Economic Policy Review ISSN 1313 - 0544

Sir Alan – the missing advisor

Author: Krassen Stanchev / 05.02.2009
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Sir Alan Walters died on January 3rd this year at the age of 82.

He was given the knighthood in 1983. After his death "The Economist" called him "the monetary guru of Mrs. Thatcher", to whom he was a personal economic advisor.  As such he contributed to the program that won her elections in 1979, but also her resignation in 1990. (That is when a joke was going around that when in Sofia there are strikes; in London they are submitting resignations.)

Sir Alan comes from a working class mid-England family; he is the son of grosser traveling through the jobless regions, who was intellectually fond of communism and began working at the age of 15 as an operator of a conveyor in a shoe factory. In 1951 he graduated from Nuffield College in Oxford. When I had the occasion to work there for a short period of time at the end of 90's (together with Luisa Perotti from INSEAD), my personal impression was that the professors were classic liberals in the European sense of "liberal".  It is known that during the 50's the only classic liberal economist in Nuffield was professor Terrence Gordon and that until the end of the 80's the free market economy is perceived in the West, in the best case, as a harmless form of madness.  

At that time the narrow economic specialty of Sir Alan Walters was transportation. In that area he is know for the introduction of road tolls in Singapore (1952) and his participation in the selection of the site for Gatwick airport (1968). During 1959 Sir Alan Walters is a visiting professor at Chicago University, where he finally reaches the conclusion that quantity of money in the economy has a significant effect on contracts and prices, concluded in it. After fourteen-fifteen years of publications and lecturing in Birmingham and at the London School of Economics, and after obtaining a position as a professor of political economy at John Hopkins University in the US (1976), Walters' ideas are sufficiently popular among the British Tories. (His friendship with MP's helped that.) 

True to his convictions that during inflation bad decisions follow, causing higher unemployment, Sir Alan Walters formulates the tree whales for recovery of the British economy: control over the money supply, reduction of the expenses and the taxes, and privatization. These political measures were undertaken under the conditions of the recession at the end of the 70's. The appointment of Sir Alan Walters as an advisor is taken as a slap in the face of the Bank of England, the labor and the trade unions.  The worst offence was by the economists. 394 representatives of that profession claim in a famous letter to The Times that the advisor could not be right. However, two years later the opposite is proven and Alan Walters is given knighthood. Under the conditions of the current recession it seems that everybody in the United Kingdom and the USA (and Russia, and Ukraine, and Kazakhstan) have forgotten the conclusions from that experience, the main among being the maxima: "you could not spend the money with which the entrepreneurs would get you out of the crisis".

In April 1993 Sir Alan accepted my invitation to become a member of the Consultative Board of the Institute. Here is what I owe to my acquaintance with him. 

In April 1993 he encouraged me to introduce myself to Lord Harris of Highcross, who at that time was a key figure at the Institute for Economic Work (IEW) in London ( At that time I did not meet Lord Harris, but understood how to manage such a brain trust and got in contact with the Centre for Research of Post-Communist Economies ( and its director Lisl Biggs Stevenson. From its foundation until now the centre resides in the building of IEW. Actually I owe to Sir Alan my friendship with the Centre, following the example of IEW, as far as we could, the acquaintance, the friendship and work with Lisl, Ljubo Sirc, John Blundell, Lord Harris and many others. (By the way Lord Harris is the other well known advisor to Margaret Thatcher. He is also with worker's background. Waclaw Klaus calls him Lord Harris from Central Europe.)

In 1994 I managed to convince Sir Alan to come to Bulgaria to advise the Institute and president Zhelev in the area of privatization. The idea was to convince the President to veto the changes in the Privatization Bill and some other special bills that professor Berov's cabinet was using to introduce the scheme for mass privatization. Due to the floating majorities and the approaching summer holiday the veto had some chances to stop the process. All arguments up until then proved to be without any result and I wanted to use the authority of Sir Alan. Veto was not applied. This fact has its explanations and excuses. Solomon Passi helped me to organize a public lecture of Sir Alan Walters entitled "The difference between political and economic freedom", which took place in the Military Club (I hope that a recording of this lecture exists somewhere.)

During 1996 Sir Alan published a mind-boggling paper for the countries in transition entitled "Why the IMF and the World Bank should be closed". It was the reason for a new discussion about money, the currency boards in Hong Kong and Argentina, which during 1997 led to the second participation of Sir Alan in Bulgarian reforms.  

One of the ideas for an unpopular or at least forgotten reform at that time was to eliminate the Bill on State Guarantees of the banking accounts from the time of Mr. Videnov and to replace it with something sensible. Sir Alan lent me again his authority in order to prove that guaranteeing the savings may be helpful, but should not be an obligation, rather than a free choice in a competitive environment, similar to the insurance.  Among all participants in the discussions only Emil Harsev and I were behind this idea, which was developed in a short electronic letter.

I think that the following developments in both occasions prove that Sir Alan Walters was right. It is more important, however, that today there are no such advisors even in the United Kingdom.