The practical economist

Print edition : September 13, 2019

February 17, 1981: South Wales miners pickets outide the Nantgarw/Windsor Colliery near Caerphilly in South Wales. Under Margaret Thatcher, new laws allowed employers to sack strikers, reduced dismissal compensation, forbade workers to strike in support of others, repealed protections preventing courts seizing union funds, and made unions liable for huge financial penalties. Photo: The Hindu Archives

.June 1982: British Prime Minister with U.S. President Ronald Reagan during a summit in the Palace of Versailles, France. Photo: AP

The biography of the economist Ajit Singh is also the history of the tactics neoclassical economists have adopted all over the world to drive out reality-based heterodox economics.

THIS is the most impressive intellectual biography of any economist I have ever read. It is eloquent and passionate, engaging closely with every theme Ashwani Saith touches, be it Ajit Singh’s Punjabi Sikh background, his early engagement with the support of student demands in Cambridge, his opposition to the Vietnam War, his almost 50-year-long battle to save the core of the Marshall-Keynes-Kaldor tradition of economics as a subject grappling with real-life problems from the neoclassical mafia of theory without content, and the enormous contribution Ajit made to economics as a professional. The book sometimes appears to be hagiographic, written by his PhD student, Ashwani Saith, but Ajit attracted affection amounting to reverence from his other students also. For example, when Andy Cosh, another of his PhD students, was offered by Queens’ College, Cambridge, a Fellowship to be created in his name, Cosh wanted it be named after Ajit: so there is now an Ajit Singh Fellowship in Queens’ College.

Ajit came from a privileged Sikh background on both his mother’s and his father’s side. Saith’s use of “radical Sikh” as the appellation of Ajit is justified, because Ajit was radical, and he wore his long hair covered with a colourful Sikh turban as a proud marker of his identity without being a regular gurdwara-goer all his life. He was born in Lahore on September 11, 1940, to Sardar Gurbachan Singh and Pushpa (nee Bawa). Gurbachan was a sub-judge in the Punjab judiciary and Pushpa, a university student. Pushpa’s family stood in the direct line of descent from the third Sikh Guru, Amar Das. Ajit’s paternal grandfather was Deputy Inspector General of Punjab Police. Pushpa studied in a “convent” school and enrolled for a BA in history at the elite Kinnaird College. Her maternal grandfather was a doctor. After Partition, Ajit’s father rose to be a sessions judge in Ambala. Both his parents were keen that their children study in a local government school with vernacular (not English) as the medium of instruction so that education would not distance them from the ground reality of their country.

Ajit was a precocious student. In 1955, aged 15, he enrolled for a BA degree at Government College for Men, Chandigarh. He chose to study Sanskrit for nationalistic reasons and mathematics as the main subject But, in his own words, “in order to understand how India could become a modern, prosperous country”, he also studied economics. There was no formal faith instruction in Sikhism at home. There were no regular diwan trips every Sunday to the gurdwara. These trips were limited to gurpurabs, Diwali and Baisakhi festival days; the annual akhand path and monthly sangrant were performed at home. There was a separate darbar sahib where the holy book, Guru Granth Sahib, was kept. But ritual obeisance to the book was not taught to the children. Pushpa’s mother being a Hindu, the children learnt tales of the Mahabharata and the Ramayana and sang bhajans.

Ajit got into politics in college. He won the election to be president of the students’ union of the college, but the principal forced him to stand down in favour of then Punjab Chief Minister Pratap Singh Kairon’s son. The second brush with the principal was more serious. The principal had upset the entire student body by using his arbitrary authority over some disagreements, and the students went on strike. At this time, the annual college magazine was released, with a full-page photograph of the principal. When the principal arrived in the classroom, student after student ripped out the page containing the photograph of the principal. The latter picked on Ajit as the ringleader, and as punishment his marks were arbitrarily docked in the ensuing examination.

Journey to U.S.

Experiencing this harassment, Ajit decided to leave India for further study. In the winter of 1958, Ajit secured admission to Howard University, Washington, D.C. In that city, he was welcomed by a network of Sikh families. Through the influence of his Sikh friends, he obtained a job in the India Supply Mission and with those earnings he financed his evening studies at Howard. He also took the lead in organising gurpurabs. Howard mainly catered to African Americans and Ajit came face to face with racism, a form of internal colonialism. Ajit completed his MA in economics with straight As in 1960. On the advice of a Sikh cab driver, Ajit made a three-day journey to Berkeley, California, arriving there penniless. Another Sikh lent him money to tide him over. There also he found support from the expatriate Sikh community.

