Milton Friedman: Loves a disaster, hates the draft
It's tough being Milton Friedman these days. On top of being dead, the Nobel prize-winning economist is getting a posthumous beat-down by popular anti-capitalist Naomi Klein. In her writing and talks on globalization and the free market, Klein often quotes three sentences of Friedman's writing to expose the economist as an evil genius who helped inspire so-called "disaster capitalism." As Klein recently wrote in the L.A. Times:
Do the free-market policies packaged as emergency cures actually fix the crises at hand? For the ideologues involved, that has mattered little. What matters is that, as a political tactic, disaster capitalism works. It was the late free-market economist Milton Friedman, writing in the preface to the 1982 reissue of his manifesto, "Capitalism and Freedom," who articulated the strategy most succinctly. "Only a crisis -- actual or perceived -- produces real change. When that crisis occurs, the actions that are taken depend on the ideas that are lying around. That, I believe, is our basic function: to develop alternatives to existing policies, to keep them alive and available until the politically impossible becomes politically inevitable."
A smoking gun? See the quote in context and decide for yourself after the jump.
By itself, the quote makes Friedman look like a heartless profit-monger. But within its context from Friedman's book "Capitalism and Freedom" . . . well, you decide:
What then is the role of books such as this? Twofold, in my opinion. First, to provide subject matter for bull sessions. As we wrote in the Preface to Free to Choose: "The only person who can truly persuade you is yourself. You must turn the issues over in your mind at leisure, consider the many arguments, let them simmer, and after a long time turn your preferences into convictions."
Second, and more basic, to keep options open until circumstances make change necessary. There is enormous inertia--a tyranny of the status quo--in private and especially governmental arrangements. Only a crisis--actual or perceived--produces real change. When that crisis occurs, the actions that are taken depend on the ideas that are lying around. That, I believe, is our basic function: to develop alternatives to existing policies, to keep them alive and available until the politically impossible becomes politically inevitable.
A personal story will perhaps make my point. Sometime in the late 1960s I engaged in a debate at the University of Wisconsin with Leon Keyserling, an unreconstructed collectivist. His clinching blow, as he thought, was to make fun of my views as utterly reactionary, and he chose to do so by reading, from the end of chapter 2 of this book, the list of items that, I said, "cannot, so far as I can see, validly be justified in terms of the principles outlined above." He was doing very well with the audience of students as he went through my castigation of price supports, tariffs, and so on, until he came to point 11, "Conscription to man the military services in peacetime." That expression of my opposition to the draft brought ardent applause and lost him the audience and the debate.
(Boldface added by me, and you can read the whole book here.) To me, the quote looks lot more innocuous in the context of Friedman's example of the Vietnam war (the "crisis--actual or perceived") leading to the end of the draft (the "real change"). Your mileage may vary; Klein's certainly does.
Friedman was clearly the Apostle of Greed. Didn't he once argue against regulation on the grounds that Corporations or industries always police (regulate) because it is in their economic interest to do so. Yet in practice obviously this doesn't really happen or we wouldn't have banks that create disasters like the sub prime lending debacle. Drug companies wouldn't release drugs they know to be potentially harmful. There are countless other examples including the famous Ford Pinto exploding gas tanks which prove that Capitalists do not police themselves and never have. P.S. He also once said the only responsibility a corporation has is to make a profit. That tells you all you need to know.
Posted by: R.T.Thaddeus | February 06, 2008 at 05:53 AM
Naomi Klein has an interesting perspective. I am also a fan of another Canadian export, John Kenneth Galbraith, unreconstructed liberal with a conscience.
Posted by: Les Caine | February 06, 2008 at 08:10 AM
Oh boy, I hope you're kidding about JKGalbraith.
The common thread in all of Galbraith's work is that human freedom should yield to central control by clever technocrats like himself.
He travelled to Nazi Germany in 1938 and came back to write about what he considered their fascinating land reform policies.
