Milton Friedman was right about Obama’s misguided view of stimulus many years ago
Milton Friedman knew it a long time ago that President Obama was wrong when he blamed the ATM for unemployment. Take a look at this video clip below. He exposes the falacy that ignoring the principle of efficency will help create jobs. This is the misguided view that Obama has that led him to the failed stimulus two years ago too.
Sen. Ron Johnson (R-WI) spent 31 years in manufacturing before his election to Congress last November. He’s not letting that experience go to waste.
“This is a depressing display of economic ignorance,” Johnson says. He adds: “Technological innovations create jobs. They drive our economy forward, by helping workers be more productive. That raises everyone’s living standards.”
Johnson recounts a story of Milton Friedman’s visit to China. Upon seeing Chinese workers digging with shovels, he asked, “Why not use bulldozers?”. Freidman was told that workers using shovels would create more jobs. He replied, “Then why not use spoons, instead of shovels?”
Heritage is currently seeking stories from business owners who have encountered government regulations that harm business. If you would like to share your story, please send an email to scribe@heritage.org
Dear Senator Pryor, why not pass the Balanced Budget Amendment? (Part 10 Thirsty Thursday, Open letter to Senator Pryor)
Dear Senator Pryor,
Why not pass the Balanced Budget Amendment? As you know that federal deficit is at all time high (1.6 trillion deficit with revenues of 2.2 trillion and spending at 3.8 trillion).
On my blog www.HaltingArkansasLiberalswithTruth.com I took you at your word and sent you over 100 emails with specific spending cut ideas. However, I did not see any of them in the recent debt deal that Congress adopted. Now I am trying another approach. Every week from now on I will send you an email explaining different reasons why we need the Balanced Budget Amendment. It will appear on my blog on “Thirsty Thursday” because the government is always thirsty for more money to spend.
There’s nothing nutty about a balanced-budget amendment
In fact, it makes a lot of sense
Thursday, July 21, 2011
By Dick Thornburgh
A late entry in the budget deficit-debt ceiling talkathon in Washington is increasing support for a constitutional requirement that the federal budget be balanced each and every year.
Doctrinaire liberals will no doubt characterize this proposal as a nutty one, but careful scrutiny of such an amendment to our Constitution demonstrates its potential to prevent future train wrecks in the budgeting process.
Coupled with a presidential line-item veto and separate capital budgeting (which differentiates investments from current outlays), a constitutional budget-balancing requirement makes sense. These tools already are available to most governors and state legislatures. And they work.
The current debate in the Congress will likely include the following arguments usually raised against a balanced-budget amendment.
First, it will be argued that the amendment would “clutter up” our basic document in a way contrary to the intention of the founding fathers.
This is clearly wrong. The framers of the Constitution contemplated that amendments would be necessary to keep it abreast of the times. It already has been amended on 27 occasions.
Moreover, at the time of the Constitutional Convention, one of the major preoccupations was how to liquidate the Revolutionary War debts of the states. Certainly, it would have been unthinkable to the framers that the federal government itself would systematically run at a deficit, decade after decade. Indeed, the Treasury did not begin to follow such a practice until the mid-1930s.
Second, critics will argue that the adoption of a balanced-budget amendment would not solve the deficit problem overnight.
This is correct, but begs the issue. Serious supporters of the amendment recognize that a phasing-in period of five or 10 years would be required to reach a zero deficit. During this interim period, however, budget makers would be disciplined to meet declining deficit targets in order to reach a balanced budget by the established deadline.
As pointed out by former Commerce Secretary Peter G. Peterson, such “steady progress toward eliminating the deficit will maintain investor confidence, keep long-term interest rates headed down and keep our economy growing.”
Third, it will be argued that such an amendment would require vast cuts in social services and entitlements or defense expenditures.
Not necessarily. True, these programs would have to be paid for on a current basis rather than heaped on the backs of upcoming generations. Certainly, difficult choices would have to be made about priorities and levels of program funding. But the very purpose of the amendment is to discipline the executive and legislative branches actually to debate these choices and not to propose or perpetuate vast spending programs without providing the revenues to fund them.
The amendment would, in effect, make the president and Congress fully accountable for their spending and taxing decisions, as they should be.
Fourth, critics will say that a balanced-budget amendment would prevent or hinder our capacity to respond to national defense or economic emergencies.
This concern is easy to counter. Any sensible amendment proposal would feature a “safety valve” to exempt deficits incurred in response to such emergencies, requiring, for example, a three-fifths “super majority” in both houses of Congress. Such action should, of course, be based on a finding that such an emergency actually exists.
Fifth, it will be said that a balanced-budget amendment would be “more loophole than law” and might be easily circumvented.
The experience of the states suggests otherwise. Balanced-budget requirements are now in effect in all but one of the 50 states and have served them well.
Moreover, the line-item veto, available to 43 governors, would assure that any specific congressional overruns (or loophole end-runs) could be dealt with by the president. The public’s outcry, the elective process and the courts would also provide backup restraint on any tendency to simply ignore a constitutional directive.
In the final analysis, most of the excuses raised for not enacting a constitutional mandate to balance the budget rest on a stated or implied preference for solving our deficit dilemma through the “political process” — that is to say, through responsible action by the president and Congress.
But that has been tried and found wanting, again and again.
Surely, this country is ready for a simple, clear and supreme directive that its elected officials fulfill their fiscal responsibilities. A constitutional amendment is the only instrument that will meet this need effectively. Years of experience at the state level argue persuasively in favor of such a step. Years of debate have produced no persuasive arguments against it.
Perhaps Thomas Jefferson put it best:
“To preserve our independence, we must not let our rulers load us down with perpetual debt.”
