Today marks the 101st year since the birth of Milton Friedman, whose observations and conclusions ring loud and true today.
Regarding achievements, Friedman said,
“The great achievements of civilization have not come from government bureaus.”
Albert Einstein Was Not Inspired by Government Order
“Einstein didn’t construct his theory under order from a [government] bureaucrat. ” Milton Friedman
Henry Ford was not ordered to improve production by government.
Henry Ford didn’t revolutionize the automobile industry in that way.” [by government order] – Milton Friedman
Milton Friedman argues that the only cases in which the masses have escaped from grinding poverty, the only cases in recorded history is where the society had capitalism and largely free trade.
On the other side of history, the masses are worst off in the societies that depart from capitalism. Such as when Stalin moved to force the collectivization of farming which resulted in the drastic drop in living standards of the masses and widespread famine where an estimated 5 to 10 million people died of starvation.
Stalin’s Collectivism death by starvation.
“So the record of history is absolutely crystal clear that there is no alternative way so far discovered of improving the lot of the ordinary people that can hold a candle to the productive activities that are unleashed by a free enterprise system.” – Milton Friedman
Graph: When high unemployment continues despite the spending, the spending is often followed by a sharp economic contraction like the recession of 2008.
Milton Friedman states,
“Ever since the new deal, a primary excuse for the expansion of government activity at the federal level has been the supposed necessity for government spending to eliminate unemployment.”
At first Keynesians say that government spending is necessary to ‘prime the pump.’ They argue incorrectly over and over again, that temporary expenditures by the Fed would get the economy going and the government could then ‘step out of the picture.’ Well the government never steps out of the picture.
Secular Stagnation
Even during good times, theories are needed to keep the government spending going. Keynesian economics theory of “Secular Stagnation” was developed to help justify continuing spending. The Theory explains as the economy becomes mature, there are no new opportunities for investment and people still want to save. Therefore it is necessary for the governemnt to spend, spend, spend and run a perpetual and increasing deficit. The theory goes on to make the claim that the securities issued to finance the deficit would provide individuals with a way to accumulate savings while increasing governmental expenditures will ultimately provide the needed employment.
Regarding Secular Stagnation, Friedman wrote in 1962:
This view has been thoroughly discredited by theoretical analysis and even more by actual experience.
The whole idea of secular stagnation is embraced only by the ever enlarging government program bureaucrats. The new spending programs didn’t work then, yet are still with us today. Instead of government ‘stepping out of the picture’ the government keeps the new bureaucracy keeps growing year after year. Worse of all, many of the programs don’t even go into effect until after the recession has passes.
To keep the spending going it is argued that a healthy expansion must not be jeopardized by cuts in government expenditures. Instead the long term effects are damaging to the economy by creating an ‘inflationary bias’ in government policy while increasing the tax burden on Americans.
Augury – an event that is experienced as indicating important things to come; “he hoped it was an augury”; “it was a sign from God.”
From Milton’s Capitalism and Freedom:
As Adam Smith once said, “There is much ruin in a nation.” Our basic structure of values and the interwoven network of free institutions will withstand much. I believe that we shall be able to preserve and extend freedom despite the size of the military programs and despite the economic powers already concentrated in Washington. But we shall be able to do so only if we awake to the threat that w face, only if we persuade our fellow men that free institutions offer a surer, if perhaps at times a slower, route to the ends they seek than the coercive power of the state. The glimmerings of change that are already apparent in the intellectual climate are a hopeful augury.
Friedman was an optimistic man who believe to have real freedom one needed to live in a trichotomy of economic freedom, civil freedom AND political freedom.
Milton Friedman held that the government’s role in the guidance of the economy should be restricted severely.
Taking over car companies is not restricted government economics from any sense of the concept. A health care program which will cost taxpayers dearly and continuing to expand all social programs cut into the economic freedoms of everyone working.
We should be cutting programs that Milton says, ‘enslave those who are supposed to benefit from the very program that is supposed to help.’
Unions continue to hurt much more than they help. Unions have a bad name in our country. More on that here: Milton Friedman on Labor Unions.