He was one of few Americans allowed into China during the cultural revolution (no doubt because of his sympathetic view of their brutal dictatorship). On returning he wrote. “Dissidents are brought firmly into line in China but one suspects with great politeness.” The government executed between 5-10MM Chinese citizens during the cultural revolution and millions more were killed in associated violence and famine.
In 1984, just months before Gorbachev declared an economic emergency, Galbraith wrote: “That the Soviet system has made great material progress…is evident both from the statistics and from the general urban scene…One sees it in the appearance of solid well-being of the people on the streets. . . . Partly the Russian system succeeds because, in contrast with the Western industrial economies, it makes full use of its manpower.”
Galbraith was wrong about the two biggest economic questions of the 20th century - fascism and communism. He consistently sided with power over freedom. This is why he is a leftist icon.
More here:
http://tinyurl.com/39u8m3
Posted by: Dirck the Noorman | February 06, 2008 at 01:18 PM
Dirck the Noorman: interesting points about Galbraith. I'll have to check your sources, though.
With respect to your cheap shot conclusion, though ("...sided with power over freedom. This is why he is a leftist icon."), well, to be nice, that's just intellectual dishonesty (but most likely it is just a combination of ignorance and partisanship). True leftist icons, like Noam Chomsky, are consistently against power.
Back to Paul Thorton's post: this is a rather pointless cheap shot as well. The fact that Friedman won a debate because he was against the draft proves in no way that his political and economic views are either correct or humane. Friedman and his supporters are responsible for much of the misery that has afflicted Latin America after WWII. That region's recent recovery has been made possible only by rejecting the disastrous policies inspired by Friedman, as well as the monstrous regimes that enacted these policies. It would be more constructive to talk about that, rather than technicalities as to who got what quote in what context, etc...
Posted by: Arnaud | February 06, 2008 at 04:44 PM
John Kenneth Galbraith was a respected and trusted economist/advisor to FDR & JFK, coincidently good times for the U.S., and claimed to have had JFK's ear trying to avoid a larger fiasco in Viet Nam.
Posted by: Les Caine | February 06, 2008 at 05:03 PM
Dear R. T. Thaddeus,
I am hardly a fan of Friedman myself. But, on the duty of corporations what he is recounting is just a legal fact. Corporations utmost duty is the fiduciary duty they have to their shareholders. Where Friedman goes into lala land is where he suggests that given this fact that corporations will regulate themselves.
Join the revolution at www.bloodyflag.com
Posted by: Robert Lee Hotchkiss, Jr. | February 06, 2008 at 05:42 PM
Mr. Thaddeus,
You fail to notice that the subprime lending debacle was caused by the availability of unlimited quantities of fiat currency created by the Federal Reserve, as opposed to having to lend out depositors' savings as banks should do. Sure, the banks are culpable, but don't forget that their accomplice is a government-created bogus monetary authority.
-jcr
-jcr
Posted by: John C. Randolph | February 07, 2008 at 08:15 AM
"John Kenneth Galbraith was a respected and trusted economist/advisor to FDR & JFK, "
FDR's adherence to Galbraiths recommendations have a lot to do with the severity and duration of the Great Depression, and as for JFK, he had the good sense to get Galbraith the hell out of the country and ask the congress for tax cuts.
Galbraith was always an enemy of liberty, and had that obnoxious Harvard habit of believing that he was some kind of demigod of wisdom who was anointed to dictate to the rest of us. He lived far too long, and good riddance to him.
-jcr
Posted by: John C. Randolph | February 07, 2008 at 08:20 AM
Greed did cause the subprime, then Alt-A and soon to come Prime and finally FHA meltdown.
Greed caused it despite of Regulation Z, ECOA, HOPEA, HMDA, CRA, state lender licensing, state broker licensing, state loan originator licensing. Greed caused the meltdown despite city, county and state predatory lending laws, state regulated mortgage insurers, federally chartered banks, S&L's and Government Sponsored Entities.
Surely legislating another mortgage regulation will eliminate greed.
Posted by: Michael Fernwood | February 07, 2008 at 10:22 AM
RT,
Clearly the Apostle of Greed? What is clear about that statement is that its author could not possibly have read much of Milton Friedman’s writings!
