FRIEDMAN FRIDAY “The Tyranny of Control” in Milton Friedman’s FREE TO CHOOSE Part 5 of 7 (Transcript and Video) “There is no measure whatsoever that would do more to prevent private monopoly development than complete free trade”

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 asserts, “The best way to limit the control of a few is free trade on a worldwide basis. There is no measure whatsoever that would do more to prevent private monopoly development than complete free trade. It would do __ be far more effective than all the antitrust suite in the world.

Milton Friedman’s Free to Choose – Ep.2 (5/7) – The Tyranny of Control

McKENZIE: Could we go __ Milton. There’s a direct challenge. What would you do about displaced workers, or let the slack be taken up by other __

FRIEDMAN: I believe that you have to separate, and should separate sharply the issue of what you do about people in distress, from how you handle the industrial system. I do not believe you ought to have a special program for displaced workers. What you ought to have, and what all societies do have, is some mechanism, voluntary or governmental, which will assist people in distress. We have another program in this series which deals with exactly that issue, in which I come out, as you know, in favor of a negative income tax as a way to do it. But I think it’s a great mistake to try to link it directly with tariffs. And the reason is that many people who are displaced are not in trouble. Many of those have good alternatives. Some of them will benefit from it. There are some who will be in distress, of course, but there are always people who are in distress for all sorts of reasons. In a dynamic society, demands are going up here, demands are going up there, there is no more reason in my opinion to have a special program for those who are displaced because of the changes in demand and supply in the international scene, than because of the changes on the domestic scene.

McKENZIE: A quick reaction to that __

DEASON: Why would you want to return to a concept that this country exists, you know, had in 1900? Why would you want to return to where a few control the economic destiny of every working man and woman?

FRIEDMAN: It’s exactly the other way, Mr. Deason. The best way to limit the control of a few is free trade on a worldwide basis. There is no measure whatsoever that would do more to prevent private monopoly development than complete free trade. It would do __ be far more effective than all the antitrust suite in the world.

DEASON: I totally disagree. You would wind up with a situation like in the movie Rollerball, where corporations carved out their spheres of economic influence throughout the world, and controlled everything. It would be controlled by corporations __

FRIEDMAN: You saw the __

DEASON: __ in its entirety.

FRIEDMAN: Excuse me. You saw the picture of Hong Kong, didn’t you?

DEASON: Yes.

FRIEDMAN: Where are those corporations there?

McKENZIE: We might get down that alley and have difficulty in finding our way out of it. Could we move to another big theme in the film: that is, that the third world countries have, broadly speaking, made a very serious error in moving into planned economies, from beginning to end, and you use a phrase in the case of India, “Central planning has condemned the Indian masses to poverty and misery.” Now, what’s your reaction to that, sir?

BHAGWATI: I partly agree with Milton as well as I largely disagree with him. I think it is true that the invisible hand ought to be seen more in the poor countries, (Laughter) than it is, and I would like to see the iron fist disappear. Unfortunately, it’s the other way around. On the other hand, I think it cannot be maintained that laissez faire is the answer, either that it’s a necessary or a sufficient condition for development. Let me go to Milton’s examples and, you know, refer to Japan. Japan is a prime example, actually, of where the visible hand is invisible to everybody who is outside of Japan. But it’s writ large on the wall for the Japanese. The Japanese government, right from the major restoration, has taken a very active interest in the development of the country. It has regulated technology and imports. Even to this date the government and business have a strong symbiotic relationship. I think it’s just __

McKENZIE: Highly paternalistic.

BHAGWATI: __ and business is highly paternalistic. I don’t think it’s a valid example at all of what I believe was the implication of Milton’s program.

McKENZIE: Let’s bring in Helen Hughes. On this theme, has the third world made a disastrous mistake in almost unanimously moving into planned economies rather than the free market?

HUGHES: Well, first of all, it hasn’t almost unanimously moved into planned economies.

McKENZIE: Overwhelmingly so.

HUGHES: Not even overwhelmingly. I mean, India is a large country, but the majority of developing countries are not centrally planned. They have some sort of planning, and secondly, some of the countries which have been most successful have had the highest government intervention. The best examples are Taiwan, Korea, Brazil, Singapore. And even in Hong Kong, which is often held up as an example of no government intervention, I mean this is just not true. The Hong Kong government has provided the infrastructure. It has provided the roads and the ports and schools. And it’s been very important. But when you move to a country like Malawi or Papua New Guinea, you can’t do without government intervention. There is nothing there. There are no entrepreneurs in place, and the American entrepreneurs are not interested in small places like that.

