Friedman
confirmed free markets work best
Dallas
Hansen
November
18, 2007
Friedman
confirmed free markets work best
By Dallas Hansen
During the 20th century, there was among economists much debate
about what role the government should have in shaping economic policy.
While interventionists, notably John Maynard Keynes, believed
government programs necessary to tackle the problems of unemployment
and inflation, Milton Friedman—who died this week at age
94—believed the best thing a government could do to help
an economy is get out of the way.
Calling himself a “classical liberal,” Friedman
audaciously dismissed the interventionists, shredding several of
Keynes's theories in the process. Above all, Friedman stood as a
champion of not only economic but human freedom, notoriously
advocating against compulsory military service, restrictions on
foreign trade, and the criminalization of prostitution and drugs.
In 1976 Friedman was awarded the Nobel Prize in
Economics—one of several distinguished awards he was to
receive throughout his lifetime. Yet his humble beginnings in
working-class Brooklyn affirmed the axiom that free markets will reward
the patient diligence of individuals with the fruits of prosperity.
While free-market philosophies have come to dominate economic thinking
as of late, it was only as recently as the 1970s that
then-president Richard Nixon declared himself a Keynesian. By that
point Keynes himself had been dead for decades, but Friedman was
around to blame the decade's stagflation—high unemployment
coupled with high inflation—upon Keynesian economic
policies. Friedman's laissez-faire thinking subsequently became
valuable currency during the tax-slashing age of Reaganomics.
It could be argued that Friedman's influence upon the direction of the
world's largest economy in the 1980s led to America's even better
economic performance during the 1990s. Low inflation, a raging
bull market in securities, the widespread gentrification of formerly
blighted urban areas—the century's end was kind to America,
a vindication of once-controversial free trade agreements and the
monetarist school of economic thought with which Friedman's name became
synonymous.
Friedman's ideas owe much to the man known as the first economist,
Scottish philosopher Adam Smith, whose seminal 1776 work An
Inquiry Into the Nature and Causes of the Wealth of Nations famously
suggested that an “invisible hand” would guide
people toward their own self-interest. Classical economists such as
Smith believed that a natural state for free economies was full
employment. The United States today, with a population that has
recently passed the 300 million mark, has an unemployment rate of
just 4.6 per cent. With an increasingly mobile workforce
delivering labour to where it's needed, America has work for nearly
all of her willing citizens—and even, as has lately been
much-reported, her undocumented immigrants.
Perhaps the most impressive aspect of the American economy is how new
entrepreneurs are being made daily, many of them earning a living in
ways most unlikely. Only in America could you, for example, make
your fortune as a professional harmonica instructor. Or, for that
matter, as a Barry White impersonator.
During Friedman's long life he got to see laissez-faire economics move
from unorthodox to mainstream. He observed the failings and the
collapses of centrally planned juggernauts in the communist world.
Despite his advanced age, he never plunged into senility, opining
in 2004 that even as Russia and China have become freer with their
embrace of market capitalism, many western societies were suffering
beneath the yoke of increased regulation. Still, he did, during
that interview, declare himself “an optimist,”
and although he had already won many battles, he would still
continue to argue for school vouchers and privatizing Social Security.
"Government today controls something like 40 per cent of the resources
of the country," said Friedman in a March, 2006 interview. "A decent
government controls like 10 or 15 per cent." He then joked, "The virtue
is that government is so inefficient, it wastes the great bulk of those
resources. If it used those resources efficiently, it could do great
damage."
Keynesianism and governmental attempts to tweak economic demand were in
vogue during the 1950s, when Friedman came of age as an academic. This
was a time of "galloping socialism," as Friedman described it, which
would later slow down to "creeping socialism." During, however, the
Reagan and Clinton administrations, the U.S. federal government even
experienced a contraction. But there is no mistaking that Friedman, a
lifelong Republican, felt betrayed at the current Bush administration's
runaway budgets when he said, again in March, "I think it's really
disgraceful that the Republican Party, which preaches holding down the
size of government, should have been, and the Bush administration
should have been, such a big spender."
If you believe sound monetary policy, rather than happenstance, to be
responsible for today's prosperous times, do remember Milton Friedman.
He may have left this world, but his ideas are here to stay.
dallashansen.com
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