Friedman was correct on all counts. Do you think it is not in the economic interest of a business to self-regulate? How many people would fly an airline whose planes crash regularly? Who will eat at a restaurant where patrons regularly contract food poisoning?
Of course, the problem is rarely so simple. Life is about tradeoffs. Would you spend $50,000 for a round trip flight to Dallas if you knew the odds of a crash would be half what they would be on another airline for $500? Probably not. Does that mean you do not value life? Should people be allowed to take drugs that have a chance of helping them but perhaps also a chance of an unfortunate side effect? That is not an unusual situation - few, if any, drugs are 100% effective with 0% side effects.
So it is clearly incorrect to say that there is no self-regulation. But self regulation is not a 100% guarantee and tradeoffs are always necessary. The competitive market provides ample incentives – like staying in business - which drive innovation and improvements in quality and safety.
Friedman did say – correctly – that the responsibility of a corporation is to profit. He wrote a whole essay on it. Read it and then you can tell us what specifically you disagree with.
Posted by: gator80 | February 07, 2008 at 05:07 PM
If “Friedman was clearly the Apostle of Greed,” he was so in Darwin’s sense of survival of the fittest. Enterprises are like all organisms in that they attempt to position themselves to survive and thrive. Individuals do the same. Instead of “greed” we refer to the drive as “self-interest” or “survival”, but it’s all the same.
Friedman’s genius lay in his recognition that information is dispersed: central planning is a fantasy because no mechanism, organization, or structure can process all the information needed on a minute-by-minute basis to direct capital and human energy to satisfy human needs. It’s the ever-changing mix of independent producers in a free market who try to survive by meeting the changing needs that drive improvements to the human condition.
Galbraith did not recognize the importance of dynamism, the ability of and necessity for producers to change their products and services to suit the whims of consumers. His view implied a static structure that could be directed to meet all needs. Yet his structure inhibited innovation because all elements, whether they were productive or not, survived because they were essential to the overall structure.
Friedman envisioned chaos, with parts of the structure collapsing as new elements arose and found ways to connect themselves to better suit consumer needs. Communism and its cousin Fascism failed because their central direction could not innovate. The Internet happened because hundreds of entrepreneurs saw possibilities and found some way to take advantage of them for consumers’ benefit. Ditto for cellular communications and all sorts of products and services.
A rule that I follow is to figure out which approach maximizes individual freedom and select it. Friedman wins in this case.
Posted by: SC Mike | February 07, 2008 at 07:27 PM
"True leftist icons, like Noam Chomsky, are consistently against power."
Well, that depends, doesn't it. If it's the Viet Cong, or some other Communist wielding unlimited power brother Chomsky might be okay with it. It's democratic governments that Chomsky hates, knowing that he incurs no risk by speaking against those.
Chomsky is a self-righteous hypocrite. You decide if that makes him a icon of the Left.
Posted by: Joe | February 09, 2008 at 01:12 PM
HEY PAUL THORNTON:
I HOPE YOU DIDN'T JUST STEAL THE ARGUMENT I MADE IN MY YOUTUBE VIDEO VERBATIM AND POST IT HERE TO GET PAID. BECAUSE THAT WOULD BE JUST WRONG.
I'LL LET YOU BE THE JUDGE.
http://www.youtube.com/watch?v=vVUFyEY3gmo
Posted by: Devil's Advocate | February 12, 2008 at 07:32 AM
Devil's Advocate: Nope, I had not seen that video; I read some of Friedman's work in college, which wasn't very long ago.
I'm glad you beat me to the punch; this is an important point to make. Thanks for pointing me to your video.
Posted by: Paul Thornton | February 12, 2008 at 10:02 AM
THANKS PAUL:
BY THE WAY, HER FATHER WAS A DRAFT DODGER. THAT IS WHY HE WENT TO CANADA.
COINCIDENCE?
Posted by: Devil's Advocate | February 12, 2008 at 05:40 PM