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.
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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.
With the national debt increasing faster than ever we must make the hard decisions to balance the budget now. If we wait another decade to balance the budget then we will surely risk our economic collapse.
The first step is to remove all welfare programs and replace them with the negative income tax program that Milton Friedman first suggested.
Milton Friedman points out that though many government welfare programs are well intentioned, they tend to have pernicious side effects. In Dr. Friedman’s view, perhaps the most serious shortcoming of governmental welfare activities is their tendency to strip away individual independence and dignity. This is because bureaucrats in welfare agencies are placed in positions of tremendous power over welfare recipients, exercising great influence over their lives. In addition, welfare programs tend to be self-perpetuating because they destroy work incentives. Dr. Friedman suggests a negative income tax as a way of helping the poor. The government would pay money to people falling below a certain income level. As they obtained jobs and earned money, they would continue to receive some payments from the government until their outside income reached a certain ceiling. This system would make people better off who sought work and earned income.
Participants: Robert McKenzie, Moderator; Milton Friedman; James R. Dumpson, Chief Administrator, Human Resources Admin., NYC; Thomas Sowell, Professor of Economics, UCLA; Robert Lampman, Professor of Economics, Institute of Poverty; Helen Bohen O’Bannon, Secretary of Welfare, State of Pennsylvania
O’BANNON: I think the other __ we have a program in Pennsylvania for essentially all of those who are not taken care of by the AFDC program. It’s called the General Assistance Program. And there less than 15 percent are on more than eighteen months. So we have a great turnover. We have essentially young males moving into the welfare system after unemployment compensation, and then moving out when a job opportunity comes along. This, you know, I think the notion of generations of people on welfare is a very small minority in the whole system. That doesn’t mean that the system as presently defined and as the set of programs that we have put together don’t often contradict each other and I’m the first to agree with Dr. Friedman that some of the programs are conflicting. However, I think it is overly broad to say that we turn people into helpless children.
SOWELL: I don’t remember talking to anyone who’s ever been on welfare who didn’t think they were being treated like children while they were on it.
DUMPSON: Of course, I think, you know, you __ one must make a difference, a distinction between a system that was set up to help people and the people who are employed in that system. Look at any public welfare system around the country and we have no, practically few trained people who to work with people. We employ them ill-trained, people who are not equipped to be helping people. We say they’re social workers. They’re not social workers, they have neither the skills, the attitudes, and some of them not even the concerns; so I think one has to separate how a conceptual framework of a system designed to help people and what the country and community puts into that system to implement those programs.
SOWELL: You mean to separate the hopes from the reality.
DUMPSON: I separate the skills that are available in order to implement what the objectives of the program are. I think we have to separate whether we are talking about program objectives, or we’re talking about how it operates. I would be the first to say that the system that I administered had ill-prepared people to do the job that we were set up to do, and I would not say that the system that we set up __
SOWELL: I talked to some social welfare people who think that in fact they were so hamstrung by the system that there was very little they could do to help people to get off welfare; that is to build up skills at jobs, do whatever was necessary to get off welfare. They felt it was the system.
MCKENZIE: Bob Lampman, your comment.
LAMPMAN: The system that we’re stereotyping is one of a great deal of paternalistic interference in individual family’s lives and in fact isn’t it true, Mr. Dumpson, that case load is so high for an individual welfare worker that they can’t do a lot of interfering in individual family lives. Moreover, in the last decade there’s been a real attempt to ease this welfare trap in AFDC by changing the take-back rate and by administering work expenses and child care expenses in such a way as to facilitate work by those who may want to do it; so it’s not quite as harsh a picture as we sometimes get that there is this omniscient welfare worker who’s right there in the living room with the family making all their decisions for them.
FRIEDMAN: I’ve never heard of a government program which was defective in which the people who ran it didn’t say, “If only we had more money to spend on what we’re not being able to accomplish with the amount we’re spending now.”
MCKENZIE: Milton, we’re going to move along now to some of your prescriptions in that film because I think it’s good ground for discussion. The most drastic one was when you said, speaking of an unemployed man, “Supposing you were cruel and took away welfare from this man, he would find a job at some wage, there’d always be a job he could get; he might need some charity on route, private charity, but he would get a job.” Now, I want you to react, those of you, before we come back to Milton on that. Is that a picture that seems plausible to you?
DUMPSON: He may get a job, and he may get a job in what we refer to as the underground economy, and that’s where a number of our youth are now going to get their jobs. Those activities that are illegal, the only opportunities they have for earning their part of a livelihood.
O’BANNON: I think the other issue is that you have a whole group of people who are the single, female head of the household; and yes, cut off welfare tomorrow: What will they do? What will be their immediate response? At what price to their small children and to their middle-aged children? Yes, they’ll get a job, in fact the statistics show that women, in fact, are the most successful through the employment program. But what has to supplement that typically is the provision of some kind of day care arrangement. Either the individual woman has to earn enough money to be able to pay privately for her day care, or in fact, she is quote “subsidized” through this insidious, corrupting program, set of programs, run by the federal government which, in fact, makes her employable and a taxpayer. It’s an interesting notion of trying to get people in a productive mode.
MCKENZIE: Tom Sowell.
SOWELL: It’s incredible the way you start the story in the middle as if there’s a predestined amount of poverty, a predestined amount of unemployment and that the welfare system is not itself in any way responsible for that __
O’BANNON: There is a predestined 20 percent of the bottom half of the population.
SOWELL: I have never __ well, that’s always been true __
(Everyone speaking at once)
O’BANNON: There’s going to be 20 percent at the bottom.
SOWELL: It’s also true that 20 percent of the bottom population doesn’t have to be living on the government and ruled by the government. You mentioned, for example, a female head of household. Many of those, in addition to the grown woman who has all the kids, are teenage pregnancies. There’s not a predestined amount of teenaged pregnancies. I grew up in an era when people, and particularly blacks, were a lot poorer than today, faced a lot more discrimination than today, and in which teenage pregnancy rate was a lot lower than today. I don’t believe there is a predestined amount of teenage pregnancy. A predestined amount of husband desertion. Gutman has done a study of a black family showing that this whole notion that the black family has always been disintegrating, that is nonsense. His studies go up to 1925, the great bulk of black families were intact two-parent families up to 1925 and going all the way back through the era of slavery, so it is now, only within our own time, that we suddenly see this inevitable tragedy which the welfare system says it’s going to rush in to solve.
O’BANNON: We’re talking to Tom about __
SOWELL: To which it is itself a point __
O’BANNON: We’re talking about a very small group. We’re talking about twelve percent of the families are not intact. Are not two-parent families at any one period __
SOWELL: Do you mean __ among welfare recipients __
O’BANNON: No.
SOWELL: __ or the public at large?
O’BANNON: Among the public at large. We’re talking about twelve percent of the families; twelve percent.
SOWELL: That’s right.
O’BANNON: That’s a small number. But __
SOWELL: We’ve got to build on welfare.
O’BANNON: We’re still talking about a significant component of the bottom twenty percent that are the bottom twenty percent. Whether they are above the poverty line or below the poverty line; they are still the bottom twenty percent. And the issue is: What is the responsibility of the other eighty percent; if any, towards those others?
SOWELL: There’s no program plan to eliminate there being a bottom twenty percent?
O’BANNON: No. But it intends to raise the bottom twenty percent so __
SOWELL: We’re raising them by having more __ by having more illegitimacy, more unemployment, by having __
O’BANNON: I’m not making them be __ have illegitimate children. I hope that’s clear.
SOWELL: Oh, I_I__ you don’t have to do that. You simply subsidize it.
