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Sojourn: Journal of Social Issues in Southeast Asia, Volume 29, Number3, November 2014, pp. 691-720 (Article)

P bl h d b n t t t f th t n t dDOI: 10.1353/soj.2014.0040

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SOJOURN: Journal of Social Issues in Southeast Asia Vol. 29, No. 3 (2014), pp. 691–720 DOI: 10.1355/sj29-3f© 2014 ISEAS ISSN 0217-9520 print / ISSN 1793-2858 electronic

Sayagyi and Sage: Hla Myint, Myanmar’s “Classical” Economist

Sean Turnell

Burmese economists have been unusually prominent contributors to the evolution of economic thought. Looming over all of them, however, is Hla Myint. An intellectual pioneer in the study of economic development, trade and the institutions that drive growth, he could have had a decisive influence on economic policymaking in Myanmar. Effectively forced into exile via a misguided reaction in Myanmar against the perceived economics of colonialism, he instead made contributions that assumed a global importance. The principal ideas of Hla Myint may be located then within the discourse of “classical economics”, but they were also informed by the circumstances of the country of his birth. In 2012, over seventy years after he first took up his pen in Myanmar’s service, Hla Myint’s wise counsel was once again heard, with immediate effect, and newfound hope.

Keywords: Myanmar economy, Myanmar economists, economic reform, development economics, vent for surplus.

Fifty years of military rule in Myanmar brought many detrimental effects to the country’s economy, but not the least of these was the loss of human capital that it caused. This loss had many manifestations, including the effective exile of many of Myanmar’s best and brightest. Hla Myint stands in the first rank of these able exiles, and his loss was grievous. As he was an economist whose ideas were part of the intellectual framework for the economic policies of Asia’s “tiger economies”, it is no little irony that his ideas were dismissed as synonymous with colonial policies, and that Myanmar so comprehensively went in other directions.

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In February 2012, Hla Myint made a triumphant return to Myanmar as the honoured guest at a public celebration at the Yangon Institute of Economics, an institution that, although subject to countless transformations across the decades, was the direct descendent of the economics department that he re-created out of the wreckage of the Second World War.1 To many in the audience on that occasion, his eminence would have been a revelation, itself something of an articulate commentary on how far Myanmar’s education system had declined.2 Notwithstanding, and not pausing for regret for what had been wasted, Hla Myint urged confidence in pushing ahead with reforms — political and institutional as well as economic — as the best way to surmount the anxiety that Myanmar lacked the administrative capacity to change its circumstances. Hla Myint addressed this concern in a way that was a microcosm of his thinking across the decades: administrative capacity, like that of national productive possibilities more broadly, is not immutably fixed. Openness, exchange, growth — such attributes could take Myanmar forward, just as they had transformed many of the country’s peers and neighbours.

The purpose of this paper is to present the ideas of Hla Myint in their broadest sense, to locate these across his life and times and to outline his vision for Myanmar’s economic future. The paper begins, accordingly, with an account of Hla Myint’s origins and formative years, his role as a policy advisor and as an educator and his eventual effective exile. Overseas, Hla Myint went on to make extraordinary contributions to the discipline of economics, but especially to that part of the discipline which we would now label “development economics”. These contributions are outlined with an eye to their relevance to Myanmar’s situation, both in the past and now. Turning to present day concerns, the paper outlines Hla Myint’s current thinking and advocacy for reform in Myanmar. The paper concludes with the argument that it will be through the embrace of “home grown” reforms, and of the legacy of its greatest economist, that Myanmar will be best placed to redeem its once, and future, promise.

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Life and Times

Hla Myint was born in 1920, in Bassein (now Pathein), the port city and capital of Myanmar’s Ayeyarwady region, and long a hub for rice milling and export. Hla Myint’s father died young, and his mother thereafter ran a small shop in order to ensure that the family survived.3 Possessing a certain degree of business acumen, she was later to expand the shop, and eventually moved to Rangoon. She was later remarried, to a government official of modest rank named U Hla Tin. The latter was the younger brother of U Tun Shein, a prominent politician from Mandalay who, with U Pu and U Ba Pe, had been part of a delegation from the Young Mens’ Buddhist Association that visited London in 1919 to call for constitutional reform in Burma (Taylor 2008, p. 163). U Tun Shein had died the year Hla Myint was born, however, minimizing the leverage of the only real “connections” that the family enjoyed.

Notwithstanding his relatively humble beginnings, Hla Myint’s promise did not take long to be noticed. Accelerated through his schooling, Hla Myint was encouraged by the headmaster of the school that he attended to apply to the University of Rangoon to study economics while still just fourteen years old. Waiving the customary minimum age for new undergraduates of fifteen, the university admitted Hla Myint to its economics programme in 1934.

At the University of Rangoon, Hla Myint came under the influence of Harro Bernadelli, an Austrian economist of Italian extraction who had been a student of Joseph Schumpeter in Vienna (Donoghue 2007, pp. 25–27).4 Bernadelli was amongst that cohort of scholars forced to flee the Nazis in the early 1930s. He initially found refuge at the London School of Economics (LSE), where he worked alongside such luminaries as Lionel Robbins, John Hicks and — significantly for Hla Myint later — Friederich Hayek. Robbins, who was central to the programme of rescue and sanctuary of academic refugees from the Third Reich, recorded at the time that Bernadelli was “by far the most distinguished of the younger men who have come under our observation” (quoted in Howson 2011, p. 243). In the late 1930s

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Bernadelli was appointed to the Department of Economics at the University of Rangoon, where, apart from teaching, he researched the motivation for and impact of Indian migration to British Burma (see, for instance, Bernardelli 1941). Bernadelli introduced Hla Myint to leading continental European thinkers on economics (rather than, as might have been expected, to British economists), and especially to those of the “Austrian school” who (severely to simplify matters) favoured the spontaneous outcomes of markets over government planning. Curiously, at the University of Rangoon Hla Myint had very little exposure to the practical economics of his own country, including its critical agricultural sector. According to Hla Myint, speaking nearly eighty years later, “agricultural economics was taught out of text books on Indian agriculture, which had little relevance for Burmese conditions”.5 It was, he noted, only much later at Oxford that he was able to explore in a meaningful way the economic problems of Burma.

