Confessions of an Economic Hit Man

Saudi Arabia made many careers. Mine was already well on the way, but my successes in the desert kingdom certainly opened new doors for me. By 1977, I had built a small empire that included a staff of around twenty professionals headquartered in our Boston office, and a stable of consultants from MAIN’s other departments and offices scattered across the globe. I had become the youngest partner in the firm’s hundred-year history. In addition to my title of Chief Economist, I was named manager of Economics and Regional Planning. I was lecturing at Harvard and other venues, and newspapers were soliciting articles from me about current events.¹ I owned a sailing yacht that was docked in Boston Harbor next to the historic battleship Constitution, “Old Ironsides,” renowned for subduing the Barbary pirates not long after the Revolutionary War. I was being paid an excellent salary and I had equity that promised to elevate me to the rarified heights of millionaire well before I turned forty. True, my marriage had fallen apart, but I was spending time with beautiful and fascinating women on several continents.

Bruno came up with an idea for an innovative approach to forecasting: an econometric model based on the writings of a turn-of-the-century Russian mathematician. The model involved assigning subjective probabilities to predictions that certain specific sectors of an economy would grow. It seemed an ideal tool to justify the inflated rates of increase we liked to show in order to obtain large loans, and Bruno asked me to see what I could do with the concept.

I brought a young MIT mathematician, Dr. Nadipuram Prasad, into my department and gave him a budget. Within six months he developed the Markov method for econometric modeling. Together we hammered out a series of technical papers that presented Markov as a revolutionary method for forecasting the impact of infrastructure investment on economic development.

It was exactly what we wanted: a tool that scientifically “proved” we were doing countries a favor by helping them incur debts they would never be able to pay off. In addition, only a highly skilled econometrician with lots of time and money could possibly comprehend the intricacies of Markov or question its conclusions. The papers were published by several prestigious organizations, and we formally presented them at conferences and universities in a number of countries. The papers—and we—became famous throughout the industry.²

Omar Torrijos and I honored our secret agreement. I made sure our studies were honest and that our recommendations took into account the poor. Although I heard grumbling that my forecasts in Panama were not up to their usual inflated standards, and even that they smacked of socialism, the fact was that MAIN kept winning contracts from the Torrijos government. These contracts included a first—to provide innovative master plans that involved agriculture along with the more traditional infrastructure sectors. I also watched from the sidelines as Torrijos and Jimmy Carter set out to renegotiate the Canal Treaty.

The Canal negotiations generated great interest and great passions around the world. People everywhere waited to see whether the United States would do what most of the rest of the world believed was the right thing—allow the Panamanians to take control—or would instead try to reestablish our global version of Manifest Destiny, which had been shaken by our Vietnam debacle. For many, it appeared that a reasonable and compassionate man had been elected to the U.S. presidency at just the right time. However, the conservative bastions of Washington and the pulpits of the religious right rang with indignation. How could we give up this bulwark of national defense, this symbol of U.S. ingenuity, this ribbon of water that tied South America’s fortunes to the whims of U.S. commercial interests?

During my trips to Panama, I became accustomed to staying at the Hotel Continental. However, on my fifth visit I moved across the street to the Hotel Panama because the Continental was undergoing renovations and the construction was very noisy. At first, I resented the inconvenience—the Continental had been my home away from home. But now the expansive lobby where I sat, with its rattan chairs and paddle-bladed wooden ceiling fans, was growing on me. It could have been the set of Casablanca, and I fantasized that Humphrey Bogart might stroll in at any moment. I set down the copy of the New York Review of Books, in which I had just finished reading a Graham Greene article about Panama, and stared up at those fans, recalling an evening almost two years earlier.