At Berkeley, Ajit won the competitive interdepartmental Alice J. Rosenberg Fellowship in 1961-62, boosting both his reputation and finances. He mentions being particularly influenced by Harvey Leibenstein, Dale W. Jorgenson and Tibor Scitovsky and realised that his inclination was in testing theory with facts; this was further strengthened under the influence of Brian Reddaway at Cambridge. Serendipitously, Robin Marris was spending a year at Berkeley, when he took on Ajit as his research assistant in the summer of 1961. Marris arranged for Ajit to go to Cambridge to work on Marris’ magnum opus, The Economic Theory of Managerial Capitalism. Marris thanked Ajit fulsomely for his help in his book.

When Labour won the election in 1964, Marris joined the government as an economic adviser, and Ajit took over his teaching. Alan Brown left Cambridge for a Chair at Bristol, leaving a gap in the Department of Applied Economics (DAE) and in the teaching at Queens’. Ajit joined the DAE in 1964-65, and in the course of 1965 became a Fellow (Economics) of Queens’ and Assistant Lecturer in the Department of Economics and Politics. Saith (page 62) gives a list of South Asians and Sri Lankans who did their PhD in Cambridge, from the 1950s through the early 2000s, which begins with Amartya Sen and ends with Sukti Dasgupta. I would add to that list G. Uswatte-Aratchi, S.K. Rao, Jitendra Gopal Borpujari and S.M.P. Suriya Aratchi.

When Ajit joined the faculty of economics and politics, the Vietnam War was raging. As in other universities, the faculty was divided between hawks who wanted the Americans to continue the aggression and doves who wanted them to withdraw from the war. Ajit naturally belonged to the latter camp. According to Martin Bernal, Ajit and he had been involved in protests against the Vietnam War from 1962. Ajit and Tariq Ali were involved in the teach-in on the Vietnam War at Oxford Union on June 16, 1965. On the American side, there was not only the U.S. Ambassador, Henry Cabot Lodge, Jr, but also the Labour Foreign Secretary, Michael Stewart. Stewart and especially Lodge were so raucously heckled by the audience that Lodge appealed to Christopher Hill, who was chairing the meeting, to bring the audience to order, but to no avail. So the teach-in ended in chaos. Ajit immediately followed this up by writing a booklet, published by CND, in which he demolished Stewart’s arguments point by point.

From 1969, Ajit was actively involved in addressing several thorny issues, including the reform of the examination system that the students of economics demanded. The first formal Staff-Students Examinations Committee was set up in Lent 1969 and was jointly chaired by Nicholas Kaldor and B. Rivers-Moore for the students, with Ajit as a member; a second Staff-Students committee was set up with William Brian Reddaway and Rivers-Moore as co-chairs and Ajit as a member. There was finally a third committee set up by the Faculty Board to look into the specific issue of having a by-dissertation-only option as a substitute for written examinations, again with Ajit as a member. It shows how much Ajit was central to the whole process and how much students trusted him.

Of the reform proposals, the dissertation-only alternative to Part II was dropped but the other proposals were sent by the Faculty Board to the General Board for approval. But the General Board peremptorily rejected the proposals. The Faculty Board persisted and asked the General Board for its rationale. This was immediately followed by a huge Staff-Students meeting in Lady Mitchell Hall. This meeting became confrontational, with students from other faculties being present and demanding student representation on faculty councils and boards.

After a student sit-in there was an inquiry by Lord Devlin into the events. Devlin first wanted to know what Ajit Singh and Bob Rowthorn, both members of the Faculty of Economics, had said in Lady Mitchell Hall. Ajit then overnight prepared a crystal-clear document for Devlin. The latter was impressed both by this document and another prepared by Ajit, a 24-page statistical analysis of the pairs of marks from first and second readers. Though Lord Devlin pulled up the student body for excesses, the student body had effectively won its argument at the highest level, so the university was now obliged to introduce changes demanded by the students. The students’ arguments had clearly been boosted by Ajit’s radicalism and hard work.