In Cambridge, at the LSE

In 1939 Hla Myint received a Burmese government scholarship to pursue postgraduate study at the London School of Economics. Then as now, the LSE loomed large within the economics profession, but within the British colonial system a more usual choice for a budding young scholar from Burma would have been Oxford or Cambridge. Under the influence of Bernadelli, however, the LSE became Hla Myint’s institution of choice. Of course, for a young man of no great means and who had lived his whole life in the tropics of Southeast Asia, the idea of London — with its winters — was not a little intimidating. Assistance, material and financial, in acquiring clothing suitable for England came courtesy of Bernard Swithinbank, then a district commissioner in the colonial administration of British Burma who had, prior to his service there, been a close friend of the economist John Maynard Keynes and other members of the famous Bloomsbury literary set.6 This kind gesture, recalled by Hla Myint with warmth up to the present, started a friendship that was to last until Swithinbank’s death in 1958.7

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War disrupted Hla Myint’s journey to the United Kingdom, with his ship forced to detour around the Cape of Good Hope rather than travel the shorter distance to Europe via the Suez Canal. War would also have a dramatic impact upon his studies in England. By the time Hla Myint arrived in London the LSE had been evacuated to Cambridge, while many of its (British) staff had been recruited for war service.8 Lionel Robbins, whom Hla Myint was initially assigned as his supervisor, decided, after seeing Hla Myint’s work, to waive the usual requirement that he complete a master’s degree before enrolment in a doctoral course. But Robbin’s call-up to serve the British government in financial diplomacy and on post-war reconstruction issues brought Hla Myint under the wing of Friederich Hayek. Hayek was at that time putting the finishing touches to The Road to Serfdom, the book that would make his name and ensure his legacy. Hla Myint liked Hayek, finding him a “genuine liberal”. Finally, and of no little personal import, Hla Myint met his wife, the then Joan Morris, whilst at the LSE. She was studying economic history, a subject that she would teach at the University of Rangoon from 1946 to 1949.9

Hla Myint’s doctoral thesis was extraordinarily well received. His principal examiner, John Hicks, not only passed it, but on its strength invited Hla Myint up to the University of Manchester, where Hicks then served as professor of economics, on a post-doctoral fellowship so that he could then turn the thesis into a book.10 Published in 1948, Hla Myint’s Theories of Welfare Economics is today regarded as a seminal work in the field. It set the intellectual foundations for all his subsequent work.

Back at Rangoon University and Advising Government

In 1946 Hla Myint returned to Myanmar in response to a call to become professor of economics at Rangoon University, and to re-create a functioning economics department in one now largely denuded of the foreign academics that had once constituted its core teaching and research staff. Hla Myint arrived at a university, and in a country, devastated by war. What serviceable buildings that

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remained were primarily being used to house soldiers recovering from the wounds of war. For the first few months after he arrived, the economics “department” consisted of little more than a desk in a corridor of a student hostel, while the first post-war classes took place in hastily constructed bamboo huts. Hla Myint himself did not come to the university empty-handed, however. Before leaving London he had been given £500 by the British government to spend on books to restock the departmental library, a sum he thought well-spent on resources that “provided the basis of the education of successive generations of economic honours students at Rangoon”.11

Hla Myint greatly enjoyed his time rebuilding the physical and intellectual resources of the University of Rangoon. Creating an academic institution more or less “from scratch” was not an everyday opportunity for “a fledgling 26 years old professor”, even if it involved working harder than he had worked ever before, or — he recalled — ever would work again.12 Part of this work involved recruiting new academic staff, but within a year he managed to snare U Tun Wai, a newly minted graduate of Yale who would later go on to prominence at the International Monetary Fund (IMF), and R.M. Sundrum, then a fresh graduate of Rangoon University who likewise would end up a distinguished economist far from home — in his case, ultimately at the Australian National University in Canberra. Thus in place, this triumvirate formed the basis of what would become — for but a brief shining moment — one of the most significant economics departments in Asia.

Hla Myint’s institution-building idyll was spoilt by his “drafting” into (officially part-time) service as economic advisor to Burma’s new government soon after the country achieved independence in January 1948. His spell as an economic adviser to the government of U Nu, independent Burma’s first prime minister, was not a happy one, however, and it would soon lead to Hla Myint’s departure from Myanmar once more. Frustrated “by long and fruitless meetings”, Hla Myint came to feel that he was utterly out of step with the government’s economic policymaking, and that he “had little to contribute” towards its vision of a state-led economy. More in tune

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with this vision was the team of economic advisers from Robert Nathan and Associates, the firm employed by the Burmese government to engage in long-term economic planning for the country.13 Hla Myint got along well personally with these American advisors, and especially with Nathan’s chief economist “on the ground”, Louis Walinsky, but was sceptical of the giant “engineering” report that they drew up to propel Myanmar’s industrialization, the Economic and Engineering Development of Burma, Comprehensive Report, 1953. Containing “too much American organisation” and requiring an administrative framework that Burma neither possessed nor could support, he regarded the report’s proposals as doomed to failure.14 In this view, as in much else from the period immediately following Burma’s independence, Hla Myint would be proved prescient.

During his time as economic advisor to U Nu, Hla Myint was especially troubled by the State Agricultural Marketing Board (SAMB), a body set up to serve as Burma’s monopoly rice exporter — and one whose profits from paying farmers a price for their crop below the world market price were the primary funding vehicle for state-led industrialization and other schemes (Turnell 2009, pp. 191–92). Matters came to a head in 1950, when Hla Myint “approached Prime Minister U Nu to explain that Burma’s rice export industry was being strangled to death both by the government policy… and by the ‘dead weight’ loss from the sheer inefficiency and corruption” of the SAMB.15 Hla Myint told U Nu that “the only way to save” Myanmar’s rice export sector was to abandon the SAMB, and allow both private and foreign investment to “re-enter the industry”. This advice was “totally unacceptable to U Nu”, whom it struck as a return to the “much hated ‘Colonial’ system of Laissez faire”. Soon after this encounter, Hla Myint decided to return to the United Kingdom, “dejected and confirmed to my belief that I had no future as an economic adviser in [Burma]”. Reflecting on the episode many years later, Hla Myint believed that it was possible to trace the “misguided” economic policies that followed from this point to the reaction against a caricature of “colonial economic policies” that held firm in the minds of that first generation of his country’s post-independence leaders.

