“Friedman Friday” (“Free to Choose” episode 3 – Anatomy of a Crisis. part 5 of 7)

MCKENZIE: Ah, well, that’s not on our agenda actually. (Laughter)
VOICE OFF SCREEN: Why not?
MCKENZIE: I boldly repeat the question, though, the expectation having been __ having been raised in the public mind, can you reverse this process where government is expected to produce the happy result?
LEKACHMAN: Oh, no way. And it would be very foolish of the public which is on the whole more sensible than academic, to come to this conclusion. They look around them, what do they see? They see a whole collection of visible hands attached to EXXON, other large corporations. These are not small, independent competitors jostling with each other for the patronage of the public. These are large organizations, with substantial influence on their markets. Government’s interference, clumsy as it often is, is an almost unavoidable response to the very visible manipulations of large organizations.
FRIEDMAN: If there again, you’re an academic, we’re talking about fact in history. Now the history is that the growth of government has not been as a result of the things you’re pointing out. It isn’t the large corporations. It isn’t the large unions. It isn’t the technological development that has produced the major growth of government. The major growth of government in our time has come in the redistributive area. It’s come in the area of designing programs which take from some people and give to others. We’re not going to go into those here, because we discuss those in our next two programs which deal with exactly the question of whether the government intervention that was stimulated by The Great Depression has been a success or a failure. But to your point, the grounds that you give for greater government intervention have almost nothing whatsoever to do with the actual factual growth of government. Now at the end of the war, immediately after World War II, it was thought that government was going to get involved, especially in Britain, in France, in central economic planning on a large scale.
JAY: Partly because of the war experience, too, when government was very much involved.
FRIEDMAN: Partly.
MCKENZIE: In Germany and Japan as well.
FRIEDMAN: Germany and Japan as well, it was a war. It created a myth just as the, as The Great Depression created myth.
MCKENZIE: Or rather reinforced the myth of government responsibility.
FRIEDMAN: Yes, but it created a different myth. This is a subject we don’t discuss much in the film. We’ve discussed it in a book that we’re bringing out with the same title to go along with it but __ but the great, but the great myth that was created by the war, was the myth that government was inefficient. And it was.
MCKENZIE: We won the war.
FRIEDMAN: For wartime purposes in, at least in Britain and the United States. It wasn’t so inefficient in Germany and the losing countries. But why is that a myth? It was a myth because it is one thing for government to plan and to control an economy for a single overriding objective. One solitary objective __ win the war. It’s a very different thing for government to control the economy for the many numerous tastes of all us, of a very large number of people in a complex world. And I __ you ask the question of whether people’s opinions can be changed.
MCKENZIE: Yes.
FRIEDMAN: I can’t change their opinions. You can’t change their opinions, but experience is changing their opinions. Is there anybody, anywhere now who believes that government is an efficient way to run an industrial enterprise?
JAY: I think your question, can you get the genie back into the bottle, is a very important one. It is undoubtedly true that in democratic countries there will be a public urge expressed through the political process, for something to be done about anything that seems to be wrong. The one thing that inhibits that is the belief that it can’t be done. There is not politically expressed desire for the government to do something about the weather because it is widely believed that the government does not control the weather. It was widely believed under the gold standard and pre-Keynes that there was nothing the government could do about the kind of economic traits I call in depressions that we had before that time. Since then it is very widely believed, Milton may believe, I may believe wrongly, but nonetheless, it’s very widely believed that is now a manageable thing, and therefore the demand is expressed that unemployment should not rise too high, inflation should not rise too high, and so forth.
MCKENZIE: That we keep a war on want or a war on poverty.
JAY: If you believe, as Milton does, and on this issue I agree with him, that in fact government cannot handle this issue, and you want to get that genie back into the bottle, you can’t simply do it by authorities, or pundits, or academics, or others saying, “Here is a new rule. The government will do nothing. It will not intervene; it will not perform, but will just be a simple monetary rule.” You’ve got politically to persuade people that this is part of a system which they can understand, which will, in fact, deliver for them the minimal economic objectives that they have, which are basically high employment __ high employment and stability of prices, and one of two other things. Now in order to do that you’ve got to describe a political economic system which will in fact deliver that result. And they will not believe, and in my opinion they will rightfully not believe, that simply going back to where we were, or where we imagined that we were in 1930 or 1870, by withdrawing the government form the game and doing nothing else, will produce that result. And they’re right not to believe it.
TEMIN: The kind of pristine view that you appear to be putting up of no government isn’t really a consistent view because if you __
FRIEDMAN: I’m not putting up a view of no government. I’m putting up a view of a limited government. Limited __
TEMIN: Just how do you, how do you impose the limit?
FRIEDMAN: Note __ note that today the budget of HEW is one-and-a-half times the whole defense budget. That is not where the major growth of government has come. Whether we spend too little of too much on the military is very a arguable issue which I’m not competent to discuss.
TEMIN: Okay.
FRIEDMAN: But it is not the cutting edge of the dispute that we’re engaged in. That cutting edge is on all these other functions which government has increasingly taken on its shoulders.
TEMIN: Yes, but the question __
VON HOFFMAN: How do you get from here to there?
FRIEDMAN: By persuading people to do it, and by doing it gradually. You do not get it overnight. CAB was a very, very persuasive element on __ on getting rid of one branch of regulation. The failure of government to produce the full employment and the stable prices that was promised is another. You know what is __ who are we kidding? Is there anybody around any more who really believes that government knows how to prevent by its present methods inflation or unemployment? We’ve had increasing inflation. We’ve had increasing unemployment. Not only in the United States __
VON HOFFMAN: Well we __ we know that this government doesn’t __
VOICE OFF SCREEN: Wait, wait.
LEKACHMAN: It seems to me that we’re talking about at least four kinds of government intervention of different popularity among the public. One is redistributive __ via the Social Security System and so on __ and lots of that is popular. Welfare is unpopular, but Social Security is quite popular. Medicare has a mixed reputation, Medicaid a bad reputation. The redistributive system is a mixed bag from the public’s standpoint. Another kind of intervention deals with unemployment; a third kind deals with prices; and a fourth kind deals with regulation. Now, again, there is a cry about regulation which itself breaks down, it seems to me, into two parts: Partly a safety kind of thing, partly an economic kind of thing. I doubt that the public is prepared, for example, to eliminate the Food and Drug Administration.
FRIEDMAN: Take the way of trying to smooth out the business cycle.
LEKACHMAN: All right, now wait on that. I think that the record of doing this, in its clumsy way, Republicans, Democrats, assorted administrations in England and elsewhere, between 1945 and 1973 was quite good. Average unemployment during this considerable span of years was lower than had been probably in any previous spell of modern economic history. Inflation was not a persistent problem in this. Now I would say, putting the claim at a very modest one, that Keynesian intervention, if we use that as a label,
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