Remembering Peter Bauer: A True Friend of the World’s Poor
Today marks the 98th birth anniversary of economist Peter Thomas Bauer (1915–2002).
In a biographical sketch of Peter Bauer, Sauvik Chakraverti has characterised him as a ‘true friend of the world’s poor’. This characterisation assumes greater significance when one notes the fact that Peter Bauer was the biggest opponent of the then mainstream idea that foreign aid by developed countries is the best way to help the underdeveloped world. His opposition to the growing fad of government interventions of all forms (such as central planning, foreign aid, price controls and protectionism) through his scholarly work were done in the intellectually hostile climate of the second half of the twentieth century.
Bauer had no trouble calling things as he saw them. It was in this spirit that he called foreign aid ‘government-to-government transfers’ and said that it was essentially an income transfer from the poor in rich countries to the rich in poor countries.
Commenting on foreign aid in Indian Economic Policy and Development (1961), Bauer wrote:
Foreign aid represents resources compulsorily taken from the citizens of the donor countries. … Foreign aid generally increases the resources of the government relative to the private sector of the economy. By strengthening the government, it (foreign aid) underpins the policies pursued by the government. Foreign aid also discourages the recipient government from promoting the inflow of private funds. Indeed, it would be unpatriotic of the government to seek to obtain funds on the market terms if they are available free or on subsidised terms. … The suggestion that foreign aid should be granted specifically to underwrite Indian economy planning should be rejected — not so much because of the cash cost to the United States and the West, but because of the cost to India.
Echoing Bauer’s concerns, B R Shenoy, writing in late 1960s when India was taking a steep leftward turn (as amply demonstrated by the nationalisation of 14 banks in 1969), chose to blame not only Indian policy makers but aid-giving foreign countries as well for India’s predicament. Bauer and Shenoy correctly identified foreign aid as a tool which discounts the cost for the recipient country by prolonging and legitimising government interventions of all sorts. In the absence of such colossal aid, shortage of foreign exchange would have compelled India to review its policies. Instead, foreign aid fed policies that only led to more planning and government control.
As prophecy would have it, eventually it was the lack of foreign exchange in 1991 that forced India into course-correction.
In an essay dedicated to Shenoy Bauer famously described B R Shenoy as a hero and a saint. To Bauer, Shenoy was a hero because he publicly resisted development fads, and a saint because he remained serene “in the face of neglect, disparagement, even abuse.” I am sure, Shenoy would have said the same for Bauer.
Bauer was elevated to the House of Lords in 1982 by the only person who could repose such a faith in a man who opposed all forms of government intervention, his friend and admirer Margaret Thatcher.
We would do well to remember and share the apprehension of Lord Peter Bauer when looking to government intervention as the solution to our problems.
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Some of the major work by Peter Bauer are available with the B R Shenoy Memorial Library at the Centre for Civil Society -
The Economics of Underdeveloped Countries (1957), Indian Economic Policy and Development (1961), Dissent on Development (1971), Equality, the Third World, and Economic Delusion (1981), Reality and Rhetoric (1984), The Development Frontier (1991), Population Growth (1995) and From Subsistence to Exchange and Other Essays (2000).
