1 - Albert Hirschman’s Forgotten Book

Summary

In 1941, a little-known economist by the name of Albert Hirschman arrived at the University of California, Berkeley, on a fellowship. He was 25 years old and a Jewish German refugee. In the early 1930s, as Hitler rose to power, Hirschman had been active in the German Socialist Party but subsequently fled Berlin for Paris. From there, he went to study at the London School of Economics. Completing his studies at LSE, Hirschman went to Barcelona to fight in the Spanish Civil War. Then to Trieste, Italy, for doctoral work in economics and back to Paris to enlist in the French army. Peddling part of the way on a stolen bicycle, he later fled France over the Pyrenees and went on to Lisbon for his escape from European fascism.

While in Berkeley, Albert Hirschman met his wife and wrote a book. He would go on to write many more books as he became increasingly famous, and this first book has been almost forgotten. It is entitled National Power and the Structure of Foreign Trade and represents a refugee economist's struggle with the economics of fascism. Indeed, the book was in part a response to Herman Göring's famous statement that “guns will make us powerful; butter will only make us fat.” As such, it was a contribution to a centuries-long argument in economics between “power” and “plenty” and still has relevance for us today.

The objective Hirschman set out for himself in National Power was “a systematic exposition of the question of why and how foreign trade might become […] an instrument of national power policy.” To address this, he engaged in novel statistical analysis of Nazi trade relations in the pursuit of national power. This analysis led him to the following conclusion:

The Nazis have […] shown us the tremendous power potentialities inherent in international economic relations, just as they have given us the first practical demonstration of the powers of propaganda. It is not possible to ignore […] these relatively new powers of men over men; the only alternative open to us is to prevent their use for the purposes of war and enslavement and to make them work for our own purposes of peace and welfare.