“Friedman Friday” (“Free to Choose” episode 1 – Power of the Market. part 6 of 7)

PETERSON: Well, let me ask you how you would cope with this problem, Dr. Friedman. The people decided that they wanted cool air, and there was tremendous need, and so we built a huge industry, the air conditioning industry, hundreds of thousands of jobs, tremendous earnings opportunities and nearly all of us now have air conditioned homes and cars and offices. Then the people decided they wanted clean air, and they couldn’t buy it in the marketplace, so they voted at the polling place. They got elected representatives to go to the Congress and say, we are going to have clean air. Now, overnight there was a new market, and the free enterprise system responded to that, and now there’s a big environmental industry making earnings, providing jobs, but also serving this public need to have the freedom to breathe clean air.

FRIEDMAN: You grossly underestimate the extent to which the private market is able to do it. It’s not an accident that the air, before you had any of this legislation, air and water were cleaner in the United States today than they were in the United States a hundred years ago. You know the automobile added one kind of pollution, but it eliminated a far worse kind of pollution. If you consider what the streets of New York would look like today if you were still transporting people by horse-drawn vehicles, you would have pollution on a scale that would stagger you. In the same way, it’s not an accident that the air is cleaner and the water purer in those countries today that are the most advanced, than they are in the backwards country. It’s not been in Afghanistan that you find clean air and water. It’s in the advanced countries. So the market is a very much more subtle mechanism than people give it credit for being.

HARRINGTON: I would like to get this back to the real world, because in the real world there is no possibility that American business, which is a welfare dependent business system, is going to adopt these ideas. What these ideas function as in the real world is a rationalization for the myth of free enterprise which disguises the fact of state capitalism as an argument against social intervention, in a society that does intervene on behalf of the steel industry very quickly. Finally in terms of the American political process, I don’t believe that the political process is so simple as having the people elect the government. The fact is that when a Jimmy Carter is elected President on a relatively liberal platform, he then has to win business confidence, because of the control of the investment process by corporate power. And I think that fact, corporate power, rationalized by free enterprise myths, is the central problem of freedom in our time, and that’s what has to be attacked.

McKENZIE: Before we come to Milton again __

FRIEDMAN: No, no. I’ve got to comment on this, because I think we mustn’t let words get in the way of what really is the case. I take it you think we don’t have socialism. I would say to you that 46 percent of every corporation in this country is owned by the U.S. Government. That’s the corporate income tax, that means out of every dollar of profit the corporation makes, 46 cents goes to the U.S. Government. The actual tax is far higher than that because you tax that doubly when it comes to the individual. The extent to which corporations control their investment decisions has been increasingly reduced. The government is dictating what they spend their investment funds on in the name of pollution control, in the name of other things. It’s a myth to suppose that there is some kind of a big corporate power over here. There was a time when corporations were more influential than they are now, but at the moment I think they’re a beleaguered minority rather than a dominant majority.

McKENZIE: I’d like to take the others into this for a moment. What is the process, for those of you who want to roll back the state, or to push back governmental influence, on the operation of the economy? Before we let Milton in on that, what would you do as an active politician, as another politician, and a businessman?

CONABLE: Well, I personally think we ought to restrain the growth of government in the future.

McKENZIE: How?

CONABLE: By putting some sort of limit on government expenditures. I would like to see a Constitutional Amendment doing that, otherwise we’re going to continue to have the government growing faster than the economy, and thus pushing more and more of the gross national product through the tin horn of government. I think that would be a mistake. It’s a difficult thing to do. I hope we can find some way to do it without making ourselves less free in some way.

McKENZIE: Governor Peterson, can it be done?

PETERSON: Yes, I think we can make substantial headway by furthering our pluralistic society, by encouraging educating more people to think comprehensively. I think one of the big problems in our world is that leaders in government and in industry are shortsighted. They don’t look at the long-term impacts of their decisions. And in a democracy such as ours, the power is with the people, just like the textbooks say, and if they get this more comprehensive understanding and knowledge, they’re gonna see to it that the special interests of the elected officials will be in tune, again reelected, and they will look at the long-term views just like the citizenry is. So I am all in favor of an all out push to get this freedom to vote in the polling place, added to the freedom of the marketplace, because that’s a potent combination.

FRIEDMAN: But voting in the polling place is a very different kind of freedom than voting in the marketplace. When you vote in the polling place, it is important, but it’s very different. When you vote, you vote for a package. And, if you are in the minority, you lose. You don’t get what you want. When you vote in the marketplace, everybody gets what he votes for. If you vote for a __ I vote for a green tie, I get a green tie. You vote for a blue tie, you get a blue tie. If we do that in the polling booth, if 60 percent of us vote for a green tie, you have to wear a green tie.

McKENZIE: Oh, but the 40 percent don’t just shut up. They can try to influence decision making to their own.

FRIEDMAN: They can try to influence __

McKENZIE: Yeah.

FRIEDMAN: __ but it’s a very different and less efficient mechanism__

McKENZIE: Yeah.

FRIEDMAN: __ for matching performance, matching results, to individual taste and preference.

VOICE OFF SCREEN: Whatever kind of car I buy, I still get dirty air.

GALVIN: There are good people running this society, and most of the people that we’re talking about work someplace, and they know that their company is doing something pretty good, or trying to do something pretty good. I think the people are going to start telling the leaders where they’ve gone wrong and start to redress it by the direction of the ballot box.

HARRINGTON: The people in general are more conservative and in particular are more liberal. That is to say, if you ask the people in general, what do you think of government, “Get it off my back, less taxes.” If you ask in particular what about health, national health; what about full employment, government is the employer of last resort. What about pollution, do something about it. Everett Ladd had an article in Fortune about a year ago, which is hardly a radical left wing journal, showing this contradiction. And I think that there is in the United States today a rapid movement to the left, right and center, which I, obviously, hope will be resolved not by an across the boards cut aimed primarily at poor and working people, but by an increasing democratization on economic power, and an increasing democratization of the government. I think that in this complicated society of huge institutions and bureaucracies, if we talk about freedom, one thing that I would like to see would be a law providing funds for any significant minority to buy the research to counter the majority.

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