In Mysterium Coniunctionis, Jung points to a fundamental difference between Christian religion and alchemy. Both are concerned, according to him, with the monumental task of unifying opposites; but Christian religion finds these opposites projected in spirit (Geist) and alchemy projects them into physis (Stoff), whereas “none locates the problem where it originated, namely, in the human soul” (“Keiner aber verlegt das Problem dahin, wo es entstanden ist, nämlich in die Seele des Menschen.”; GW XIV/I, §103.) To simplify somewhat: Christianity appears too one-sidedly spiritual, alchemy too one-sidedly physical — and both miss the right turn, for those opposites needing unification rather appear in the soul.
But there is a complication: the opposites themselves are generally associated with pneuma and physis. Their opposition cannot be overcome (they cannot be unified), therefore, on either of their own territories: one cannot unify spirit and physis in the spiritual sphere, and one cannot do it in the physical sphere, either. (Contemporary materialists should take note, as Jung would invariably remark at this point.) But if both pneuma and physis are mediated in the psyche, then it is not only their opposition which becomes apparent there; their unification must happen there, too.
Precisely what are the “opposites” we’re talking about here?
The conflict between the life of the world and the being of spirit […] was elevated by Christianity to the mystical wedding of the sponsus (Christ) and the sponsa (Ecclesia); by alchemy hower, it was located in the physis as coniunctio solis et lunae.
Der Konflikt zwischen dem Leben der Welt und dem Sein des Geistes […] wurde durch das Christentum zur mystischen Hochzeit des sponsus (Christus) und der sponsa (Ecclesia) erhoben, durch die Alchemie aber in die Physis versetzt als coniunctio solis et lunae.
GW XIV/I, §103.
For the Christian tradition, the unification is between their savior and their church, the alchemists understand it as sun and moon coming together. In both versions we have thus personified metaphors (mother & sun, king & queen) of sexual polarity, which is an adequate enough expression for the strength of the opposition we’re dealing with. And which, by the way, is also why Jung identifies it as the “incest problem”.
If Hillman is correct in his claim that pathologizing is an indicator of soul-work (in contradistinction to spirit-work), then we should expect this historical line to continue broadly into modern times, where the relevant milestones are Freud’s psychoanalysis (centered around the Oedipus complex), and then Jung’s positing of a collective unconscious and discovery of the mother complex and the hero’s struggle with it (in Symbols of Transformation). What’s more: we should also expect the predominant perspective on it as pathological to persist, since this is what makes it properly psychological (rather than spiritual in a Christian or scientific mould).
And clearly, Jung was very well aware of this coupling, and emphasizes it explicitly:
The physician nowadays knows that the incest problem [i.e. the clash of opposites, metaphorically personified into sexual contraries] appears everywhere, more or less distinctly, and immediately comes to the surface once foregrund illusions are cleared away. But he only knows its pathological side […] without becoming aware that [it] is the embryonic pre-stage of a secular issue which has created symbolisms of the greatest meaning in ecclesiastic allegory and in the foundations of science. […] The psychopathological incest problem is the misunderstood natural form of the problem of the unification of opposites, which, as a task for the soul, has never appeared to consciousness or, if it has, has then dropped back out of view.
Der Arzt weiß heute, daß das Inzestproblem [i.e. the clash of opposites, metaphorically personified into sexual contraries] überall mehr oder weniger deutlich vorkommt und sofort an die Oberfläche dringt, sobald die Vordergrundillusionen weggeräumt sind. Er kennt es aber meist nur von der pathologischen Seite […] ohne sich klarzumachen, daß [es] die embryonale Vorstufe einer säkulären Problematik ist, welche in der überpersönlichen Sphäre der kirchlichen Allegorik und in den Fundamenten der Naturwissenschaft eine Symbolik von größter Bedeutung erzeugt hat. […] Das psychopathologische Problem des Inzestes ist die mißverständliche Naturform der Gegensatzvereinigung, die als seelische Aufgabe entweder noch nie bewußtgeworden oder, wenn einmal bewußt, wieder aus dem Gesichtskreis verschwunden ist.
GW XIV/I, §105 (my emphasis).
This, the task of soul-work (“seelische Aufgabe”), which was only vaguely sensed in alchemy (cf. GW XIV/I, §93), moves into focus much more strongly in contemporary times. It claims this position in the spotlight precisely by virtue of the pathologies it generates (i.e. by “pathologizing”, in Hillman’s terminology — as a partial result, then, Hillman’s claims in “Peaks and Vales” that he is merely explicating a position contained already in Jung’s views, actually do check out.)