Memo To: Peter Passell, The New York Times
From: Jude Wanniski
Re: Nicholas Kaldor
Your report Sunday on Asia's growth path says that in the 1950s British economist Nicholas Kaldor argued that since the rich can afford to save and the poor cannot, wealth should be permitted to accumulate. You are exactly wrong. Kaldor in fact sold steeply progressive tax systems all over Asia. More than any economist of the 1950s, Lord Kaldor spread poverty everywhere he went. In researching The Way the World Works in 1977 I found his evil hand practically everywhere I looked. His argument was that the rich saved too much, or when they spent, it was on conspicuous consumption that did not benefit the nation. Remember, Peter, in the 1950s demand-side economics was still the rage, and that meant the problem was too much savings. The Kaldor argument, which became the development model at the United Nations, was that government should tax away the incomes of the rich and invest it in projects that would benefit development. As a result, governments throughout Asia and Africa borrowed huge sums from western banks to build steel mills and such, with the future income streams of the rich as collateral. When the projects went bust, the governments had to tax the poor to pay off the western banks. The Kaldor legacy lives on in the accumulated debt of the poorest nations of Asia and Africa, now being collected by the IMF.
I'm happy to see your colleague, Lou Uchitelle, writing on the front page of the Week in Review that both parties are now on the supply-side. Bye, bye John Maynard Keynes and Milton Friedman!! If you want to get ahead of the curve, you really need to look into the importance of risk-taking as a driving force in economic growth — something Kaldor never understood. Paul Samuelson and Bob Solow still think growth occurs by taxing away the rewards to risk-takers who succeed and distributing them to those who failed or did not even try.