There is one man who embodies the spirit of capitalism, but most have never heard of him. That needs to change. It's time for Americans to remember and get to know Milton Friedman, the father of modern economics.
Milton Friedman was a brilliant champion of the free market, capitalism and the American way of life. He was not a politician, just a man who looked at things in a radically different way --- and articulated them simply and persuasively.
The four-part series is compiled below for your convenience.
Part I: Economics 101
Bloomberg Money recently printed an article extolling the “helicopter money” theory from a man many consider to be the greatest economist in the 20th century — Milton Friedman. Friedman was a brilliant defender of the free market — or capitalism.
Milton Friedman was the son of poor, immigrant parents. His father died when he was 15, forcing him to creatively supplement a scholarship to Rutgers University. Capitalizing on the tradition that all freshmen must wear green ties, he and a friend went door to door, selling them in the dormitory. There he learned early the benefits of a free market — offering products at a lower, competitive price while making a profit.
After graduating from Rutgers, Friedman earned his Master’s Degree from the University of Chicago and later his Ph.D. from Columbia University. He married his college sweetheart and went on to teach at Columbia, Cambridge, the University of Chicago and the Hoover Institution.
Before Friedman rose to prominence, the preeminent economist of the 20th century was Englishman John Maynard Keynes, who advocated for more government intervention in the economy. Friedman however, was a rare breed and didn’t think inside the box. He was thrilled in 1947 to receive an invitation from the Nobel Prize winner Friedrich von Hayek to meet in Sweden with some of the brightest minds in the world. Decades later, in 1976, Friedman himself was awarded the Nobel Prize in economic sciences.
Friedman was unafraid and unashamed in the goodness and rightness of capitalism. He often engaged detractors on college campuses, stating that “a society that aims for equality before liberty will end up with neither equality nor liberty.” In 1979, he sat down for an epic interview with Phil Donahue, addressing the talk show host’s concerns about capitalism.
Today, Friedman would no doubt be labeled an uncaring, hateful racist for his straightforward thinking. For example, when asked at a college forum what role the government plays in helping the poor, he spoke decisively on the matter:
“First of all, the government doesn’t have any responsibility. People have responsibility. This building doesn’t have responsibility. You and I have responsibility. People have responsibility,” Friedman said. “How can we as people exercise our responsibility to our fellow man most effectively? That’s the problem. So far as poverty is concerned, there has never in history been a more effective machine for eliminating poverty than the free enterprise system and the free market.”
Friedman’s ideas would eventually become hugely influential in the thinking of Chairman of the Federal Reserve Alan Greenspan, President Ronald Reagan, British Prime Minister Margaret Thatcher, and later, Ron and Rand Paul.
Milton Friedman died in 2006, at the age of 94, silencing a voice that strongly defended the virtues of capitalism and a free market system that has richly blessed as the United States.
Part II: Evils of Collectivism
Nobel Prize-winning economist Milton Friedman was a staunch and brilliant defender of capitalism. He understood that without America and the free market system, the world would still be languishing in the Dark Ages. He very often took on socialists and their distortions of history and reality. In a forum at the University of Chicago, Friedman took on Michael Harrington of the Democratic Socialist Organizing Committee.
MICHAEL: I think people over 65 years of age in the United States today are freer now because of Medicare. I do not think that the freedom to die from the lack of medicine was a very good thing. Secondly, related to industrialists, I think that one of the startling things about American history is that when Franklin Roosevelt was saving the system from itself, the main beneficiaries were screaming bloody murder at him for being a traitor to his class, when he was, in fact, the salvation of that class. And I think if you — therefore, if you look at our history, I do think you find a tremendous myopia on the part of industrialists, and you find that the positive increments to our freedom, interestingly enough have not come from the college graduates, but often from people — not from the best people. It’s come from working people. It’s come from poor people. It’s come from blacks and Hispanics and the like.
MILTON: Unaccustomed as I am to agreeing with Michael Harrington, I will agree in part with what he’s just said. I do not believe it’s proper to put the situation, in terms of industrialists 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 worker and the ordinary consumer. I think business is a wonderful institution, provided it has to face competition in the marketplace and it can’t get away with something, except by producing a better product at a lower cost. And that’s why I don’t want government to step in and help the business community. Now, I want to go to your question about Medicare. There are many people who benefited from Medicare, but you’re not looking at the cost side. What has happened to the people who are paying for it? It isn’t — we don’t have a free good. It isn’t coming from nowhere. And are they benefiting from it, in a cost-effective way? Those are the questions. It’s demagoguery, if you’ll pardon me, Michael Harrington, to say the people who have Medicare are freer. Of course, in one dimension. But they themselves had been paying all their life, and have they gotten a good bargain? At the moment, they have. The young man, the young working people who are going into Social Security now, they’re going to get a very raw deal indeed.