Battle of ideas

From the 1970s, a battle began between Keynesians, post-Keynesians, Marxists and other heterodox economists on the one side, and the neoclassical economists on the other side. The neoclassical side was led by the triumvirate of Frank Hahn, Partha Dasgupta and Robin Matthews, and those ranged against them by Ajit and Robert Rowthorn (the latter changed sides later). Behind the triumvirate was the benign presence of James Meade (who also happened to be the father-in-law of Partha Dasgupta), who was the author of an elaborate neoclassical theory of growth and whose Nobel Prize was primarily for the neoclassical theory of international trade. What Hahn and Co. wanted to do was to mathematise economics into pure theory without content. They accused the heterodox economists of mathematical illiteracy (although one of the three had done badly in the Mathematics Tripos and minted gold by shifting to economics). The heterodox side comprised some brilliant mathematicians, David Gawen Champernowne, Brian Reddaway, Richard Stone and Richard Goodwin. Except for Stone and Goodwin, who used formal mathematics in their work, the others generally followed the Cambridge tradition descending from Marshall to Keynes of hiding their mathematics in footnotes or appendices, giving their findings in clear prose. Goodwin was a creative mathematician, collaborating with Le Corbullier and Iliya Prigogine (a Nobel laureate in chemistry) in his work and using differential equations to solve a variational problem in his paper “Optimal growth path for a developing economy” (Economic Journal, 1961). His short paper for the Maurice Dobb Festschrift, modelling the Marxian theory of growth cycles, has generated a huge literature.

So the battle over the soul of the Faculty of Economics and Politics was not about the use of mathematics in economics but whether economics would be based on empirical evidence or not. Ajit, with his firm grasp of sophisticated statistical methods and his determination to confront all hypotheses (or theories) with hard empirical evidence, was a natural leader of the group. That Ajit was no respecter of persons was shown by his Economic Journal article in 1975 in which he refuted the theory of takeovers put forward by Robin Marris, the person who eased his path to Cambridge. Before I go on, I must correct a misapprehension of Saith, who writes on page 89 that “Kahn and Sraffa, Keynes and Robertson, or Kaldor and Sraffa, were unlikely to consult each other”. In fact, Kaldor and Piero Sraffa were good friends and went mountain climbing together. For many of that generation, for example, Joan Robinson, Sraffa was the final arbiter on questions of theory. Saith calls Sraffa a recluse, but he was not: he was choosy, as I know from my own experience. Sraffa used to have long conversations with Amartya Sen, Luigi Pasinetti, Pierangelo Garegnani and Krishna Bharadwaj.

To get back to the main story of the fight over the control of the faculty, if Hahn was Machiavellian in his tactics, so was Ajit. In the election of the Faculty Board, members of the Faculty of Economics and Politics as well as members of the DAE had voting rights. The latter, being hard empiricists, were naturally on the heterodox side. Ajit would mobilise all faculty members as well as DAE members on his side. But the seniors in the heterodox camp had little strategic sense. They failed to recruit young hopefuls on their side. For example, they did not try to retain Pasinetti or recruit Amit Bhaduri, one of the most brilliant theorists of the younger generation.

Age of Capitalism

In the meantime, the external environment turned increasingly in favour of the neoclassical economists. (The Golden Age of Capitalism: Reinterpreting the Postwar Experience was a book co-edited by Stephen Marglin and Juliet Schor, published in 1990. Two years earlier, in 1988, Andrew Glyn, in collaboration with Ajit Singh and two others had published a working paper, “The Rise and Fall of the Golden Age”.) The wages and working conditions of workers in the advanced capitalist countries of western Europe, north America and Japan were boosted by post-War reconstruction in Europe and Japan and the investments of countries trying to catch up with U.S. technology, which had come out economically much stronger than before. Workers’ movements and the threat of spread of communism led most western European countries, formally social democratic or not, to institute wide-ranging social insurance measures such as public healthcare, free education up to the university level in Germany, France, the Netherlands and the Scandinavian countries, scholarships for poor students in the United Kingdom, old-age pensions and insurance, unemployment insurance, and so on. In several countries, public utilities such as railways, electricity and gas were brought under public ownership. Rates of investment in advanced capitalist countries were unprecedentedly high and labour productivity rose faster than before. For the world as a whole, manufacturing output more than quadrupled between the early 1950s and early 1970s.

The whole structure began to unravel when the U.S., battered by the costs of the Vietnam War and competition from a resurgent Germany and Japan in crucial sectors such as steel and automobiles, had large, unsustainable balance of payments deficits and decided to delink the dollar from gold in 1971 and thereby greatly disturbed the currency markets. Also, the profitability of capital had been eroded by high and rising wages, and capitalists began their counterattack, getting the state to undertake repressive measures against striking workers, banning trade unions in their companies and so on.

The counterattack acquired massive force with the election of Margaret Thatcher as Prime Minister of the U.K. in 1979 and Ronald Reagan as President of the U.S. in 1980. Even before that, the appointment of Paul Volcker as chairman of the Federal Reserve Bank of New York marked the advent of monetarism and the pursuit of deflationary policies in order to protect the assets of the wealthy and creditors in general.

In Britain, Margaret Thatcher smashed the miners’ strike by building up enough coal stocks, getting some miners to work and using the police to break up pickets by miners. The coal industry was privatised in 1994. Under Margaret Thatcher, new laws allowed employers to sack strikers, reduced dismissal compensation, forbade workers to strike in support of others, repealed protections preventing courts seizing union funds, and made unions liable for huge financial penalties.

