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The Road to Selfdom

Free to Choose: A Personal Statement

by Milton Friedman, by Rose Friedman
Harcourt Brace Jovanovich, 338 pp., $9.95

Television is dramatic. It appeals to the emotions. It captures your attention. Yet, we remain of the opinion that the printed page is a more effective instrument for both education and persuasion. The authors of a book can explore issues deeply—without being limited by the ticking clock. The reader can stop and think, turn the pages back without being diverted by the emotional appeal of the scenes moving relentlessly across his television screen.

Anyone who is persuaded in one evening (or even ten one-hour evenings) is not really persuaded. He can be converted by the next person of opposite views with whom he spends an evening. 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.

With this appeal to reason, Nobel laureate Milton Friedman, perhaps the most famous conservative economist in the world, and his wife and collaborator Rose Friedman introduce the reader to their diagnosis of our present ills and their prescription for remedying them. (See box on page 4.) To judge by the rapid appearance of Free to Choose on the bestseller list, and by the attention given to the series of TV shows in which Milton Friedman repeats its message and defends himself doughtily against its critics, their statement seems assured of a vast success. It remains only to be seen if the appeal to reason works: if its hundreds of thousands of readers—perhaps the millions of readers who will eventually buy the paperback we can anticipate seeing in airports and drugstores—will become fortified in their convictions and adopt the Friedmans’ view as their own.

That depends very much, of course, on the strength of the convictions that will be engendered by the Friedmans’ arguments. Let us see, therefore, what the reader gets when he or she opens the book.

The first message is forceful and clear. It is a ringing endorsement of economic freedom and political liberty, and a warning about the dangers of continuing on our present course:

The experience of recent years—slowing growth and declining productivity—raises a doubt whether private ingenuity can continue to overcome the deadening effects of government control if we continue to grant ever more power to government, to authorize a “new class” of civil servants to spend ever larger fractions of our income supposedly on our behalf. Sooner or later—and perhaps sooner than many of us expect—an ever bigger government would destroy both the prosperity that we owe to the free market and the human freedom proclaimed so eloquently in the Declaration of Independence.

This message, frequently repeated throughout the book, accounts, I am sure, for its popular success. The Friedmans articulate what a large number of people are yearning to hear. It is hardly news that a vast frustration and irritation are to be found in democratic electorates everywhere, and that popular resentment, once focused against the excesses of big business and big labor, is today mainly brought to bear on big government. Thus the Friedmans’ book will be bought, and its calls for action eagerly read and frequently cited, because it is a book in tune with the times, whether its arguments and diagnoses are cogent or not.

There is, however, much more to Free to Choose than these affirmations and denunciations. Most of the book consists of economic arguments that are intended to document its diagnosis and to validate its claims. This is the part of the book that gives it its authority, but I suspect it is a part that will go largely unread. The Friedmans may have earnestness, virtue, perhaps even truth on their side, but their account has none of the verve and immediacy of the work of an economic journalist like Martin Mayer or the wit and impudence of that of J.K. Galbraith. Consequently, I fear that few of those who buy the book because they know it speaks to their frustrations will actually “turn the pages back” to mull over arguments. They will take them on faith, unread.

Those readers who do make their way through the Friedmans’ lucid and plain prose will find the themes of the efficacy of the free market and the baleful effects of government illustrated or explained in connection with a succession of related topics. They will begin with the Great Depression, whose cause is dismissed as “growing economic difficulties plus the puncturing of an unsustainable speculative bubble,” but whose wracking persistence is ascribed at length to the ill-considered actions of the monetary arm of the government, the Federal Reserve system.

Readers will then consider the growth of the welfare state, the outcome of the Depression. Once again they will discover that the intrinsically self-defeating properties of government have brought to naught programs whose objectives were noble. “The repeated failure of well-intentioned programs is not an accident,” the Friedmans declare. “It is not simply the result of mistakes of execution. The failure is deeply rooted in the use of bad means to achieve good objectives.” The bad means are essentially government spending programs aimed at results that contravene the market, or that mushroom into waste because they have no built-in regulators similar to those of the market. Thus HEW expenditures mount, but there is no improvement (we are told) in the actual medical care received by the public. The Social Security program is vast, but its finances are in serious disarray. Waste is rife in the welfare system, but even more distressing than the waste is the damage to our moral fabric: the family is weakened, the incentive to work and save and make innovations is impaired, our freedom is constricted.