FRIEDMAN: We, as human beings, don’t have a responsibility; but I hope we have a compassion and an interest in the bottom twenty percent. And I only want to say to you that the capitalist system, the private enterprise system in the 19th century did a far better job of expressing that sense of compassion than the governmental welfare programs are today. The 19th century, the period which people denigrate as the high tide of capitalism was the period of the greatest outpouring of Ella Mosner in charitable activity that the world has ever known. And one of the things I hold against the welfare system, most seriously, is that it has destroyed private charitable arrangements which are far more effective, far more compassionate, far more person-to-person in helping people who are really, for no fault of their own, in disadvantaged situations.
O’BANNON: I have to disagree with you though, because I think that the whole notion of private property was excluded, whole segments of society were excluded from the notion of private property in the 19th century; namely, women, idiots and imbeciles. And so, I don’t go back to the 19th century and hold it up as any paragon that we would want to replicate today.
MCKENZIE: Anyway. I want Milton now to come to your major prescription, which I know you don’t say is on the agenda for tomorrow, but it lies ahead; that is, the negative income tax. And I’m not sure people fully understand how it would work. We can’t, I think, go to the details of it, but I’d like to get a reaction around the panel first of all, is this a viable approach to the enduring problems of poverty? Negative income tax.
_________________
Thank you so much for your time. I know how valuable it is. I also appreciate the fine family that you have and your commitment as a father and a husband.
Sincerely,
Everette Hatcher III, 13900 Cottontail Lane, Alexander, AR 72002, ph 501-920-5733, lowcostsqueegees@yahoo.com
In 1980 economist and Nobel laureate Milton Friedman inspired market reform in the West and revolutions in the East with his celebrated television series “Free To Choose.”
Thirty years later, in this one-hour documentary, the young Swedish writer, analyst and Cato Institute Fellow Johan Norberg travels in Friedman’s footsteps to see what has
actually happened in the places Friedman’s ideas helped transform. In location after location Norberg examines the contemporary relevance of Friedman’s ideas in the 2011 world of globalization and financial crisis. Central to his examination are the perennial questions concerning power and prosperity, and the trade-offs between individual liberty and income equality.
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I have enjoyed reading this series of reviews by T. Kurt Jaros on Milton and Rose Friedman’s book “Free to Choose.” I hope you enjoy it as much as I did.
T. Kurt Jaros is currently a Master’s student studying Systematic Theology at King’s College in London. He holds a B.A. in Philosophy and Political Science cum laude and an M.A. in Christian Apologetics high honors from Biola University, an evangelical Christian university outside of Los Angeles.
He enjoys learning and thinking about theology, specifically historical theology, philosophical theology and philosophy of religion, and issues pertaining to monergism and synergism. Additionally, he enjoys learning and thinking about political philosophy, economics, American political history, and campaigns.
This is part of a series on Milton Friedman’s “Free to Choose.”
In my previous post I explained the three ways a market economy naturally regulates prices in a way that is more efficient than a command economy. This is part three of a book series on Free to Choose by Milton Friedman.
Some people think the free market is full of greedy men who respond to monetary stimuli. But this isn’t the essence of a market (despite some types of those men acting within the free market). Rather, self-interest is “whatever it is that interests the participants, whatever they value, whatever goals they pursue.” This is why an economy is very much like any industry: science, linguistics, theology, etc. In each industry there is the attempt to build and grow the knowledge within the field, so that the bad ideas will dissolve over time and the good ideas succeed and live on.
So what is the role of the government in all of this? In a way, the government is like a market because people voluntarily choose what they believe is the most effective way of achieving something (like universal healthcare). Friedman points to local governments as entities where we can object to what the government does because we can move. And yet government is more than a voluntary cooperation of individuals because “it is also the agency that is widely regarded as having a monopoly on the legitimate use of force or the threat of force as the means through which some of us can legitimately imposes restraints through force upon others.”
Friedman cites three points from Adam Smith. First, a government has a duty to protect its people from violence and invasion from other societies. Second, a government has a duty to protect its people from people within the society (and to set up a system that administers justice). Third, a government should erect and maintain certain public works and institutions. This third point has been grossly misused to defend all sorts of government programs. “In our view it describes a valid duty of a government directed to preserving and strengthening a free society; but it can also be interpreted to justify unlimited extensions of government power.”
Consider the example of road building. The costs may be too high for any one organization to build roads and then collect tolls to cover their costs. Therefore we give this task to the government to handle. However, despite the benefits there are also costs, and often, unforeseen costs. Aside from poorly budgeted projects, delays and unions to work with, there are third parties that are affected. Parties that do not use the roads and would otherwise never have paid to use such a government program or institution. Friedman writes, “as a result a government attempt to rectify the situation may very well end up making matters worse rather than better—imposing costs on innocent third parties or conferring benefits on lucky bystanders.” Moreover, there is a greater risk with power for some of the citizens to take advantage of others. This is seen on the low-income end where people may abuse the system or on the high-income end where the crony capitalism takes place.
The lesson to be learned is that there ought to be a very clear cost-benefit analysis where the burden of proof is on the bureaucrats before any plan is implemented. Even still, “experience shows that once government undertakes an activity, it is seldom terminated.” Rather than its abolition, a license for more power and more money is granted. Today we are suffering under the size and power of the federal government. Some of us are suffering from the size of our state governments, too! We need to elect wise individuals who have a basic knowledge of economics and markets, who can understand that the government is not the solution to our problems, but the cause.
I must say that I have lots of respect for Reason Magazine and for their admiration of Milton Friedman. However, I do disagree with one phrase below. At the end of this post I will tell you what sentence it is. Uploaded by ReasonTV on Jul 28, 2011 There’s no way to appreciate fully the […]
Milton Friedman on Hayek’s “Road to Serfdom” 1994 Interview 1 of 2 Uploaded by PenguinProseMedia on Oct 25, 2011 Says Federal Reserve should be abolished, criticizes Keynes. One of Friedman’s best interviews, discussion spans Friedman’s career and his view of numerous political figures and public policy issues. ___________________ Two Lucky People by Milton and Rose Friedman […]
What a great man Milton Friedman was. The Legacy of Milton Friedman November 18, 2006 Alexander Tabarrok Great economist by day and crusading public intellectual by night, Milton Friedman was my hero. Friedman’s contributions to economics are profound, the permanent income hypothesis, the resurrection of the quantity theory of money, and his magnum opus with […]
Milton Friedman videos and transcripts Part 7 On my blog http://www.thedailyhatch.org I have an extensive list of posts that have both videos and transcripts of MiltonFriedman’s interviews and speeches. Here below is just small list of those and more can be accessed by clicking on “Milton Friedman” on the side of this page or searching […]
Milton Friedman at Hillsdale College 2006 July 2006 Free to Choose: A Conversation with Milton Friedman Milton Friedman Economist Milton Friedman is a senior research fellow at the Hoover Institution at Stanford University and a professor emeritus of economics at the University of Chicago, where he taught from 1946-1976. Dr. Friedman received the Nobel Memorial […]
Milton Friedman said that getting George Bush I to be his vice president was his biggest mistake because he knew that Bush was not a true conservative and sure enough George Bush did raise taxes when he later became President. Below is a speech by George W. Bush honoring Milton Friedman: Milton Friedman Honored for […]
Below is a discussion from Milton Friedman on Bill Clinton and Ronald Reagan. February 10, 1999 | Recorded on February 10, 1999 audio, video, and blogs » uncommon knowledge PRESIDENTIAL REPORT CARD: Milton Friedman on the State of the Union with guest Milton Friedman Milton Friedman, Senior Research Fellow, Hoover Institution and Nobel Laureate in […]
Milton Friedman and Chile – The Power of Choice Uploaded by FreeToChooseNetwork on May 13, 2011 In this excerpt from Free To Choose Network’s “The Power of Choice (2006)”, we set the record straight on Milton Friedman’s dealings with Chile — including training the Chicago Boys and his meeting with Augusto Pinochet. Was the tremendous […]
Milton Friedman’s negative income tax explained by Friedman in 1968: President Obama c/o The White House 1600 Pennsylvania Avenue NW Washington, DC 20500 Dear Mr. President, I know that you receive 20,000 letters a day and that you actually read 10 of them every day. I really do respect you for trying to get a […]
Milton Friedman on the American Economy (5 of 6) Uploaded by donotswallow on Aug 9, 2009 THE OPEN MIND Host: Richard D. Heffner Guest: Milton Friedman Title: A Nobel Laureate on the American Economy VTR: 5/31/77 _____________________________________ Below is a transcipt from a portion of an interview that Milton Friedman gave on 5-31-77: Friedman: […]
With the national debt increasing faster than ever we must make the hard decisions to balance the budget now. If we wait another decade to balance the budget then we will surely risk our economic collapse.
