To take an example that at first sight seems about as far away as you can get __ the language we speak; the words we use; the complex structure of our grammar; no government bureau designed that. It arose out of the voluntary interactions of people seeking to communicate with one another. Or consider some of the great scientific achievements of our time __ the discoveries of an Einstein or Newton __ the inventions of Thomas Alva Edison or an Alexander Graham Bell or even consider the great charitable activities of a Florence Nightingale or an Andrew Carnegie. These weren’t done under orders from a government office. They were done by individuals deeply interested in what they were doing, pursing their own interests, and cooperating with one another.This kind of voluntary cooperation is built so deeply into the structure of our society that we tend to take it for granted. Yet the whole of our Western civilization is the unintended consequence of that kind of a voluntary cooperation of people cooperating with one another to pursue their own interests, yet in the process, building a great society.
DISCUSSIONI’m Linda Chavez. Welcome to Free to Choose. Joining Dr. Friedman in a discussion of the power of the market are David Brooks of the Wall Street Journal, and James Galbraith of the University of Texas at Austin. Dr. Galbraith, should we follow the example of Hong Kong and simply allow an unregulated free market?Galbraith: I think we do better in this country whereas the combination of a free market and its advantages, and a well regulated, carefully thought out structure of government, which provides a chance to pick up some of the losers from the market process and give them a second start. It provides us with a chance to make the economic process a little safer, a little healthier, a little more environmentally sound and protective, than you might get from a strict adherence to the free market such as Professor Friedman has described in the case of Hong Kong.
Chavez: Dr. Friedman, is there any such thing as a well-regulated market?
Friedman: No. He is begging the question. Obviously he is right. If you could have a well-regulated, carefully thought out, properly done market, benevolent dictatorship is the best of all forms of government.
Galbraith: Oh, I don’t agree with that at all.
Friedman: Neither do I.
Galbraith: Constitutional democracy is the best of all forms of government.
Friedman: No. Constitutional democracy is the least bad of all forms of government. But you beg all the questions when you talk about well-regulated, carefully thought out __ if you look at the actual programs that governments follow, they most always have effects that are the opposite of those that were intended by their well-meaning advocates.
Galbraith: Let me tell you what troubles me.
Friedman: I will tell you something. Matching the invisible hand of the market is the invisible foot of government.
Galbraith: You make the point in the program that in every case where you have a smaller role of government and a freer market, you have a higher standard of living.
Friedman: No. I didn’t say that. I didn’t say that. I said there are better conditions for the poorer people.
Galbraith: Okay. Better conditions for the poorer people. Fine, I will accept that. At the same time you are making the argument in the program that the conditions in Hong Kong are better, for example, than in the United States, which is manifestly not true. You are making the argument that Hong Kong is more free than we are.
Friedman: It is more free.
Galbraith: Does it then follow that the conditions for poor people in Hong Kong are better than they are in the United States? That I don’t believe is true.
Friedman: I said in there where you compare like with like.
Galbraith: Okay this is an important qualification.
Friedman: Hong Kong obviously started out from a much lower position. If I were to compare conditions in Hong Kong in 1945 or 1950 with conditions in the United States in 1820 or 1830, you would have a much closer comparison.
Galbraith: Are you then saying, a position which I would find much more congenial, that where you have a country which has developed a base of material wealth, a degree of comfort for the average citizen, that it is then legitimate for the government of that country to step in and provide some guarantees and some security for poor people and old people.
Friedman: No. I am not saying that at all. Every time they step in and try to do that, they end up doing the opposite.
Galbraith: This discussion reflects a feature of the program that I found to be most troubling which is the failure to make a distinction between governments of the kind that we have developed in this country over 200 years, and governments of the kind that you described in the People’s Republic of China. It’s perfectly clear that one can have, and many countries do have, the curse of repressive dictatorships. It is also perfectly clear that an economy that is organized by Commissars is going to fail. We have certainly seen laid out before us over the last several years, the ashes of those failed economies. But is it possible to take the example of the Soviet Union, Poland, Hungary, and to say that because their governments, which were after all dictatorships modeled after the system of government installed in the Soviet Union by Stalin, are in fact parallel to the actions of our government which is a government which operates on many different federal levels, and where fundamentally what you have is the ability of the ordinary citizen whose power is not weighted by the amount of money he or she has, to use the vote in order to make some collective decisions. Granted, after ten years of Reagan’s Washington, you’ve got a serious problem of corruption. Does that mean we should abandon the idea that you have a democratic process that should be entrusted with certain important decisions __ I don’t think so.
Friedman: You don’t have a democratic process in the sense in which you mean it. We have a democracy. We have a majority rule, but the majority that rules is a collection of minorities. It is a collection of special interests. You cannot tell me that the consumers in this country would vote for a sugar quota that makes the price of sugar three times the world price. When you say you can’t compare it to Russia, you are quite right, but only because they are 100% and we are 50%. If our system, if our present regulations and rules had prevailed, our scope of government had prevailed 100 years ago, we wouldn’t be where we are today.
Chavez: Let me understand you Dr. Friedman. Do you believe that there should be no role at all, whatsoever, for government?
Friedman: Of course there should be a role for government __ a very important role for government.
Chavez: What is that role?
Friedman: The role for government is first of all, to protect people from physical coercion by their neighbors or by foreign countries, that is to protect the national defense and to protect law and order at home. There is a role for government enabling us to have a mechanism whereby we decide on the rules which we want to run, how we define private property, what we mean by private property. There is a role for government in adjudicating disputes between us. There is a role for government. A very important role and I believe our government played that role quite well for about 100 years until the Great Depression.
Brooks: I would go a little further. I think there is a health and safety role as well. The problem is that you have to keep your regulations simple and minimal. You have to realize that there are costs and often the costs outweigh the benefits. In fact, in Washington there are interests who want to divert costs to themselves, so there is sort of a built in structure, a dynamic to make costs outweigh the benefits.
Galbraith: We are making progress here. I would add that the government has a role to protect the environment. I would say the government has a role to set standards for products, where information is very costly for the individual consumer to obtain. I like very much the fact that the steaks that the dentist was eating were inspected by the USDA. Their purity was guaranteed by a rather well-functioning aspect of our government.
Brooks: On the other hand, you have the FDA which has these long delays, 10 years to get a drug approved so that the effect is that you have to be a big drug company to get any kind of dent of the market. Basically you are closing off the market.
Galbraith: On the other hand, you have had a set of regulations which have disappeared without any well-justified regrets. For example, the regulations that govern the entry into interstate trucking; the regulations that govern entry and rates in the airlines.
Friedman: Don’t tell me that that was done under the Reagan administration.
Galbraith: Oh no. Those reforms were done under the Carter administration.
Brooks: There is no doubt that Carter did the heavy lifting on deregulation.
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