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To such leaders, “free international trade and an open-door policy towards foreign investment and immigrant labour” were synonymous with the colonial order. The reaction against these policies combined to bring about the country’s isolation from the world economy, and the beginning of its modern tragedy.16

Oxford

Hla Myint’s return to the United Kingdom saw him take up a position in 1950 as “lecturer in colonial economics” at the University of Oxford.17 Even at the time, it was an anachronistic job title. But Hla Myint would soon turn the curriculum of his teaching and research into what would become development economics, and the name of his position to “lecturer in underdeveloped countries”. The sub-discipline of development economics did not then exist, and to the extent that consideration was given to questions of growth and development, much of the existing literature was fixated on China and India, countries “suffering from acute population pressure and material poverty”, but countries that Hla Myint regarded as not at all representative of the situation elsewhere. Hla Myint also found that much of the approach of universities to the teaching of development was either geared towards the training of colonial officials, intended “to make a case for increasing international aid” (Hla Myint 1973, p. 17), or both. Accordingly, Hla Myint turned to the classical writers on economics. As he would remark to the author in 2012, “I looked for alternatives and found them in Adam Smith.”18

Rector of the University of Rangoon

In 1958, Hla Myint returned to Myanmar for one final time to serve as rector of the University of Rangoon, out of “a residual sense of obligation” to his home country.19 He was confident that he might be able to do good — reasoning that, if he lacked the political abilities to be an economic advisor, then at least education was something on which his own priorities and that of the Myanmar government should be in accord. Alas, his time as rector was to be no happier than his earlier stint as an advisor. In 1958 the University of Rangoon was

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in turmoil, roiled by student strikes, declining academic standards, soft marking and other maladies that Hla Myint tried hard to lean against, but in opposition to which he felt isolated and besieged.20 Hla Myint was especially set against U Nu’s plans to expand the University’s annual intake of new students to 5,000. Hla Myint regarded 3,000 as an upper limit, determined both by the need to require acceptable qualifications and the maximum number of students that could be physically accommodated within the university’s lecture halls. U Nu won out, as did the students who appealed to the prime minister against the poor grades that they received under Hla Myint’s administration. The augurs for a lengthy stay as chief of the University of Rangoon were not promising.

The cause of the end of Hla Myint’s tenure as rector of the University of Rangoon came from an unexpected angle, however, when in 1962 the chief of Burma’s armed forces, General Ne Win, took power in a military coup. Quickly establishing a programme of extreme nationalism and doctrinaire state socialism, all under the rubric “the Burma road to socialism”, the new regime made one of its first acts moving against foreigners in the country. Most significantly, the population in question included substantial numbers of ethnic Chinese and Indians, many of whom had lived in Burma for generations (Holliday 2011, p. 50). Of import for Hla Myint individually was the fact that these expulsions followed that of grand old man of Anglo-Burmese letters, J.S. Furnivall (Taylor 1995, Pham 2005).

Hla Myint’s disappointment over Furnivall’s removal festered.21 The economic advisor to U Nu at the time of his ejection from the country, Furnivall had been brought back to Burma after his retirement from the Indian Civil Service and a life otherwise devoted to the country by Hla Myint personally in 1948. At that time, Hla Myint recalled, there was little “common ground between us in terms of economics, but I was attracted to him because of his deep love for old Burmese culture”. Later, their thinking on economics was to converge too. Hla Myint was impressed that Furnivall, the author of the term “plural society” for the way in which the British

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had created in Burma a society in which foreigners and Burmese people lived side by side but separately, “not united for common welfare or any common end”, was yet concerned that nationalists “look outside their little world”.22 Along with Hla Myint, throughout the 1950s Furnivall urged an “outward looking policy”, not just on trade but also in adopting an inclusive approach to immigration, in which all those “partly or wholly of foreign origin who elect to enrol themselves as citizens [of Burma] should find a home in the country”. Prior to Furnivall’s expulsion Ne Win had made known his suspicions that he — as well as Gordon Luce, another venerable Burma scholar who was then the professor of history at the University of Rangoon — were “CIA spies”. This accusation, for Hla Myint, was the “last straw.… I resigned from my Rectorship to return to Oxford, never to work again in [Burma or Myanmar]”.

Scholar in Exile

Hla Myint taught and researched economics at Oxford until 1965, when he returned to his old stomping ground of the LSE. Appointed professor of economics, he remained at the LSE until his retirement in 1985, whereupon he was appointed professor emeritus. For some years he consulted for the World Bank, while keeping up a vast output of scholarly publications (see for example Hla Myint 1964, 1971, 1972, 1975, 1985, 2001; Hla Myint and Lal 1996). In 2005, and upon the death of his wife, Hla Myint settled in Bangkok.

Contributions to Economic Theory

During his tenure at Oxford and at the LSE, Hla Myint was to make an array of lasting contributions to economics. Many of these centred around the question of how openness to trade and exchange contributed to economic development. Hla Myint worked very much within the “classical tradition” in asking the “big” questions of what brought about the wealth and prosperity of nations. In his first book in 1948, which — as noted above — was an extension of his doctoral thesis, he addressed his conception of these larger questions, and the classical approach to them, in this way:

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The central principle, which unifies the various classical economic doctrines from Adam Smith to J.S. Mill, embodies the following fundamental proposition: viz. the economic welfare of society can be more effectively promoted (i) by increasing the physical productivity of labour, and (ii) by increasing the total volume of economic activity, rather than by tamely accepting the given quantity of productive resources and making refined adjustments in allocating them among different industries. From this follow the two major canons of classical economic policy, (i) free trade which extends the scope of division of labour and brings fresh resources into the productive framework, and (ii) capital accumulation which enables society to maintain a greater quantity of labour. (Hla Myint 1948, p. 12, emphasis added)

Hla Myint was to be no mere celebrant of the classical tradition, however. He would also extend this literature, and in profound ways. Most prominent was his extension of the concept known as the “vent for surplus”, a notion of great relevance to the Burma in which he had grown up. But his work also included contributions on what now would be labelled “institutional change”, a field that would later become a prevailing discourse in development economics. Along the way, his research would include insights into all manner of significant practical policy areas too, from foreign aid and education to the dangers of credit subsidies and the virtues of giving farmers rights and freedoms.