Milton Friedman boldly argued against government-controlled fairness and “social justice.”
MILTON: Social injustices are clearly greatest where you have central control. The degree of social injustice and torture in a place like — and incarceration, in a place like Russia, is of a different order of magnitude than it is in those Western countries where most of us have grown up and in which we have been accustomed to regarding freedom as our natural heritage. Where do you have the greatest degree of inequality? In the socialist states of the world.
Don’t look at what the proponents of one system or another say are their intentions, but look at what the actual results are. Socialism, which means government ownership and operation of means of production, has appealed to high-minded, fine people. To people of idealistic views because of the supposed objectives of socialism, especially because of the supposed objectives of equality and social justice. Now, those are fine objectives. And it’s a tribute to the people of good will that those objectives should appeal to them, but you have to ask the question: Does a system, no matter what its proponents say, produce those results? And once you look at the results, it’s crystal clear that they do not.
According to Milton Friedman, the motives of those involved in oppressive nations may even be good, but it doesn’t matter. He argued to look beyond the motives and assess the results.
MILTON: The most harm of all is done when power is in the hands of people who are absolutely persuaded of the purity of their instincts and the purity of their intentions. Thoreau said that philanthropy is a much overrated virtue. Sincerity is also a much overrated virtue. Heaven preserve us from the sincere reformer who knows what’s good for you and, by heaven, is going to make you do it whether you like it or not. That’s when you get the greatest harm done. I have no reason to doubt that Lenin was a man whose intentions were good, maybe they weren’t, but he was completely persuaded that he was right and he was willing to use any methods at all for the ultimate good.
Friedman tried to reason with the collectivists who believed in socialism and wanted more of it, including more health care.
MILTON: I say to people who say we have to have government medicine in there. I say, would you mind first telling me which of the other great reforms of government have achieved their objectives? I take it you mean the federal housing program has solved the problem of housing for the low-income groups. I take it you mean that the federal welfare program has solved the problems of welfare of indigents and dependents, that federal urban renewal and housing — and reconstruction programs have solved the problem of urban life.
Despite the pressures from socialists and communists, Friedman never lost hope — and neither should we.
Part III: Friedman vs. Liberal Detractors
Milton Friedman was a powerful, passionate, cheerful and reasoned defender of what America and capitalism has done for the country and the world. Friedman’s handling of radicals and leftist was done with calm logic grounded in facts and common sense. Many today might be thinking, “Mister, we could use a man like Milton Friedman again.”
When Friedman encountered radical extremist Frances Fox Piven, who co-authored the Cloward-Piven plan to overload the welfare system in this country and bring down our economy, he challenged her irrational logic with facts and direct questions.
FRANCES: That so-called free enterprise system has always used government. The entrepreneurs of that free enterprise system have always used government. And the question that you raise is whether other people can use government to achieve their ends.
The free enterprise system, as it is spread around the world, as it is spread to Asia and Africa and Latin America, has spread through the force of alms, among other things. And those alms were wielded by governments. That was government intervention under the name of the free enterprise system, but a government intervention which destroyed the freedoms of many people.
MILTON: You always are talking about mixed systems, and I challenge you to find a single example in history at any time of any society where people have been relatively free, and I don’t mean merely — what you call merely — economic freedom. I mean freedom in the full sense. I mean freedom of individuals to pursue their own objectives, their own values, to live their lives. I want you to name me any society in which you’ve had any large measure of that freedom, where capitalism and free enterprise has not been the predominant mechanism for controlling economic activity. Not the sole mechanism, but the dominant one. I want you to name me one exception.
Friedman was continually attacked by leftists who believed socialism or communism were superior to capitalism and the free market. And he continually rebutted their claims with a clear truth based in facts.
Friedman also educated college students who believed the free market to be inferior. When challenged by one student that in a free market system the poor remained poor and the rich remained rich, Friedman had plenty to say.
MILTON: This is not built into the system at all. It’s never been true. It’s simply a false. If you look at the evidence, there is an enormous amount of mobility from one class to the other. In fact, there used to be a saying, three generations from church leads to church slaves, which reflected the exactly opposite affect. So it’s simply not built into the system. On the contrary, there’s a great deal of mobility within generations and between generations, and we shouldn’t argue on the basis of false factual premises. In my opinion, a society that aims for equality before liberty will end up with neither equality nor liberty.
Contrary to what most economists of his day — and of this day — believe, Friedman also felt government was the problem, not the solution for education and unemployment.