The first step is to remove all welfare programs and replace them with the negative income tax program that Milton Friedman first suggested.
Milton Friedman points out that though many government welfare programs are well intentioned, they tend to have pernicious side effects. In Dr. Friedman’s view, perhaps the most serious shortcoming of governmental welfare activities is their tendency to strip away individual independence and dignity. This is because bureaucrats in welfare agencies are placed in positions of tremendous power over welfare recipients, exercising great influence over their lives. In addition, welfare programs tend to be self-perpetuating because they destroy work incentives. Dr. Friedman suggests a negative income tax as a way of helping the poor. The government would pay money to people falling below a certain income level. As they obtained jobs and earned money, they would continue to receive some payments from the government until their outside income reached a certain ceiling. This system would make people better off who sought work and earned income.
Participants: Robert McKenzie, Moderator; Milton Friedman; James R. Dumpson, Chief Administrator, Human Resources Admin., NYC; Thomas Sowell, Professor of Economics, UCLA; Robert Lampman, Professor of Economics, Institute of Poverty; Helen Bohen O’Bannon, Secretary of Welfare, State of Pennsylvania
MCKENZIE: The discussion’s already underway here at the University of Chicago, so let’s join it.
DUMPSON: As I looked at the film, I had a growing sense of anger. Anger that that position failed to recognize that the system that was being attacked was necessary in our capitalistic, free enterprise system that by its own failure produces poverty, and therefore requires governmental intervention in the interest of those people caught in the traps of poverty. So, as I sat and looked at the film, and as I hear Dr. Friedman’s statement, I was aroused to the point, as I said, of anger because only half the story is told. We are really blaming again a victim, this time a system, the welfare system, for the failure of other systems to operate in the interest of people.
MCKENZIE: Let’s get other reactions now to that statement: “Trying to do good with other people’s money simply has not worked, the welfare system is rotting away the very fabric of society.” Tom Sowell.
SOWELL: My reaction was just the opposite from __ my anger was at what had been created in the city where I grew up, under very different conditions, during the period of capitalistic failure, during the period when there wasn’t this humanitarianism, and when it was possible for people to live better and to get out of that poverty. Now, I think someone who lived in the very same place where I lived would find it much harder to escape from that poverty because of all these things. Buildings were not abandoned like the buildings that we saw in that film when I lived in Harlem. The crime rate __ they’re all things that are blamed upon the failures of the previous method did not exist. I slept out on the fire escapes in Harlem. I would defy anybody to do that in any part of New York City today.
LAMPMAN: Traditionally in the United States we have tried to avoid some of the welfare trap that was referred to by denying eligibility to people who are able-bodied and not aged and so on. And we’ve therefore tried to close the welfare door to a good number of categories within the poor population. The second point that was emphasized and I think needs to be put in some perspective is that some, but not all, of what we might call welfare programs broadly, have this very strong take-back of benefits as you earn some more money and that I guess is what I would like to single out as the principal problem identified in the film but it is not common to any and all welfare programs that one might think of.
O’BANNON: When the family fails, when the private sector fails to create jobs at a fast enough rate you find that people are unemployed and drift into needing help in order to exist and the welfare system was created in the ’30’s to do exactly that. When the private sector, essentially, failed we have the development of a welfare system, and it’s not corrupting society, it is taking what society _ institutions have left behind: The family breaking up, the economy not expanding fast enough, the health system failing, the educational system not doing its job. We have untrained, unskilled people looking for jobs in a highly technical society or jobs that pay so low that people cannot in fact live at a decent level of humanity. I see the welfare system not corrupting, but in fact taking the remains and attempting to help people live in dignity.
MCKENZIE: So rotting away the fabric of society is not supported __ except perhaps by you, would you back that phrase or so.
SOWELL: Absolutely. You’re saying __ you’re talking about the failures of the other parts of society. What the welfare system and other kinds of governmental programs are doing is paying people to fail insofar as they fail they receive the money; insofar as they succeed, even to a moderate extent, the money is taken away. This is even extended into the school systems where they will give money to schools with low scores; insofar as the school improves its education the money is taken away, so that you are subsidizing people to fail in their own private lives and become more dependent upon the handouts.
O’BANNON: We have expectations built in today about the quality of life, the quality of jobs, the level if income for which one expects in return. Why? Because we look at the level around us that it takes us to have __
SOWELL: No, that’s not why. That’s not why. I may have all sorts of expectations, the question is: What can I do? If someone else is subsidizing my expectations, my expectations would be far higher. But insofar as the Center for Advanced Study was subsidizing my expectations a few years ago, I refused to work at UCLA for the normal full professor’s salary. Why should I when I can get the same money for being at the Center for Advanced Study with no hours, no duties and no classes.
MCKENZIE: Let’s look at another proposition in Milton’s case. The insidious effect on those who receive welfare. They lose their independence and dignity, are treated like children, and so on. Now, Dr. Dumpson, as a former Administrator of a major program, is that a great hazard?
DUMPSON: That is not a great hazard. As a matter of fact, that presumes that people get on welfare, stay on welfare, and therefore have the result that Dr. Friedman’s statement issues. The fact of the matter is that in our AFDC program throughout the country and particularly was this true in New York, there is a graduate __ a turnover of the welfare AFDC roles _ about a third of them go off each year. Now, if these people were so destroyed by the system, when they go off they wouldn’t go into employment, they wouldn’t hold employment, they wouldn’t stay off the roles for six months, eighteen months, twenty-four months, as long as they are able to stay off. So, there’s something wrong with that argument when one looks at people and what they do. People, you know, who are poor are no different from those of us who are not poor and their motivation for self-dependency, self-support and mobility in the economic scale is no different that those of __ than the motives we have, so that they will not let the system __ you remember, Dr. Friedman, the welfare rights organization who refused to let the system squash them down as it was attempting to do. We turned the policies around.
FRIEDMAN: You and I agree completely, that the people who are poor and are on welfare roles are no different from the rest of us. Of course not. They are human beings and they deserve every sympathy and every possibility of making their own way, but the welfare system makes them different.
DUMPSON: But you give them __
FRIEDMAN: It makes it in their interest to be different.
MCKENZIE: How do you account for them going off the roles, Milton?
FRIEDMAN: Oh, but figures are figures and you’ve got to be careful with figures. The fact that a third, there’s a turnover of a third does not mean that there aren’t half who are on all the time. People come on, go off; come on, go off. We’ve got to have the other figures __
DUMPSON: The latest statistic, Dr. Friedman, is that __
FRIEDMAN: __ fraction __
DUMPSON: __ 34 percent of the people on AFDC are on for five years or longer and when one thinks of the purpose of the AFDC program, which was the rearing and support of children, dependent children, minor children, I would submit to you that five years is not a terribly long time for a mother and children to have to be dependent if there’s no other source of income.
