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, “I’m not pro business. I’m pro free enterprise, which is a very different thing, and the reason I’m pro free enterprise.”

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

HUGHES: Well, I think Milton’s fundamental example of why not be like Britain in the 19th century is wrong. Britain in the 19th century was THE industrialized country; it was well ahead of everybody else __

McKENZIE: Many decades ahead.

HUGHES: __ many decades ahead of everybody else, and it was making larger profits, larger economic rents on its production, and it was doing it at very great cost to the workers in Britain. The workers in Britain were greatly exploited under those circumstances, and we don’t want to go back to that. The international situation is much more complex, and countries __ there are countries at different levels of development, countries with different social systems, and countries with different social objectives, so I think that the solution, you know, is wrongly founded, and it’s millenarian, it’s utopian. I think that we have to think of a much more realistic process of discussions, negotiation, such as has taken place through that, to get to where we’re going, without hurting the people who pay for the adjustment, and that is basically the workers, not the economists.

RUMSFELD: Could I just comment briefly?

McKENZIE: Yeah.

RUMSFELD: I worry about the argument that because of the complexities of international relations, that therefore they must be planned and managed. By definition, we’re not capable of managing the world economy. Each instance when we try to do it, it doesn’t work out quite the way we intended.

FRIEDMAN: I don’t apologize for a moment for setting __ for being millenarian; because I think unless we know where we want to go, the timid steps that we take in that direction will go in the wrong direction. And if we’re gonna go in the right direction, we ought to have a view. But I want to be sure to get down on the record a very strong objection to the statement of fact by Helen Hughes about 19th century Britain. I believe it is simply wrong. The workers were not exploited. The studies that have been done recently have shown over and over again that the 19th century was a period in which the ordinary English worker experienced a very rapid and very substantial rise in his standard of life. England did not stand alone. Japan had complete free trade for thirty years after the major restoration. Japan in more recent years has not. Japan in more recent years is not an example I would cite. But in its early years it had complete free trade. So I don’t believe England stands alone. Now on the more __

McKENZIE: Politics of it.

FRIEDMAN: On the politics of it, of course it’s not politically feasible, why? Because it’s only in the general interest and in nobody’s special interest. Each of us is fundamentally __ has more concern with our role as a producer of one product than we have as a consumer of a thousand and one products. The benefits of a tariff are visible. Mr. Deason can see that his workers are quote “protected.” The harm which a tariff does is invisible. It’s spread widely. There are people who don’t have jobs because of the tariff, but they don’t know they don’t have jobs. There’s nobody who can organize them. Consumers all over are paying a little more for this, that and the other thing. They don’t recognize that the reason they’re paying for it is because of the tariff. The businessmen? I have never been in __ I’m not pro business. I’m pro free enterprise, which is a very different thing, and the reason I’m pro free enterprise __

RUMSFELD: Don’t point at me when you say that. (Laughter)

FRIEDMAN: No, no. I don’t mean to point to you, Don. I point to the business community, because you are an exception. Because that __

McKENZIE: But he conceded there was a tacit alliance because that way __

FRIEDMAN: Oh there’s __

McKENZIE: __to prevent you from achieving your purpose.

FRIEDMAN: Oh, there’s no doubt that there’s such an alliance. In my opinion, the strongest argument for free enterprise is that it prevents anybody from having too much power. Whether that person is a government official, a trade union official, or a business executive. It forces them to put up or shut up. They either have to deliver the goods, produce something that people are willing to pay for, willing to buy, or else they have to go into a different business.

McKENZIE: Well, there we must leave the argument for this week, and I hope you’ll join us again for the next episode of Free to Choose.

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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)

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:

I think the United States would prosper in a way that is hardly imaginable today. It would be an example and a beacon to the rest of the world. What kind of sense does it make, here we are supposedly the leaders of the world. We are the ones who promote freedom, and free enterprise, and individual initiative. And what do we do? We force puny little Hong Kong to impose limits, restrictions on its exports at tariffs, in order to protect our textile workers. We go to Japan, and we say to Japan, “For God sakes, you got to limit the number of television sets you come out.” Instead of doing that, we ought to be setting an example to the world, and if we set the kind of an example to the world that Great Britain set to the world in the 19th century, it would be a tremendous __ it would have a tremendous impact, it would strengthen our moral position in the world, it would strengthen our ethical position in the world.

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Milton Friedman’s Free to Choose – Ep.2 (6/7) – The Tyranny of Control

McKENZIE: How close are you to what Deason was saying a moment ago in this area? He would seem to be arguing with you that there was a responsibility to make competition work.

FRIEDMAN: The responsibility is to set up a framework of laws and of arrangements, under which competition will flourish. And the most __

McKENZIE: Inevitably flourish? I mean, or __

FRIEDMAN: Well, so far as I know, I don’t know of any case in history in which monopolies have been able to maintain themselves for very long without having government assistance directly come in on their side. The trade union monopolies that Mr. Deason represents would never have the kind of power they do now if it weren’t for the special privileges which government has granted to them. I can perfectly well understand his being in favor of such action, of antitrust action by the government, because it really is pro-monopoly action, in the main.

