October 2015 newsletter – Ajit Singh

Ajit Singh was something of a contradiction: atheist, yet proud Sikh, radical challenger of orthodoxy, yet devoted Fellow of Queens’ College, Cambridge for over fifty years. Above all, however, he was an outstanding academic economist. His initial research focused on the modern corporation and stock markets and their role in economic growth. At first he worked on advanced economies but subsequently made major contributions to the study of deindustrialisation, long-term structural change and financial markets in both developed and developing economies. His research led him to be an implacable critic of the neo-liberal consensus that budget austerity, deregulation, privatisation and open market policies are essential to stability and growth.

Singh was born in 1940 in Lahore in pre-partition India and his early education was at Punjab University. In 1959 he won a scholarship to complete an MA in Economics at Howard University, Washington D.C. From there he moved to Berkeley in 1960. He was taught by, and worked with Harvey Leibenstein, Tibor Scitovsky and Dale Jorgensen, but the major influence on his work was the Cambridge economist, Robin Marris. At that time Marris was working on his book, The Economic Theory of Managerial Capitalism and Singh was his research assistant during his visit to Berkeley in 1960/61. This collaboration led to Singh choosing takeovers as the topic of his PhD dissertation, later published as Takeovers: their relevance to the stock market and the theory of the firm (1971).

Marris invited Singh to Cambridge and he was appointed a research officer at the Department of Applied Economics (DAE) in 1963; and then elected to an assistant lectureship at the Faculty of Economics and Politics and to a fellowship at Queens’ College in 1965.

In Cambridge, Singh formed a close working relationship with Geoffrey Whittington. Together they pioneered the use of computer based analysis of large scale corporate databases, which they also helped create, and which underpinned decades of subsequent research by themselves and others. The publication of Takeovers was delayed by work on the book they co-authored, Growth, Profitability and Valuation (1968).

The analysis in Takeovers is rooted in theories of the firm proposed by William Baumol, Oliver Williamson and Marris. These were linked to the 1930s work of Berle and Means on the principal-agent problem in corporations with dispersed share ownership and professional management. A pursuit of increased size for reasons of personal aggrandizement and higher rates of remuneration would, it was argued, be at the expense of profits.

In these circumstances Marris had hypothesized that takeovers would constitute a market for corporate control which would select the fittest companies for survival, act as a curb on managerial cupidity, and secure economic efficiency (a view also championed by Harvard’s Michael Jensen). Singh demonstrated conclusively that these rosy conclusions were false. By careful empirical study of takeovers, he revealed that it is not possible to distinguish between the characteristics of acquired and non-acquired firms, other than that there is a tendency for smaller firms to be taken over. Equally, both the short- and long-run impacts of takeovers on share prices suggest that, on average, takeovers lead to substantial loss of wealth for shareholders of the acquiring company. Firms seeking to avoid takeover were better off pursuing increased size rather than increases in long-term profitability. His subsequent research over several decades with other colleagues at the DAE and at the Centre for Business Research (CBR) demonstrated that the induced myopic behaviour of companies too narrowly focused on their short-term stock market valuation and the threat of takeovers could reduce economic competitiveness.

Singh’s interest in industrial structure and performance took a more macro-economic focus in the debate (stimulated initially by Nicholas Kaldor) over the de-industrialisation of Britain. Defined as simply a declining share of manufacturing in GDP (a characteristic shared by all developed countries), empirical research on the phenomenon lacked analytical precision prior to the publication in 1977 of Singh’s path-breaking article in the Cambridge Journal of Economics, ‘UK industry and the world economy: a case of de-industrialisation?’

Singh argued that ‘given the normal levels of the other components of the balance of payments, we may define an efficient manufacturing sector as one which (currently as well as potentially) not only satisfies the demands of consumers at home, but is also able to sell enough of its products abroad to pay for the nation’s import requirements. This is, however, subject to the important restriction that an 'efficient' manufacturing sector must be able to achieve these objectives at socially acceptable levels of output, employment and the exchange rate.’ This characterisation of efficiency is particularly pertinent today, when, with North Sea revenues exhausted and net property income from overseas sharply reduced, the UK’s deficit on manufactured trade is 5 per cent of GDP (having been 1.5 per cent 20 years ago), contributing to a balance of payments deficit of 6 per cent of GDP. Current levels of output and employment are sustained only by the persistent accumulation of foreign debt.

In 1982 Singh was diagnosed with Parkinson’s disease, a tragedy for anyone, but particularly for someone who relied on all of his physical, as well as mental, powers. His first reaction was to travel the world experimenting with treatments, but quickly came to terms with the need to manage the condition in a manner that least limited his career. For the next thirty years he took on a daily workload and travel schedule that would have given difficulty to a healthy young man. It was remarkable feat of willpower that lasted, without self-pity, until the very end.

From the nineties onwards his work concentrated increasingly on developing economies and most recently, with colleagues at CBR, on the link between systems of corporate and labour law and economic development. The latter challenged the then dominant pre-Crash view that financial systems would converge towards liberal deregulated stock market based forms such as the US and away from more bank based civil law systems such as prevail in Germany. His earlier studies of corporations and stock markets in developing economies showed that, in contrast with corporations in advanced countries, the rapid growth of newly listed companies is reliant on external sources of finance. He argued that the capital account liberalization advocated under the Washington consensus in the1990s would not be helpful. His concern that this would leave developing countries exposed in times of adverse circumstances proved to be well-founded. This debate, in which he was an early participant, mirrors those taking place in Europe following the financial crisis of 2008.

Singh was appointed to an ad hominem Chair in Cambridge in 1995, and in 2010 to the Tun Ismail Ali Chair in International Finance and Economics at the University of Malaysia, He received the Glory of India Award in 2011 for ‘individual excellence…and for an outstanding contribution for the progress of the nation…and worldwide’.

Singh was committed to the view that economics should be useful and should contribute to the improvement of the human condition. Despite his intellect and status, he was accessible to everyone and had no pomposity. He will be remembered for his loyalty to his friends, his colleagues, his beloved Queens’ College, and to the hundreds of students he taught and mentored over the last fifty years — including the authors of this appreciation.

Andy Cosh, Judge Business School, Cambridge
John Eatwell, Queens’ College
Alan Hughes, Imperial College, London