A full accounting of Hla Myint’s vast contributions to economics is beyond the scope of the discussion here, but some of the following areas of his scholarship might be usefully highlighted, not least for their relevance to Myanmar’s problems and possibilities — past, present and future.

Vent for Surplus

Hla Myint’s extension of Adam Smith’s concept of “vent for surplus” is, quite correctly, often referred to in the literature as “Smith-Myint vent-for-surplus”, for it is his most celebrated contribution to economics. Recasting the traditional comparative-costs theory of the patterns and benefits of trade, which posited the more efficient

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allocation of fully employed resources in an economy via a new set of relative prices available thanks to trade, Hla Myint opened the analysis to countries hitherto isolated from trade and characterized by unemployed or surplus capacity. In short, what “his” vent-for-surplus idea described was the possible gains from trade to an “under-developed” country such as Burma when it first came under British control and was therefore newly exposed to international commerce — and even, to some extent, in Myanmar’s situation today. Under the more relevant scenario that Hla Myint introduced, the function of trade is, as he put it in his seminal article on the topic, “not so much to reallocate the given resources, as to provide new effective demand for the output of the surplus resources which would have remained unused in the absence of trade” (Hla Myint 1958, p. 321).

Institutional Change

The nexus between trade and economic development was the dominant theme throughout Hla Myint’s writings. Over time, however, it went well beyond vent-for-surplus notions of the bringing into production of erstwhile surplus resources, and deeper into ways in which “institutional change” could be stimulated. The role that institutions play in economic development is now mainstream. Indeed, the idea is behind the awarding of more than one Nobel Prize in economics. But Hla Myint’s emphasis on it was pioneering at the time that he advanced it.23 Here he is, for instance, writing in 1973, with a sceptical eye on the then fashionable Rostovian staged “take off” model of development (Rostow 1960).

… although there is much discussion about providing the underdeveloped countries with the material “infrastructure” such as transport systems and power stations, there has been little discussion of the problems of providing them with the social and institutional “infrastructure” as necessary preconditions for the take-off. On the contrary, much of the discussion proceeds on the implicit assumption that all the underdeveloped countries are ready for the take-off, as though a sufficiently long runway had already been built and that what is needed is a final spurt of speed on it. (Hla Myint 1973, p. 14, emphasis added)

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Hla Myint dug deeper into the processes of institutional change (he mostly used the expression “organisational framework”) throughout his work across the 1960s and into the 1990s. Summarizing it all in 1996 in a book that he co-authored with Deepak Lal, but in which the passage quoted below was his own, he outlined the ways in which (once again), a developing country could use the opening of its agricultural sector to restructure its economy by transforming its institutional arrangements. As a first step this process would involve vent-for-surplus gains by bringing small farmers into the light of international exchange, and yielding scale economies and improvements in infrastructure, both physical and otherwise.

… the expansion of peasant exports, leading to the development of the market system by drawing the peasant households into the exchange economy, would be a powerful factor in reducing the marketing and organizational costs of the traditional sector. This would pave the way for further economic growth through a greater degree of specialization and division of labour … by widening the size of the local market through improvements in transport and communications and joining them together into a more articulated market system extending over the whole economy. (Hla Myint and Lal 1996, p. 194)

These developments would continue until finally a country’s organizational framework (its “institutions”) was transformed, and its growth set in motion. Using the first and most successful Asian tigers as examples, Hla Myint and his co-author described the process thus.

The remarkably rapid expansion of labour-intensive manufactured exports from Taiwan and Korea could not have been possible without the improvements in the organisational framework to support the process, and these improvements spread spontaneously from the agricultural sector. The widening of the domestic market, and the sharing of common facilities such as transport, electricity, and the marketing and credit network, between the small industrialists and the small farmers in a decentralised pattern of industrialisation, would then reduce the general level of transactions costs for the whole economy. Last but not least, the close human contacts between the small industrialists and small farmers would help to bring out latent

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entrepreneurial talent among the latter, stimulating a steady stream of minor technical improvements adapted to local conditions. (Hla Myint and Lal 1996, p. 342, emphasis added)

International Aid, Subsidized Credit and Other Assistance

For much of his professional career Hla Myint was writing at a time when, amongst development economists and the governments that they advised, “planning” of various forms and scope were the order of the day. This was certainly the case in Myanmar, in a mild and democratic form under U Nu’s Pyidawtha Plan, implemented starting in 1952, and then disastrously so under the attempt at complete central planning of Ne Win’s road to socialism.24 Both variants were, in Hla Myint’s view, symptomatic of an affliction that he often described, with respect to Myanmar but elsewhere too: of an “over-reaction” against “colonial laissez-faire”.25 As this article makes apparent in these pages, however, Hla Myint was writing in a very different tradition, that of classical economics, and with a very different mindset. In 1964, at a time when planning was still in the ascendency, he wrote,

… direct bureaucratic planning by the government is a very cumbrous and inefficient method of rationing scarce resources and coordinating the plans of different sectors of the economy. Beyond a certain point the difficulties and delays in coordinating the different types of direct controls tend to paralyze economic activity, even in countries with a well-developed administrative system. (Hla Myint 1964, p. 144)

Likewise rejecting the idea that governments were needed to take a “pioneering lead” in the early stages of economic development, when, allegedly, the private sector was reluctant to invest in new and potentially risky areas, he opined that “in practice, the expansion of the public sector in some underdeveloped countries frequently takes the opposite pattern — of nationalizing or taking over the concerns which have already been successfully operated by private enterprise” (Hla Myint 1964, p. 145; emphasis added). At the time Hla Myint wrote these words, such “nationalizing” was hitting its stride in Burma. The state was expropriating all manner of enterprises, from

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the commanding heights of industry to local stores (Mya Maung 1991, p. 122; Turnell 2009, p. 229). The pattern was to be sadly a familiar one in the decades ahead.