That is the aim of a balanced-budget amendment. Reform-minded members of Congress should choose to support such an amendment to our Constitution as a means of resolving future legislative crises and ending “credit card” government once and for all.
A nutty idea? Not by a long shot.
Dick Thornburgh, of counsel to the Pittsburgh law firm K&L Gates, is a former U.S. attorney general and governor of Pennsylvania.
In the short film above you can see that it was the kindness of the two “haves” to the other “havenots” that allowed everyone to eat. However, the article below shows that the best way to help people is give them a job instead of a one time gift.
Surprisingly, there is one thing that Mr. Jobs is not, at least not yet: a prominent philanthropist. Despite accumulating an estimated $8.3 billion fortune through his holdings in Apple and a 7.4 percent stake in Disney (through the sale of Pixar), there is no public record of Mr. Jobs giving money to charity. He is not a member of the Giving Pledge, the organization founded by Warren E. Buffett and Bill Gates to persuade the nation’s wealthiest families to pledge to give away at least half their fortunes. (He declined to participate, according to people briefed on the matter.) Nor is there a hospital wing or an academic building with his name on it. …the lack of public philanthropy by Mr. Jobs — long whispered about, but rarely said aloud — raises some important questions about the way the public views business and business people at a time when some “millionaires and billionaires” are criticized for not giving back enough… In 2006, in a scathing column in Wired, Leander Kahney, author of “Inside Steve’s Brain,” wrote: “Yes, he has great charisma and his presentations are good theater. But his absence from public discourse makes him a cipher. People project their values onto him, and he skates away from the responsibilities that come with great wealth and power.”
But why, to address Leander Kahney’s criticism, should we assume that Mr. Jobs has done nothing for the poor? He’s built a $360 billion company. That presumably means at least $352 billion of wealth in the hands of people other than himself. And that doesn’t even begin to count how consumers have benefited from his products, the jobs he has created, and the indirect positive impact of his company on suppliers and retailers.
To give credit where credit is due, the article does present this counterargument. It reports that Mr. Jobs told friends, “that he could do more good focusing his energy on continuing to expand Apple than on philanthropy.”
This is a critical point. Do we want highly talented entrepreneurs and investors dropping out of the private sector and giving their money away after they’ve reached a certain point, say $5 billion? Or do we want them to focus on creating more wealth and prosperity?
Interestingly, Warren Buffett used to understand this point (before he started arguing that politicians could more effectively spend his money). And Carlos Slim Helu still does:
Mr. Jobs, 56 years old, is not alone in his single-minded focus on work over philanthropy. It wasn’t until Mr. Buffett turned 75 that he turned his attention to charity, saying that he was better off spending his time allocating capital at Berkshire Hathaway — where he believed he could create even greater wealth to give away — than he would ever be at devoting his energies toward running a foundation. And last year, Carlos Slim Helú, the Mexican telecommunications billionaire, defended his lack of charity and his refusal to sign the Giving Pledge. “What we need to do as businessmen is to help to solve the problems, the social problems,” he said in an interview on CNBC. “To fight poverty, but not by charity.”
None of this is to say that charitable giving is wrong. I’m proud to say that my employer, the Cato Institute, refuses to accept money from government. This means we are completely dependent on private philanthropy.
But those of us who work at Cato understand that creating wealth—maximizing the size of the economic pie—is the most important priority. And if the pie is big, generous people then have more ability to make contributions to worthy causes such as school choice scholarship funds, the Salvation Army, or (ahem) America’s best think tank.
Steve Jobs was raised as a conservative Lutheran but he chose to leave those beliefs behind. Below is a very good article on his life. COVER STORY ARTICLE | Issue: “Steve Jobs 1955-2011″ October 22, 2011 A god of our age Who was Steve Jobs? A revered technology pioneer and a relentless innovator, the Apple […]
COUNTER-DEMONSTRATION: At Kappa Sigma house in Fayetteville. The Drew Wilson photo above went viral last night — at least in Arkansas e-mail and social media users — after the Fayetteville Flyer posted it in coverage of an Occupy Northwest Arkansas demonstration in Fayetteville. The 1 percent banner was unfurled briefly on the Kappa Sigma frat […]
(If you want to check out other posts I have done about about Steve Jobs:Some say Steve Jobs was an atheist , Steve Jobs and Adoption , What is the eternal impact of Steve Jobs’ life? ,Steve Jobs versus President Obama: Who created more jobs? ,Steve Jobs’ view of death and what the Bible has to say about it ,8 things you might not know about Steve Jobs ,Steve […]
(If you want to check out other posts I have done about about Steve Jobs:Some say Steve Jobs was an atheist , Steve Jobs and Adoption , What is the eternal impact of Steve Jobs’ life? ,Steve Jobs versus President Obama: Who created more jobs? ,Steve Jobs’ view of death and what the Bible has to say about it ,8 things you might not know about Steve Jobs ,Steve […]
It is strange that the New Yorker Magazine did no research. (If you want to check out other posts I have done about about Steve Jobs:Some say Steve Jobs was an atheist , Steve Jobs and Adoption , What is the eternal impact of Steve Jobs’ life? ,Steve Jobs versus President Obama: Who created more jobs? ,Steve Jobs’ view of death and what the Bible […]
Still of Alan Alda, John Candy, Kevin Pollak, Rip Torn, Michael Moore and Rhea Perlman in Canadian Bacon
Michael Moore is a liberal movie director and his films have been pitiful. However, I did enjoy the movie “Canadian Bacon” which was very funny. Above is a clip from that movie.