For too long we have lived with improper spending. Living as if lunch were free.
“There is No Free Lunch”
– Milton Friedman
Countries taking ‘no heed’ of proven Friedman economic fiscally responsible theories are now suffering with huge cuts in social programs resulting in violent protests from an under-informed public. Irresponsible governments are defaulting on financial obligations and are on the brink of bankruptcy.
Where does that leave US in Friedman’s eyes?
Right now all we have are Milton Friedman approved ‘promises’ from newly elected conservative lawmakers. If congress puts together a budget this year, that would be a good first step. Last year the democrat controlled congress failed to put forth a budget for the first time in history. Never before has the house failed to pass a budget, yet that same congress passed huge spending bills without a financial forecasted budget.
The next step to being more Milton Friedman-like would be to honor federal spending cut promises.
Here are some highlights, thanks Daniel Foster for putting this list together:
– Reducing the federal workforce by 15 percent through attrition, and eliminating automatic pay increases for the next five years.
– Eliminating all remaining “stimulus” funding. $45 billion
– Privatizing Fannie Mae and Freddie Mac. $30 billion
– Prohibiting any funding of the implementation — or legal defense — of Obamacare.
– Cutting the federal travel budget in half. $7.5 billion annually
– Cutting the federal vehicle budget by 20 percent. $600 million annually
– Eliminating the Corporation for Public Broadcasting subsidy. $445 million annually
– Eliminating Amtrak subsidies. $1.565 billion annually
– Repealing Title X Family Planning. $318 million annually
– Repealing the Davis-Bacon Act (which sets “prevailing wages” for workers on federal projects). $1 billion-plus annually
– Prohibiting taxpayer funded union activities by federal employees. $1.2 billion savings over ten years
Next, let states declare bankruptcy. Lawmakers are working on a way to let states declare bankruptcy and get out from under crushing debt, including pensions promised to retired public workers. The New York Times reported on Friday that House Republicans, and senators from both parties, have taken an interest in the issue.
More cuts and bankruptcies are needed. It will be a painful catharsis. You can’t pay for this lunch with “lunch money”. You’re going to need allot more.
Early map of Hispaniola and Puerto Rico, circa 1639.
Milton Friedman would look at the Island of Hispaniola and point to it as an example of the relationship between economic freedom and economic success. Friedman would call the Island of Hispaniola ‘a tale of two countries – Haiti and the Dominican Republic’.
One country has a democratic republic which encourages capitalism. The other a history of repressive military government and even slavery.
Governments which allow individuals to pursue their own economic interests generate greater economic well being and freedom to larger swaths of the general population. Governments that get too big and too powerful become oppressive to its people, reduce economic wealth and individual freedom.
Hispaniola is an excellent example of capitalism working and lack of capitalism causing economic hardships.
Economically speaking, Haiti is the poorest country in the Americas. Contrast that with the capitalist Dominican Republic with the largest economy in Central America.
Haiti, by contrast, had a nominal GDP of 7.018 billion USD in 2009 with a GDP per capita of 790 USD, about $2 per person per day. Dominicans have a GDP of 9208 USD with exceptional economic growth rates around 10% per year over the past 2 years!
Haiti is an impoverished country, one of the world’s poorest and least developed. Comparative social and economic indicators show Haiti falling behind other low-income developing countries (particularly in the hemisphere) since the 1980s.
Haiti now ranks 149th of 182 countries in the United Nations Human Development Index (2006). About 80% of the population were estimated to be living in poverty in 2003. Most Haitians live on $2 or less per day. Poverty has forced at least 225,000 children in Haiti’s cities into slavery as unpaid household servants.
Contrast Haiti with the Dominican regarding tourism. The only figures I can find is $1.5 billion in 2007 for DM and no economic number for Haiti.
Friedman would summarize that “Clearly capitalism works, just look at the Island of Hispaniola” which shows in stark contrast a tale of a country that has prospered and another has failed miserably.