Changing the law was not, however, enough: examples had to be made. The government inflicted “a series of defeats on unions in set-piece battles with the public sector, and encouraged private sector employers to take on the unions”. The first to face Margaret Thatcher’s iron fist were the steelworkers in 1980, who lost a 13-week strike battle and would pay the price with thousands of jobs. She also privatised public utilities, the railways, electricity and gas. All of them were downsized and trade unions lost members. By the time Margaret Thatcher finished her 11-year reign, trade unions had lost half their numbers. As Sir Alan Walters, official adviser to Margaret Thatcher, told me at an Asian Development Bank seminar in Manila: “I told Mrs Thatcher to kick the trade unions, and go on kicking them when they were down.”

The Cambridge story

To go back to the Cambridge story, the first attack by Sir Keith Joseph, the Minister for Education in the Thatcher government, was against the Social Science Research Council (SSRC), then headed by Michael Posner, a Cambridge don. Posner managed to persuade Joseph to allow the inquiry to be made by Lord Rothschild, a respected zoologist and scientific adviser to several governments. Rothschild renamed the SSRC as Economic and Social Research Council (ESRC) in 1983, ridding the word “Social Science”, which, according to the Conservatives, turned its scholars into troublemakers.

One of the first groups, headed by Wynne Godley, as head of the DAE, was the Cambridge Economic Policy Group (CEPG). There were basically two reasons for this. “First, the economic strategies—such as import controls on manufactured goods, keeping out of the European Common Market (ECM)—recommended by the CEPG were not compatible with the new orientations of the government and its financial back-stoppers, the IMF [International Monetary Fund], which underwrote the precarious bottom line of the economy” (Saith, p.118).

“Second, the CEPG analysis forecasts and policy prescriptions were quite unpalatable for the Tory monetarists” (Ibid). In 1982 the SSRC decimated the funding for the CEPG, which it did without paying a site visit or engaging in any significant consultation. As a protest Godley resigned as head of the DAE, and the Hahn group secured its first scalp.

The Cambridge Growth Project (CGP) was started by Richard Stone and Alan Brown in 1960 and received substantial SSRC funding support from 1967 onwards under various chairmen.

From 1981, however, “the CGP applications met hostility from SSRC, and in 1987, after a couple of rounds of grudging conditional extensions, funding was rejected altogether, leading to the termination of the project and its team of researchers. The decision was made by a Consortium comprising, among others, experts from the Bank of England, Her Majesty’s Treasury, and the SSRC itself” (Ibid, page 120).

The next stage of the attack on the DAE was operationalised by an unexpected Review of the DAE by the General Board of Faculties of the University. The Review lasted from 1984 to mid 1987, the Review hanging like the sword of Damocles over DAE staff.

The Review recommended that the DAE should be managed by the director and a management committee of professionals—mostly outsiders—with no representation of the DAE staff. It also recommended separation of the sociologists from the DAE. The new director of the DAE was David Newbery, a staunch member of the Hahn camp. The vote bank of the heterodox economists was greatly weakened and the victory of the neoclassical camp was more or less complete.

The truncation of the faculty and the DAE resulted not only in the expulsion of the sociologists to a new faculty of Social and Political Sciences (SPS) but also in the termination of economic history after the retirement of Phyllis Deane, and the extreme truncation of development studies. Many of the heterodox economists, but not Ajit, migrated to the Judge Business School, led by Alan Hughes. When The Economic Journal was taken over by the neoclassical economists, the Cambridge Left started Cambridge Journal of Economics (CJE), with Brian Reddaway, Goodwin and Luigi Pasinetti as patrons. The first issue featured Ajit’s important paper on deindustrialisation of the U.K. economy under the impact of globalisation. The CJE has continued to thrive both professionally and financially.

I will not try to summarise Ajit’s contributions to the theory and practice of economic development or on stock markets. On the latter, his basic contribution was to show that the stock market is rudderless: it neither operates efficiently, nor does it reveal fundamental values. Takeovers are more a matter of financial muscle than of perception of undervaluation of firms. Ajit also crafted policies for industrial development and advised many governments in the Third World. What is remarkable is that his energy in fighting battles of the Left and writing an enormous number of papers on diverse subjects remained undiminished over a 35-year-old battle against Parkinson’s disease. What is also remarkable is the number of collaborators he could attract: I counted 24 of them.

This book will be useful not only to the aficionados of Cambridge University but to all students of economic development and of the tactics neoclassical economists have adopted all over the world to drive out reality-based heterodox economics.

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