Milton Friedman – an appraisal five years after his death

The free market economist Milton Friedman died November 16, 2006; he was awarded the 1976 Nobel Prize for Economics, but how do his ideas shape up today?

Milton Friedman

The presentation speech for Friedman’s prestigious 1976 award can be found here.

When President Barack Obama was awarded the Nobel Peace Prize, he expressed amazement. One might rightly ask if the same amazement should not have been expressed by Friedman, or indeed by any economist.

Firstly, it has to be said that as far as economists go, Friedman doesn’t shape up too bad. To begin with, he was a free market economist, something for which he should be given credit. Although in his early days he flirted with socialism, he became a staunch Libertarian, and this is reflected in his economic philosophy. He was also, just as importantly, a time-serving academic, and like many academics, he was somewhat out of touch with the real world, certainly with those on the bottom rung of society, who don’t work short hours, with long holidays, well paid sinecures and all manner of grants to subsidise their research into whatever books they are writing at the time.

Having said that, he wasn’t as out of touch as some, as can been seen from this video. Here he shows clearly that he recognises the evils of big government, and the fact that while welfare (social security in Britain) does redistribute wealth, it does so at a heavy price. For one thing, it creates a poverty trap in which people become not simply trapped but locked permanently. For another, it creates an enormous, unwieldy bureaucracy, and something he might have added but didn’t, it creates or recruits to do its policing, a class of at best unpleasant and at worst tyrannical benefit “advisors”, snoops and others, some of who delight in causing even more misery to those caught in the downward spiral.

Unfortunately, while Friedman recognised the problem, he had no inkling of what is the real solution, he simply assumed that people like the hospital worker he profiled in above video will be able to earn a living wage once the welfare system – and in Britain the welfare state – is dissolved. That may have been possible at one time, but even by 1976 it was not true.

Take another look at the video at around 35 seconds, what you see is a massive typing pool, a phenomenon that is now long extinct. The reason the typing pool has gone the way of the dinosaur is not hard to seek.

New technology has destroyed many old, tiresome, laborious, and at times dangerous, jobs. Granted that new technology also creates new jobs because of both our (hopefully) continually rising standard of living, new challenges, and new ways to spend our leisure time, but these new jobs are largely either in service industries or in high tech/highly qualified fields. Check out this article about PokerStars, the world’s largest poker site. * This has a small army of staff whose tasks are to reply to e-mails, process payments in and out, issue press releases, maintain the site’s blog, its store and so on. On December 4, the site is hosting a poker tournament with around 150,000 entrants. Imagine the level of technical knowledge required to develop a software program of that sophistication, including the ability to work as part of a team.

Then consider the simple fact that almost every aspect of our lives is dominated by this kind of technology, from your wristwatch and mobile phone to your TV set and desktop PC. Even cars are now as much computer as internal combustion engine on wheels.

Although nowadays some sort of computer literacy including basic typing skills is more or less universal, people who work with, who develop, this kind of technology, are head and shoulders above us, as are doctors and research scientists. These people, the emerging technocracy, are highly paid, and deservedly so. Coupled with the destruction of unskilled jobs, these welcome advances in technology create a dearth of purchasing power in the growing underclass of all races, and including even some college and university graduates who have degrees in the “wrong” disciplines.

As a mainstream economist, Friedman was in thrall to the dogma of wage slavery, because running an economy is not an economic problem, rather it is an engineering problem, in particular that of distributing the goods and services the community creates, to all and sundry. To do this in a highly technologically advanced society, another form of income is needed for the people at the bottom. This Basic Income, which should be paid to all – including the super-rich – was the brainchild of the engineer Major C.H. Douglas, who stands head and shoulders above Milton Friedman, and any and every other Nobel Laureate economist, yet today most people have never heard of him.

The nearest Friedman came to recognising the problem of those at the very bottom of the economic ladder was his advocacy of a negative income tax, which although a step in the right direction would be every bit as bureaucratic as the social security system he consistently opposed, if nowhere near as tyrannical.

More could be written about Milton Friedman, one thing that is definitely in his favour is that he was opposed to the Federal Reserve; he also recognised the simple but incontrovertible fact that depressions are caused by a sharp contraction in the money supply.

His legacy is still very much alive, and although he produced a sizable body of work, he is probably best known for the saying and the spirit that there is no such thing as a free lunch. That may be true for us little people, but it is certainly not true for the banksters.

For those with little knowledge of economics (or short attention spans) there are many videos of Friedman floating around in cyberspace, most especially on the YouTube website. Whatever the merits of any of his particular ideas, Friedman was a lucid speaker, and most people will have no trouble understanding what he is saying, a claim that can be made of few economists, and even fewer politicians.

Below, two disparate views of Friedman:

Milton Friedman – the way his detractors saw him.

A benign view of Friedman and his Chicago School of Economics.

[The above op-ed was first published November 16, 2011, not November 15 as shown on the archived version. * In the original, the PokerStars article linked here was not linked; the article on UK unemployment was linked twice by mistake.]

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