On his Twitter feed Monday, the Oscar-winning film director also blamed the 2008 economic collapse on Standard & Poor’s — apparently because it and other credit-ratings agencies did not downgrade mortgage-based bonds, which encouraged the housing bubble and let it spread throughout the economy.
“Pres Obama, show some guts & arrest the CEO of Standard & Poors. These criminals brought down the economy in 2008& now they will do it again,” Mr. Moore wrote.
Standard & Poor’s, one of three key debt agencies, stripped the U.S. federal government of its AAA status Friday night and reduced it to AA+ for the first time in the nation’s history.
I don’t think that Standard and Poors did anything wrong and I think they would have been wrong if they did not act because of all the political pressure they were receiving from the Obama administration. My views are much closer to those below.
FreedomWorks President Matt Kibbe told The Daily Caller that liberals are using the slogan to distract Americans from the bad economic numbers he says President Obama’s policies have caused. “Well of course they want to say that,” Kibbe said of how the Obama administration is attempting to blame the tea party movement for the credit downgrade. “They don’t want to talk about how Obama’s fiscal policy led to this and 9.1 percent unemployment.”
Kibbe noted that Obama never provided his own debt plan and added that he believes it was Democrats and liberal Republicans who perpetuated the “out-of-control spending” that led Standard & Poor’s to downgrade the U.S. credit rating from AAA to AA+ with a negative outlook for the first time in the nation’s history.
Let Freedom Ring executive director Alex Cortes said the reason his organization launched TheObamaDowngrade.com is to point out how it’s largely the president’s fault for the credit downgrade. Like Kibbe, Cortes says both political parties are responsible for overspending through the years. But, he argued, Republicans are the “only ones” who have put “serious reforms” on the table in recent months.
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Terry Miller, director of the Center for International Trade and Economics at the Heritage Foundation, talks about Standard and Poor’s downgrade of the U.S.’s debt rating to AA+ from AAA and its impact on investment strategy. Miller speaks with Betty Liu and Erik Schatzker on Bloomberg Television’s “InsideTrack.” (Source: Bloomberg)
Here is the video clip and transcript of the film series FREE TO CHOOSE episode “What is wrong with our schools?” Part 1 of 6.
Volume 6 – What’s Wrong with our Schools
Transcript:
Friedman: These youngsters are beginning another day at one of America’s public schools, Hyde Park High School in Boston. What happens when they pass through those doors is a vivid illustration of some of the problems facing America’s schools.
They have to pass through metal detectors. They are faced by security guards looking for hidden weapons. They are watched over by armed police. Isn’t that awful. What a way for kids to have to go to school, through metal detectors and to be searched. What can they conceivably learn under such circumstances. Nobody is happy with this kind of education. The taxpayers surely aren’t. This isn’t cheap education. After all, those uniformed policemen, those metal detectors have to be paid for.
What about the broken windows, the torn school books, and the smashed school equipment. The teachers who teach here don’t like this kind of situation. The students don’t like to come here to go to school, and most of all, the parents __ they are the ones who get the worst deal __ they pay taxes like the rest of us and they are just as concerned about the kind of education that their kids get as the rest of us are. They know their kids are getting a bad education but they feel trapped. Many of them can see no alternative but to continue sending their kids to schools like this.
To go back to the beginning, it all started with the fine idea that every child should have a chance to learn his three R’s. Sometimes in June when it gets hot, the kids come out in the yard to do their lessons, all 15 of them, ages 5 to 13, along with their teacher. This is the last one-room schoolhouse still operating in the state of Vermont. That is the way it used to be. Parental control, parents choosing the teacher, parents monitoring the schooling, parents even getting together and chipping in to paint the schoolhouse as they did here just a few weeks ago. Parental concern is still here as much in the slums of the big cities as in Bucolic, Vermont. But control by parents over the schooling of their children is today the exception, not the rule.
Increasingly, schools have come under the control of centralized administration, professional educators deciding what shall be taught, who shall do the teaching, and even what children shall go to what school. The people who lose most from this system are the poor and the disadvantaged in the large cities. They are simply stuck. They have no alternative.
Of course, if you are well off you do have a choice. You can send your child to a private school or you can move to an area where the public schools are excellent, as the parents of many of these students have done. These students are graduating from Weston High School in one of Boston’s wealthier suburbs. Their parents pay taxes instead of tuition and they certainly get better value for their money than do the parents in Hyde Park. That is partly because they have kept a good deal of control over the local schools, and in the process, they have managed to retain many of the virtues of the one-room schoolhouse.
Students here, like Barbara King, get the equivalent of a private education. They have excellent recreational facilities. They have a teaching staff that is dedicated and responsive to parents and students. There is an atmosphere which encourages learning, yet the cost per pupil here is no higher than in many of our inner city schools. The difference is that at Weston, it all goes for education that the parents still retain a good deal of control.
Unfortunately, most parents have lost control over how their tax money in spent. Avabelle goes to Hyde Park High. Her parents too want her to have a good education, but many of the students here are not interested in schooling, and the teachers, however dedicated, soon lose heart in an atmosphere like this. Avabelle’s parents are certainly not getting value for their tax money.
Caroline Bell, Parent: I think it is a shame, really, that parents are being ripped off like we are. I am talking about parents like me that work every day, scuffle to try to make ends meet. We send our kids to school hoping that they will receive something that will benefit them in the future for when they go out here and compete in the job market. Unfortunately, none of that is taking place at Hyde Park.
Friedman: Children like Ava are being shortchanged by a system that was designed to help. But there are ways to help give parents more say over their children’s schooling.
