Jagdish Bhagwati on Milton Friedman

Source: https://www.youtube.com/watch?v=W_k6v-rVR40 Duration: 327.3s

Jagdish Bhagwati (00:08): I heard him actually in the Planning Commission, and he was bold enough to say in the in the Planning Commission that my main advice is that you people should be wound up. So it was then, of course, he was a fine debater, so it was very difficult to trap him in anything. But there were a lot of people who were for planning in the audience. And then Friedman went a little too far, and he said there was not a single instance where a public sector enterprise had ever been successful. So one of my English friends who was who was also an adviser, Robert Neild, and he said, what about Volkswagen? So Milton Friedman said, but that’s only one example. But the point is, he had said that there’s no example. So he just turned around very quickly and so on. So but he also had the he went around the country at that time. I don’t know if anybody has told you that. And at that time, when Mrs. Robinson came later and she was, of course, for planning and so on, she found out what the itinerary of Milton Friedman was, you know, all the different cities he had visited. And then she went through each one of them to undo the damage which Milton Friedman had done. It was very funny. Who actually said that you know, how we should loosen up and so on. It was not even reported in the newspapers at the time. And, you know, it was quite astonishing. But, you know, there’s a sort of self censorship sometimes. And particularly if you’re challenging the very assumptions under which the government is doing the planning and so on, it’s very difficult to get any kind of, you know, outlet. I mean, now, of course, there are more people. But I think it was generally the feeling was that any economist who was not in favor of planning was not a very good was an ideological economist. Whereas if you were practical and, you know, pragmatic, then you would really go for some element of intervention. The only problem was as soon as you admitted that possibility that you could actually have a, you know, essential intervention with them, then the question was, you know, whether government would actually be doing the correct things and in many cases, they don’t do that. De facto, the under under Prime Minister Nehru, it was it was sort of not strong socialism of any kind. None. There was not even a licensing system in the first five year plan. And because the economy was doing reasonably well, it all came in with the second five year plan, and as a result of balance of payments difficulty. As soon as balance of payments difficulty arose, then people began to say, Ah, now, foreign exchange is scarce, therefore, we must start allocating foreign exchange, which is again, you know, I mean, sounds like reasonable that if something is scarce, you should allocate. Right? It’s like, I mean, when you’re driving a car in snow in in in United States, they say if the car starts skidding, then you must steer in the direction of the skid, which is completely counterintuitive because if it’s going that way, you want to steer this way, right? And so this is the same thing about intervention also. When you think things are scarce, you feel you’ve got to kind of hustle the resources, must, you know, allocate. So it is counterintuitive idea. And I think most most people fell for it, you know, and that obviously it is so obvious, so pragmatic, so non ideological that you should really, you know, manage something which is scarce. So it took a long time, you know, also way down the road that people began to really think through the thing in light of experience because the thing became so ridiculously bad that, you know, people who had appeared ideological at one time like Milton Friedman, and to some extent, Milton was ideological. He wasn’t speaking from actual because there weren’t there weren’t so many experiments. He was just ahead of his time to think through all these things. Right? I mean, he turned out to be right, you see, but he appeared ideological. So one of the problems in the early days was that anybody who was from markets appeared ideological rather than really, you know, in command of the I mean, to be really perceptive. That happened after when people like, you know, me and Padma Desai and T. N. Srinivasan, a whole slew of us started departing from the ranks. In light of experiences, I said, you know, we saw what Yojana Bhavan was doing, and we were horrified, I mean, that anybody could be planning that way.