Posted on 03/22/2016 1:41:27 PM PDT by Uncle Miltie
How the free market protects
Historically, political freedom has followed the emergence of free markets and capitalist institutions. This is because, Friedman notes, a healthy private economy naturally provides a check on the power of the state.
For instance, even though they were officially persecuted, in medieval times Jews still thrived because they could operate as merchants. The Puritans and Quakers were only able to relocate to America because they had built up funds in the comparatively free markets of Britain, despite being lumbered with other restrictions.
Where monopolies and trading restrictions are rife, so is special treatment of one social, racial or religious group over another; the ability to ‘keep people in their place’ remains. In a genuinely free market, economic efficiency is separated from irrelevant characteristics such as skin color or faith. “[The] purchaser of bread”, Friedman remarks, “does not know whether it was made from wheat grown by a white man or a Negro, by a Christian or Jew.” Further, a businessman who favors one group over another will be at a market disadvantage to a businessman who does not, and one who is blind to differences among his suppliers will have more choice from whom to buy and hence lower costs.
During the period of ‘blacklisting’ of Hollywood actors and screenwriters as the result of Senator McCarthy’s anti-communist witch hunts, many writers continued to work anyway, often under assumed names. Without an impersonal market which created a demand for their services, they would have lost their livelihood. In a communist society, Friedman notes, such a thing is impossible since all of the jobs are controlled by the state. Winston Churchill was prohibited from speaking out against Hitler on BBC radio in the years after Hitler came to power, because the matter was deemed too controversial. It is unlikely this would have happened had the BBC not been a government monopoly. Friedman’s message: government often seeks to protect citizens from all sorts of things, failing to see that the ‘invisible hand’ operating in free and open markets – for goods, labor and information – somehow manages to offer much greater protections of personal liberty.
The idea that free markets do this was the exact opposite of what intellectuals were saying through most of the 20th century. The individual was seen to be vulnerable in the face of corporate power, and to need governmental protection. This view evolved out of the horrors of the Great Depression, which was considered to be a terrible failure of the markets. In fact, as Friedman argues in the book, the Depression was largely a governmental failure.
Meddling in the market
Both ‘full employment’ and ‘economic growth’ have been put up as reasons why governments should have more control over the economy. The Great Depression, people invariably say, is surely evidence of the inherent instability of markets left to their own.
In fact, Friedman says, the Depression was caused by government mismanagement. The US government’s Federal Reserve System, through clumsy use of the levers of the monetary system – specifically, not increasing the money supply in the wake of bank collapses - turned what would have been a contraction lasting a year or two into a catastrophe. The ‘mistakes of a few men’ caused untold misery to millions which could have wholly been avoided if the market was truly left to itself. Though he accepts that it is the role of government to create a stable monetary system, the responsibility is a grave one and should be severely limited.
Progress via people, not governments
There is never any shortage of ‘good reasons’ why government should get involved in curing market or social ills. Sometimes, the good intentions are matched with impressive achievements. Friedman applauds, for example, the creation of a US national freeway system, the building of major dams, its public school system, and some public health measures.
However, most of the advances in the American people’s standard of living have arisen from their ingenuity and have nothing to do with government. Prosperity has come despite all the laws and ‘projects’, not because of them. Generally, excess regulations “…force people to act against their immediate interests in order to promote a supposedly general interest”.
Friedman famously includes a list of areas of government intervention which he believed were not justifiable. These include tariffs and import quotas, subsidies to farmers, rent controls, minimum wages, regulation of industries including banks, transport and radio/TV, social security programs making people put aside a certain amount of money for retirement, public housing, licensing of occupations, and conscription in peacetime. While all these policies sound good in theory, in truth they often have the reverse effects that were intended.
For instance, the minimum wage was partly aimed at alleviating poverty of African-Americans; what actually happened was that the unemployment rate of teenage blacks shot up. Public housing was designed to alleviate poverty; instead, it concentrated poverty in pockets. ‘Social security’ policies were intended to provide a safety net for those unable to work, but instead created dependents who might otherwise have contributed to the economy. Friedman’s damning conclusion: “Concentrated power is not rendered harmless by the good intentions of those who create it.”
There are really only two ways a society can organize economic activity, Friedman writes: * Through centralization and coercion; * Through facilitating a marketplace for the trade of goods and services.
The drive towards centralization usually begins in a spirit of good will, but before too long power becomes more important, and ‘the ends justify the means’. Coercion and violence are considered a small price to pay for a glorious dream of equality.
In a free country, however, free discussion and voluntary cooperation are the means towards achieving anything. This may be a slower way to achieve ends, but is a surer and less dangerous. The beauty of markets is the way they allow unanimity without conformity; a direction emerges, but no one has been made to do anything.
Friedman accepts that after World War Two the United States had to centralize and enlarge its military spending in order to defeat the USSR, but dealing with this danger created a back door for a large increase in government’s share of national spending and control. A bigger threat than Russia was the erosion of freedoms and free institutions at the expense of the growing power of ‘the nation’.
Freedom first, equality second
Friedman argues that inequality is always less in capitalist countries. Many will disagree with this, pointing to the vast gaps between say, a corporate executive earning $10,000 a day, and someone who works in a shop earning $20,000 a year. Yet even a low paid person in a capitalist economy, he points out, is better off than the privileged classes were a century ago: They do not have to engage in backbreaking labor, medical care is vastly improved, they have at least basic education, live with modern plumbing and heating, have cars, television, radio, phones and entertainment, all of which the rich and royal of previous times could only have dreamed about. Even if an individual does not seem to do well out of capitalism, he or she still benefits in many ways. In contrast, with stratified social systems and socialism, the ‘goodies’ always seem to go only to those at the top.