Hla Myint’s approach to the question of international aid was one marked by scepticism. Writing in 1964, he acknowledged that “advanced” countries had both the ability and, in many cases, the political desire to provide aid, but they shirked the main contribution that they could make to development. This contribution would be simply to remove “the various trade obstacles” (Hla Myint 1964, p. 150) that they had put in place against the exports — especially the agricultural exports — of developing countries. Against this failure, he argued, “the conventional preoccupation with the problem of increasing international aid to the underdeveloped countries frequently distracts attention from some of the more important problems of economic development” (ibid.).

Hla Myint’s attitude to aid was consistent with his broader economic philosophy of course, as was his approach to what might be called “corporate welfare”, whether for foreign or local business. Regarding the former, Hla Myint always argued that foreign investors were “less influenced by the ‘hand out’ of tax concessions than by the factors which affect the total business environment” (Hla Myint 1972, p. 101). The latter were, in essence, elements of the institutional environment discussed above. They included, in Hla Myint’s formulation, not only the “bureaucratic controls and administrative inefficiency which hinder day-to-day running of business”, but also, “the longer-term sense of security and freedom from political uncertainties which enable them [business people] to make long-term business decisions” (ibid.). The latter virtues were long in gestation, of course, but Hla Myint was far from pessimistic about inculcation — a view that allows some optimism, perhaps, for the situation in Myanmar today.

Some of the Southeast Asian countries already have achieved high reputations in this respect, based on their past records. Others may be induced to follow the path when it is realized that this “intangible asset” of confidence and goodwill is essential for the expansion of foreign investment. To build it up, a country

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should follow a policy of enlightened self-interest and refrain from snatching at short-run gains for the sake of the more important longer-run benefits. (Hla Myint 1972, pp. 101–2)

Similarly, assistance to local business — as, for example, in the form of subsidized credit — was, in Hla Myint’s calculation, to be avoided. In Burma, state-subsidized credit brought about the gradual decline of the country’s financial sector, which would collapse completely following its full nationalization under military rule from 1962. With this experience in mind, he wrote:

This type of policy has been tried in some countries in the past to promote industrialisation, with very unfortunate consequences. Firstly, those who are able to obtain loans at artificially low rates of interest are tempted to employ excessively capital-intensive methods of production using too little labour. Secondly, by keeping down the rate of interest below the level which equates the demand with supply, an excess demand for credit is generated, and government agencies have to take an increasing part in rationing loans among the borrowers. By accident or design, such a mechanism tends to favour bigger enterprises, if only through the fact that the small man is unable to cope with the complexities and delays of administrative procedures. Finally, artificially low rates of interest discourage saving, especially where the real value of savings is quickly eroded by inflation. (Hla Myint 1971, p. 49)

No Ideologue

To the reader primed to identify the whiff of doctrine, it might be worthwhile at this stage to point out that Hla Myint’s championing of “the market” over “the plan” was no reductive impulse on the part of a free-market ideologue. He was long, and remains today, critical of “neo-classical” abstraction, and of the idea that free markets alone are sufficient.

Formal international trade theory tends to assume that once trade distortions are removed, a country’s potential comparative advantage emerges automatically through the workings of a well-coordinated market system and a fully-developed institutional framework. But before a developing country can convert its abundant labour supply into a comparative advantage in labor-intensive manufactured exports, two crucial assumptions must be

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fulfilled. First, agricultural productivity has to be raised to keep wages down and to release labour for manufacturing. Second, productivity in manufacturing, relative to the low wages, must be increased, to gain a competitive advantage in the world market for labor-intensive manufactures. Both conditions require great improvements in the domestic institutional framework. (Hla Myint 2001, p. 523)

As we have seen, improvements in the domestic institutional framework will, in Hla Myint’s conception, come about in part from the opening of an economy to trade, but there is also a crucial role for government. To illustrate this point, Hla Myint once again employed the examples of South Korea, and Taiwan, in which he argued that “less well appreciated” active government policies had raised the productivity of all factors in rural areas.

… by improving social infrastructure and by building up organizations and institutions designed to cater for the needs of small farmers and small industrialists widely dispersed over the countryside. These policies are not only important for Korea and Taiwan, they are also relevant for the application of economic theory to developing countries. (Hla Myint 2001, pp. 524–25; emphasis added)

Practical Consequences

Hla Myint’s theoretical contributions formed part of an intellectual framework that, as briefly noted already, was set against an erstwhile dominant discourse favouring state-directed planning as the vehicle to deliver growth and development. In Burma, Hla Myint’s framework gave both context and direction to the study of economics at the University of Rangoon, where — from 1948 to the mid-1960s, when many scholars were forced to flee Burma — a cohort of first-class economists steeped in the best scholarly traditions emerged in his wake. Ronald Findlay, Khin Maung Kyi, Mya Maung, U Thet Htun, Aye Hlaing, Myo Nyunt, U Myint — were all of this “school”. With the aforementioned U Tun Wai and R.M. Sundrum, all would pit their convictions and intellects against the prevailing ideology of Burma’s and then Myanmar’s governments from the 1950s into the twenty-first century. 26

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In contrast to what happened in Indonesia, a country that has at times been something of a role model for Myanmar’s military leaders, this cohort of highly capable economists would not gain the ear of government in the manner of a “Berkeley mafia”.27 Indeed, most would be vilified and forced to leave the country. The economics of dirigisme would continue, even as Hla Myint’s ideas formed part of the intellectual armoury with which other Southeast Asian nations pursued export-led growth models (Mya Maung 1991; Tin Maung Maung Than 2006; Myat Thein 2004; Dutt 2005).

The Return of the Economist

On 12 July 2013, the New Light of Myanmar published a full-page letter warning of the dangers of a new “Farmers’ Protection Bill” then before the country’s parliament. The letter was written by Hla Myint, and published in a newspaper that had been the mouthpiece of successive Myanmar governments “in the public interest” (Hla Myint 2013). It was Hla Myint’s first public intervention into the public-policy debate in Myanmar for fifty years.