_______________
Thank you so much for your time. I know how valuable it is. I also appreciate the fine family that you have and your commitment as a father and a husband.
Sincerely,
Everette Hatcher III, 13900 Cottontail Lane, Alexander, AR 72002, ph 501-920-5733, lowcostsqueegees@yahoo.com
With the national debt increasing faster than ever we must make the hard decisions to balance the budget now. If we wait another decade to balance the budget then we will surely risk our economic collapse.
The first step is to remove all welfare programs and replace them with the negative income tax program that Milton Friedman first suggested.
Milton Friedman points out that though many government welfare programs are well intentioned, they tend to have pernicious side effects. In Dr. Friedman’s view, perhaps the most serious shortcoming of governmental welfare activities is their tendency to strip away individual independence and dignity. This is because bureaucrats in welfare agencies are placed in positions of tremendous power over welfare recipients, exercising great influence over their lives. In addition, welfare programs tend to be self-perpetuating because they destroy work incentives. Dr. Friedman suggests a negative income tax as a way of helping the poor. The government would pay money to people falling below a certain income level. As they obtained jobs and earned money, they would continue to receive some payments from the government until their outside income reached a certain ceiling. This system would make people better off who sought work and earned income.
Friedman: Joe Gardner helped to set up an organization of local black people to protect their own interests. Previously, the blacks had rioted in the streets to try to get their way. Now it was to be done peacefully using government money.
When government funds became available, the Woodlawn Organization got control. They used them to build the kind of houses they wanted. Low rise apartments like these.
The bureaucrats, planners and architects told them that it was uneconomical. That only high-rise blocks would work. They were wrong.
Joe Gardner: A lot of people have this view that, the disadvantaged if you will, have no ideas what their problems are and how to resolve them, that it takes outside professionals to do that. And we say that’s baloney because the outside professional does not feel in his gut what a woman on welfare with six kids living off of a $100 a month in a deteriorated building feels. She can come up with solutions much better than a bureaucrat.
Friedman: The intentions of this local community group are good. They want to rebuild the community as the community wants.
Joe Gardner talking to an elderly woman: I can’t hear you. I said are you pretty pleased with the work we are doing? Yes I am very pleased with it.
Friedman: But government money always corrupts. Look at the number of people rebuilding this garage. It doesn’t make sense except that these are CETA workers paid for by taxpayers money.
Government funds have allowed the organization to take over a whole area of Chicago. They now have their own supermarket.
They’ve built splendid houses for middle class occupiers. Very expensive, protected by the latest security systems. All at the taxpayers expense.
Joe Gardner: In a sense TWA is rapidly becoming a mini-government. At this particular point we have approximately 400 employees. We have an operating budget of, in excess of $5 million per year. So we are large.
Friedman: Large and expanding. Their next project is to redevelop this site. And that’s only the first step in a 20 year plan that will cost $220 million. Most of it coming from the taxpayers.
In the South Bronx, they are very familiar with government protection. Like the rent controls have made it uneconomic for landlords to maintain their buildings. They’ve moved out and the vandals have moved in. The South Bronx is an area where many of the people are on welfare, and where the crime rate is high. But all this could change. A group of local people has begun to renovate these buildings to build new homes. They call themselves “Sweat Equity.” Because at first sweat and effort was all they could put into the project. Only later did they accept a small government grant.
Friedman and Robert Foster: How long ago did you start working on this building? Four months ago for this building right here. And I take it what you are going…to gut the whole thing from beginning to end. Totally gut it. And you’ll have to rewire, right, roof, put new walls up, new floors, new ceilings, new everything in winter and summer whenever there was a chance to work. How many people do you have working here? A good 40 people. How do you keep them working? You know, some of them must want to, get tired of it. We show them what can be done in the future and what will be done in the future. And they get, at first, it’s kind of hard to prove to somebody that in the next three or four years what will come out of it. They can’t see it in long range terms. They only see it in short, they need money right now, not in two years. So we try to show them that it will happen.
Friedman: It’s true they now accept some government money. But so far they’ve managed to retain their original philosophy. That the best way to get something done well is to do it yourself.
Robert Foster: Like what we’re doing. We’re bringing people out of the street and giving them something to look forward to. They have their own apartment, they’ll be taken care of, the area around it, they have a garden, they have something to look forward to. They even get off welfare, you even give them a job. They can drop the welfare and have some self pride. That’s the only thing about it, self pride. The longer you take from the government and sitting back, you’ve got no worries. We’re not sitting back, we’re working. We’re making our money come in. And we are putting it into our building, we’re building ourselves up as well as the buildings.
Friedman: Some of these people are CETA workers. Paid for by the taxpayer. But this isn’t as useful as it might appear.
You ask these fellows which would they rather have, the CETA workers or the money that’s being paid to the CETA workers? Laughter. Which would you rather have?
Robert Foster: The money paid to the workers. Friedman: That’s your answer. That’s very expensive help. In terms of what these people could use with the money. You give these people the amount of money you’re paying to that CETA worker and I’ll bet they’ll have twice as much, three times as much, work. Am I wrong?
Robert Foster: Your right.
Friedman: So it’s a very inefficient way to use their money. The problem is you’ve got bureaucracy and the government bureaucrats, they want to decide what to do. They don’t want to let you decide what to do.
Robert Foster: Exactly.
Friedman: Ask yourself, how does this place get built up in the first place. After all, this was a pretty respectable, solid, substantial region when it was first developed. It wasn’t done through a government project. It was done by people individually having an incentive to put up these buildings and occupying them. What these people we’ve been seeing here are doing is they are trying to restore that feeling and that attitude. You’ll have a far healthier community here that grows out of the self-help of people like the people we’ve been talking to. That it is a paternalistic venture undertaken by governmental civil servants and bureaucrats who have to plan on a large scale for other people.
We must find a way to give everyone caught in the welfare trap the kind of initiative these people have.
The best, or should I say the least bad, solution I have even been able to devise was something called the negative income tax. This is the idea that we should get rid of a large part of the welfare bureaucracy, and for demeaning rules, and we should help people who are poor fundamentally by giving them money.
With a positive income tax, you’re entitled to a certain amount of personal exemptions and deductions. And above that amount you pay tax. But suppose you have no income. Under a negative income tax a fraction of your unused exemptions would be paid to you by the government. Guaranteeing at least a minimum income.
If you earned something, you’d still get a fraction of your unused exemptions. And you’d end up better off.
As your earnings rose, the supplement to your income would become smaller and smaller until your earnings equaled your exemptions. At that point, you’d break even. Neither paying tax nor receiving a subsidy.
It’s not an ideal system. It’s not the system we might have liked to get into, but it’s a system which would have the effect of eliminating the separation of a society into those to receive and those who pay. A separation that tends to destroy the whole social fabric. It would mean that we could each of us take advantage of opportunities that opened up without fearing that if by some chance we lost our jobs, it would be a long time before we could get back on assistance. It would be a system that would give all of us an incentive gradually to improve our lives would perhaps enable us, over time, to work ourselves out of the kind of mess we’ve gotten ourselves into. A mess we’ve gotten ourselves into for the very best of motives but with the very worst of results.
We’ve become increasing dependent on government. We’ve surrendered power to government, nobody has taken it from us. It’s our doing. The results, monumental government spending. Much of it wasted, little of it going to the people whom we would like to see helped. Burdensome taxes, high inflation, a welfare system under which neither those who receive help nor those who pay for it are satisfied. Trying to do good with other people’s money simply has not worked.
_______________
Thank you so much for your time. I know how valuable it is. I also appreciate the fine family that you have and your commitment as a father and a husband.