From a consideration of these short-comings or outright perils the Friedmans move to an examination of the problem of equality, namely the rise of the new and pernicious view that “everyone should have the same level of living or income, should finish the race at the same time.” This view of equality, with its stress on outcomes rather than opportunities, produces serious social harm because it leads to unenforceable egalitarian legislation. Worse yet:

When people start to break one set of laws, the lack of respect for the law inevitably spreads to all laws, even those that everyone regards as moral and proper—laws against violence, theft, and vandalism. Hard as it may be to believe, the growth of crude criminality in Britain in recent decades may well be one consequence of the drive for equality.

The Friedmans then turn to problems of schooling, to the protection of the consumer and the working person, and finally to inflation. Here we have more variations on the same theme. Public education suffers from the malady of an excessive reach and unchallengeable monopoly of government. The well-being of consumers may on occasion be safeguarded by government agencies but is more often jeopardized by the inertia or self-interest of government bureaucracies. National problems such as energy are not alleviated but only aggravated when the flexible market is discarded in favor of government intervention. Restrictions on the entry into occupations, such as those imposed by the American Medical Association or by any other trades union, protect small constituencies at the expense of large groups of citizens. As for inflation, it too results from the imposition of government power beyond its proper limits. “Since time immemorial,” the Friedmans warn, “sovereigns—whether kings, emperors or parliaments—have been tempted to resort to increasing the quantity of money to acquire resources to wage wars, construct monuments, or for other purposes. They have often succumbed to the temptation. Whenever they have, inflation followed close behind.”

Woven into this chapter-by-chapter diagnosis of our major ills the reader will find numerous prescriptions. Predictably, the Friedmans urge that market activity be encouraged and that government activity be discouraged. Thus the monopoly of public education should be broken by their well-known voucher plan that would enable parents to choose the schools their children would attend, putting private schools on a par with public. The umbrella of consumer “protection” should be furled, and the distortions of monopoly corrected, partly by dismantling all tariff and quota barriers, partly by breaking up the licensing powers of professional groups such as the AMA. And of course the issuance of ever more money must be brought under control. Ideally capping the program would be a series of constitutional amendments for economic freedom. These would limit the taxing and spending power of the government, abolish tariffs, prohibit wage and price controls, prevent licensing of occupations and professions, simplify taxation, forbid the taxation of corporations, limit the annual growth in the money supply, and index government bonds to protect bond holders against inflation.

That is roughly the gist of the Friedmans’ book. It has the ring of self-evident truth and self-confidence, a tone of conviction that is quickly communicated to the reader. Indeed, what strikes one at first is the apparently overwhelming logic, the unanswerable evidence in favor of the Friedmans’ case. Take, as an initial instance, the contrast of Japan in 1867 and India in 1947 which they introduce early into the book. Was there not a striking similarity in the initial starting points of the two nations? “Both were countries with ancient civilizations and a sophisticated culture. Each had a highly structured population. Japan had a feudal structure…, India had a rigid caste system…. Both countries experienced a major political change that permitted a drastic alteration in political, economic, and social arrangements. In both countries a group of able, dedicated leaders took power…, determined to convert economic stagnation into rapid growth….”

Indeed, in retrospect the differences all seem to favor India. Japan in 1867 was utterly cut off from the Western world. It had no capital structure, no railroads, factories, or civil service such as India enjoyed in 1947. In resources Japan was the poorer of the two. It had no fortuitous influx of capital, such as the “enormous volume of resources” that India received as foreign aid.

Yet look what happened. Japan rose to be a formidable economic power, with a high standard of living and widespread political freedom. India remained economically stagnant and even lapsed into brief dictatorship, which it may do again (the Friedmans warn). What, then, explains the difference? “We believe the explanation is the same as for the difference between West and East Germany, Israel and Egypt, Taiwan and Red China. Japan relied primarily on voluntary cooperation and free markets…. India relied on central economic planning.”

The argument sounds convincing, until one begins to think about what has been left out: the long traumatic Indian experience with British imperialism for which the Japanese have no counterpart; the linguistic fragmentation of India, compared with the homogeneity of Japanese culture; the Japanese descent into dictatorship in the 1930s. The Friedmans leave out also the huge injection of American capital into Japan after World War II, when Japan became America’s military outpost in the Far East. Whatever the free enterprise talk in Tokyo, there is also the informal planning of government, banks, and corporations in Japan (“Japan Incorporated”) contrasted with the sprawling chaos of Indian village life, whatever the socialist rhetoric in Delhi.

They leave out, in short, a vast array of elements that would muddy the clarity of their exposition. What appears to be a clear-cut demonstration, properly simplified to present a bold case, becomes in fact a case built on selected and omitted evidence that, were it used by an ideologue of the left, would unhesitatingly be described by the Friedmans as shameful. And it is not just in the contrast of India and Japan that we find this kind of argument. The contrast between East and West Germany makes no mention of the drain of resources out of East Germany by Russia. In discussing the difference between Israel and Egypt they do not consider the respective skills and training of the two populations or the critical infusion of philanthropic capital into Israel. The juxtaposition of Taiwan and mainland China omits the fact that the market system of pre-communist China collapsed.