This is a fundraising evening for a school supported by a voluntary organization, New York’s Inner City Scholarship Fund. The prints that have brought people here have been loaned by wealthy Japanese industrialist. Events like this have helped raise two million dollars to finance Catholic parochial schools in New York. The people here are part of a long American tradition. The results of their private voluntary activities have been remarkable.
This is one of the poorest neighborhoods in New York City: the Bronx. Yet this parochial school, supported by the fund, is a joy to visit. The youngsters here from poor families are at Saint John Christians because their parents have picked this school and their parents are paying some of the costs from their own pockets. The children are well behaved, eager to learn, the teachers are dedicated. The cost per pupil here is far less than in the public schools, yet on the average the children are two grades ahead. That is because teachers and parents are free to choose how the children shall be taught. Private money has replaced the tax money and so control has been taken away from the bureaucrats and put back where it belongs.
This doesn’t work just for younger children. In the 60’s, Harlem was devastated by riots. It was a hot bed of trouble. Many teenagers dropped out of school.
Next year is the 100th anniversary of Milton Friedman’s birth and I get on the computer today and read an article published today on the National Review Online and it quotes Milton Friedman.
Michael Tanner is a senior fellow at the Cato Institute and coauthor of Leviathan on the Right: How Big-Government Conservatism Brought Down the Republican Revolution.
If you are looking for a single statement that defines the essence of the modern welfare state, look no further than Secretary of Energy Steven Chu’s defense of the administration’s efforts to ban incandescent light bulbs. “We are taking away a choice that continues to let people waste their own money,” Chu said, quite satisfied with government’s efforts to protect Americans from their own choices.
Contrast this with Milton Friedman’s view that
those of us who believe in freedom must believe also in the freedom of individuals to make their own mistakes. If a man knowingly prefers to live for today, to use his resources for current enjoyment, deliberately choosing a penurious old age, by what right do we prevent him from doing so? We may argue with him, seek to persuade him that he is wrong, but are we entitled to use coercion to prevent him from doing what he chooses to do? Is there not always the possibility that he is right and we are wrong? Humility is the distinguishing characteristic of the believer in freedom, arrogance of the paternalist.
For too long, both liberals and too many conservatives have attempted to impose on people the government’s standards of what is best for them rather than leaving them to their own decisions, merely because those decisions may be mistaken. That is the real legacy of the welfare state as expanded by President Obama and as it has been practiced on a bipartisan basis for the last half century or more: We are, quite simply, less free.
Once you accept the paternalistic premise, there is no end to government interference.
In some cases, the restrictions on liberty are tangible and easily seen. As the economy becomes more and more socialized, so too do the consequences of individuals’ behavior. This, in turn, creates an incentive for the state to control that behavior. After all, if individual decisions impose a collective cost, it is only rational for those bearing that cost to demand input on those decisions. Thus, the nanny state seeks to restrict all manner of private consensual activity, whether it is eating fast foods and smoking or having consensual sex or driving without a seat belt.
But there are other equally important, if less obvious, ways that the welfare state restricts liberty. Government-run health-care systems, for example, impose a minimum amount that you must spend on health care, either through taxes or through insurance mandates, as with the Patient Protection and Affordable Care Act. They determine which medical conditions and eventualities you must insure against, even if you would prefer not to cover such conditions. Thus, they turn individual moral decisions, such as whether to buy insurance that covers abortion, contraception, or drug-abuse treatment, into political questions. And in some government-run systems they deny people the right to purchase the health care they want even with their own money.
By the same token, government-run anti-poverty programs limit your ability to support the charity of your choice. Money you pay in taxes to support government charity is money that you cannot donate to private charity. Yet the charitable activities chosen by the government may not be the ones that you would have chosen, or even the ones most needed. Indeed, the government’s charitable decisions are likely to be driven by politics, favoring those constituencies with the greatest voting power or those causes that capture the public imagination because they are on television or in the newspapers.
Government-run schools automatically pit the values of one group of parents against the values of other groups. How many textbook controversies or debates about what to teach about homosexuality, whether students may pray, or phonics versus whole language could be avoided if parents could choose the school their child attended?
Social Security may or may not be a Ponzi scheme, but it prevents people — especially poor people — from saving and investing for their own retirement in ways that would allow them to build real, inheritable wealth.
Beyond the programs themselves, there is the simple fact that every dollar that the welfare state consumes to pay for itself is one fewer dollar that individuals have to spend the way that they want to, however that may be. As the French economist Frederic Bastiat put it in his parable of the shopkeeper with the broken window, “He would, perhaps, have replaced his old shoes, or added another book to his library.” Or to put it in today’s context, he might have purchased health care, saved for his retirement, or donated to charity. He might have started a business and hired workers. Or he might have spent it entirely on pleasure or frivolities. He might even have bought energy-inefficient light bulbs.
Whatever he might have done, he is now deprived of that choice. He is, in fact, less free.
Once paternalism is accepted in principle, there is no limit to the actions that government may take in controlling our lives and restricting liberty. The ultimate result, as Friedman writes, is “dictatorship, benevolent and maybe majoritarian, but dictatorship nonetheless.”
As we debate the ever-expanding welfare state and all its consequences — joblessness, a crushing debt burden on our children and grandchildren, and the loss of opportunity for the neediest among us — let us not forget the other casualty of big government: freedom.
Sooner or later, there will be a giant battle in Washington over the value-added tax. The people who want bigger government (and the people who are willing to surrender to big government) understand that a new source of tax revenue is needed to turn the United States into a European-style social welfare state. But that’s exactly why the VAT is a terrible idea.
I explain why in a column for Reuters. The entire thing is worth reading, but here’s an excerpt of some key points.