MILTON: Why do we have a black teenage unemployment rate from 30 to 40 percent? Because of two failures of government. One, a failure to provide decent schooling, which is a governmental responsibility. Has been. Whether it should be or not, it has been. And second, because of a minimum wage rate, which prevents those kids who haven’t had decent schooling from getting jobs at low pay at which they can earn the skills on the jobs that would enable them to ride to higher pay. If you look at the sources of poverty, you will find a very — most of them are derived from what I regard as wrong-headed government policy.
Rather than just citing problems, Friedman also offered solutions to things like education.
MILTON: In my opinion, there is not a single thing you could do in this world that would do more to improve the condition of the black people who are in the lowest income classes, of the black people who have been most affected by discrimination, there is not anything you could do that would be more affected than the voucher scheme. Why? Because as I said to you before, and I challenge anybody to deny it, that there’s no respect in which the black and the slum is more deprived than in the quality of schooling he can get. He’s much worse off in that respect than he is even in the quality of the housing he can get and in the quality of the automobile he can buy and the quality of the job he can get with given education.
The only effective device that there is for improving his schooling that anybody has suggested is to give the parents more control, to introduce the competition and the drive of private — of private market, to improve the quality of the schooling that is available to them.
During a Free to Choose discussion, Friedman was confronted regarding the morality of capitalism.
VOICE: Dr. Friedman, is there an economic system now or historically that has allowed free enterprise alone to determine which direction the economy goes? Secondly, in economics, you have resources. And how to best use these resources is a value judgment. But it seems to me you can either have free enterprise decide or a government decide or some combination. And don’t you think combination would be the best alternative? And thirdly — if I can remember it — isn’t there some benefit to having the government steal our money, which is what they do effectively. They hold a gun to our head and say, “Pay us 40 percent of your income and go to jail.” They take this money, and they give it mostly to government employees. Well, the government employees spend it. The marginal propensity to consume is pretty high. So the people who were robbed have to do something creative to get the money back. And isn’t this creative activity the real wealth —
MILTON: I take it that they would have to be still more creative if 98 percent were being spent by the government.
No, the third part of your thing is just pure fallacy from beginning to end. Because if those people who are now government employees, who are employed in creative activity and productive activity, they would also be spending their money. And we would have a greater total around. All you’re doing — let’s suppose for a moment — take the extreme case that that 40 percent is being used just to have people sit around. The fact that they spend their money doesn’t alter the situation. The only product there is, is what the 60 percent produce. And that 60 percent is divided among 100 percent. If those 40 percent are also producing goods, then there are more goods to go around among everybody.
You are just involved in a fallacy of looking at dollars, which is important sometimes. Instead of looking at the real product, the goods and services that people produce and people consume.
Spending isn’t good. What’s good is producing. What we want to have is more goods and services. And as I say, the obvious indication that that’s clear is that if your logic were right, it would apply at — for 50 percent. 60 percent. 70. 90. 98. 100 percent. And, obviously, you would see that that would be a bunch of nonsense at that stage.
It is desirable to have some money spent by government for those things, those services that we believe we can get more usefully and more effectively through government. If people are getting their money’s worth, fine. That’s why it’s very desirable to have governmental expenditures take place at as local a level as possible. Because you, as a citizen of a small community, can judge whether you’re getting your money’s worth. You can decide that you want to spend it. But when it comes to the federal government, you tend to think that you’re spending somebody else’s money. And you are in a way. But he’s spending yours.
Friedman always went back to people and production being the answer — not government control or programs.
MILTON: The real problem is, in my opinion, that as we move from the local community to the state and from the state to the federal government, it becomes increasingly difficult for us to control the mechanism we have established. And that mechanism tends to control us. That was the great wisdom of the Founding Fathers of this country, of the people who wrote the Constitution. That Constitution was designed to limit government’s powers, in order to preserve the freedom of the individuals. And what has happened in the past 50 years is that the fundamental character of the Constitution has really been changed. We have broadened enormously the conception of what is a government mental power and what is not and have departed from that limited government until we have created a Frankenstein, an unlimited government that threatens to destroy us.
Part IV: Unapologetic and Unafraid
Through recordings left behind, we’re able to have a conversation, if you will, with the greatest defender of capitalism in the past century: Milton Friedman. He was unapologetic for the free market because he knew and understood its amazing benefits — the ability to lift billions of people out of poverty. That confidence enabled him to be unafraid when defending wealth.
VOICE: Why is it that we have so many millionaires and everything in the United States and we still have so many impoverished people who try to get up into the world? Why is it that we have this lack of money, where people who can’t support themselves decently and get a decent job, where all these big men are up on top making oodles and oodles of money — they don’t need it. They can only eat that much. Eat, you know, sleep in the bed . . .