This same one-sided argument characterizes much of their policy diagnoses and prescriptions. Their espousal of the voucher system, for example, pays no heed to the critics’ fears that such a system would convert our public schools into dumping grounds for all students who, for whatever reasons, would not be acceptable to private educational institutions. Their attack on the regulated industries effectively returns us to the aegis of free-market forces which is precisely the environment from which we fled into government regulation in the first place. Their confident call for a curb on the money supply to halt inflation ignores the growing body of professional skepticism with the monetarist position. Their attack on the antisocial consequences of the drive for equality leans on their insinuation that this is a factor behind the growth of “crude criminality in Britain in recent decades,” but leaves out of consideration the rise of racial conflicts in England stemming from Asian and African immigration or the appearance of a violent youth culture around the world.

In the face of such arguments, a critic can only throw up his hands. Some of the Friedmans’ specific proposals appear to me to be shrewd and worth consideration, but not on the basis of the winnowed evidence or shabby arguments they have advanced on their behalf. Free to Choose is to serious economic and political debate what fundamentalist preaching is to Bible scholarship.

Since I cannot, without writing a book as long as theirs, either defend the merits or demonstrate the demerits of their arguments, let me instead turn to a few basic ideas that seem to underlie their thinking. The first of these is their view of the historic role of capitalism itself with respect to “human nature.” To the Friedmans, capitalism represents a stage of history in which a propensity of deep, almost primordial, strength is finally accorded its rightful place and scope. This is the propensity for material betterment that provides the motor strength of capitalism and—as a consequence of competition—its built-in regulating device. Adam Smith certainly held such a view of history, calling the market economy the stage of “perfect liberty,” and the Friedmans continue to rest their social philosophy on that belief.

There is, however, an opposing view. It is that the market system, far from representing the fruition of a long-blocked propensity, is the product of a violent process of social displacement during the seventeenth and eighteenth centuries that culminated in an unstable and unwelcome structure of social and economic relationships. That is the view of such observers as Burke and Coleridge and Ruskin, not to mention Polanyi, Veblen, and Marx. From this standpoint, the market system is only a passing episode in the human drama, a tumultuous and creative era in which the economic sphere was temporarily lifted above the matrix of political and social forces that normally contain and control it.

From this perspective, I think, we get a clearer picture of the contrast between market and nonmarket societies that figures so large in the Friedmans’ book. No one denies that the forces of capitalism can give rise to dramatic economic growth. The Friedmans are entirely right in pointing to Hong Kong—or to Japan or West Germany or Israel—as monuments to the capital-accumulating capacities of such systems, and perhaps to their ability to create and nurture democratic political processes. That is not however the entire picture. Capitalism builds and it also undermines. It satisfies wants but creates new ones even more rapidly, so that capitalist societies are marked by a perpetual craving, not a sense of contentment. Capitalist societies create political freedoms and simultaneously fear the implications of applying the democratic creed to the economic sphere.

Thus capitalism is far more dynamic, more restive, more self-contradictory than the Friedmans would have us believe. Their view of the market system is naïve, grasping one part of its nature, blind to others.

Closely associated with this simplistic view of the market system is their conception of economic freedom. A key word here is one the Friedmans use often: “voluntary.” The hallmark of a market system, as they describe it, is that its members cooperate voluntarily, and therefore with enthusiasm and efficiency. “The key insight of Adam Smith’s Wealth of Nations is misleadingly simple,” the Friedmans write. “If an exchange between two parties is voluntary, it will not take place unless both believe they will benefit from it.” Yet even Adam Smith recognized that the voluntary exchange of the services of labor and of capital was not of exactly the same nature for both sides. “The workman may be as necessary to the master as the master to him,” he said, “but the necessity is not so immediate.” Thus the exchange of labor on the marketplace—the core activity of the market system—is not quite so natural or so unambiguously voluntary as the Friedmans make it out to be.

This restricted view of economic freedom of course affects their argument. As they use the term, economic freedom means the right to pursue one’s livelihood in the marketplace, and the allied right to enjoy as little public restraint as possible in that pursuit. But once again, there is another view. Economic freedom can take the form of laws that set men free from the pressures of the marketplace, for example by enabling them to demand a legal minimum wage, or to go on welfare rather than perform distasteful work. We may not like the effects of minimum wages or welfare provisions, but it is wrong to deny that they also provide freedom of a kind to those who benefit from them. So too, economic freedom can appear as the ability of individuals to achieve collectively ends they cannot attain singly: labor unions make men free to impose their desires, which they would not be free to do without them. Again, we may rail against the abuse of power by unions, but that is not to deny their effect in freeing their beneficiaries from their nonunion impotence.

