This is probably one of the funniest things I've heard this week. Watching Bill Maher, he asked Bill O' Riley why he thought the rich were worth roughly 27% of the wealth in the US, where in the beginning of the 80's they only owned about 9%. O'Riley's response was that this was an effect from our technological advancements.
But anyway, I have been learning and reading a bit of "Capitalism and Freedom", which is a book by Milton Friedman. Seemed like an interesting book and let me say first that I am a true supporter of capitalism and all it has done for humanity. Having said that, I have to say I believe there is a fundamental difference between capitalism and free market. In some ways I feel Friedman uses the word capitalism when he is really referring to free market. So that was a flag right away that I wouldn't really agree with a lot of his ideas.
Friedman claims that humanity's biggest achievements were a result of individual genius and not as a result of governmental directives. He uses examples such as Newton, Shakespeare, Bohr, Edison and Ford. While those are examples of what he is trying to argue, I would mention the involvements of governments in the development of more recent achievements such as the understanding of nuclear physics, space exploration and the internet as being some of the most important achievements of the 20th century, all only possible due to governmental support. I know most of these examples are recent, but I would argue the progress in politics and the improvement in the way nations are runned are also part of the reason for that. Putting all that aside, I would also like to bring up that the quality of life should be seen as important as well, and that technological progress should not be used as the sole way to measure human achievements.
"Free market, not government, ensures the protection of individual rights and standards of quality and delivers extraordinary prosperity to those who seek it." I don't even know where to start on this statement. I think I may instead just mention, Sweat shops and social alienation that are clear consequence of greedy corporations doing anything possible to increase profits. These two examples illustrate how free market is able to exploit social and economical disparities between countries, lacking ethics and taking away work that could actually benefit the people of their countries of origin by providing more reasonable wages at the cost of increased profits. This fits a concept I always fall back to, that nothing comes from nothing. Increased profits come from the exploitation of less fortunate people to benefit those who don't need it.
Friedman also believes free markets are the basis of personal and political liberty. Friedman goes as far as saying that a healthy private economy naturally provides a check on the power of the state. While I don't necessarily disagree with this statement, I believe a free market with too much power doesn't stop at providing checks on the power of the state but at some point they begin to influence the state into making decisions to benefit those with too much power. I don't think there is much arguing that powerful corporation in many sectors spend a lot of resources on lobbying to make sure the state doesn't anything too drastic that could negatively affect their business. That's part of what makes me believe it is imperative to have a strong economy based on capitalist ideals, but a sustainable economy that benefits the people and is monitored by the state. I believe it is just as important for the state to keep checks on the power of the corporations as it is for the corporations to keep check on the power of the state.
In Capitalism and Freedom, the author also talks about the great depression. He says that the view it as a failure of the markets is false, arguing the depression was largely a failure of government. His argument is that the failure of the government to increase money supply in the wake of bank collapses is what caused the depression. However, and this may be just me, it sounds a lot like Friedman is blaming the government for the great depression for not doing something and saying at the same time that governments shouldn't try to control the economy. I know I have the perspective of someone living in a recession after the great depression, where a lot of funds were injected into the economy from federal funds in order to minimize the impact of the recession and seeing its effects. As much as I think the money allocation for the most part was a half ass response to what was wrong and continues to be wrong, I can't deny the effects it had on the economy. A lesson was definitely learned from the great depression, and that lesson was not to let it work itself out. I think the only aspect of this topic I agree with Friedman is that the money spent as stimulus packages are mostly inefficiently allocated.
Lastly, Friedman talks a lot about governments controlling people to act against their immediate interest to promote a "supposedly general interest". As much as he does have good examples of bad regulations that originated from governments in the past, I would always argue that his examples are clearly the error of the people in charge at the time but not of the government as a whole. The same way markets are highly modulated by individuals in good and bad ways, the government is also subjected to "bad calls" from the people in power. People are bound to make mistakes, but the error of the few should not invalidate the value of the whole. In the same manner influential individuals have the ability to destroy their company, individuals can also destroy their own political parties and open the way for a change in power. As I said there were some good examples of what he calls unjustifiable government regulations, there are many I'd like to say I strongly disagree such as relation of banks, pensions, minimum wages and public housing. Friedman claims minimum wage implementation simply increased unemployment; he says public housing concentrated poverty in pockets and social security created dependence for people who might have otherwise contributed to the economy. I feel most of his examples are circumstantial and simply point out flaws in the implementation of good policies rather than weaken the value of the policies themselves.
Its interesting to read Friedman's ideas and note that his right winged views are still used in politics today. I think he does bring a lot of interesting ideas to the table and he points out a lot of flaws in social programs and government regulations. It is important however, to look at his views with the knowledge that he lived in a different time without a lot of the advancements we've had in the understanding of economics in the last 30-40 years. It is similar to reading the works of ancient Greeks in the natural sciences and admiring their ingenuity for their time.
