdingout" of intrinsicmotivationas a
result of the introductionof extrinsic(usually monetary) rewards.1 The becomingsecond-nature process appears to have
aroused less interest than the crowding-out
one, perhapsbecause it is auspicious,rather
than worrisomeand dismal.
Returningfrom ordinarylanguageto social science,the term "disjunction"has been
used by Daniel Bell (1976) to describe how
the culturaland artisticlife of modern societies no longerreflectsthe evolutionof society and economy in general. The term was
meant to convey dissent from those sociological thinkers, from Karl Marx to Emile
Durkheim and Talcott Parsons, who cultivated a vision of society as an integrated
whole. In the Marxianscheme, for example,
culture, the "superstructure,"is supposed
to correspond somehow to economy and
society (the "infrastructure").So, from the
point of view of that scheme, when culture
takes on a "life of its own," it seems fair
enough to speak of disjunction:something
that was supposedto be controlledby something else, acquiresautonomy.Curiously,in
spite of his solid non-Marxistconvictions,
Bell saw this autonomyas somethingvaguely
abnormaland threatening.
This negativeinterpretationcomes to the
fore in a fairytale or myththat reflectsonce

1As famouslydescribedby RichardTitmuss(1970),

extensivelysurveyedby Robert Lane (1991), and recentlyreanalyzedby BrunoFrey(1992).

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VOL. 84 NO. 2

THE ROLE OF DEMOCRACY

again the notion of uncoupling. It is the

story of the sorcerer'sapprenticewho, unlike the master, turns out to be unable to
control the forces he has unleashed. Social
processes of the sorcerer'sapprentice type
are not hard to find. In the United States,
for example, the Prohibition Statute of
1919/1920 gave rise to the emergence of
"Big Crime"syndicateswhich organizedillegal networksof production and distribution of alcoholic beverages.But the repeal
of Prohibitionin the 1930's did not cause
Big Crime to disappear(Thomas Schelling,
1984 p. 178).
In similarways, the processes previously
describedas the "ratchet effect" and "taking on a life of its own" have potential for
both good and evil. Onlywhen a behavioris
said to become "second-nature"is it normallyassumedthat one is in the presence of
genuine learning. Even this process can
sometimes be given a negative interpretation by presenting it as the outcome of
"brainwashing."
Some important connections between
economic and political progress or decline
are best describedin terms of the concepts
just surveyed,particularlywhen the initial
causation runs from economics to politics,
as in the following two well-knownexamples.
The vigorousdevelopmentof the Spanish
economy duringthe three postwardecades
contributedin variousways to undermining
the authoritarianregime established after
the end of the Civil War by Francisco
Franco. After the death of the long-time
dictator in 1975, a fairly smooth transition
to democracygot underway.But just then
the internationaloil crisistemporarilyhalted
economic expansionand caused large-scale
unemploymentto appear. Fortunately,the
new democratic institutions were able to
acquire a "life of their own" and became
"second-nature"to Spanish society (Juan
Linz and Alfred Stepan, 1989 pp. 43-46).
The opposite case is tragicallyillustrated
by the history of Germany in the earlier
part of this century.Here it was the rise of
Adolf Hitler that was powerfullyassistedby
economicforces-the GreatDepressionand

345

the ensuing mass unemployment. Then,

once in power in one of the world's most
technically and culturally advanced countries, the Nazi regime went on its madly
"autonomous"course to suppress democracy,unleash war, and commitgenocide.
II. From Political to Economic Progress:

Toward a Repertoire of History's Tricks

In exploring connections between economics and politics, social scientists have

ordinarilygiven preferentialattentionto sequences where economic events clearly influence and shape the realm of politics. As
just illustrated,politics then has a way of
takingover, it becomes unhingedfrom economicsin line with the "on-and-offscheme.
Examplesfor the opposite sequence, where
politics would be the prime mover, do not
spring to mind as readily, but it may be
helpful to proceed by analogy with the
Spanish and German cases. This involves
examiningsequences of events startingwith
some importantadvancetowarddemocracy
and then looking at the economic consequences. Here a basic difference appears
between economic and politicalchange:the
latter is more likely to be discontinuous
than the former. Advances toward democracy have typicallyoccurrednot as a result
of some gradual"democraticupswing,"but
because an oppressive regime has been
overthrownor because a voting-reformlaw
broadeningthe franchisehas been adopted.
It is because such democratic advances
typically happen as one-time events that
much of the analysisof the economicconsequences of politicalchange ends up as exercises in comparativestatics. One compares
the economic performance of democratic
and nondemocraticcountries and hopes to
be able to conclude that the former do
better in the economic realm as well. An
earlyexampleof this way of disposingof the
problem is Adam Smith's well-knowndictum: "Little else is requiredto carrya state
to the highest degree of opulence from the
lowest barbarismthan peace, easy taxes,
and a tolerable administrationof justice"
(Dugald Stewart,1858 p. 68).