Haiti Needs Economic Freedom
Allow the people to work unhindered and you will see Haiti become a top travel destination. The weather is beautiful year round. Haiti needs to help its people help themselves by turning oppression into economic freedom. Without Capitalism, Haiti fails over and over again. A man must be allowed to look out for himself without repression. He must be allowed to seek the labor he so desires without taxation or threat of violence. To be successful economically, he must be allowed to reap the rewards of his labor so he may contribute to the economy economically. Haiti needs a fair government of free people.
Let the capitalist rebuild. Perhaps someone will see the value. Especially if the government becomes a democratic republic like its neighbor, DM.
And let this be a lesson to those in America that big government is exactly what we need to avoid. Smaller government means greater economic freedom. Be free and live.
Nearly 16 million people can’t find jobs even though the worst recession since the Great Depression has supposedly ended. The Labor Department said Friday that jobless rate rose to 10.2 percent, the highest since April 1983, from 9.8 percent in September.
Economists say the unemployment rate could climb as high as 10.5 percent next year because employers remain reluctant to hire.
Thanks to Reagan and the confidence he brought to America with his economic plan*, the economy soared by nearly 8 percent in 1983 after a steep recession. This lowered the jobless rate by 2.5 percentage points that year.
But with Obama’s presidency, all confidence is gone, spending is up and the economy is likely to grow by less than 3% according to recent comments from many noted economists such as Wells Fargo chief economist John Silvia. Mr. Silva projects 2.4% for all of 2010.
Friedman would advise that Obama go on a strict diet.
He should reduce the size of government, reduce spending, reduce taxes and reduce the the growth of the money supply.
This is causing too much growth in the size of the Obama Administration.
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*Reganomics
When Ronald Reagan entered the White House in 1981, he immediately put into effect a dramatic new economic policy that was founded on the principles of one of his most important economic advisors, Milton Friedman.
Reaganomics has four main policy objectives:
1. Reduce the growth of government spending
2. Reduce the marginal tax rates on income from both labor and capital
3. Reduce regulation
4. Reduce inflation by controlling the growth of the money supply
The goal of these objectives was to increase savings, investment, and economic growth. Balancing the budget, restoring healthy financial markets, and reducing inflation and key interest rates.
Although Friedman lived in earlier times, 1912 to 2006, what Friedman concludes about our capitalist system is exactly what we need to conclude today. Friedman is an excellent study because he at times agreed with both liberal and conservative points of view. Ultimately Friedman’s political eye acutely focused on minimizing the role of government in favor of the private sector.
Friedman Saw Both Sides
He didn’t start out being a conservative, Friedman was originally a liberal and a supporter of FDR’s New Deal’s government intervention in the economy. That all changed in the 1950s when Friedman saw the New Deal Keynesian consumption model failing over and over again. This was the impetus for Friedman to re-evaluate Keynesian economics. He realized the fatal flaw that was a obstacle to business growth and economic recovery. The government was taking too much from the providers and giving it all to the takers. At some point this becomes too big a burden on the workers of a society and the system fails to produce any real growth.
Friedman won the Nobel Peace Prize in Economics. It’s too bad the prize has fallen into shame today.
Friedman More Qualified Than Most
It could be argued that Friedman not only agreed at times with both sides, his arguments have been the most proven to be correct over time. Even Democrat Bill Clinton subscribed to tax cuts to 90 percent of small businesses. President Clinton signed into law the largest deficit reduction plan in history resulting in over $600 billion in deficit reduction. This is right out of Milton and the Chicago School of Economics.
Are there no Milton Friedman’s in Washington?
George W. Bush did not go to the same Chicago school of Economics. And GW Bush did not subscribe to Friedman’s proven policies. Instead George W. Bush spent 5 times more than Clinton. W. Andrew Sullivan of the TimesOnLine asks, Is Bush a Socialist?
The Time to be Fiscally Responsible is NOW
Obama has proven to be totally irresponsible in fiscal matters. Spend first, find the money second is not only irresponsible, some of the spending may be constitutionally questionable. How can the government seriously fund $787 Billion overnight to bail out private businesses? Health care will increase spending by $600 in a US House bill. Cash for Clunkers cost taxpayers $24,000 per car and destroyed the entire economic value of every used car.
