Milton Friedman: Jewish tradition is so akin to capitalism but many Jews are socialists, what a paradox (Part 2)

Milton Friedman on the American Economy (5 of 6)

Uploaded by on Aug 9, 2009

Host: Richard D. Heffner
Guest: Milton Friedman
Title: A Nobel Laureate on the American Economy VTR: 5/31/77


Below is a part of the series on an article by Milton Friedman called “Capitalism and the Jews” published in 1972. 

Capitalism and the Jews

October 1988 • Volume: 38 • Issue: 10 • Print This Post11 comments

Milton Friedman, recipient of the 1976 Nobel Memorial Prize in Economic Science, is a Senior Research Fellow at the Hoover Institution. This article is reprinted with the permission of Encounter and The Fraser Institute.

“Capitalism and the Jews” was originally presented as a lecture before the Mont Pelerin Society in 1972. It subsequently was published in England and Canada and appears here without significant revision.


I.       Paradox Exposed 

Postwar Collectivism in the West 

Immediately after the Second World War, the prospects for freedom looked bleak. The war had produced an unprecedented centralization of economic controls in every belligerent country. The “socialists of all parties,” to whom F. A. Hayek dedicated his brilliant polemic The Road to Serfdom, seemed well on their way to establishing central planning as the standard for peace as for war, pointing triumphantly to the full employment that had been produced by inflationary war finance as decisive evidence for the superiority of central planning over capitalist chaos. And, if that occurred, there seemed little hope of halting the slide toward full-fledged collectivism. 

Fortunately, those fears have not been realized over the intervening years. On the contrary, government inefficiency together with the clear conflict between central planning and individual freedom served to check the trend towards collectivism. In Britain, in France, in the U.S., war-time controls were dismantled and market mechanisms were given greater play. In West Germany, the courageous action of Ludwig Erhard in ending controls in the summer of 1948 triggered the so-called German economic miracle. Even behind the Iron Cur- rain, Yugoslavia broke with its Soviet masters, rejected detailed control of the economy, and treated us to the surprising vision of creeping capitalism in an avowedly communist society. 

Unfortunately, these checks to collectivism did not check the growth of government. Rather, they diverted that growth from central direction of the economy to central control of the distribution of the product, to the wholesale transfer of income from some members of the community to others. 

The Collectivist Trend in Ideas

Much more important and much more relevant to our society, the favorable trends in the world of affairs were not paralleled in the world of ideas. For a time, there was an intellectual reaction against governmental intervention. Some of us optimistically envisioned a resurgence of liberal values, the emergence of a new trend of opinion favorable to a free society. But any such resurgence was spotty and short-lived. Intellectual opinion in the West has again started moving in a collectivist direction. Many of the slogans are individualist—participatory democracy, down with the establishment, “do your own thing,” “power to the people.” But the slogans are accompanied by attacks on private property and free enterprise—the only institutions capable of achieving the individualistic objectives. They are accompanied by a demand for centralized political power—but with “good” people instead of “bad” people exercising the power. 

West Germany is perhaps the most striking example of the paradoxical developments in the world of affairs and the world of ideas. Who could ask for a better comparison of two sets of institutions than East and West Germany have provided in the past two decades? Here are people of the same blood, the same civilization, the same level of technical skill and knowledge, torn asunder by the accidents of warfare. The one adopts central direction; the other adopts a social market economy. Which has to build a wall to keep its citizens from leaving? On which side of the wall is there tyranny and misery; on which side, freedom and affluence? Yet despite this dramatic demonstration, despite the Nazi experience—which alone might be expected to immunize a society for a century against collectivism—the intellectual climate in Germany, I am told, is overwhelmingly collectivist—in the schools, the universities, the mass media alike.

This paradox is a major challenge to those of us who believe in freedom. Why have we been so unsuccessful in persuading intellectuals everywhere of our views? Our opponents would give the obvious answer: because we are wrong and they are right. Until we can answer them and ourselves in some other way, we cannot reject their answer, we cannot be sure we are right. And until we find a satisfactory answer, we are not likely to succeed in changing the climate of opinion. 

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