Progress vs. ‘Plans’

October 19, 1959

When the present writer went to Europe in 1947, his chief impressions were those of bombed buildings, disrepair, half-empty shop windows, scarce, outmoded products, “austerity” programs, price controls, a chaos of inconvertible currencies, and dark, deserted streets at night. A month now in Europe, particularly if the stop-offs are few and somewhat haphazard—Oxford, London, Paris, Vienna, Athens, Delphi, and the Greek Islands—may not provide the most satisfactory basis for a representative economic comparison. But it does impress one anew with the enormous progress that Europe has made in the last dozen years.

Last year I wrote about the incredible amount of new building in Germany and Italy. This year I found the amount of new building around Vienna and in Greece hardly less incredible. In Greece new houses, apartments, hotels, roads are being constructed everywhere; half of Greece looks as if it had been built in the last six years. Vienna and Athens, no less than London, Paris, Frankfurt, and Rome, now have their neon lights and traffic jams.

EFFECT OF PEACE

What has led to this result has not been wise public policies but principally peace. It is only four years since the Russians got out of Austria and nine since Greece has been free of war and civil war. The result is a seeming miracle. Once more we have an illustration of Macaulay’s thesis that: “No ordinary misfortune, no ordinary misgovernment, will do so much to make a nation wretched as the constant progress of physical knowledge and the constant effort of every man to better himself will do to make a nation prosperous.”

Where governments have followed free market policies, as in West Germany, progress has been far more striking. But there has been progress even in highly socialized economies. This was brought out in some of the papers presented at a conference which I attended at Oxford of the Mount Pèlerin Society, made up of economists from a score of different countries. Prof. Bruno Leoni, for example, of the University of Pavia described in detail the extent of government ownership or operation of Italian industry: Eighty percent of the production of cast iron, 45 percent of the production of steel, 80 percent of shipbuilding, 60 percent of natural gas, 99 percent of coal production, 30 percent of electrical energy—and practically 100 percent of the railroad system, the telephone service, and radio and television.

ITALY AND INDIA

As a result, one person in every three in Italy now depends directly or indirectly on the government for his living. But Leoni sees no justification for this immense socialization (much of it inherited from the day of Mussolini) and cites some of the enormous wastes under it. The government-owned Ansaldo Fossati tractor factory at Genoa has accumulated a deficit of 18 billion lire since 1950 which is 4 billion lire more than would have been sufficient to keep all the factory’s workers at home and pay them a full wage. The main product of this factory was a practically useless heavy tractor. Yet there are very good private tractor manufacturers in Italy like Fiat, who sell their products profitably.

But sometimes government control and socialization become greater than an economy can endure. Prof. B.R. Shenoy of Gujarat University fears that this is the case in India. His paper drew a dramatic contrast between what has happened since 1948 in the free market economy of Germany and in his own socialized and “planned” country. Even in the eight years since 1950, “German national income (at current prices) more than doubled, the annual average increases in it being 15.9 percent (probably a world record for a sustained rise at this high rate) [and] real wages went up by 60 percent” whereas India’s economic product in recent years has barely kept pace with its population growth. “He who can rescue the country from its present economic policy and bring about a change-over to a free market economy will have done more in speeding up Indian economic development than all the foreign aid that is being planned, or that the country has received.”