Sincerely,
Everette Hatcher III, 13900 Cottontail Lane, Alexander, AR 72002, ph 501-920-5733, lowcostsqueegees@yahoo.com
THE OPEN MIND
Host: Richard D. Heffner
Guest: Milton Friedman
Title: A Nobel Laureate on the American Economy VTR: 5/31/77
_____________________________________
HEFFNER: Indeed. You know, I was thinking about, before we began to do this program, I was thinking about where is it written. And I was considering going back to a very ancient civilization, mostly in terms of the reports that we have that you may in your visits to Israel advise the new Israeli government in terms of its economic problems. And I wanted to ask you a question. I wanted to ask you a question about a remark that I had heard you make in connection with this story about the role you might play in relation to the new Israeli government. You said something like this – and to the degree that I’m distorting your words or your thoughts, please correct me – “It is somewhat strange that socialism is supposed to find so many friends, and capitalism so many enemies among Jews when perhaps some people might think that the essence of the Jewish tradition is so alien to socialism and so akin to capitalism.” And I wondered, to the extent that you meant much of that, what you meant by it?
FRIEDMAN: Well, I think I mean, I would endorse certainly that statement as you put it, while going onto say it needs some elaboration in some respects. Let me see if I can put it to you in a sort of a different way. My first visit to Israel was made about 15 years ago. I was there for about three months as a visitor at the Hebrew University in Jerusalem. And after I left Israel, I summarized my impressions by saying that I thought that the best way to understand Israel was to recognize that two Jewish traditions were at war with one another in Israel. One of them was a very recent tradition, a tradition of 100, 150 years old. That’s the tradition of socialism. That’s the tradition you referred to in your initial comments, that it is true that on the whole the Jewish intellectuals have been strongly pro-socialist. And that’s contributed disproportionately to the socialist literature. That was the one tradition. The other tradition, I said, was a tradition that was at least 2,000 years old. It was a tradition that had arisen during the Diaspora and as a result of the Diaspora. It was a tradition of how you get around government regulations, how you find chinks in controls, how you find those areas in which the free market operates and make the most of them. It was that tradition which had enabled the Jews to survive during centuries of persecution by the constituted authorities. Once in a while there would be a monarch who would intervene in favor of the Jews. But almost always that was because there had been a Jew who had accumulated enough money through the free market, through capitalism, to have loaned money to the monarch and have him in his debt. The story in the Bible of Esther is not a very usual story. That isn’t usually the way it occurs. Most of the time the Jews have survived despite the opposition of the powers that be, not because of them. And this ancient tradition of 2,000 years is still very much alive in Israel. And what I said at that time was that fortunately for Israel the ancient tradition is strongly renewable.
Now, let me go back to that in a modern context. I believe that there are few people in the world who have benefitted as much from capitalism and free enterprise as the Jews. Suppose you ask yourself in what countries it is that the Jews have been able to survive and thrive. They’ve been able to survive and thrive primarily in those countries that have had capitalism and free enterprise. They haven’t been able to survive and thrive in the socialist utopias of Russia or of Poland. They haven’t been able to, they weren’t able to survive and thrive in the national socialist state of Nazi Germany. They have been able to survive and thrive in places like Great Britain, in Germany when it was capitalist before Hitler, in France which is largely capitalist, and the United States. And more important, in what parts of those economies have they done best? In those parts where government has had the least role to play. You do not find in the United states that the Jews have done very well in large-scale manufacturing or in commercial banking, because those are areas which are very closely intertwined with government. In banking you need a governmental franchise. And there is probably no industry in the United States in which there are fewer Jews, surprising as it may seem, in major positions of responsibility than in the commercial banking industry. Where have they thrived? In the industries which have been most competitive, where there’s been the least monopoly, private or public: retaining, which was open to all; in new industries, in Hollywood. Why? Because it was a new, brand new industry. There were no settled positions of privilege or of power, no government involvement.
So, Jews have done best – and other minorities. I’m not only speaking of Jews. If you look at the Japanese in the United States, if you look at the blacks in the United States, in every case they have done best in those areas where you have had the greatest degree of competition; and they have done worst in those areas where you have had the most monopoly and the most governmental link to government. So on the one hand, there are no people in the world who have benefitted so much from capitalism as the Jews. Look at Israel. Suppose socialism had triumphed in the world. How would Israel have gotten support? Did Israel get support in its early and difficult days from the governments of the world? Or from people? And from what people? From the Jews who had managed to make a little bit of a competence for themselves and accumulated a little funds in the capitalist bastions of the world.
So, the Jews have benefitted enormously from capitalism. And yet on the other side – and that’s the issue you raise – here you have the paradox that the Jews have been among those who have contributed much to undermine the intellectual foundations of capitalism.
HEFFNER: Is this a dichotomy that exists in contemporary Israel too?
FRIEDMAN: Of course. Of course. It has existed.
HEFFNER: Then how will you make a contribution?
FRIEDMAN: Oh, well, you know how it is. I will make a contribution. I would be delighted to if I could. But you know, people ask for advice from people who they know will give them the advice they want to hear. Well, there’s no shortage of good economists in Israel. They are very good economists. They know what to do. And in fact, the economists in Israel have not been in favor of governmental policies in Israel. It’s like it has been in the United States, where the economists have been opposed uniformly to many governmental policies, such as the price-fixing policies I was talking about, such as rent control. Similarly, the economists in Israel have been almost unanimously opposed to some, many governmental controls and regulations. What’s happened in Israel is that you now have a new party that came into power. … It’s a party that proclaims it’s belief in private enterprise. It proclaims its desire to reduce the size of government and to give greater opportunities to individuals. Their objectives are excellent. I hope they achieve them. I’m not wholly confident that they will, in fact. I have many doubts about whether they will succeed. And a reason why they have asked me if I would advise them is because they know that I believe in a free economy and that their policy is my policy. And insofar as I can give any assistance, I am delighted to, both because of my general desire to see freedom prosper, and also because I have a very strong personal sympathy and interest in Israel. I am Jewish by origin and culture. I share their values and their belief. I share the admiration which many have had for the miracles that have occurred in Israel. So if I can make any contribution to a more effective policy for preserving Israel, Israel’s freedom and strength, I would certainly be delighted to do so.
With the national debt increasing faster than ever we must make the hard decisions to balance the budget now. If we wait another decade to balance the budget then we will surely risk our economic collapse.
The first step is to remove all welfare programs and replace them with the negative income tax program that Milton Friedman first suggested.
Milton Friedman points out that though many government welfare programs are well intentioned, they tend to have pernicious side effects. In Dr. Friedman’s view, perhaps the most serious shortcoming of governmental welfare activities is their tendency to strip away individual independence and dignity. This is because bureaucrats in welfare agencies are placed in positions of tremendous power over welfare recipients, exercising great influence over their lives. In addition, welfare programs tend to be self-perpetuating because they destroy work incentives. Dr. Friedman suggests a negative income tax as a way of helping the poor. The government would pay money to people falling below a certain income level. As they obtained jobs and earned money, they would continue to receive some payments from the government until their outside income reached a certain ceiling. This system would make people better off who sought work and earned income.
Here is a portion of the trancript of the “Free to Choose” program called “From Cradle to Grave” (program #4 in the 10 part series):
For the past 7 years Maureen Ramsey has had to buy food and clothes for her family out of a government handout. For the whole of that time, her husband, Steve, hasn’t had a job. Each week he collects what’s known in Britain as Social Security. The government looks after him, his wife and their children. But accepting welfare payments means accepting the rules of those who hand them out.