Many Washington insiders are claiming that America needs a value-added tax (VAT) to get rid of red ink. …And President Obama says that a VAT is “something that has worked for other countries.” Every single one of these assertions is demonstrably false. …One of the many problems with a VAT is that it is a hidden levy. …VATs are imposed at each stage of the production process and thus get embedded in the price of goods. And because the VAT is hidden from consumers, politicians find they are an easy source of new revenue – which is one reason why the average VAT rate in Europe is now more than 20 percent! …Western European nations first began imposing VATs about 40 years ago, and the result has been bigger government, permanent deficits and more debt. According to the Economist Intelligence Unit, public debt is equal to 74 percent of GDP in Western Europe, compared to 64 percent of GDP in the United States (and the gap was much bigger before the Bush-Obama spending spree doubled America’s debt burden). The most important comparison is not debt, but rather the burden of government spending. …you don’t cure an alcoholic by giving him keys to a liquor store, you don’t promote fiscal responsibility by giving government a new source of revenue. …To be sure, we would have a better tax system if proponents got rid of the income tax and replaced it with a VAT. But that’s not what’s being discussed. At best, some proponents claim we could reduce other taxes in exchange for a VAT. Once again, though, the evidence from Europe shows this is a naive hope. The tax burden on personal and corporate income is much higher today than it was in the pre-VAT era. …When President Obama said the VAT is “something that has worked for other countries,” he should have specified that the tax is good for the politicians of those nations, but not for the people. The political elite got more money that they use to buy votes, and they got a new tax code, enabling them to auction off loopholes to special interest groups.
You can see some amusing — but also painfully accurate — cartoons about the VAT by clicking here, here, and here.
For further information on why the VAT is a horrible proposal, including lots of specific numbers and comparisons between the United States and Western Europe, here’s a video from the Center for Freedom and Prosperity.
Among the most familiar passages in the Declaration of Independence is the section reading, “We hold these truths to be self-evident, that all men are created equal, that they are endowed by their Creator with certain unalienable Rights, that among these are Life, Liberty and the pursuit of Happiness.”
Matthew Pate
Who am I to dispute one of the key sentiments contained in the great foundational document of our republic?
Even so, I’m disputin’ it.
Namely, I have a problem with the idea that we are all created equal. Perhaps in some abstract sense of tabula rasa, we all emerge from the womb with approximately equal potential, but I am dubious of even that.
This said, Ireadily, wholly and unequivocally believe we should all be treated as though we were equal, but facts being what they are, we are not all equal.
As someone whose job requires the issuance of class grades, I can fully attest that not all snowflakes are special. They all may be unique and valuable, but some are bright white and some appear to have been visited by sled dogs. Like it or not, we are a people of standards, rankings and competitions.
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The answer to this question of what equality is can be found in the first part of the episode “Created Equal” in the film series FREE TO CHOOSE by Milton Friedman.
Milton Friedman and Ronald Reagan
Liberals like President Obama (and John Brummett) want to shoot for an equality of outcome. That system does not work. In fact, our free society allows for the closest gap between the wealthy and the poor. Unlike other countries where free enterprise and other freedoms are not present. This is a seven part series.
Created Equal [1/7]. Milton Friedman’s Free to Choose (1980)
In this program, Milton Friedman visits India, the U.S., and Britain, examining the question of equality. He points out that our society traditionally has embraced two kinds of equality: equality before God and equality of opportunity. The first of these implies that human beings enjoy a certain dignity simply because they are members of the human community. The second suggests societies should allow the talents and inclinations of individuals to unfold, free from arbitrary barriers. Both of these concepts of equality are consistent with the goal of personal freedom.
In recent years, there has been growing support for a third type of equality, which Dr. Friedman calls “equality of outcome.” This concept of equality assumes that justice demands a more equal distribution of the economic fruits of society. While admitting the good intentions of those supporting the idea of equality of outcome, Dr. Friedman points out that government policies undertaken in support of this objective are inconsistent with the ideal of personal freedom. Advocates of equality of outcome typically argue that consumers must be protected by government from the insensitivities of the free market place.
Dr. Friedman demonstrates that in countries where governments have pursued the goal of equality of outcome, the differences in wealth and well being between the top and the bottom are actually much greater than in countries that have relied on free markets to coordinate economic activity. Indeed, says Dr. Friedman, it is the ordinary citizen who benefits most from the free market system. Dr. Friedman concludes that any society that puts equality ahead of freedom will end up with neither. But the society that puts freedom before equality will end up with both greater freedom and great equality.
Friedman: From the Victorian novelists to modern reformers, a favorite device to stir our emotions is to contrast extremes of wealth and of poverty. We are expected to conclude that the rich are responsible for the deprivations of the poor __ that they are rich at the expense of the poor.
Whether it is in the slums of New Delhi or in the affluence of Las Vegas, it simply isn’t fair that there should be any losers. Life is unfair __ there is nothing fair about one man being born blind and another man being born with sight. There is nothing fair about one man being born of a wealthy parent and one of an indigenous parent. There is nothing fair about Mohammed Ali having been born with a skill that enables him to make millions of dollars one night. There is nothing fair about Marleena Detrich having great legs that we all want to watch. There is nothing fair about any of that. But on the other hand, don’t you think a lot of people who like to look at Marleena Detrich’s legs benefited from nature’s unfairness in producing a Marleena Detrich. What kind of a world would it be if everybody was an absolute identical duplicate of anybody else. You might as well destroy the whole world and just keep one specimen left for a museum. In the same way, it’s unfair that Muhammed Ali should be a great fighter and should be able to earn millions. But would it not be even more unfair to the people who like to watch him if you said that in the pursuit of some abstract idea of equality we’re not going to let Muhammed Ali get more for one nights fight than the lowest man on the totem pole can get for a days unskilled work on the docks. You can do that but the result of that would be to deny people the opportunity to watch Mohammad Ali. I doubt very much he would be willing to subject himself to the kind of fights he’s gone through if he were to get the pay of an unskilled docker.