The Friedmans of course recognize that unions can win special benefits for their own members, but they call our attention to the constraints they impose on others. It never seems to occur to them that the rights of property and of managerial prerogatives also enhance the freedom of some and limit the freedom of others. As with their conception of capitalism, the Friedmans’ use of the word freedom is oversimplified and abstract.*

A third idea also displays a curiously narrow view. This is the Friedmans’ approach to equality:

Much of the moral fervor behind the drive for equality of outcome comes from the widespread belief that it is not fair that some children should have a great advantage over others simply because they happen to have wealthy parents. Of course it is not fair. However, unfairness can take many forms. It can take the form of the inheritance of property—bonds and stocks, houses, factories; it can also take the form of the inheritance of talent—musical ability, strength, mathematical genius. The inheritance of property can be interfered with more readily than the inheritance of talent. But from an ethical point of view, is there any difference between the two?

The answer to this question is that there is indeed a difference, and moreover a difference that must surely be known to the authors. It is that we do not attach any moral significance to unfairnesses determined by nature, whereas we do attach such significance to those determined by society. No one considers it morally wrong that one person is handsome and another ugly, but everyone holds it to be morally wrong when two people have incomes which, when compared, offend sensibilities or violate conventions. This is true whether those incomes are equal or not. We are morally outraged when a gangster makes as much as a law-abiding citizen and when a useless citizen has more than a useful one. Thus the moral issue is not that of equality of outcomes at all. It is the character of the arguments that we adduce in favor of, or against, any kind of social determination, be it access to justice, work, income, or whatever. The Friedmans have failed to alert their readers to this obvious moral distinction. They must not be discomfitted, then, if their readers, on hearing it, conclude that their mentors are not altogether reliable moral guides.

THE WORKS OF FRIEDMAN

Milton Friedman’s work as an economist has made him famous on at least three fronts. Early recognized as an exceptionally brilliant and iconoclastic mind, he came to national attention in the 1950s and 1960s with a series of imaginative articles on the motivation behind consumption behavior. Vigorously challenged and skillfully defended, these articles vaguely associated Friedman with an “anti-Keynesian” view and identified him as a conservative because of the emphasis they placed on the self-asserting power of spontaneous economic behavior despite governmental efforts to influence it, especially with respect to the decisions of individuals to spend or save.

A second, related, element in Friedman’s reputation was the formulation of the bold hypothesis that “money mattered” in the determination of GNP, a view that flew in the face of the prevailing orthodoxy that only fiscal policy, not monetary policy, could affect GNP. Friedman’s Monetary History of the United States, written with Anna J. Schwartz and published in 1963, together with a number of disconcerting and sharply argued articles, gradually changed economic opinion, until monetarism itself became, by the early 1970s, the prevailing orthodox view. Never wholly unchallenged, the view is now perhaps in decline. It is typical of Friedman’s liking for extreme positions that he has always insisted that only money mattered, and that fiscal policy—spending and taxing—are policies that have little effect on the economy as a whole or at least little intended effect.

Third, Friedman is also known for his striking position on economic methodology—namely, that the only criterion for economic science is the correct outcome of the predictions that follow from its hypotheses. In arguing this position, Friedman asserts that the “realism” of those hypotheses has no relevance at all—that economic science should be entirely indifferent to the plausibility of its assumptions and only concerned with the reliability of its predictions. Needless to say, this contention has again brought him into the eye of a self-created storm.

Free to Choose is his second political book, preceded in 1962 by Capitalism and Freedom, also written with his wife. The philosophy of the earlier book is much like that of the present one. Indeed, the Friedmans themselves consider their latest book to be only a more “practical,” “nuts and bolts” version of the themes to be found in the first.

Letters

Free to Choose? November 20, 1980

Free to Choose? November 20, 1980

  1. *

    Many years ago, reviewing a book by the Polish economist Oskar Lange, Milton Friedman wrote: “Here is a brilliant display of formal logic, abstract thinking, complicated chains of deduction; yet the analysis seems more nearly a rationalization of policy conclusions previously reached than a basis for them. What is there about the type of theorizing employed that makes it sterile even in the hands of so competent a practitioner as Lange?” (Essays in Positive Economics, Chicago, 1966, p. 277).

    Friedman answers that Lange stoops to “oversimplification” and to the “use of classifications that have no direct empirical counterpart.” The shoe seems to fit.

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