Of course, that such a letter could appear in the New Light of Myanmar at all was a sign of how much, in certain respects at least, the Myanmar of 2012 was a different place to that of just a few years earlier. Ruled now by a quasi-civilian government headed by President Thein Sein, the hand-picked successor to the previous military ruler General Than Shwe, Myanmar was still well short of being a functioning democracy. Human rights abuses continued in the country, political prisoners (albeit a smaller number than previously) remained locked up, and ethnic conflict was increasing. The latter was partly stirred up by groups within the governing apparatus, not least to throw a spanner in the reformist works. And yet some political reform had advanced, economic reforms were at last partially being rolled out, and, of most relevance here, the press was largely free to talk about all of this.

Hla Myint’s letter, written at the urging of old friends and colleagues inside and outside of the country, appeared in the context

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outlined above. More specifically, he penned it in response to a law that threatened to derail Myanmar’s economic reforms, more or less from the outset. At the centrepiece of the “Farmers’ Protection Bill” (FPB) was a scheme under which the state would guarantee a minimum rice-price for Myanmar’s cultivators, to be made manifest by purchases of the crop by the government itself. The objective of the scheme, as the name of the bill implied, was to protect Myanmar’s farmers by establishing what was, ostensibly, a minimum income scheme delivered through state procurement.

The FPB and the minimum rice-price arrangements that were at its core seemed unpleasantly familiar to Hla Myint, however well-intentioned its sponsors may have been. In so many ways, they resembled both the basic propositions of the old SAMB and, in a contemporary twist, a very similar scheme in Thailand. Even as the FPB was being tabled in Myanmar’s parliament, that latter country’s “rice pledging” scheme was placing in jeopardy not just Thailand’s rice sector, but its financial stability.28 The FPB, Hla Myint reasoned, threatened to have similar consequences for Myanmar, and he reminded his readership of past experiences with such arrangements, of corruption, inadequate storage and crop spoilage. He wondered in his letter whether the new state purchasing apparatus had mastered more efficient buying and storage arrangements than those of the past. If not, he declared, “I shudder to think how it would cope with the vastly larger amounts of rice which would be pouring into the government buying stations” (Hla Myint 2013).

As an alternative to state purchasing, Hla Myint characteristically advocated in his letter market liberalization as the solution to decades of exploitation of Myanmar’s farmers. In a private memorandum for policymakers written to bolster the arguments of his published missive, he celebrated the way in which the beans and pulses sector had been reinvigorated through market reform.

… we should liberalize the rice marketing system to allow private traders to compete in buying rice from the farmers. This will result in the farmers receiving a price related to the world market price for rice to give them the necessary economic incentive to

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expand rice exports. The stimulating effect of giving the farmers the economic incentive under free market conditions can be seen in the phenomenal growth of the exports of pulses and beans after 1988. This was the only agricultural product left alone without government intervention. By the 1990s, the exports of pulses by value had overtaken rice exports and become the largest agricultural export of the country.29

Given the degraded state of rural infrastructure in Myanmar, however, and the lack of support farmers received, Hla Myint added that liberalization on its own was not enough.

The reform in the rice marketing system should be followed up by various measures to increase rice output, ranging from measures to raise agricultural productivity, better provision of credit facilities for farmers, and the increased investment in irrigation, flood controls, and rural transport and communications.30

According to Hla Myint, the FPB was a “populist appeal” that left out what his published letter described as “the poorest section of the agricultural population”. This group, which — Hla Myint noted — was estimated to be as high as “10 million”, consisted primarily of landless agricultural labourers. For these people, such a policy guaranteed only that the prices that they would pay for food would rise; their poverty would deepen as a consequence (Hla Myint 2013).

Most significantly of all, Hla Myint argued in his letter to the New Light of Myanmar that the FPB ignored the real problem of Burmese agriculture. This problem was not low crop prices or the oft-abused attribution of “exploitation of the peasant farmers by the moneymen”, but rather “unnecessary government regulations and out-dated laws … causing delays and providing opportunities for bribe taking” and pushing up transactions costs. The solution — “the liberalization of the economy, abolishing unnecessary regulations, is a ‘costless’ way of reducing transactions costs and improving Myanmar’s marketing and credit system”. Such policies “may not have the populist appeal of a minimum guarantee rice-price policy”, but, “if successfully carried out, the policy to lower the transport

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and transaction costs would not only increase the price which the up-country farmers would receive for their paddy, but would also have favourable effects on the country at large” (Hla Myint 2013).

Finally, in his letter Hla Myint worried that such a policy as the FPB could “unwittingly undermine” the newly available comparative advantage that the country had in labour-intensive manufacturing — that is, its low-cost base, centring upon lower labour costs than its peers in Southeast Asia. Such an advantage was especially critical in this “new age” of manufacturing, in which trade did not just take place amidst finished products, but as inputs into vast supply chains of intermediate goods, the production of each of which was predicated operating in the lowest-cost location (Hla Myint 2013). Again, in a later private memorandum written to support the letter’s contentions, he outlined the compelling logic of what was possible.

In the post-war period, the rise of the Asian “Tiger economies” such as Taiwan and South Korea had demonstrated how poor low-wage countries could launch themselves into rapid and sustained economic growth by expanding labour-intensive exports of manufactures. By the 1970s these countries had become labour-scarce countries, and with rising wages at home, they sought to relocate the more labour-intensive type of manufacturing in the Southeast Asia countries with lower wages, such as Thailand and Malaysia with stable economic conditions which welcomed foreign direct investment. Thus Thailand and Malaysia were able to diversify their exports, producing both primary products and manufactured products, starting with the simpler manufactures, gradually moving up to the export of more complex goods.31

The campaign against the FPB, waged both in public — as through Hla Myint’s letter to the press — and behind the scenes by economists and other reformers within the Thein Sein government, was largely successful.32 In September 2013 the FPB was substantially rewritten to replace the certainty of a system of state purchases of the rice crop with a more modest provision stating that such an arrangement “may” be put in place at some time. The FPB was also renamed. It became the “Protecting Rights and Enhancing Economic Welfare of Farmers Law”. Under that name, the bill was promulgated by

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Myanmar’s parliament, the Pyingdaungsu Hluttaw, on 3 October 2013 (Su Phyo Win and Kean 2013).