This beautiful estate, its manicured lawns, its trees, its shrubs, was built by men and women who were taken by force in Africa and sold as slaves in America. These kitchen gardens were planted and tended by them to furnish food for themselves and their master, Thomas Jefferson, the Squire of Monticello. It was Jefferson who wrote these words: We hold these truths to be self-evident that all men are created equal. That they are endowed by their creator with certain inalienable rights, that among these are life, liberty and the pursuit of happiness. These words penned by Thomas Jefferson at the age of 33 when he wrote the Declaration of Independence, have served to define a basic ideal of the United States throughout its history.
Much of our history has revolved about the definition and redefinition of the concept of equality, about the intent to translate it into practice. What did Thomas Jefferson mean by the words all men are created equal? He surely did not mean that they were equal and/or identical in what they could do and what they believed. After all, he was himself a most remarkable person. At the age of 26, he designed this beautiful house of Monticello, supervised its construction and indeed is said to have worked on it with his own hands. He was an inventor, a scholar, an author, a statesman, governor of Virginia, President of the United States, minister to France, he helped shape and create the United States. What he meant by the word “equal” can be seen in the phrase “endowed by their creator”. To Thomas Jefferson, all men are equal in the eyes of God. They all must be treated as individuals who have each separately a right to life, liberty and the pursuit of happiness.
Of course, practice did not conform to the ideals. In Jefferson’s life or in ours as a nation, he agonized repeatedly during his lifetime about the conflict between the institution of slavery and the fine words of the declaration. Yet, during his whole life, he was a slave owner.
This is the City Palace in Jaipur, the capitol of the Indian state of Rajasthan, is just one of the elegant houses that were built here 150 years ago by the prince who ruled this land. There are no more princes, no more Maharajas in India today. All titles were swept away by the government of India in its quest for equality. But as you can see, there are still some people here who live a very privileged life. The descendants of the Maharajas financed this kind of life partly by using other palaces as hotels for tourists __ tourists who come to India to see how the other half lives. This side of India, the exotic glamorous side, is still very real. Everywhere in the world there are gross inequalities of income and wealth. They offend most of us.
A myth has grown up that free market capitalism increases such inequalities, that the rich benefit at the expense of the poor. Nothing could be further from the truth. Wherever the free market has been permitted to operate, the ordinary man has been able to attain levels of living never dreamed of before. Nowhere is the gap between rich and poor. Nowhere are the rich richer and the poor poorer than in those societies that do not permit the free market to operate, whether they be feudal societies where status determines position, or modern, centrally-planned economies where access to government determines position.
Central planning was introduced in India in considerable part in the name of equality. The tragedy is that after 30 years, it is hard to see any significant improvement in the lot of the ordinary person.
Friedman Friday” Free to Choose by Milton Friedman: Episode “Created Equal” (Part 3 of transcript and video) Liberals like President Obama want to shoot for an equality of outcome. That system does not work. In fact, our free society allows for the closest gap between the wealthy and the poor. Unlike other countries where free enterprise and other […]
Free to Choose by Milton Friedman: Episode “Created Equal” (Part 2 of transcript and video) Liberals like President Obama want to shoot for an equality of outcome. That system does not work. In fact, our free society allows for the closest gap between the wealthy and the poor. Unlike other countries where free enterprise and other freedoms are […]
Milton Friedman and Ronald Reagan Liberals like President Obama (and John Brummett) want to shoot for an equality of outcome. That system does not work. In fact, our free society allows for the closest gap between the wealthy and the poor. Unlike other countries where free enterprise and other freedoms are not present. This is a seven part series. […]
Politico reports here that a group of celebrities, including former Baptist pastor Mike Huckabee, shouted a four-letter obscenity for cameras in a promotion to speak up against famine. Bleeps and labels to cover mouths obscure the actual word.
In the PSA, our celebrity supporters shout out one four letter word that the majority of viewers will find offensive, in order to shine a light on something only a minority seems to be offended by. I know the tone is a bit rough for ONE — that’s no accident. If it feels like a punch in the face, then good — mission accomplished. It’s time for a wakeup call and here’s the alarm. Love it? Great. Hate it? OK. Just don’t ignore it.
I’m not sure I believe Huck did precisely as described.
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One of the key parts of the solution is economic freedom. It is not the bailout, welfare approach of President Obama who Bono supported in 2008. Here is the second part of an excellent article from the Cato Institute:
Ending Mass Poverty
by Ian Vásquez
September 2001
Ian Vásquez is director of the Cato Institute’s Project on Global Economic Liberty. This essay originally appeared on the U.S. Department of State’s electronic journal, Economic Perspectives (September 2001).
Economic growth is the “only path to end mass poverty,” says economist Ian Vásquez, who argues that redistribution or traditional poverty reduction programs have done little to relieve poverty. Vásquez writes that the higher the degree of economic freedom — which consists of personal choice, protection of private property, and freedom of exchange — the greater the reduction in poverty. Extending the system of property rights protection to include the property of poor people would be one of the most important poverty reduction strategies a nation could take, he says.
The historical record is clear: the single, most effective way to reduce world poverty is economic growth. Western countries began discovering this around 1820 when they broke with the historical norm of low growth and initiated an era of dramatic advances in material well-being. Living standards tripled in Europe and quadrupled in the United States in that century, improving at an even faster pace in the next 100 years. Economic growth thus eliminated mass poverty in what is today considered the developed world. Taking the long view, growth has also reduced poverty in other parts of the world: in 1820, about 75 percent of humanity lived on less than a dollar per day; today about 20 percent live under that amount.
