Sunday, June 3, 2012
Uncle Miltie: Musings on Milton Friedman's "Free to Choose"
Chitester had been introduced to Nobel Prize winning University of Chicago Economist Milton Friedman in 1977 by the then chairman of the Corporation for Public Broadcasting, a non-profit corporation to promote public broadcasting, W. Allen Wallis, a Republican who had served in several Republican administrations in Washington before 1977 and would go on to serve in several more after 1980. Wallis like Chitester was a classical liberal. Today we would call them both neoliberals or neoconservatives. Both Chitester and Wallis felt that with Friedman, a man cut from the same classical liberal cloth as themselves, they had found the right man for the job of putting Keynesian liberalism represented by John Kenneth Galbraith, the Keynesian liberalism that had dominated the Western world since the Great Depression, in its place.
"Free to Choose" in its original form, a revised version was later transmitted in 1990 after the triumph of the "Reagan Revolution", consisted of ten episodes, The Power of the Market, The Tyranny of Control, Anatomy of Crisis, From Cradle to Grave, Created Equal, What's Wrong with Our Schools?, Who Protects the Consumer?, Who Protects the Worker?, How to Cure Inflation, and How to Stay Free. "Free to Choose" is part classical liberal economics 101, part an attack on Keynesianism, part libertarian manifesto, part travelogue, and part debate of the issues each episode raised.
The first episode, "The Power of the Market" (video: http://www.youtube.com/watch?v=f1Fj5tzuYBE, transcript: http://www.freerepublic.com/focus/f-news/1667407/posts) explores something near and dear to contemporary classical liberal (ironically classical liberals of the intellectual neoliberal revival that began in the 1950s would take the name conservatives transforming that term from one used by anti-capitalists and anti-modernists, i.e., anti-liberals, to describe themselves, to a term applied to a movement risen in defence of "traditional" classical liberal laissez faire values) hearts, the dangers of big government to a free market and to personal freedom tied inextricably to the existence of a free market.
There is a lot to like and dislike about Friedman's polemics in "The Power of the Market". The likes first. I found and continue to find Friedman's contention that the bigger the government the bigger corporate influence on and control of the government an interesting and somewhat compelling assertion. What libertarian liberalism misses in its nearsightedness, however, is that it is not only political entities that are centralising it is also happening in the economic domain and that this centralisation is not being driven by political centralisation but by the centralising tendencies of the modern world including capitalism, industrialism, the division of labour, specialisation, nationalism, and population growth. I found and continue to find Friedman's contradiction of social compact and some Enlightenment notions that men (remember Friedman was presenting a television programme in an era in which man and mankind were still in use as general terms or humankind) were not born free but were only made free interesting and again somewhat compelling. I found Friedman's condemnation of unfree labour markets interesting and compelling. But most of all I liked the fact that Friedman actually, even more than William F. Buckley on his PBS show "Firing Line", actually debated intelligent people who disagreed with him. In the first episode of "Free to Choose" these intelligent critics included democratic socialist and author Michael Harrington, former DuPont executive and former Republican governor (just another example, by the way, if another was needed, of the revolving door between corporations and political power) of Delaware Russell Patterson, then Republican Congressman from New York State and future president of the World Bank Barber Conable, sometime critic of Friedman and then Motorola executive Bob Galvin, and moderator and political sociologist Robert McKenzie.
My problems with "The Power of the Market" are some of the same ones Michael Harrington enunciates very early on in the debate portion of the first episode, specifically Friedman's ahistoricism, the abstractions that result from Friedman's ahistoricism, and the role Friedman's political economy plays in rationalising and justifying corporate economic actions, corporate power, and corporate wealth, classical liberalism, in other words, as cheerleader apologetics.
What is absent from Friedman's analysis of Hong Kong's success, however, is real history. As Conable and McKenzie note it is important to put Hong Kong in its broader historical contexts. Contemporary Hong Kong, as Conable notes, can only be understood in the context of its relationship with Communist China and Hong Kong's relationship to the "free world". Hong Kong was, of course, in 1980, a colony of Great Britain and had been so essentially since the 1840s. It would be so until 1997 when the British returned the city-state to China after they received certain guarantees. Because of this, Hong Kong has to be seen for what it is, the product of British imperialism, British colonialism, British colonial policies and practises, British legal traditions, British trade policies and practises, and British political and economic power. British governmental policies and practises, in other words, played an important and significant role in making Hong Kong what it was in 1980 and what it is today.
Friedman's amnesia about the broader historical contexts of Hong Kong reflects, as Harrington notes, a general historical amnesia present in Friedman's analysis, polemics, and apologetics. Harrington uses the example of the US government's role in subsidising the building of networks of railroads across the US as another example of Friedman's blindness when it comes to the "positive" role governments have played in economic development throughout human history (assuming governments helping to create capitalist economies is a positive). As Harrington points out the US gave public land to railroad companies in Gilded Age America (1877 to approximately 1902), land grants which played an important role in stimulating capitalist economic development in the US.
Friedman dismisses Harrington's example by claiming that Harrington is seeing the hole in the barn door but not the barn itself. In other words, Friedman claims that government intervention was, for the most part, absent during the Gilded Age and when it wasn't absent it generally had negative impacts on the free market and human freedom. But did it? In fact, the gift that the US government made of public lands to private companies stimulated settlement of the West, the area beyond the Mississippi River, and stimulated the construction of railroads and, as a result, stimulated other industries associated with railroad building like iron, steel, timber, railway locomotive and railway car construction, and helped create the first national economy in the US since it was the railroads that linked America East and West for the first time in American history. By stimulating a host of industries in the US the American government also helped create jobs and, by extension, consumption by simply giving railroad companies an initial real estate handout. This is not, as Freidman implies, a little thing nor, unless you are an anti-capitalist traditional conservative, and I don't think Friedman is that, necessarily a "bad" thing.