FRIEDMAN: I’m not in favor of no government intervention. I never have been. I point out in the film that what the government did in Hong Kong was very important. The question is: What kind of intervention? And in the states you’ve described, in the places you have described where you’ve had success, governmental intervention has been of a rather special kind. It has provided infrastructure. It has not tried to determine the outline of industrial production, the areas in which industry should go, exactly what the allocation of __ it has not gone in for central planning.

HUGHES: Well that’s just not true in Korea. I mean, you are factually wrong because in Korea the government has actually __

FRIEDMAN: Oh, it is true in Taiwan.

HUGHES: It’s fairly true in Taiwan, but not in Korea, which has grown faster than any other country. Where Korean exports have been determined to a very large extent, by direct government intervention. I think your point is, what sort of government intervention, what for, and what are the tradeoffs between government intervention and the free market. These are the relevant issues.

McKENZIE: What is the role of government in relation to the market economy? How do you see it performing, Don Rumsfeld, do you want to see government, as it were, enforcing competition by chasing down monopoly, restrictive practices, and all the rest of it in the society?

RUMSFELD: The record’s clear that they don’t do it well. They can’t manage the __

McKENZIE: But does that mean they shouldn’t do it at all, or do it better?

RUMSFELD: Take the wage price controls in the United States of America, I happen to have been involved, and I don’t say it with any great pride. The real world is __ I don’t care about good intentions, I don’t care about brains, I don’t care about integrity, the fact of the matter is they’re not smart enough to manage the wages and prices of every American, 215 million strong. They can’t do it well. They do it poorly. And the weight of that is harmful. It’s graphically shown in every document issued by the Council of Economic Advisors in the United States.

McKENZIE: But what about the additional question, though, does the government properly, in this or elsewhere, insure competition by other devices. I’m not talking now about price control, wage control, but insuring competition rather than permitting price fixing or agreements and monopoly. What do you feel about it?

DEASON: I feel the government properly acts in that area. It must __ the government must be there to insure competition.

RUMSFELD: The government’s not smart enough __ look at the Antitrust Law. You talk about a patch __ the implementation of antitrust regulations in the United States, between the Department of Justice and the FTC. It’s a __ it’s a patchwork mess. There isn’t any logic to it. People don’t know what to do. They don’t __ they can’t get answers. They’re inhibited from mergers and consolidations that would make a lot of sense from the standpoint of the consumer.

DEASON: And would make even more sense from the point of multinational corporations.

HUGHES: I think that one of the points you’re making is that it’s very hard for the government to intervene in a very large country, like India or the United States. But compare government intervention in some of the small, homogenous countries of Europe or Singapore, and I think that’s very important. Switzerland has a great deal of government intervention. Sweden, Denmark, Norway __ I’ve just quoted you the four highest income countries in the world. They do have intervention to try and protect the functioning of the market system, and to make it more efficient.

BHAGWATI: Milton is absolutely right, that if you’re talking about central planning that has been disastrous. Absolutely, in terms of having targeted industrial allocations and so on; I mean there’s absolutely no doubt in anybody’s mind who has studied the problem over the last twenty years.

McKENZIE: Disasters in India, too.

BHAGWATI: In India as well, very definitely.

McKENZIE: You advised on that, didn’t you?

BHAGWATI: No, not on centralized planning, no. (Laughing)

RUMSFELD: That wasn’t a clear question anyway. (Laughter)

FRIEDMAN: That’s all right. I was over there as an advisor, too.

BHAGWATI: I’m on the side of the angels on that. For a number of years __ I’m supposed to be a friend of Milton’s there, which is disastrous. (Laughing)

DEASON: To give advice is one thing. To have it taken is a different one.

FRIEDMAN: I agree very much with what Helen Hughes has said, that the more homogenous the country, the less harm the government will do by intervening. I don’t believe it does positive good. I just simply believe it does less harm. But, as to antitrust __

McKENZIE: Yeah.

FRIEDMAN: I am in favor of the laws which make agreements and restraint of trade illegal.

McKENZIE: Yes.

FRIEDMAN: Most of the rest of the antitrust apparatus has promoted monopoly instead of hindered monopoly. If you look at where there are monopolistic elements in the world, and in the United States, including the multinationals you want to refer to, in almost every case that monopoly derived from a special grant by government. And therefore, the problem is not how does government enforce competition, how do you keep government from setting up monopolies? That’s the real problem, if you look at the real world, and not at the preamble, the language, of antitrust measures and similar laws.

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