What about the next generation of republicans and blue dog democrats? Will there be any fiscal conservatives in the next presidential election?
Its time to stop burdening our children with our wild and reckless spending.
Robert David Sanders Novak has joined Milton Friedman. But like Friedman, he is still speaking to millions who posess conservative values by the volumes of work he leaves behind.
Bob, what his friends called him, was clearly a desciple of Friedman. He was known for saying, “always love your country, but never trust your government.”
Novak, like Friedman, lived and worked among the movers and the shakers, Milton in Chicago and Novak in Washington D.C..
Novak was the Milton Friedman of American Journalism. His reporting was from the viewpoint of a fiscal conservative with high standards of personal responsibility and moral values.
The first president he covered was Harry Truman, and he has been in Washington ever since, breaking a huge number of big stories.
Here are some excerpts from the book that Novak remembers about our presidents:
The secret of Reagan’s success: he “kept his gaze on big goals” and displayed “implacable calm in the face of adversity”
Gerald Ford: “Of the ten presidents I covered, only Ford was a believer in congressional supremacy” and the minimizing of presidential power.
Richard Nixon: “A poor president and a bad man who inflicted grave damage on his party and his country”
Jimmy Carter: “A habitual liar who modified the truth to suit his own purposes”
Clinton’s politics: “Clinton was a man of the Left who disguised himself as a man of the center…Combining this with his personal misadventures meant the nineties would prove a dreadful decade for the Democrats”
George H.W. Bush: “An unhappy president. He could not come to grips with the prevailing Republican opinion on taxes, abortion, racial quotas, and other social and economic issues.”
Novak was very much influenced by Milton Friedman. He believed that the teaching of American history today is riddled with misrepresentations, misunderstandings, and flat-out lies about the people and events that have shaped the nation.
For example: the Indians didn’t save the Pilgrims from starvation by teaching them to grow corn. The “Wild West” wasn’t a freewheeling, lawless region – in fact it was more peaceful and a lot safer than most modern cities. Franklin Roosevelt’s New Deal didn’t lift the United States out of the Great Depression. Foreign aid programs don’t help our friends and allies break out of poverty. And the biggest scandal involving Bill Clinton didn’t have anything to do with an intern in a blue dress and vengeful Republicans.
As a libertarian, Milton Friedman advocates private enterprise wherever possible. He uses central park in New York as a prime example of what is wrong with the government owning the park.
It used to be that you could take your children to central park, drop them off with a teenage babysitter and feel good about it. Not any more since the park is government owned it has become a filthy unsafe place. No one in their right mind would consider dropping their kids off at the park today.
Not so with the museums in New York. Museums are privately owned. Some are for profit, some are not for profit. Museums, because they are owned by the people who manage them, are safe and clean. I would indeed allow my children to be dropped off at a museum because the owners are the best stewards of the property.
People are the best stewards of their own money. Governement is the worst. More info: Friedman Explains Spending
Milton Friedman is considered one of the nation’s foremost Conservative economist. But Mr. Friedman says this, “I never consider myself as a conservative economist…”
“Conservative means conservative, keeping thinks as they are. I don’t want to keep things as they are. The true conservatives today are the people who are in favor of ever bigger government. The people who call themselves liberals today, ‘the New Dealers’, they are the true conservatives because they want to keep going on the same path we are going on.”
Milton Friedman Calls Himself a Liberal
He says, “I call myself a liberal in the true sense liberal. In the sense of which means and of and pertaining to freedom.”
Milton wants to evoke change, change is liberalism. Change from Big Governement spending, one which allows people to spend their own money. Milton Friedman Explains Spending. He argues that people are the best stewards of their own money and government is the worst spender of money.
Milton Friedman would be proud of the change that the miss-named Conservative movement is making today. If he were alive, I am sure he would be at the Chicago Tea Party. I am sure he is smiling today.
Where does that leave US in Friedman’s eyes?
Friedman would advise that Obama go on a strict diet.
Capitalism and Friedman 