There are, of course, a number of other instances of government intervention in the US economy both before and after the New Deal, that era of American history that marks the beginning of declension for most classical liberal polemicists and apologists in the United States. There was Abraham Lincoln's homestead and land grand college acts. There was Theodore Roosevelt's creation of the National Park and National Monument systems. And there was Dwight Eisenhower's building of the US interstate highway system, a governmental action that essentially gave us the highly suburbanised America we live in today.
The United States, of course, was not the only modern nation where significant government interventions took place. Governments in Russia, Prussia, Germany, France, Australia, Canada, and New Zealand, to name a few, played important roles in expanding the economies, creating scientific research and development institutions, building railroads, creating national economies, creating jobs, and stimulating consumption all of which helped make their new nations even more capitalist than they already were. They did it, in part, to keep up militarily with the other Jones's of the Western industrialised world. Remember that the nineteenth and early twentieth century was the era of Great Power Struggles in the West. Hey perhaps this isn't so "good" though for reasons different from Friedman.
Friedman's blind spots when it comes to the significant and important roles Western governments have played in the economic arena stem from, I think, Friedman's tendency, like that of many other economists, to think in abstract and somewhat ahistorical terms. A few examples. First, Friedman fails to grasp the real history of capitalism. He seems to conflate old merchant capitalism, a type of capitalism that has existed since at least Çatal Hüyük and which has existed in monarchical societies of all types, republics, corporatist regimes, totalitarian regimes, and authoritarian regimes, and modern forms of capitalism, forms of capitalism that really came of age in the seventeenth century, namely industrial capitalism and financial capitalism which were also found in various types of societies including "capitalist" and "communist". The speculative booms and busts so typical of capitalism since the tulip mania of 1630s in the Netherlands are, of course, typical of industrial and financial capitalism as the history of the many booms and busts ever since shows.
Second, Friedman fails to grasp, as Max Weber did in the early part of the twentieth century, that centralisation is not a characteristic of governments ancient or modern but is rather a characteristic of the modern world with its modern bureaucracies, its modern economic bureaucracies, its modern political bureaucracies, its modern educational bureaucracies, its modern cultural bureaucracies, its modern conceptions of efficiency and effectiveness, rationality, meritocracy, or better putative meritocracy, and its modern forms of capitalism. All forms of modern capitalism be they modern merchant capitalism, industrial capitalism, and financial capitalism have been impacted by these centralising tendencies as the American Gilded Age, the gilded age of big corporations and robber barons, shows. Modern economies tend toward centralisation for at least one simple reason. Capitalists have realised that the bigger an economic bureaucracy is, the easier it is for them and their corporations to control costs and to expand their profit margins (their apparent god figure and raison d'etre). I give you Standard Oil, Microsoft, Walmart, JP Morgan, and Goldman Sachs, to name a few.
It isn't states only which can and do limit human freedom. Educational institutions, religious bureaucracies, and economic bureaucracies can also be tyrannical and limit human freedom. Inequalites of power, for instance, have been a part of the human condition since the rise of larger scale societies beyond hunter-gatherer forms of social organisations be these societies pastoral, agricultural, or modern-industrial. And while Marx, Friedman, and others have argued that capitalism was and is progressive and that inequality has declined with the rise of modern capitalism (and modern nation-states, I might add) inequalities still exist as Friedman notes when he admits that poverty and inequality can still be easily found even in the place he says has the most free of free markets, Hong Kong. Once again, as the American Gilded Age shows, these inequalities of power have been exacerbated by the rise of corporate capitalism. There are and continue to be some with more power and some with less power whether this power is political or economic in the age of big corporate capitalism. The free capitalist societies Friedman praises, in other words, are rent through with inequalities of economic power.
Fourth, Friedman, praiser of the voluntary free market society--Friedman uses a pencil to give viewers a lesson in how people around the world voluntarily cooperate to produce goods--to high heaven, never really addresses the issue of whether the selling of labour power by those with limited power, the working and middle classes, a selling of labour power, by the way, that both John Locke and Karl Marx railed against because they felt that one's property and labour were inalienable, is truly voluntary or the outcome of a need, in a society of incredible discrepancies in economic power, to earn enough money so that one can obtain shelter and food. If, of course, one has to sell one's labour in order to survive than such a transaction is not purely or perhaps not at all voluntary, is it?
Fifth, Friedman, tends, intentionally or unitentionally, as he did with Hong Kong, to place the United States largely outside of the realm of history and into that ideological domain where history is partially fictionalised and transformed into myth. The only time he talks about the colonialism and imperialism that created the US is when he repeats the tale that the Dutch bought Manhattan from the natives for $24 in trinkets. He never mentions slavery or the role it played in American economic development or financial strength. He never talks about how the US, Canada, Australia, and New Zealand, English settler societies all, shared republican governments, an emphasis on Enlightenment freedom and liberty, liberal economic systems, indigenous peoples who had their land taken away from them by the European colonialists, senses of messianic mission, and mass migration to them. Friedman appears to be, for ideological reasons, someone who believes in American exceptionalism.