DEASON: Why were those exemptions to monopoly laws given to unions?

FRIEDMAN: Because of the political power of unions, of course. I’m not questioning that.

DEASON: and because __ and because of the tremendous imbalance of power of companies at the time that unions were getting their start.

McKENZIE: There’s one concluding idea toward the end of your script that I’d like to look at, because it seemed to me to be most provocative. You talked about the need for constitutional restraints on governments to prevent them interfering in foreign exchange free markets, and in foreign trade. Now what have you in mind, Milton, when you say “constitutional restraints”?

FRIEDMAN: I __ no doubt what I have in mind if I, if I could persuade the public, I would like it to adopt a constitutional amendment strictly parallel to the constitutional prohibition in the text of the constitution, against the central government __ I’m sorry, against state governments imposing tariffs on imports. I would like to have a constitutional amendment which would read, “The Congress shall not impose any taxes, any taxes on imports, or give any subsidies to exports, except such as may be necessary,” I think the wording of the constitution is that the states are permitted to do it if it’s necessary for inspection. That’s the excuse under which California inspects you every time you drive past to see whether you’re carrying any plants or fruits or vegetables.

DEASON: Milton, let me ask you a question: How long do you think that the United States would survive if the United States enacted what you would like to have?

FRIEDMAN: I think the United States would prosper in a way that is hardly imaginable today. It would be an example and a beacon to the rest of the world. What kind of sense does it make, here we are supposedly the leaders of the world. We are the ones who promote freedom, and free enterprise, and individual initiative. And what do we do? We force puny little Hong Kong to impose limits, restrictions on its exports at tariffs, in order to protect our textile workers. We go to Japan, and we say to Japan, “For God sakes, you got to limit the number of television sets you come out.” Instead of doing that, we ought to be setting an example to the world, and if we set the kind of an example to the world that Great Britain set to the world in the 19th century, it would be a tremendous __ it would have a tremendous impact, it would strengthen our moral position in the world, it would strengthen our ethical position in the world. Instead of giving money to underdeveloped countries to produce products which we then refuse to buy and don’t let them export to us, we would be saying to the rest of the world, “If you produce anything, if you can produce anything and have a market here, come, we’re delighted to buy it, and we’ll produce things for you to buy.” That’s the kind of a pattern I would like to see the United States establish.

McKENZIE: Would your members buy that?

DEASON: Never. That’s a __

FRIEDMAN: Never is a long word, sir.

DEASON: Yes, you’re right.

FRIEDMAN: __ and you must distinguish between __

DEASON: And one should never say never.

FRIEDMAN: Your union officials would not buy it. But I am not sure your members wouldn’t.

DEASON: My members would not. No. My members would never buy it either. I cannot conceive of the United States setting itself up to become a target for the rest of the world.

FRIEDMAN: It’s not a target.

DEASON: There would be absolutely nothing that would require or compel any other country to enact any reciprocal agreements relative to tariffs__

FRIEDMAN: That’s right.

DEASON: __ and until such time as they have succeeded in dumping in the United States __ and I used dumping in the broadest sense of the word __ any and every product, either government subsidized by a foreign government, either put there because of multinational corporations manufacturing facilities in a foreign country, until they have succeeded in absolutely draining us dry __

FRIEDMAN: Draining us dry of what?

DEASON: Of every __ of every asset.

FRIEDMAN: How?

DEASON: Of every __

FRIEDMAN: What would they do with the dollars they got?

DEASON: They’d probably buy up, as they are now, as they __

FRIEDMAN: If they bought up __

RUMSFELD: The choice farmland.

FRIEDMAN: Yes. Yes.

McKENZIE: Let’s broaden this. On this very argument, now and a constitutional amendment argument. We’ve learned from our union friend he would __ can’t sell it and won’t sell it. Would business buy it?

RUMSFELD: Oh, no! They __ speaking __ (Several people talking at once.)

RUMSFELD: I’m not saying whether I’d buy it. No, no, but if business would help, which is the question. No, when I __ I speak not as a businessman, but as an ex-government employee, whenever proposals like that came up, one of the first things people see happen is government __ business and labor come in in lockstep, saying, “Horrors, horrors, the sky is falling.” There’s a commonality of interests there and people get used to what is, they get terribly conservative, and they know how to work the system the way it exists, and particularly the big unions and the big business, and they get very satisfied with it, they can manage it pretty well, and any time you try to unravel any kind of regulation or restriction or government intrusion, they’re philosophically for it, but in the practical world, they don’t want you to change the drill, they just figured out how to work this. Why should you then change it and make it all the more complicated. No, I think you’d get a good deal of reaction, just like you did out of the steel company in your television show.

McKENZIE: And what would the international reaction, do you think, as an international economist. Supposing Milton got his amendment, constitutional amendment, which had that effect, how would other countries react to it?

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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)

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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“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)