Even a short-term view confirms that the recent acceleration of growth in many developing countries has reduced poverty, measured the same way. In the past 10 years, the percentage of poor people in the developing world fell from 29 to 24 percent. Despite that progress, however, the number of poor people has remained stubbornly high at around 1,200 million. And geographically, reductions in poverty have been uneven.
This mixed performance has prompted many observers to ask what factors other than growth reduce poverty and if growth is enough to accomplish that goal. Market reforms themselves have been questioned as a way of helping the poor. After all, many developing countries have liberalized their economies to varying degrees in the past decade.
But it would be a colossal mistake to lose focus on market-based growth and concentrate instead on redistribution or traditional poverty reduction programs that have done little by comparison to relieve poverty. Keeping the right focus is important for three reasons — there is, in fact, a strong relationship between growth and poverty reduction, economic freedom causes growth, and most developing countries can still do much more in the way of policies and institutional reforms to help the poor…
The Importance of Economic Freedom
The West’s escape from poverty did not occur by chance. Sustained growth over long periods of time took place in an environment that generally encouraged free enterprise and the protection of private property. Today, developing countries have an advantage. By adopting liberal economic policies, poor countries can achieve within one generation the kind of economic progress that it took rich countries 100 years to achieve. High growth is possible because poor countries will be catching up to rich countries, rather than forging a new path. Studies by both the World Bank and the International Monetary Fund confirm that countries such as China and others that have chosen to open their economies are indeed converging with the industrialized world.
The most comprehensive empirical study on the relationship between economic policies and prosperity is the Fraser Institute’s “Economic Freedom of the World” annual report. It looks at more than 20 components of economic freedom, ranging from size of government to monetary and trade policy, in 123 countries over a 25-year period. The study finds a strong relationship between economic freedom and prosperity. Divided by quintiles, the freest economies have an average per capita income of $19,800 compared with $2,210 in the least free quintile. Freer economies also grow faster than less free economies. Per capita growth in the 1990s was 2.27 percent in the most free quintile, while it was -1.45 percent in the least free countries.
The Fraser study also found that economic freedom is strongly related to poverty reduction and other indicators of progress. The United Nations’ Human Poverty Index is negatively correlated with the Fraser index of economic freedom. People living in the top 20 percent of countries in terms of economic freedom, moreover, tend to live about two decades longer than people in the bottom 20 percent. Lower infant mortality, higher literacy rates, lower corruption, and greater access to safe drinking water are also associated with increases in economic liberty. Indeed, the United Nations’ Human Development Index, which measures various aspects of standards of living, correlates positively with greater economic freedom.
The implications for the poor are impressive. Economists Steve Hanke and Stephen Walters examined the leading empirical studies on the relationship between economic freedom and prosperity and concluded that a 10 percent increase in economic freedom tends to increase per capita gross national product by 7.4 to 13.6 percent. Since developing countries can still increase their levels of economic freedom substantially, and some have by 100 percent or more in the past two decades, the payoff of enhanced liberty can be seen not only in terms of growth but also in terms of a range of human development indicators. Hanke and Walters found, for example, that an increase in per capita income from $500 to $1,000 produces a rise in life expectancy of about 6 percent. Indeed, high growth creates the wealth that makes it possible for countries to invest in health, education, and other human needs that are an essential part of continued growth. Nor are those benefits shared unequally. The Fraser study found that there is no correlation between economic freedom and inequality, while a World Bank study has found that the incomes of the poorest 20 percent of the population rise proportionately with the average rise in income.
Toward More Effective Poverty Reduction
Although the collapse of central planning forced many countries to abandon inward-looking economic policies in the 1990s, most of the developing world is still far from adopting a coherent set of policies consistent with economic freedom. Russia may have dumped communism, but in terms of economic freedom the Fraser Institute ranks the country 117 out of 123 nations. Even countries such as Argentina and Mexico that have done much to liberalize their economies have clung to policy remnants of the past, with devastating consequences for the poor. Mexico’s peso crisis of 1994-95, for example, resulted from monetary and fiscal policies during an election year that were thoroughly inconsistent with market economics.
Attention to market-oriented macroeconomic policies is well founded, particularly since they benefit the poor. That is especially so of two such policies — reducing inflation and the level of spending — which disproportionately favor the poor. Much less attention, however, has been paid to institutional reforms and the microeconomic environment. Three areas stand out: the rule of law, the level of bureaucratic regulation, and the private property rights of the poor.
A legal system capable of enforcing contracts and protecting persons and their property rights in an evenhanded manner is central to both economic freedom and progress. Indeed, the sustainability of a market economy — and of market reforms themselves — rests largely on the application of the rule of law. Yet the rule of law is conspicuously missing in much of the developing world. The 2001 “Economic Freedom of the World” report, which includes a more comprehensive index of economic freedom for 58 countries, takes this measure into account. It finds that Latin American countries rank especially low in this area. Also at the bottom of the list are transition countries such as Russia and Ukraine. Were reliable data available for African countries, they would no doubt receive low ratings as well.
The absence of the rule of law is especially unfortunate for the poor, not only because they have fewer private resources to protect their rights, but also because the rule of law in itself is related to economic growth. Robert Barro created an index that measured the rule of law on a scale of 0 to 6 and found that a country’s growth rate increases by half a percentage point with each increment in his index. Because the rule of law provides essential protections for the poor, sustains a market exchange system, and promotes growth, it may well be the most important ingredient of economic prosperity.