Mrs. Ramsey: My opinion, anyway you feel as they own you. You know, there is no other way of putting it. Say I got a job tomorrow, because I needed something, well I know that means I’ve got to go down there and report it. Because I couldn’t go into the job because you’d be looking over your shoulder thinking well the Social Security is coming in. And I’m going to be done for it. It’s just hopeless, you can’t fight against that.
Mr. Ramsey: The jobs are out there you only come up with about 45 pounds a week. And you need a doctors stamp over there. You see, you finish up with about 29 pound. So what good is it working? You still get the same thing, you know what I mean? I can’t make any sense of it.
Friedman: Of course, he’s quite right. It may not pay to get a job now. That’s not his fault and I don’t blame him. He’s acting sensibly and intelligently for his own interest and the interest of his family. It’s the fault of the system which takes away the incentive from him to get a job.
But suppose you were cruel and simply took away the welfare overnight. Cut it off. What would happen? He would find a job. What kind of a job? I don’t know. It might not be a very nice job. It might not be a very attractive job. But at some wage, at some level of pay, there will always be a job which he could get for himself. It might be also that he would be driven to rely on some private charity. He might have to get soup kitchen help or the equivalent. Again, I’m not saying that’s desirable or nice or a good thing it isn’t, but as a matter of actual fact as to what would happen, there is little doubt that he would find some way to earn a living.
The American government is trying to break the welfare trend. These people were unemployed. They are now being trained at the taxpayers expense. It may or may not lead to a real job.
Lawrence Davenport: Here we have a vast national welfare system which is diametrically opposed to everything that America believes in. Because America was founded on a work ethic, has practiced a work ethic, and it’s said this is what we want everybody to do. An opportunity to hold a job in America.
Friedman: Everyone here has to clock in and do a full days work. It’s an attempt to make it seem like a real job.
Lawrence Davenport: We’re saying a job is a part of the American way of life and we’re going to help you find a job. So that you can get a piece of the pie. You can pay taxes, you can become a part of that American dream.
Friedman: But the dream isn’t working. Schemes like this run under the government’s Comprehensive Education and Training Act (CETA) have a high drop out rate and many trainees end up back where they began, on welfare.
The men and women who administer CETA and similar programs, the officials of the Department of Health, Education and Welfare are dedicated people. Their motives are good. Their achievements are not.
The results of these programs have been disappointing. Why? I believe that the basic reason is because it is very hard to achieve good objectives through bad means. And the means we have been using are bad in two very different respects.
In the first place, all of these programs involve some people spending other people’s money for objectives that are determined by still a third group of people. Nobody spends somebody else’s money as carefully as he spends his own. Nobody has the same dedication to achieving somebody else’s objectives that he displays when he pursues his own.
Beyond this, the programs have a insidious effect on the moral fiber of both the people who administer the programs and the people who are supposedly benefiting from it. For the people who administer it, it instills in them a feeling of almost Godlike power. For the people who are supposedly benefiting it instills a feeling of childlike dependence. Their capacity for personal decision making atrophies. The result is that the programs involved are misuse of money, they do not achieve the objectives which it was their intention to achieve. But far more important than this, they tend to rot away the very fabric that holds a decent society together.
If you think that’s overstating the case, look what ATW found when it made a special investigation into the spending of the vast funds it administers.
Public Health Service worker: We just got the plan from the Public Health Service on reducing unnecessary beds.
Friedman: In these reels of tape that record every payment made, every recipient, they found evidence that a staggering $7.5 billion had been lost by fraud, waste and abuse in one year.
Doctors, building contractors, hospitals, schools, welfare recipients, everyone had been fraudulently dipping into the pot. And the investigation isn’t over yet.
The inevitable consequence of having a huge pot of taxpayers money is that all of us want to get our hands in it. You can be sure that we’ll all be able to find very good reasons why we should be the ones to spend somebody else’s money.
Somebody or other put up a good case for spending taxpayers money to subsidize rents in New York City, including the rents of these apartments. The people who occupy these apartments pay something like $200 a month less than the market rent. And that subsidy comes out of the taxes of people, most of whom are much poorer than the people who live here. It’s not unusual for this sort of thing to happen when government tries to do good with our money.
Look at what happened in Chicago. For most visitors, the immediate impression is of a rich, prosperous, bustling city. But like every large city in America, it has its problem areas. Over crowded slums breeding poverty and crime.
After WWII, one such area developed in Hyde Park. In the 50’s, plans were drawn up to pull down large areas of slum buildings and to rebuild using government funds under an urban renewal program. It was to be a show project replacing a blighted area with an integrated community. Who controlled the spending of that government money? It was in fact, my own University of Chicago which felt it’s very existence threatened by the spread of urban blight and crime. Government money was used to tear down an area that contained many small shops as well as families of low income. Once the area was cleared, private money rebuilt it with middle class apartments, townhouses and shopping complexes. The blight had been cleared here, but only to be shifted elsewhere.
Joe Gardner: In may instances, when government administers large grants, a lot of those funds don’t wind up directly serving the people and achieving the objectives that were the intent of the programs. Because the grant has too feed that large government bureaucracy.
_______________
Thank you so much for your time. I know how valuable it is. I also appreciate the fine family that you have and your commitment as a father and a husband.
Sincerely,
Everette Hatcher III, 13900 Cottontail Lane, Alexander, AR 72002, ph 501-920-5733, lowcostsqueegees@yahoo.com
Friedman: Once all of this was a swamp, covered with forest. The Canarce Indians who lived here traded the 22 square miles of soggy Manhattan Island to the Dutch for $24.00 worth of cloth and trinkets. The newcomers founded a city, New Amsterdam at the edge of an empty continent. In the years that followed, it proved a magnet for millions of people from across the Atlantic; people who were driven by fear and poverty; who were attracted by the promise of freedom and plenty. They fanned out over the continent and built a new nation with their sweat, their enterprise and their vision of a better future.
For the first time in their lives, many were truly free to pursue their own objectives. That freedom released the human energies which created the United States. For the immigrants who were welcomed by this statue, America was truly a land of opportunity.
They poured ashore in their best clothes, eager and expectant, carrying what little they owned. They were poor, but they all had a great deal of hope. Once they arrived, they found, as my parents did, not an easy life, but a very hard life. But for many there were friends and relatives to help them get started __ to help them make a home, get a job, settle down in the new country. There were many rewards for hard work, enterprise and ability. Life was hard, but opportunity was real. There were few government programs to turn to and nobody expected them. But also, there were few rules and regulations. There were no licenses, no permits, no red tape to restrict them. They found in fact, a free market, and most of them thrived on it.
Many people still come to the United States driven by the same pressures and attracted by the same promise. You can find them in places like this. It’s China Town in New York, one of the centers of the garment industry __ a place where hundreds of thousands of newcomers have had their first taste of life in the new country. The people who live and work here are like the early settlers. They want to better their lot and they are prepared to work hard to do so.
Although I haven’t often been in factories like this, it’s all very familiar to me because this is exactly the same kind of a factory that my mother worked in when she came to this country for the first time at the age of 14, almost 90 years ago. And if there had not been factories like this here then at which she could have started to work and earn a little money, she wouldn’t have been able to come. And if I existed at all, I’d be a Russian or Hungarian today, instead of an American. Of course she didn’t stay here a long time, she stayed here while she learned the language, while she developed some feeling for the country, and gradually she was able to make a better life for herself.
Similarly, the people who are here now, they are like my mother. Most of the immigrants from the distant countries __ they came here because they liked it here better and had more opportunities. A place like this gives them a chance to get started. They are not going to stay here very long or forever. On the contrary, they and their children will make a better life for themselves as they take advantage of the opportunities that a free market provides to them.
The irony is that this place violates many of the standards that we now regard as every worker’s right. It is poorly ventilated, it is overcrowded, the workers accept less than union rate __ it breaks every rule in the book. But if it were closed down, who would benefit? Certainly not the people here. Their life may seem pretty tough compared to our own, but that is only because our parents or grandparents went through that stage for us. We have been able to start at a higher point.