Beyond the FPB

Hla Myint’s letter on the FPB marked his most public intervention in the arena of policy advocacy in Myanmar since the establishment of the Thein Sein government. As noted above, however, Hla Myint has also been active in providing advice to policymakers and advisors in Myanmar via a series of private memoranda and other forms of correspondence. His advice has ranged across many areas, but it has all been in line with his time-honoured and consistent counsel in favour of greater openness and economic freedom. Encouraging foreign direct investment (FDI) has been a focus, but on this score Hla Myint has sought to emphasize that what the country needs is FDI with the maximum “spread effects”. He defined such effects as “broadly to include the Keynesian multiplier effect, the development of the ‘linkages’ between the ‘up-stream-downstream’ stages in the chain of manufacturing, and the indirect educative effect of contact with the outside world economy”.33 FDI in labour-intensive manufacturing, tourism and agriculture had the greatest spread effects. FDI that brought with it minimal spread effects was especially concentrated in such extractive sectors as energy, mining and logging, despite the fact that they were Myanmar’s largest foreign-exchange earners. Despite that distinction — only a virtue if the resultant revenues were used in socially productive ways — the extractive industries brought with them not insignificant problems. Based on the exploitation of exhaustible natural resources, they were often environmentally damaging and dangerous to work in. Further, in Hla Myint’s analysis, they had “a limited spread effect on the rest of the economy”.34

Institutional Framework … and Time

Of course, and corresponding to the stress that he has placed on the issue throughout his professional life, Hla Myint has continued to emphasize that Myanmar’s economic development will hinge ultimately upon the development of its institutional environment.

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Noting that rebuilding roads, bridges and other physical infrastructure was slow and difficult enough, he has argued that the task of rejuvenating the institutional framework required for an efficient market economy was immensely harder, especially after decades of being “repressed and undermined by the military government’s misguided policies”. Moreover, it

… cannot be relied on to take place according to a set timetable. It involves the improvement in the administrative capability of the government and judicial system, the general level of education of the people and changes in their mental habits, including their attitude towards bribe giving and taking.35

On this and many other aspects of Myanmar’s reform programme, Hla Myint has written that he does “not share the wild optimism of some who think that [Myanmar], with the advantage of a ‘late comer’, would leapfrog into rapid growth, catching up with the more developed Southeast Asian countries in a relatively short time”.36 Yet neither is he a counsellor of despair. He takes, he has written, “an attitude of cautious optimism”, and has “hope that through a process of learning by doing and technical assistance from abroad, [Myanmar will] progress slowly but sufficiently enough to carry her beyond the dangers of reverting to her previous economic isolation”.37 But all of this will require patience. As he warned in 1973, and at a time when current events in Myanmar must have seemed inconceivable, during economic reform

… tensions can arise both from low material incomes and from the discontent created by “the revolution of rising expectations”, impatient for quick results. Economic development plans, however, are generally of a long-term nature, involving a considerable time-lag before their fruits are ready. In the meantime, they may create a considerable amount of dislocation, discomfort and deprivation for the people without producing quick benefits. Contrary to public belief, the vigorous pursuit of economic development policies designed to raise the level of material income in the future may frequently intensify, rather than reduce, the existing level of discontent. (Hla Myint 1973, p. 16)

Wise counsel then. Even wiser now.

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A Coda

As will be apparent from the preceding discussion, Hla Myint is held in the highest esteem in the global economics profession, to which he has been a leading contributor for over seven decades. He is held in equal esteem by that small cohort of Myanmar economists who, down the decades, have tried to keep alive the idea that the country can redeem past mistakes and resume its rightful place amongst its peers in Southeast Asia. In 2000 a group of these latter produced a “Vision and Strategy” for their country which, apart from deserving to be far better known, extolled an outward-looking policy regime for Myanmar, one much like that being fitfully tried today. In so doing, they paid tribute to Hla Myint, and to the “what might have been”.

[Hla Myint’s] writings on economic development established him as one of the great pioneers of the field. In particular, he consistently advocated, long before it became an accepted part of the conventional wisdom, the role of export-oriented strategies as the most powerful “engine of growth” for developing countries in South-East Asia and throughout the world. Burma today would be a vastly more prosperous country had she only heeded the advice of this distinguished native son at the very outset of her rebirth as an independent nation in 1948. (Khin Maung Kyi et al. 2000, p. 103)

Conclusion

Fifty years of military rule in Myanmar brought with it many deleterious effects to the country’s economy. Not the least of these was the loss of “human capital”. This loss had many manifestations, including effectively sending many of Myanmar’s best and brightest into exile. Hla Myint stands in the first rank of these exiles, and his loss to Myanmar was great. His ideas were part of the intellectual framework for many of the policies subsequently adopted by Asia’s tiger economies, and it is thus no little irony — indeed a cruel irony — that Myanmar so comprehensively ventured in other directions. Now, amidst great political change, and the prospect of more to come, Myanmar may be in a position to redeem its past promise,

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an outcome that, not least, the embrace of the ideas of its greatest economist will hasten.

Sean Turnell is Associate Professor in the Department of Economics, Building E4, Macquarie University, Eastern Road, North Ryde NSW 2109, Australia; email: [email protected].

NOTES

1. Much of this paper is based on interviews with Hla Myint undertaken by the author since 2011, both in person and via email correspondence, and on private memoranda prepared by Hla Myint, both for the author and for others, across the same period. These endnotes cite such sources.

2. Most media coverage of this event focussed on the appearance of Joseph Stiglitz in Myanmar, winner of the 2001 Nobel Memorial Prize in Economics, and the only non-Burmese member of the panel (see, for example, Deed 2012).

