The Daily Hatch

In 1980 I read the book FREE TO CHOOSE by Milton Friedman and it really enlightened me a tremendous amount.  I suggest checking out these episodes and transcripts of Milton Friedman’s film series FREE TO CHOOSE: “The Failure of Socialism” and “What is wrong with our schools?”  and “Created Equal”  and  From Cradle to Grave, and – Power of the Market. In this episode “The Tyranny of Controls” Milton Friedman shows how government planning and detailed control of economic activity lessens productive innovation and consumer choice.

In this episode Milton Friedman asserted, “Central planning, in practice, has condemned India’s masses to poverty and misery. We know what has happened in Japan. Free trade set off a process that revolutionized Japan and the lives of its people. Improvements in material well-being went hand in hand with the elimination of the rigid social structure of a century ago. It’s no accident. As always, economic freedom promotes human freedom.”

Milton Friedman’s Free to Choose – Ep.2 (2/7) – The Tyranny of Control

But it is more than just a symbol of honoring the past. It typifies the policy that they are actually following.

The new government in 1948 decided that India’s traditional weaving industry and its workers should be protected from 20th century industrialization. What were the consequences of that policy? This is India today, 30 years after winning independence. These are scenes of a very typical Indian community __ one of thousands. It is called “Anicaputar” and it is about 1,000 miles south of the capital, New Delhi. This is not the kind of life the government intended to perpetuate. But it is one result of their policy. By subsidizing the cotton that the villagers spin and the cloth that they weave, they made it difficult for modern industry to develop.

This is sizing. It’s an essential technique in cloth production where the yarn is smoothed clean. A modern machine could do the same thing in a hundredth of the time. The result of government planning to modernize industry is that the number of hand looms roughly doubled in the first thirty years after India’s independence. Today, in thousands of villages throughout India, the sound of hand looms can be heard from early in the morning until late at night. In this village alone, there are more than 3,000 hand looms in operation.

Since 1948, three generations of villagers have sat at these looms making cloth with patterns that never vary, using methods that never change. There is nothing wrong with this activity, provided it survives the test of the market, provided it is the way in which these people can use their abilities and their energies most effectively. After all, in Japan, where the government has not specially encouraged the hand loom industry, there remains a very small, but very productive hand loom segment. The trouble here is that this industry exists only because the government has subsidized and supported it because it has in effect imposed taxes, direct and indirect, on the rest of the people of India, people who are no better off than these people are in order to enable this activity to continue.

Other industries, both textile industries and industries of a variety of kinds, have been restricted, explicitly kept back, prevented from providing more productive employment in order to make room for this industry. The effect has been to inhibit the development, to prevent the growth, to prevent the dynamic activity that could otherwise develop out of the energies and the abilities to the people of India. This looks like a factory, but it is also home for the people who work here. When they are not sitting at their looms, they eat and sleep in a corner of this hut.

Throughout the world, governments always profess to be forward-looking. In practice, they are always backward-looking. Either protecting the industries that exist, or making sure that whatever ventures they have decided to undertake, are encouraged and developed. This occurs at the expense of the kind of healthy development of new, dynamic, adapted industries that would surely occur if the market were allowed to operate freely. If it were allowed to separate out the unsuccessful ventures from the successful ones. Discouraging the unsuccessful and encouraging the successful.

India has tremendous economic and human potential, every bit as much as Japan had a century ago. The human tragedy is that in India, that potential has been stifled by the straightjacket imposed by an all-wise and paternalistic government.

Central planning, in practice, has condemned India’s masses to poverty and misery. We know what has happened in Japan. Free trade set off a process that revolutionized Japan and the lives of its people. Improvements in material wellbeing went hand in hand with the elimination of the rigid social structure of a century ago. It’s no accident. As always, economic freedom promotes human freedom.

And in the meantime, what has happened to the Japanese weaving industry? This is how textiles start life in a Japanese weaving shed today. A design for cloth is placed on a drum. As it revolves, it is scanned by an electric eye. Each color, each variation in the pattern and texture is transmitted faithfully to a computer. It’s all that the modern loom of Japan requires. This loom is fitted with electronics that make it one of the most sophisticated of its sort in the world. The fabric that it produces is the best silk of its kind.

Thanks to the speed and efficiency of these machines, the price of the silk is competitive. The workers are highly skilled and well paid. With the new technology, there is very little __ a loom like this cannot produce. This piece will become the sash of a traditional bridal gown. These are machine-made products. But by any standards, they are beautiful. They can stand comparison with the very finest work of the hand loom. And it’s not merely the end product itself that is remarkable. The sophisticated technology which was developed to make all of this possible, has been adapted to other processes. Part of the self-generating development under free enterprise, and it all stems from an ancient, traditional industry __ weaving __ that imported a new method for controlling its looms when Japan turned to free trade more than a century ago.

Yet, believe it or not, many still maintain today that markets cannot be left to operate freely. That they must be controlled by government. This dockside is in Scotland, a British government, a socialist government decided that its role was to protect the workers here from competition. So down there in governed shipyards, they are building these vessels for the Polish government. To get the order, the British government is using the money of British taxpayers to subsidize the work. In other words, British people are making these ships in order to sell them at a loss to the Poles. Not only the Poles, but we also in America benefit from this kind of philanthropy.

The steel industry in the United States makes a fine profit. Other countries do too. And their steel is often cheaper, sometimes because their taxpayers subsidize it. So, why shouldn’t the American consumer buy steel wherever he can get it cheapest __ at home or abroad. The American steel industry works very hard trying to persuade us that it’s not in our self-interest to buy in the cheapest market. They urge the government to restrict what they call unfair competition, though, of course, they recognize that there are dangers in this.

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“The Failure of Socialism” episode of Free to Choose in 1990 by Milton Friedman (Part 1)

By Everette Hatcher III | Posted in Milton Friedman, Ronald Reagan | Edit | Comments (0)