Frank Visalli’s father was 12 years old when he arrived all alone in the United States. He had come from Sicily. That was 53 years ago. Frank is a successful dentist with a wife and family. They live in Lexington, Massachusetts. There is no doubt in Frank’s mind what freedom combined with opportunity meant to his father and then to him, or what his Italian grandparents would think if they could see how he lives now.
Frank Visalli: They would not believe what they would see __ that a person could immigrate from a small island and make such success out of their life because to them they were mostly related to the fields, working in the field as a peasant. My father came over, he made something for himself and then he tried to build a family structure. Whatever he did was for his family. It was for a better life for his family. And I can always remember him telling me that the number one thing in life is that you should get an education to become a professional person.
Friedman: The Visalli family, like all of us who live in the United States today, owe much to the climate of freedom we inherited from the founders of our country. The climate that gave full scope to the poor from other lands who came here and were able to make better lives for themselves and their children.
But in the past 50 years, we’ve been squandering that inheritance by allowing government to control more and more of our lives, instead of relying on ourselves. We need to rediscover the old truths that the immigrants knew in their bones; what economic freedom is and the role it plays in preserving personal freedom.
That’s why I came here to the South China Sea. It’s a place where there is an almost laboratory experiment in what happens when government is limited to its proper function and leaves people free to pursue their own objectives. If you want to see how the free market really works this is the place to come. Hong Kong, a place with hardly any natural resources. About the only one you can name is a great harbor, yet the absence of natural resources hasn’t prevented rapid economic development. Ships from all nations come here to trade because there are no duties, no tariffs on imports or exports. The power of the free market has enabled the industrious people of Hong Kong to transform what was once barren rock into one of the most thriving and successful places in Asia.
If you enjoyed that then take a look at the other segments:
PETERSON: Well, let me ask you how you would cope with this problem, Dr. Friedman. The people decided that they wanted cool air, and there was tremendous need, and so we built a huge industry, the air conditioning industry, hundreds of thousands of jobs, tremendous earnings opportunities and nearly all of us now have air […]
Part 5 Milton Friedman: I do not believe it’s proper to put the situation in terms of industrialist versus government. On the contrary, one of the reasons why I am in favor of less government is because when you have more government industrialists take it over, and the two together form a coalition against the ordinary […]
The fundamental principal of the free society is voluntary cooperation. The economic market, buying and selling, is one example. But it’s only one example. Voluntary cooperation is far broader than that. To take an example that at first sight seems about as far away as you can get __ the language we speak; the words […]
_________________________ Pt3 Nowadays there’s a considerable amount of traffic at this border. People cross a little more freely than they use to. Many people from Hong Kong trade in China and the market has helped bring the two countries closer together, but the barriers between them are still very real. On this side […]
Aside from its harbor, the only other important resource of Hong Kong is people __ over 4_ million of them. Like America a century ago, Hong Kong in the past few decades has been a haven for people who sought the freedom to make the most of their own abilities. Many of them are […]
“FREE TO CHOOSE” 1: The Power of the Market (Milton Friedman) Free to Choose ^ | 1980 | Milton Friedman Posted on Monday, July 17, 2006 4:20:46 PM by Choose Ye This Day FREE TO CHOOSE: The Power of the Market Friedman: Once all of this was a swamp, covered with forest. The Canarce Indians […]
The liberal John Brummett in his article, “The fine art of thinking,” Arkansas Democrat-Gazette, August 2, 2012, asserted:
This pledge has become ruling Republican creed and a requirement to escape a GOP primary since it was cooked up by Grover Norquist. He’s a pugnacious lobbyist and conservative activist, formerly with the rabidly right-wing U.S. Chamber of Commerce, who heads a group he calls Americans for Tax Reform.
The pledge is probably not wholly responsible for destroying Washington.
Part of the blame also must be assigned to money, particularly the kind to which Burris referred that comes only if you sign the pledge.
If exercised to its logical conclusion, the pledge would force Republicans in Congress to reduce spending without adding new tax revenue. That, in turn, would send new burdens for roads and human services to state governments, where Republican legislators also would have vowed not to raise taxes.
Not only is that the logical conclusion, but it is also, I suspect, the real objective. By that I mean trying to squeeze government nearly out of business.
Liberals like Brummett think the government knows better than us how to spend money and that is why he is so angry at Grover Norquist. I come from a conservative point of view and I see the world much differently.
Government will spend whatever money we give it. About 100 years ago the federal government was spending than 5% of GDP and state and local governments were spending about double that amount. Now the federal government is at 24.7%. We need to stop giving them so much money and the only way to do that is to cut taxes.
“.If we adopt such programs, does not fiscal responsibility at least call for imposing taxes to pay for them? The answer is that postwar experience has demonstrated two things. First, that Congress will spend whatever the tax system will raise—plus a little (and recently, a lot) more. Second, that, surprising as it seems, it has proved difficult to get taxes down once they are raised. The special interests created by government spending have proved more potent than the general interest in tax reduction.
“If taxes are raised in order to keep down the deficit, the result is likely to be a higher norm for government spending. Deficits will again mount and the process will be repeated.”
Sure enough, a year later a 10% income tax surcharge was enacted by Congress to cut the deficit and fight inflation. His prediction having been confirmed
Milton Friedman videos and transcripts Part 11 On my blog http://www.thedailyhatch.org I have an extensive list of posts that have both videos and transcripts of MiltonFriedman’s interviews and speeches. Here below is just small list of those and more can be accessed by clicking on “Milton Friedman” on the side of this page or searching […]
Milton Friedman – White House Tribute (2002) Published on May 31, 2012 by BasicEconomics President Bush spoke about the life and career of Milton Friedman at a ceremony honoring him for his work and impact in the field of economics. Friedman was awarded a Nobel Prize in 1976 ___________ Milton Friedman – Biography From Milton […]
MILTON FRIEDMAN: THE MIND BEHIND THE REPUBLICAN TAX REVOLT Jack Roberts | Jul 22, 2011 | 0 comments The on-going debate over raising the debt ceiling has focused on many areas of disagreement between Democrats and Republicans but none bigger than the Republican determination not to raise taxes. Many pundits credit this to the […]
Milton Friedman videos and transcripts Part 10 On my blog http://www.thedailyhatch.org I have an extensive list of posts that have both videos and transcripts of MiltonFriedman’s interviews and speeches. Here below is just small list of those and more can be accessed by clicking on “Milton Friedman” on the side of this page or searching […]
Milton Friedman – Power of Choice (Biography) Part 3 Published on May 21, 2012 by BasicEconomics Tribute to Milton Friedman English Pages, 8. 9. 2008 Dear colleagues, dear friends, (1) It is a great honor for me to be asked to say a few words to this distinguished and very knowledgeable audience about one of our greatest […]
Milton Friedman on the American Economy (6 of 6) Uploaded by donotswallow on Aug 9, 2009 THE OPEN MIND Host: Richard D. Heffner Guest: Milton Friedman Title: A Nobel Laureate on the American Economy VTR: 5/31/77 _____________________________________ Below is a transcipt from a portion of an interview that Milton Friedman gave on 5-31-77: Friedman: […]
Milton Friedman videos and transcripts Part 9 On my blog http://www.thedailyhatch.org I have an extensive list of posts that have both videos and transcripts of MiltonFriedman’s interviews and speeches. Here below is just small list of those and more can be accessed by clicking on “Milton Friedman” on the side of this page or searching […]
Below is a discussion from Milton Friedman on Bill Clinton and Ronald Reagan. February 10, 1999 | Recorded on February 10, 1999 audio, video, and blogs » uncommon knowledge PRESIDENTIAL REPORT CARD: Milton Friedman on the State of the Union with guest Milton Friedman Milton Friedman, Senior Research Fellow, Hoover Institution and Nobel Laureate in […]
Biography Part 2 In 1977, when I reached the age of 65, I retired from teaching at the University of Chicago. At the invitation of Glenn Campbell, Director of the Hoover Institution at Stanford University, I shifted my scholarly work to Hoover where I remain a Senior Research Fellow. We moved to San Francisco, purchasing […]
Milton Friedman was a great economist and a great american. A Tribute to Milton Friedman by Mark Skousen on November 28, 2006 Mark Skousen and Milton Friedman at lunch I was at the New Orleans Investment Conference when I learned that free-market economist extraordinaire Milton Friedman, died on November 16. He was a dear friend. […]
With the national debt increasing faster than ever we must make the hard decisions to balance the budget now. If we wait another decade to balance the budget then we will surely risk our economic collapse.