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346

AEA PAPERS AND PROCEEDINGS

Two remarks are in order. Such a constructionassumesthat all that is needed for
economic growth to happen is some set of
political prerequisites such as peace and
secure property rights. With that set in
place, it is the economy that is expected to
acquire"a life of its own,"with no need for
further interaction between economic and
political forces. But such interaction obviously exists on a continuingbasis and needs
to be understood.Secondly,the usefulness
of the propositionsabout the political prerequisites of economic growth is doubtful.
The exhortation to countries lacking "democracy"or "peace" to get their act together and procure such blessings is not
notably helpful. If a country is unable to
end its civil war to stop the killing, is it
likely to do so to achieve a better rate of
growth?
I do not wish to be whollynegative.Comparativestaticsdoes have its uses. An example is AmartyaSen's (1983, 1994)point that
a countrylike India with a reasonablyfree
press, able and willingto denounceintolerable conditions and abuses, has a better
chance to avoid faminesthan an authoritarian countrylike China.If nothingelse, such
a finding packs a considerable hortatory
punch.
Yet, the main task of political economy
remains to provide a better understanding
of the ongoing interactionsbetween politics
and economics. Not to attempt the construction of building blocks here is in fact
an evasion of a real opportunity,in view of
the very characteristicsof a pluralistmarket
society. As this society creates new wealth,
it also generates problems of emerging inequality and regional or sectoral decline
that are often unjustor felt as such. Hence
there arise, in the political domain, demands for reform and political action. In
turn, these reforms and actions have economic consequences.
Political economists have not come forward with many generalizationsor conjectures in this field, perhapsfor good reasons.
What indeed can one say about the likely
consequences of democraticand social advances for economic growth? Without detailed knowledge about the nature of the

MAY1994

advance and the surroundinghistoricalcircumstancesit would seem foolish to hazard

an answer.A democraticadvancecan either
inaugurateor put an end to an era of political instability,and thus it can lead to either
economic decline or growth.
Fortunately, the historical record raises
doubts about such total indeterminacy,at
least for the countries with the most advanced economies in Western Europe and
North America. These countries are also
those that have enacted, discontinuously,a
series of political and social reforms over
the last two centuries. Does it then follow
that these "democratic"advanceshave had
on the whole a stabilizingeffect and have
improvedthe "investmentclimate" so that
economic growthcould gather strength?
This is a rather surprisingconjecture,in
partbecause it directlycontradictsAlexis de
Tocqueville's famous proposition that, in
France, attempts at reform prior to 1789
and in the earliest phase of the Revolution
had fatally destabilizingeffects on the ancien regime. This was surely a remarkable
insightfor the events Tocquevilleundertook
to analyze. But, just because the French
Revolution had aroused widespreadexpectationsthat its historyof progressiveradicalization is apt to repeat itself, subsequent
reforms played often a different, self-limiting and stabilizingrole. I now wish to advance one possible explanation,buildingon
what I call the "jeopardy thesis" in my
recent (1991) book, The Rhetoricof Reaction. By that term I understandthe argument that a proposed reformwill endanger
previousaccomplishments,an argumentthat
played a centralrole in the historyof opposition to reformin the 19th century.
After the French Revolution,democratic
and social advanceswere fought tooth and
nail by the now alerted and highlyarticulate
"reactionary"forces:every advancewas denounced as though it were in fact synonymous with revolutionand would mean the
annulment of previous advances toward
"liberty."But then, with a reform having
been adopted in spite of that strenuous
opposition, it often turned out, to much
surprise,that the reform,that famous"leap
in the dark,"could be lived with.The result

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VOL. 84 NO. 2

THE ROLE OF DEMOCRACY

was enormous relief among the owners of

capital, political stabilization,and a period
of sustainedeconomic growthand prosperity.
This interpretationyields a politicalbusiness cycle that wouldbe determinedby each
wave of reform. Concern and alarm over
reform proposals and over the connected
agitationbrings a decline in investmentactivity,which then reboundsonce the reform
has been passed and is being assimilated.
The more persuasive the warnings about
the disastrousconsequencesof reform, the
more vigorous will be the actual upswing
after the reformis passed and the warnings
are disproved.
This sequence is suggestedby the storyof
how the hotly contested Reform Laws of
1832 and 1867 in England had a peaceful
and prosperousaftermath.It should be interestingto examinewhetherthis somewhat
paradoxicalpattern can be found to hold
for similarepisodes in other countries.But
economists familiar with rational-expectation models should not be overly surprised
if prophecies of destabilization'a la Tocqueville turn out to be self-refuting,rather
than self-fulfilling.
Of course, I would never want to rely on
the mechanismI have sketched.It would be
folly to encourage "reactionaries"to make
outrageous claims about the evil consequences of a proposed reform, with the
cunning thought of eliciting feelings of relief, and hence economic upswing,once reform is adopted and proved not to be all
that disastrous.Even if this conjunctionof
events has "worked" a few times in the
past, one cannot have any confidencethat it
will do so again. Samuel Johnson once issued a fine warningagainst the intellectual
pride that would lead one to act on the
basis of such putative insights.In his philosophical novel Rasselas, he wrote: "Man
cannot so far know the connexionof causes
and events, as that he may venture to do
wrongin order to do right"(1958 p. 576).
What,then, is the point of my story?It is
to affirmonce again that political and economic progressare not tied together in any
easy, straightforward,"functional" way.
There are the various on-and-off connec-

347

tions of the first part of this paper. Then

there are stories, intricateand often nonrepeatable, like the one I have just told, that
look more like trickshistoryhas up its sleeve
than like social-scientificregularities,not to
speak of laws. To make an inventory, to
survey history's repertoire of such tricks,
seems to me an appropriatelymodest way
of tryingto make progresswith this difficult
topic.
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