The heart of liberal philosophy, Friedman writes, is people having equal rights and equality of opportunity. It does not mean there should be equality of wealth. If all people grow richer in a capitalist system, this is a welcome by-product of freedom, but it is not its purpose. The purpose of a free, capitalist system is the freedom of the individual. What they do with that freedom is their business.
Excellent.
Thank you Milton Friedman, Adam Smith, Fred Hyeck, Blackstone and Mr. Bastiat.
The gifts of your collective intellects live in my children’s minds. Cover to cover. Orally and dictated, With lots of discussion.
The best of our homeschool curriculum in law, government, and economics :^)
So long ago.....:^(
Hayek, if you please.
I wrote a paper on it in college. Not a bad paper, either.
We skipped speelin’. ;^)
I think that there are very few people over the age of 25 who think that socialism/communism will work.
The real world strips away the illusions of socialism/communism.
What we see with people who are older than 25 and still advocating socialism/communism are people who want to get wealthy by bringing in socialism/communism.
The Soviets had their country estates. Mao had his harem of young girls. Castro has his secret pleasure island.
Win. They all imagine they’ll be part of the 1% under socialism: the government apparatchiks who live high while the masses wallow ... and then die comfortably instead of a bullet to the head.
I hereby initiate an informal classic Economic Conservatism list.
I’m going to take up my own challenge and attempt to post historic, informative, intellectually sound, and well argued conservative economics for people to read, learn, discuss and internalize.
In my opinion, we need more straight Economic Conservatives here. I can help do that.
Others will need to chime in and create their own training grounds for other strains of classic conservatism including (but not limited to):
* Social Conservatism
* National Security Conservatism
* Small Government Conservatism
* Fiscal Conservatism (as separate from Economic, i.e. balanced budgets, tax structures, spending restraint, etc.)
Please confirm that you would like to be on my list, and I’ll ping you when I post, no more than once per day. Please also recommend these posts to FRiends so that we can spread the gospel of economic freedom widely!
Any other readers who would like to join the Economic Conservatism list, please ping me in line here or via FReepmail.
Thanks, and may you be FREE TO CHOOSE!
Confirm. The economic principles of Dr. Friedman, his progenitors, and his followers are too little understood.
Thanks and Welcome.
Feel free to recommend additional authors, concepts and flavors.
For example, Behavioral Economics demonstrates that Classical Economics does a bad job of explaining people’s poor economic decision making. Math can show that.
What leftists do with that information is suppose then that the government can make better decisions for individuals, and should! That is anti-freedom, and limits the possibility of people learning from their mistakes.
My formulation against that is:
“The only thing worse than stupid people making mistakes for themselves and learning from them is stupid bureaucrats making mistakes for millions of people and NOT learning from them.”
There must by now have been a formal economics rejecting that leftist conceit. I need to find it ....
Please add me to your ping list.
Thank you and God Bless FReeperNation.
>> “stupid bureaucrats making mistakes for millions of people and NOT learning from them.” There must by now have been a formal economics rejecting that leftist conceit. I need to find it <<
The “formal” system of economics that you are seeking has been around for the last 51 years. It is a well-established academic discipline, housed in political science departments and law schools as well as in economics departments, called “Public Choice Theory.”
The field was started by Nobel-winning economist James Buchanan and his lawyer sidekick, Gordon Tullock, with their magnum opus, “The Calculus of Consent,” published in 1965. This work was the main justification for Buchanan’s Nobel Prize, which he received in 1986.
(It was a great injustice, however, that the Nobel committee didn’t include Tullock in the honor.)
The foundational idea of Public Choice Theory is that bureaucrats behave basically as profit-maximizers (or more formally, as “utility” maximizers), whose mistakes and self-serving actions are not punished by the marketplace. It’s all you could wish for — and more!
Adam Smith would be appalled at what passes for free trade today. Off shoring factories and importing the product back duty free is not something Adam Smith would approve of.
George Washington on signed the first tariff act in 1789.
We reaffirm our belief in the protective tariff to extend needed protection to our productive industries. We believe in protection as a national policy, with due and equal regard to all sections and to all classes. It is only by adherence to such a policy that the well being of the consumers can be safeguarded that there can be assured to American agriculture, to American labor and to American manufacturers a return to perpetrate American standards of life. A protective tariff is designed to support the high American economic level of life for the average family and to prevent a lowering to the levels of economic life prevailing in other lands.
In the history of the nation the protective tariff system has ever justified itself by restoring confidence, promoting industrial activity and employment, enormously increasing our purchasing power and bringing increased prosperity to all our people.
The United States is rapidly becoming the very first "post-industrial" nation on the globe. All great economic empires eventually become fat and lazy and squander the great wealth that their forefathers have left them, but the pace at which America is accomplishing this is absolutely amazing. It was America that was at the forefront of the industrial revolution.
Now that I think of it: Why the hell do we have Social Security”?
No one should be guaranteed a retirement, should they? Would working until the day you died be so damned awful?
Some of the wealthiest men I know are supposedly retired. However, if you examined their life you would discover they actually work everyday managing investments in Real Estate, business ventures and charities.
Retirement? Get over yourself.
That’s akin to saying everyone deserves the supossed American Dream of home ownership.
What is wrong with renting?
Always enjoyed your postz.
Please include me on your ping list...
Continuous long term increases in prosperity depend on economic progress, which depends on increased production, which depends on technological progress, increases in productivity of labor, increased capital accumulation, expansion of division of labor, which increase efficiency. These depend on rationality, freedom, and respect for other natural rights, and the other institutions of capitalism such as profits, price system, freedom of inequality, competition, and freedom of trade.
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