3. The account of Hla Myint’s early life draws on the author’s interview with Hla Myint, 20 August 2012, Bangkok.

4. There is, sadly, very little information on the life and times of Harro Bernadelli. The best source we have on him is an entry by Mark Donaghue in a biographical dictionary of Australian and New Zealand economists. As with most foreigners, he was forced to flee Myanmar during the Japanese invasion in 1942, and never returned to the country. Ultimately he ended up at the University of Otago in New Zealand (hence the dictionary entry), where he continued to work on a great range of issues. He died, in Auckland, in 1981.

5. Author’s interview with Hla Myint, 20 August 2012, Bangkok. 6. For more on Swithinbank and his impact on Keynes and other members

of the Bloomsbury group, see Skidelsky (1983, pp. 168–69, 265). 7. Author’s interview with Hla Myint, 20 August 2012, Bangkok. 8. For a feel of what life was like at the LSE during the period of its

evacuation to Cambridge, see Howson (2011, pp. 342–86). 9. Hla Myint, personal correspondence with the author, 16 April 2014.10. Amongst Hla Myint’s colleagues at Manchester was a young native of

Breslau called Heinz Arndt (1915–2002), later professor and head in the Department of Economics, Research School of Pacific Studies, the Australian National University, and a well-known scholar of economic development and a trailblazer in the study of the economies of Indonesia and Southeast Asia more generally.

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11. Author’s interview with Hla Myint, 20 August 2012, Bangkok.12. Hla Myint, personal correspondence with author, 2 July 2012.13. This is not to say the Americans had an easy time of it either. For more,

see Walinsky (1962).14. Author’s interview with Hla Myint, 20 August 2012, Bangkok.15. Hla Myint, personal correspondence with the author, 2 July 2012. The

following three sentences also quote this same source.16. Hla Myint, personal correspondence with the author, 1 August 2013.17. While at Oxford in this period Hla Myint returned to Burma briefly in

1955 to serve as a part-time “visiting adviser”, a post created by U Nu in the context of his new found celebrity as the author of a significant UN study (United Nations 1951) on international economic stability. That study, as Hla Myint told the author, “re-established [his] credibility” with the Burmese government. Matters were little changed, as regarded the reception of his advice, and rather worse as regarded the country’s underlying economic circumstances. It was suffering from low rice export prices, which exposed the more ambitious elements of the government’s plans while at the same time wreaked havoc with its budgets. Hla Myint soon returned to Oxford.

18. Hla Myint, personal correspondence with the author, 2 July 2012. In 1994 Gerald Meier celebrated Hla Myint’s efforts to employ the classical tradition in the field of development by publishing the “lecture outline” for Hla Myint’s “Introduction to the Economics of Underdeveloped Countries”, taught at Oxford in the Michaelmas and Hilary terms, 1952. See Meier (1994, pp. 188–91).

19. Hla Myint, personal correspondence with the author, 2 July 2012.20. The section on Hla Myint’s experience is informed by the author’s interview

with Hla Myint, 20 August 2012, Bangkok.21. In a personal memorandum sent to the author on 22 June 2012, entitled

simply “J.S. Furnivall”, Hla Myint referred to Furnivall as “the man I most admire”. This same memorandum is the basis for most of the information in the entirety of this section.

22. Furnivall’s idea that there existed in Burma a “plural society” structured along racial and economic lines was first given formal expression in Furnivall (1931), but more fully explored in Furnivall (1948). The quotations here and in the remainder of the paragraph are from Hla Myint’s memo on J.S. Furnivall.

23. The seminal work on what is usually referred to as “New Institutional Economics” is North (1990). The underlying ideas in this book, a compilation of North’s work over many years, share many traits with those of Hla Myint more or less across the same period. Hla Myint did not formalize his thinking about institutions in a “stand-alone” way, with

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the result that — in the view of this author — his contributions to the field have been given insufficient attention from economists. The Nobel Prizes alluded to here are those awarded to North himself, in 1993, and perhaps even to Stiglitz, in 2001.

24. For more on each of these episodes of state planning, see Tin Maung Maung Than (2006), Myat Thein (2004), and Turnell (2009, pp. 182–85, 191–92, 216–19).

25. For more on the responses in different countries to the legacy of colonial economic policies and Hla Myint’s analyses of those responses, see Hla Myint (1967).

26. Ronald Findlay would go on to fame as a member of the Department of Economics at Columbia University and figures with Hla Myint as Myanmar’s other economist of truly international renown. Mya Maung (Boston College), Khin Maung Kyi (National University of Singapore) and Myo Nyunt (Edith Cowan University, Western Australia) would all be forced to leave Burma to pursue their academic careers. U Thet Tun would head the country’s statistical service, before joining its diplomatic corps. U Aye Hlaing soldiered on at the University of Rangoon, where he produced a series of important works on Myanmar’s economy (notably Aye Hlain 1964). U Myint would go on to work in various UN agencies, and would be one of the leading players in the economic reforms enacted by the Thein Sein government starting in 2011. A subset of these economists are celebrated in Brown (2013), which places insufficient stress on the extent to which they disagreed with the policies of the governments that they tried to serve.

27. The name given to that group of U.S.-trained Indonesian economists — which included Widjojo Nitisantro, Mohammad Sadli and Ali Wardhana — who edged Indonesian President Soeharto in the “direction” of market reform (McCawley 2011).

28. One of the best analyses of Thai policy appears in Hla Myint’s published letter to the New Light of Myanmar (Hla Myint 2013).

29. This memorandum, entitled “Two Important Policies for the Economic Development of Burma” and dated 1 August 2013, was furnished to the author by Hla Myint in personal correspondence, 1 August 2013.

30. Ibid.31. Ibid.32. For a taste of the “public” campaign, see Soong (2013).33. Hla Myint, personal correspondence with the author, 2 July 2012. Hla

Myint’s work had long placed emphasis on these three effects, which are best summarized in Hla Myint (2001).

34. Ibid.35. Ibid.

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36. Hla Myint, personal correspondence with the author, 20 August 2012, on which the discussion that follows also draws.

37. Hla Myint, personal correspondence with the author, 20 August 2012.

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Hla Myint, Myanmar's _Classical_ Economist