Deepak Lal is one of the most experienced development economists on the planet. Born in India and educated in Britain, there’s barely a country he hasn’t worked in or an international body he hasn’t advised.
For decades, he has also been at the forefront of the free-market movement. Whether helping to overturn established existing orthodoxies about centrally planned economies, or arguing for the merits of floating exchange rates, he was not just a man ahead of his time, but one who helped to shape it.
In this wide-ranging interview, he talks to CapX about how planning and bureaucracy are the enemies of prosperity, why he’d place his bets on America rather than China, and where he worries that the world is going wrong.
Deepak Lal on… getting started in the Indian civil service (1 minute 20)
“There were these fierce sergeant-majors who were supposed to make sure you didn’t fall off your horse. And I don’t get on well with horses, so I just slept. I was called by one of the deputy directors, and said I wouldn’t be able to join the service. So I told him, I think I’ll have to go to my Member of Parliament and say I have just been chucked out of the Foreign Service because I refused to partake in the imperialist activity of horse riding.”
Deepak Lal on… the problem with planning (2 min 40)
“I went and worked for one year with the [Indian government’s] planning commission, where I was the advisor to the minister. He said: ‘You obviously speak English very well, here’s the third Five-Year Plan, I would like you to edit it.”
“That gave me an idea of how these things were put together. It was quite clear that they had no basis – it was just taking numbers out of the air. There was a huge debate between two members of the commission about what the next five-year growth rate should be, whether it should be 3 per cent or 3.5 per cent. It was absolutely absurd. So that convinced me that this was just mad.”
Deepak Lal on… working at the World Bank (10 min 30)
“Game of Thrones reminded me very much of the World Bank – people turning on each other, the different factions. The World Bank was a very good idea when it was set up, no question about it, because developing countries didn’t have access to markets. When [James] Wolfensohn came, and he then converted it to essentially a gigantic NGO. I think it has to be shut down. It has no role any more.”
Deepak Lal on… what’s gone wrong with banking (17 min 30)
“I have been a supporter of the Glass Steagall Act. There should be a separation of the two, commercial and investment banks. Investment banks should just be partnerships – it’s their money and they can take whatever risks they like. That is the system we had before. Goldman Sachs, which was a perfectly fine partnership, is now a public limited company and is now passing on its risks to the general public, which should never be allowed.”
Deepak Lal on…. central banking (21 min)
“The trouble with the international monetary system now is that you have people who believe that you can fiddle around with money in some sense, and that that can have real consequences. So for good or bad, they want to fiddle around with it. People forget the thing that Milton [Friedman] said, which people forget: the only effect fiddling around with money has, is either inflation or deflation. The real effects are washed out.”
Deepak Lal on… the decline of classical liberalism (25 min)
“I am absolutely astonished. We’ve got a 1960s-style Trot who’s got adulation from the young – people who should know better – and he could be PM. The pendulum is gradually shifting back. Today, I see in my newspapers, that my old friend Oliver Letwin is arguing for raising spending and raising taxes. Now that is absurd.”
Deepak Lal on….China vs America (30 mins)
“I take a dim view of China’s prospects. And an optimistic one of America’s. It’s the only place where innovation [really] takes place… The Chinese say they have hundreds of patents, and that they are going to catch up with that, but they are all derivative. That goes to back to the fundamental problem Xi [Jinping] has. I can’t think of any centrally planned economy which has this innovative spirit, and you can’t get that in a non-market economy.”
Deepak Lal on… India and Modi (32 mins)
“India has a long way to go. I think Modi has the right idea, but the trouble with him is that he is an autodidact. I have always said a little learning is a dangerous thing, you think you know much more than you know and you’re not willing to learn. Alas, the people he has around him – one or two, the economists, are outspoken, but others are just flatterers… But he’s our only hope because the other lot are absolutely hopeless. I still think that if he can get his labour reforms, infrastructure and land [policies], then India could be growing at 10 per cent for at least 20 years.”
Deepak Lal on… Brexit (38 min)
“I voted for Brexit, and I also voted in ’75 for joining the Union. Like many other people who were pro-Europe then, we slowly learned that we’d been sold a bill of goods. The Single Market is not free trade – it’s a protectionist bloc with all these rules and regulations. The second, thing they said, they said it’s not a federal project. My final thing was, which finally convinced me that this is mad, was when the European Court of Justice was put above any British law. That meant a tremendous loss of sovereignty.
“As far as economics is concerned, British industries can go back to unilateral free trade. I told someone, if David [Davis] goes there, you can have your arguments about payments, but you don’t have to do anything. Just say we are leaving.”
You can listen to the full interview here – or subscribe via iTunes (or any other podcast service) to get the latest episode every week.
You can also catch up with our previous interviews with Anne Applebaum, Philippa Stroud, Jonathan Sacks, David Willetts, John Curtice, Andrew Cooper, David Owen, Sue Cameron, Frank Field, Nick Cohen, Daniel Hannan, Peter Oborne and Nigel Lawson.