In the
1960s, Friedman famously explained that "there's no
such thing as a free lunch." If the government
spends a dollar, that dollar has to come from
producers and workers in the private economy. There
is no magical "multiplier effect" by taking from
productive Peter and giving to unproductive Paul. As
obvious as that insight seems, it keeps being put to
the test. Obamanomics may be the most expensive
failed experiment in free-lunch economics in
American history.
Equally
illogical is the superstition that government can
create prosperity by having Federal Reserve Chairman
Ben Bernanke print more dollars. In the very short
term, Friedman proved, excess money fools people
with an illusion of prosperity. But the market
quickly catches on, and there is no boost in output,
just higher prices.
Next
to Ronald Reagan, in the second half of the 20th
century there was no more influential voice for
economic freedom world-wide than Milton Friedman.
Small in stature but a giant intellect, he was the
economist who saved capitalism by dismembering the
ideas of central planning when most of academia was
mesmerized by the creed of government as savior.
Friedman was awarded the Nobel Prize in economics
for 1976—at a time when almost all the previous
prizes had gone to socialists. This marked the first
sign of the intellectual comeback of free-market
economics since the 1930s, when John Maynard Keynes
hijacked the profession. Friedman's 1971 book "A
Monetary History of the United States," written with
Anna Schwartz (who died on June 21), was a
masterpiece and changed the way we think about the
role of money.
More
influential than Friedman's scholarly writings was
his singular talent for communicating the virtues of
the free market to a mass audience. His two
best-selling books, "Capitalism and Freedom" (1962)
and "Free to Choose" (1980), are still wildly
popular. His videos on YouTube on issues like the
morality of capitalism are brilliant and timeless.
In
the early 1990s, Friedman visited poverty-stricken
Mexico City for a Cato Institute forum. I remember
the swirling controversy ginned up by the media and
Mexico's intelligentsia: How dare this apostle of
free-market economics be given a public forum to
speak to Mexican citizens about his "outdated"
ideas? Yet when Milton arrived in Mexico he received
a hero's welcome as thousands of business owners,
students and citizen activists hungry for his
message encircled him everywhere he went, much like
crowds for a modern rock star.
Once
in the early 1960s, Friedman wrote the then-U.S.
ambassador to New Delhi, John Kenneth Galbraith,
that he would be lecturing in India. By all means
come, the witty but often wrong Galbraith replied:
"I can think of nowhere your free-market ideas can
do less harm than in India." As fate would have it,
India did begin to embrace Friedmanism in the 1990s,
and the economy began to soar. China finally caught
on too.
Friedman stood unfailingly and heroically with the
little guy against the state. He used to marvel that
the intellectual left, which claims to espouse
"power to the people," so often cheers as states
suppress individual rights.
While he questioned almost every statist orthodoxy,
he fearlessly gored sacred cows of both political
parties. He was the first scholar to sound the alarm
on the rotten deal of Social Security for young
workers—forced to pay into a system that will never
give back as much as they could have accumulated on
their own. He questioned the need for occupational
licenses—which he lambasted as barriers to entry—for
everything from driving a cab to passing the bar to
be an attorney, or getting an M.D. to practice
medicine.
He
loved turning the intellectual tables on liberals by
making the case that regulation often does more harm
than good. His favorite example was the Food and
Drug Administration, whose regulations routinely
delay the introduction of lifesaving drugs. "When
the FDA boasts a new drug will save 10,000 lives a
year," he would ask, "how many lives were lost
because it didn't let the drug on the market last
year?"
He
supported drug legalization (much to the dismay of
supporters on the right) and was particularly proud
to be an influential voice in ending the military
draft in the 1970s. When his critics argued that he
favored a military of mercenaries, he would retort:
"If you insist on calling our volunteer soldiers
'mercenaries,' I will call those who you want
drafted into service involuntarily 'slaves.'"
By
the way, he rarely got angry and even when he was
intellectually slicing and dicing his sparring
partners he almost always did it with a smile. It
used to be said that over the decades at the
University of Chicago and across the globe, the only
one who ever defeated him in a debate was his
beloved wife and co-author Rose Friedman.
The
issue he devoted most of his later years to was
school choice for all parents, and his Friedman
Foundation for Educational Choice is dedicated to
that cause. He used to lament that "we allow the
market, consumer choice and competition to work in
nearly every industry except for the one that may
matter most: education."
As
for congressional Republicans who are at risk of
getting suckered into a tax-hike budget deal, they
may want to remember another Milton Friedman adage:
"Higher taxes never reduce the deficit. Governments
spend whatever they take in and then whatever they
can get away with."
No
doubt because of his continued popularity, the left
has tried to tie Friedman and his principles of free
trade, low tax rates and deregulation to the global
financial meltdown in 2008. Economist Joseph
Stiglitz charged that Friedman's "Chicago School
bears the blame for providing a seeming intellectual
foundation" for the "idea that markets are
self-adjusting and the best role for government is
to do nothing." Occupy Wall Street protesters were
often seen wearing T-shirts which read: "Milton
Friedman: Proud Father of Global Misery."
The
opposite is true: Friedman opposed the government
spending spree in the 2000s. He hated the
government-sponsored enterprises like housing
lenders Fannie Mae and Freddie Mac.
In a
recent tribute to Friedman in the Journal of
Economic Literature, Harvard's Andrei Shleifer
describes 1980-2005 as "The Age of Milton Friedman,"
an era that "witnessed remarkable progress of
mankind. As the world embraced free-market policies,
living standards rose sharply while life expectancy,
educational attainment, and democracy improved and
absolute poverty declined."
Well
over 200 million were liberated from poverty thanks
to the rediscovery of the free market. And now as
the world teeters close to another recession,
leaders need to urgently rediscover Friedman's
ideas.
I
remember asking Milton, a year or so before his
death, during one of our semiannual dinners in
downtown San Francisco: What can we do to make
America more prosperous? "Three things," he replied
instantly. "Promote free trade, school choice for
all children, and cut government spending."
How
much should we cut? "As much as possible."