MILTON: And what do you suppose they do? If they don’t eat it and don’t use it, what do you suppose they do with it?
VOICE: They hoard it. They hoard it and invest it. MILTON: What do you mean hoard it? You mean they put it under their pillows?
VOICE: No. They keep investing it.
MILTON: Investing it in what? What are they invested in?
VOICE: Well, they invest it in a lot of different things that the little people need.
MILTON: Well, do they invest it in factories?
VOICE: Yes. MILTON: Does some of that money end up in machines?
MILTON: Do those factories and machines provide ordinary working people with jobs or not? Where do you suppose the improvements and productivity come from except from the investment by people of their savings? But if you look at it over time, if you get a sense of proportion, the well-being of an ordinary people has been the main thing that has been improved by economic progress and economic growth and development. And residual, most residual hard cases of poverty today are the result, again, of a failure of government.
When Friedman appeared at a conference of bankers, he set them straight on the real cause of the Great Depression — and took on the Federal Reserve.
MILTON: There is hardly any view that is more widespread than the view that somehow or another the Great Depression was produced by a failure of private business. That view is held, not only by those who are in favor of greater role of government, it is held by almost everybody. I venture to suggest you that if you go to any bankers, the people who are here today at this banking conference, and if you talk to them, I’d venture to say, nine out of ten of them, if they didn’t, hadn’t heard what I’m going to say, that nine out of ten of them would say, “Well, of course, the Great Depression was a failure of private business. It was due to an overextension. Over speculation of the 1920s. Or it was due to an excessive concentration of wealth in the hands of the wealthy at the expense of the poor in the 1920s. Or it was due to speculative investment abroad or whatever. But it was a failure of private business. And government had to step in in order to rescue private business from its own failure.” Nothing could be farther from the truth. …The Great Depression was not produced by a failure of business. On the contrary, it was produced by a failure of government and a failure of government in an area in which responsibility had been assigned to governments since the founding of this country. The Constitution of the United States, it gives Congress the power to coin money and set the value thereof. And it was in the management of this fundamental function of government that governments failed and produced the Great Depression.
When confronted by a college student who strongly believed in the redistribution of wealth, Friedman torpedoed his points calmly and rationally.
MILTON: There’s no justice in the distribution of income and wealth. I never would argue there is. Those who are wealthy don’t deserve to be wealthy anymore than those who are poor deserve to be poor. It’s pure accident. And we — but if you start to look at things that way, you’re going to go down the wrong line. Because you’re going to get back into this kind of a situation of destroying the good things, destroying what is possible, in the search of an impossible ideal. The only way in which you can redistribute effectively the wealth is by destroying the incentives to have wealth. And the question is: What is the way, what is a system which will offer those people who are so unlucky as to be born without good positions, what is a system which will offer them the greatest opportunity?
VOICE: Well, one possible way of redistributing the wealth without affecting the incentives to earn as much income as possible is simply to have a 100 percent inheritance tax. That won’t affect the incentives. It’s only after the person is dead.
MILTON: I beg your pardon. I’m afraid, I don’t know the family you come from. I don’t know. But as you grow up, you will discover that this is really a family society and not an individual society. We tend to talk about an individualist society. But it really isn’t. It’s a family society. And the greatest incentives of all, the incentives that have really driven people on have largely been the incentives of family creation, of family — of pursuing of — of establishing their families on a decent system. What is the effect of a 100 percent inheritance tax? The percent of a 100 percent inheritance tax is to encourage people to dissipate their wealth in high living.
VOICE: What’s the harm in that?
MILTON: The harm of that is, where do you get the factories? Where do you get the machines? Where do you get the capital investment? Where do you get the incentive to improve technology, if what you’re doing is to establish a society in which the incentive is for people if they have by accident accumulated some wealth, to waste it in frivolous entertainment? You know, the thing is that the thing that is amazing that people don’t really recognize is the extent to which the market system has, in fact, encouraged people and enabled people to work hard and sacrifice in what I must confess, I often regard as an irrational way, for the benefit of their children. One of the most curious things to me in observation is that almost all people value the utility which their children will get from consumption, higher than they value their own. Here are parents who have every reason to expect that their children have a higher income than they have. And they scrimp and save in order to be able to leave something for their children. I think you are sort of like a bull in a China shop, if you talk about the — the 100 percent inheritance tax having no incentive effect. It would destroy a continuing society. It would destroy a society in which there are links from one generation to the next.
Those who believe in income inequality and wealth redistribution have ample and vocal advocates today. Unfortunately, for capitalism and free market principles, it seems that since Friedman’s death in 2006, there hasn’t been anyone quite like him to defend its benefits and virtue.
Listen to the Full Series on Milton Friedman