Another much neglected area in need of reform is regulation. Here again the Fraser Institute’s comprehensive index found that the freedom to operate a business and compete in the market is circumscribed in much of the developing world. The same countries that ranked low in the rule of law area ranked low in this area. To have an idea of the bureaucratic burden with which people in the developing world must contend, consider the cases of Canada, Bolivia, and Hungary. According to a study by the National Bureau of Economic Research, it takes two days, two bureaucratic procedures, and $280 to open a business in Canada. By contrast, an entrepreneur in Bolivia must pay $2,696 in fees, wait 82 business days, and go through 20 procedures to do the same. In Hungary the same operation takes 53 business days, 10 procedures, and $3,647. Such costly barriers favor big firms at the expense of small enterprises, where most jobs are created, and push a large proportion of the developing world’s population into the informal economy.
The informal economy in the developing world is large due to another major factor. The private property rights of the poor are not legally recognized. Peruvian economist Hernando de Soto has documented how poor people around the world have no security in their assets because they lack legal title to their property. In rural Peru, for example, 70 percent of poor people’s property is not recognized by the state. The lack of such legal protection severely limits the wealth-creating potential that the poor would otherwise have were they allowed to participate within the legal framework of the market. Without secure private property rights, the poor cannot use collateral to get a loan, cannot take out insurance, and find it difficult to plan in the long term.
Ending what amounts to legal discrimination would permit poor people to benefit fully from the market system and allow the poor to use their considerable assets to create wealth. Indeed, as de Soto has shown, the poor are already asset rich. According to him, the assets of the poor are worth 40 times the value of all foreign aid since 1945. The wealth of Haiti’s poor, for example, is more than 150 times greater than all foreign investment in that country since its independence in 1804. In the limited places that poor people’s property has been registered, the results have been impressive. Where registration was done in Peru, new businesses were created, production increased, asset values rose 200 percent, and credit became available.
Extending the system of property rights protection to include the property of poor people is the most important social reform that developing countries can undertake. It is a reform that has been almost completely ignored around the world, yet it would directly affect the poor and produce dramatic results for literally thousands of millions of people.
Keeping the Right Focus
Countries have ended mass poverty only by following policies that encourage economic growth. But that growth must be self-sustaining to translate into enduring increases in wealth. Policies of forced industrialization or state-led development may produce high growth for a time, but history has shown that such episodes are followed by economic contraction. Economic freedom, by contrast, shows a strong relationship with prosperity and growth over time. Fortunately, many developing countries are following that path, producing high and rapid growth and showing that it is good for the poor. Their experience may create a demonstration effect for the majority of nations that are in many ways still economically unfree.
All developing nations can do more to increase growth. Establishing the rule of law, reducing barriers that hamper entrepreneurship and competition, and recognizing the property rights of the poor are three reforms that go beyond the liberalization measures that many countries have already introduced. Those reforms not only contribute to economic growth; they increase the effectiveness of growth in reducing poverty. Policy-makers in rich and poor countries alike should not lose focus on the promise of growth. It remains the only path to end mass poverty.
U2 performs Pride: In the name of Love, a song about Martin Luther King, at President-elect Barack Obama’s Inaugural concert on the Lincoln Memorial in Washington D.C. Bono told the estimated 600,000 there that on Tuesday “that dream comes to pass.” Jan. 18, 2009
The Sixty Six who resisted “Sugar-coated Satan Sandwich” Debt Deal (Part 7)
This post today is a part of a series I am doing on the 66 Republican Tea Party favorites that resisted eating the “Sugar-coated Satan Sandwich” Debt Deal. Actually that name did not originate from a representative who agrees with the Tea Party, but from a liberal.
Rep. Emanuel Clever (D-Mo.) called the newly agreed-upon bipartisan compromise deal to raise the debt limit “a sugar-coated satan sandwich.”
“This deal is a sugar-coated satan sandwich. If you lift the bun, you will not like what you see,” Clever tweeted on August 1, 2011.
Hunter Opposes Latest Debt Limit Proposal, Cites U.S. Security
For Immediate Release: August 1, 2011Washington DC—Today, U.S. Congressman Duncan Hunter voted against the latest debt limit proposal due to the likelihood that the special committee created under the plan will fail to reach an agreement and therefore “trigger” $600 billion in defense budget cuts. Hunter voted in support of the previous two debt limit proposals originating in the House—The Cut, Cap and Balance Act and Speaker Boehner’s debt limit reduction plan.
“Right now, the U.S. military is facing large equipment shortfalls and growing reset burdens while engaged in three wars,” said Congressman Hunter, a member of the House Armed Services Committee and veteran of the wars in Iraq and Afghanistan. “When we should be talking about what our military needs to keep us safe and prepare for future threats, there’s a misconception that security spending is what put the country in this fiscal sinkhole and the only way out is to cut national defense.
“The future of U.S. security should not be handed over to a 12-person super panel. Its decisions or inability to reach an agreement could ultimately break our military or bring it very close to that point.
“From a historical perspective, current defense spending is at dangerously low levels. Under President Kennedy, defense spending was at nine percent of Gross Domestic Product. It was six percent under President Reagan. Today, it’s below four percent and with $400 billion in additional cuts, military readiness will continue its steady decline.
“And we cannot overlook what a $400 billion cut in defense means for jobs. It’s estimated that every billion in defense spending supports 8,000 jobs nationwide. Any sizeable cut in the defense budget would mean more lost jobs at a time when job growth is almost non-existent and a record number of Americans remain out of work.
“There’s no substitute for a strong national defense. America’s fiscal outlook is serious, but we know what’s straining the budget and it’s not defense.”