The first step is to remove all welfare programs and replace them with the negative income tax program that Milton Friedman first suggested.
Milton Friedman points out that though many government welfare programs are well intentioned, they tend to have pernicious side effects. In Dr. Friedman’s view, perhaps the most serious shortcoming of governmental welfare activities is their tendency to strip away individual independence and dignity. This is because bureaucrats in welfare agencies are placed in positions of tremendous power over welfare recipients, exercising great influence over their lives. In addition, welfare programs tend to be self-perpetuating because they destroy work incentives. Dr. Friedman suggests a negative income tax as a way of helping the poor. The government would pay money to people falling below a certain income level. As they obtained jobs and earned money, they would continue to receive some payments from the government until their outside income reached a certain ceiling. This system would make people better off who sought work and earned income.
Here is a transcript of a portion of the “Free to Choose” program called “From Cradle to Grave” (program #4 in the 10 part series):
Friedman: After the 2nd World War, New York City authorities retained rent control supposedly to help their poorer citizens. The intentions were good. This in the Bronx was one result.
By the 50′s the same authorities were taxing their citizens. Including those who lived in the Bronx and other devastated areas beyond the East River to subsidize public housing. Another idea with good intentions yet poor people are paying for this, subsidized apartments for the well-to-do. When government at city or federal level spends our money to help us, strange things happen.
The idea that government had to protect us came to be accepted during the terrible years of the Depression. Capitalism was said to have failed. And politicians were looking for a new approach.
Franklin Delano Roosevelt was a candidate for the presidency. He was governor of New York State. At the governor’s mansion in Albany, he met repeatedly with friends and colleagues to try to find some way out of the Depression. The problems of the day were to be solved by government action and government spending. The measures that FDR and his associates discussed here derived from a long line of past experience. Some of the roots of these measures go back to Bismark’s Germany at the end of the 19th Century. The first modern state to institute old age pensions and other similar measures on the part of government. In the early 20th Century Great Britain followed suit under Lloyd George and Churchill. It too instituted old age pensions and similar plans.
These precursors of the modern welfare state had little effect on practice in the United States. But they did have a very great effect on the intellectuals on the campus like those who gathered here with FDR. The people who met here had little personal experience of the horrors of the Depression but they were confident that they had the solution. In their long discussions as they sat around this fireplace trying to design programs to meet the problems raised by the worst Depression in the history of the United States, they quite naturally drew upon the ideas that were prevalent at the time. The intellectual climate had become one in which it was taken for granted that government had to play a major role in solving the problems in providing what came later to be called Security from Cradle to Grave.
Roosevelt’s first priority after his election was to deal with massive unemployment. A Public Works program was started. The government financed projects to build highways, bridges and dams. The National Recovery Administration was set up to revitalize industry. Roosevelt wanted to see America move into a new era. The Social Security Act was passed and other measures followed. Unemployment benefits, welfare payments, distribution of surplus food. With these measures, of course, came rules, regulations and red tape as familiar today as they were novel then. The government bureaucracy began to grow and it’s been growing ever since.
This is just a small part of the Social Security empire today. Their headquarters in Baltimore has 16 rooms this size. All these people are dispensing our money with the best possible intentions. But at what cost?
In the 50 years since the Albany meetings, we have given government more and more control over our lives and our income. In New York State alone, these government buildings house 11,000 bureaucrats. Administering government programs that cost New York taxpayers 22 billion dollars. At the federal level, the Department of Health, Education and Welfare alone has a budget larger than any government in the world except only Russia and the United States.
Yet these government measures often do not help the people they are supposed to. Richard Brown’s daughter, Helema, needs constant medical attention. She has a throat defect and has to be connected to a breathing machine so that she’ll survive the nights. It’s expensive treatment and you might expect the family to qualify for a Medicaid grant.
Richard Brown: No, I don’t get it, cause I’m not eligible for it. I make a few dollars too much and the salary that I make I can’t afford to really live and to save anything is out of the question. And I mean, I live, we live from payday to payday. I mean literally from payday to payday.
Friedman: His struggle isn’t made any easier by the fact that Mr. Brown knows that if he gave up his job as an orderly at the Harlem Hospital, he would qualify for a government handout. And he’d be better off financially.
Hospital Worker: Mr. Brown, do me a favor please? There is a section patient.
Friedman: It’s a terrible pressure on him. But he is proud of the work that he does here and he’s strong enough to resist the pressure.
Richard Brown: I’m Mr. Brown. Your fully dilated and I’m here to take you to the delivery. Try not to push, please. We want to have a nice sterile delivery.
Friedman: Mr. Brown has found out the hard way that welfare programs destroy an individual’s independence.
Richard Brown: We’ve considered welfare. We went to see, to apply for welfare but, we were told that we were only eligible for $5.00 a month. And, to receive this $5.00 we would have to cash in our son’s savings bonds. And that’s not even worth it. I don’t believe in something for nothing anyway.
Mrs. Brown: I think a lot of people are capable of working and are willing to work, but it’s just the way it is set up. It, the mother and the children are better off if the husband isn’t working or if the husband isn’t there. And this breaks up so many poor families.
Friedman: One of the saddest things is that many of the children whose parents are on welfare will in their turn end up in the welfare trap when they grow up. In this public housing project in the Bronx, New York, 3/4′s of the families are now receiving welfare payments.
Well Mr. Brown wanted to keep away from this kind of thing for a very good reason. The people who get on welfare lose their human independence and feeling of dignity. They become subject to the dictates and whims of their welfare supervisor who can tell them whether they can live here or there, whether they may put in a telephone, what they may do with their lives. They are treated like children, not like responsible adults and they are trapped in the system. Maybe a job comes up which looks better than welfare but they are afraid to take it because if they lose it after a few months it maybe six months or nine months before they can get back onto welfare. And as a result, this becomes a self-perpetuating cycle rather than simply a temporary state of affairs.
Things have gone even further elsewhere. This is a huge mistake. A public housing project in Manchester, England.
Well we’re 3,000 miles away from the Bronx here but you’d never know it just by looking around. It looks as if we are at the same place. It’s the same kind of flats, the same kind of massive housing units, decrepit even though they were only built 7 or 8 years ago. Vandalism, graffiti, the same feeling about the place. Of people who don’t have a great deal of drive and energy because somebody else is taking care of their day to day needs because the state has deprived them of an incentive to find jobs to become responsible people to be the real support for themselves and their families.
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Thank you so much for your time. I know how valuable it is. I also appreciate the fine family that you have and your commitment as a father and a husband.
Sincerely,
Everette Hatcher III, 13900 Cottontail Lane, Alexander, AR 72002, ph 501-920-5733, lowcostsqueegees@yahoo.com
The Daily Hatch 