Reading the current book review http://www.nytimes.com/2011/05/08/books/review/f-a-hayek-big-government-skeptic.html and the uproar it has created among the chattering classes http://www.youtube.com/watch?v=GTQnarzmTOc and others Click here: Hayek: Think for Yourself – Maggie’s Farm about the ideas of the libertarian economist Friedrich August von Hayek, I am reminded of a curious anecdote.
In the mid-1950s, I was touring India in hot [and was it ever!] pursuit of material for a special report [another hackneyed article] on the Indian economy for Business Week magazine where I was deputy foreign editor.
At virtually my every stop — Bombay, Madras, New Delhi, and then finally Calcutta, then the major center of Indian business and finance — my path crossed that of the Swedish economist and politician Gunnar Myrdal. Myrdal was visiting many of his former Indian students and talking to academic economists who were also often myown sources for the study and article I was to write.
Contrary to the PC reference in Fukuyama’s book review, Myrdal was always a committed socialist. In fact, he had almost wrecked the Swedish postwar economy — something his reputation never recovered from in his native Sweden — when as trade minister, he signed a long-term trade pact with the Soviets, very much in Moscow’s favor, “insurance” against what he and other committed European and Soviet socialist/Communist ideologues were certain would be the coming capitalist crash in the West as a result of the end of World War II.
In fact, although his An American Dilemma: The Negro Problem and American Democracy [1944] http://en.wikipedia.org/wiki/An_American_Dilemma I had read and found superb as a youngster in North Carolina dedicated to ending legal segregation, Myrdal’s reputation far outdoes his real performance as an economist [or his wife’s as a sociologist].
Finally, in Calcutta I bearded the great man and teased him about the fact that he had joined a small and embattled Indian and foreign minority of economists and other observers who were critical and opposed to the Second Five Year Draft then about to be implemented which, in effect, committed India to Soviet planning.
The draft was the product of a scion of the Bengali elite which blossomed in the late 19th century, Prasanta Chandra Mahalanobis, physician [MD, UK, failed, as the old British Indian nomenclature actually dubbed some colleagues at the time], had been given one of the new analog GE computers through the early days of the American aid plan and which landed in Mahalanobis’ college where he taught physiology. [God help the patients of those surgeons who graduated under his auspices!].
Through the Brahmin network, Mahalanobhis had got to Indian Prime Minister Jawaharlal Nehru, himself a dilettante socialist convert from his British university days. The Bengali’s line — and Bengalis are notorious for their rhetorical skills like some other politicians we know these days — to the PM was simple, idiotically simple: “Panditji, we have the resources and we have the people. [Then as now more than 600,000 thousand villages — impoverished, isolated even with the new cell phones and TV — and socially backward.] All we have to do is to tie them together.”
With his new toy, Mahalanobhis was able to churn out statistical “constructs” by the thousands with numbers as phony as those now given us by the Chinese Communists. The few Indian economists, especially at Bombay University, who had the courage to oppose this obvious new path to modernization and utopia were called the usual names for those who argue against dreams and finally completely defeated. The Indian business community knuckled under; as one of the Tata and Sons executives was to tell me in the debris of the 1960s, “It’s all very well for you to dance in here and tell me what is wrong with the Plan, but I have built a cable factory based on their {New Delhi] projections and what am I to do with it now that there is no market!”
The adoption of Mahalanobhis’ scam as the notorious Second Five Year Plan is what sent the roaring Indian economy of the immediate post-independence years [with its huge “Sterling reserves”, debts owed by Britain, the former imperial power] into the tailspin that resulted in a half century of “the Hindu [stagnation] rate of growth”.
To give the devil his due, wherever Myrdal went on the tour, he surreptitiously argued against the new direction of what had been Indian “perspective” planning — setting targets by estimates of what the market would produce and trying to make corrections in policy and incentives in the future — to the new top-down direction for every industry. I early had fallen into the same frame of mind about where the Indian leadership was headed and the disaster that awaited them. But as luck would have it, when I got back to New York, my decent but misguided editor, Howard Whidden, later to become the chief apparatchik with the Rockefeller Committee for Economic Development, insisted on a “do good” piece. [If you want to know what I really thought and my pretty good predictions of what would follow, read my sincere thoughts in The New Leader of the time.]
In Calcutta, over a drink, I told Myrdal, “Professor, when word gets back to Sweden that you are for free enterprise, there is going to be hell to pay!” Myrdal jovially quickly responded, “Brother! I am for any kind of enterprise as long as it is enterprising!”
But Myrdal never went public with his criticism, then or later when Alva, his wife, was ambassador to India. It was almost two decades later before he took up the cudgels against the so-called socialists with their allies, the babus [clerks left over the Raj] who had destroyed virtually all South Asia’s commodities rich economies with his own discarded theory. But by then, he had fallen off the cliff — screaming for American leaders to be tried for war crimes in Vietnam and demanding the Nobel prize be abolished as it had been given to “reactionaries” like von Hayek who jointly had received it with him for economics in 1974.
Seeing as how it has gone downhill ever since it was given to Robert Mundell [1999], a michigana as one colleage at BW once described him, but an original thinker, to the likes of Paul Krugman 2008], a sometime consultant to people in foreign governments he writes about, maybe Myrdal was right on this last count.
sws-05-07-11
yeoldecrabb 
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