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When Galbraith & Friedman were in agreement

John Kenneth Galbraith was ideologically far removed from Milton Friedman. So if they both had similar views about India’s economic plans, there must have been something wrong

Published: 16th October 2021 12:22 AM  |   Last Updated: 16th October 2021 12:22 AM   |  A+A-

Galbraith; Friedman; Planning Commission

For representational purposes (Express Illustrations/Amit Bandre)

In the last of these looking back columns, let me start with an anecdote. Around the turn of the millennium, I was invited, by Jeffrey Sachs, to a conference in Harvard. There was a dinner and there, I found myself seated next to John Kenneth Galbraith. I was completely overawed. His intellectual and physical height are sufficient to dwarf anyone. At the time, Galbraith was 90+ and his memory wasn’t what it used to be. Galbraith asked me where I was from. Hearing India, he retorted, “I knew a young man from India once.” When I said India is a large country and this wasn’t sufficient information to identify anyone, he turned pensive. I told him I knew he had been an Ambassador to India and that I had read “Ambassador’s Journal”. He was puzzled at this and remarked, “Did I write that book?” This reminded me of the time I had dropped in to meet Piero Sraffa, to get his signature on a copy of “Production of Commodities by Means of Commodities”. Sraffa was 80+ then, not 90+. He looked suspiciously at the book, refusing to believe he had written it. Eventually, something jogged Galbraith’s memory and he said, “I remember the young man’s name now, Jawaharlal Nehru.”

His memory jogged, Galbraith narrated an anecdote. I will describe the incident as he related it. There are factual inaccuracies in the Galbraith account. Perhaps this is the way Galbraith wanted it to happen. Hence, he remembered this version. “Government of India set up the Planning Commission. PM Nehru wrote to the US President (that would have been Harry Truman) asking it to send an economist who would help set up the Planning Commission. They sent Milton Friedman. Horrified, the PM wrote to the US President, asking them to send someone who believed in planning, not someone who was against the idea. Therefore, I was sent instead. I wrote a report criticising the government’s policies. No action was taken on the report. It wasn’t even published. But having submitted the report, I went off with my wife on a vacation, on that toy train in Darjeeling. When I returned from my holiday, I discovered there had been a heated debate in Parliament between Jawaharlal Nehru and Asoka Mehta. Nehru waved a report and said, ‘Our policies have been supported in this report by an American economist.’ Asoka Mehta waved a report and said, ‘Your policies have been condemned in this report by an American economist.’ Since my report hadn’t been published, neither of them realised that they were talking about the same report, mine. I was the American economist cited by both. I went back to the States.” In Parliament, there were several debates between Jawaharlal Nehru and Asoka Mehta. But I haven’t been able to ascertain whether there was a debate between the two about an American economist’s report.

Towards the end of 1955, Milton Friedman visited India and was an Adviser to the then Finance Minister, C D Deshmukh. He wrote a celebrated and critical Memorandum to the Government of India. There is much that was prescient. In 1955, the context was preparations for the Second Five Year Plan (1956–61). These preparations started in 1954 and the Plan document was finalised by March 1956. At that time, the deputy chairman of the Planning Commission was V T Krishnamachari. P C Mahalanobis became a member in January 1955 and remained one till September 1967. In most discussions of the Second Five Year Plan, the Plan is equated with the Feldman-Mahalanobis model. The first Mahalanobis version was a two-sector model, published in 1953. It is possible to be contrarian and argue that the model wasn’t quite the defining attribute of the Second Five Year Plan. Economists love mathematics, algebra and rigour, and here was a model one could lay one’s hands on, even if one disagreed with its assumptions. However, apart from the obvious emphasis on heavy industry, the defining attribute of the Second Five Year Plan lay elsewhere. In its years of existence, the Planning Commission was relevant only when it was in sync with the political objective, not otherwise; 1956-61 was such a period. In an earlier column, I mentioned the emphasis on socialism. The Planning Commission and the Second Five Year Plan document were part of this jigsaw. The First Five Year plan document may have referred to the Directive Principles of State Policy, but had not used the expression “socialist pattern of society”. The Second Five Year Plan document began with this expression.

What of Galbraith? John Kenneth Galbraith was ideologically far removed from Milton Friedman. In 1955, he spent some time in India as an Adviser to the Indian Statistical Institute (ISI). In 1961, he returned as the US Ambassador to India. In 1958, he authored a perceptive piece on India, published in “Foreign Affairs”. The expression “post office socialism”, attributed to him, came later, when he was considered for the post of US Ambassador to India. I especially love one sentence from Galbraith’s 1958 essay. “If we are to understand the impact on India of foreign economic ideas we must first recognise how immune the Indian economy is to influence from any source, including that of the Indian government.” If both Friedman and Galbraith agreed, there must have been something wrong. However, as I have said earlier, this wasn’t a period when dissenting voices were heard.

Bibek Debroy, Chairman, Economic Advisory Council to the PM (Tweets @bibekdebroy)



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