With each passing week that the assault against global capitalism continues in Washington, I become more nostalgic for one missing voice: Milton Friedman's. Imagine what the great economist would have to say about the U.S. Treasury owning and operating several car brands or managing the health-care industry. "Why not?" I can almost hear him ask cheerfully. "After all, they've done such a wonderful job delivering the mail."
In the midst of this global depression, rotten ideas like trillion-dollar stimulus plans, nationalization of banks and confiscatory taxes on America's wealth producers are all the rage. Meanwhile, it is Milton Friedman and his principles of free trade, low tax rates and deregulation that are standing trial as the murderers of global prosperity.
The myth that the stock-market collapse was due to a failure of Friedman's principles could hardly be more easily refuted. No one was more critical of the Bush spending and debt binge than Friedman. The massive run up in money and easy credit that facilitated the housing and credit bubbles was precisely the foolishness that Friedman spent a lifetime warning against.
Milton's ideas on capitalism and freedom did more to liberate humankind from poverty than the New Deal, Great Society and Obama economic stimulus plans stacked on top of each other.
At one of our dinners, Milton recalled traveling to an Asian country in the 1960s and visiting a worksite where a new canal was being built. He was shocked to see that, instead of modern tractors and earth movers, the workers had shovels. He asked why there were so few machines. The government bureaucrat explained: "You don't understand. This is a jobs program." To which Milton replied: "Oh, I thought you were trying to build a canal. If it's jobs you want, then you should give these workers spoons, not shovels."
But in the energy industry today we are trading in shovels for spoons. The Obama administration wants to power our society by spending three or four times more money to generate electricity using solar and wind power than it would cost to use coal or natural gas. The president says that this initiative will create "green jobs."
I recently phoned Rose Friedman and asked her what she thought about the attacks on her husband. She was mostly dismayed at how far off-course our country has veered under President Obama. "Is this the death of Milton's ideas?" I hesitantly asked. "Oh no," she replied, "But it is the death of common sense."
I know that you might not like to hear this, but most of my ideas about how to handle this crisis come via the writings of Milton Friedman. Of course, he changed his mind in some cases, I suppose. Still, I'm largely following his lead. I can direct anyone to my sources for these positions. They include:
1) Narrow Banking
2) A Guaranteed Income
3) Quantitative Easing, Helicopter Money
4) The idea that QE and a Stimulus complement each other: held by Viner, Simons, Knight, and Fisher, during the Great Depression. Hardly leftists.
5) Health care should have either much less govt or much more govt.
Also, a stimulus could be a Sales Tax Cut and Tax Cuts on Investment.
In general, I follow Brittan in liking this essay:
"A Monetary and Fiscal Framework for Economic Stability"
I don't know Rose Friedman, and she might well be bothered by my politics, but I believe that she knows a lot about the Chicago School Proposal during the Great Depression. It would be great to hear what she remembers about it.
Don the libertarian Democrat
I'm sorry that I didn't reply earlier. There is a big difference between myself and Milton Friedman, and that it that I consider myself first and foremost a follower of Edmund Burke. There is no chance of getting government out of health care. None. Consequently, by not allowing the government to better run the current system, you are helping to perpetuate the current system, which is the worst possible system. Here's Milton Friedman:
RK: But, you know, physicians incomes relative to other highly skilled professionals are relatively lower in the western countries that have universal health insurance, so I think it is kind of indeterminate.
MF: We have the worst of all of all worlds on that score
RK: I couldn't agree with you more. We have the worst mix of government and private, I could not agree with you more.
MF: We ought to have much more private or much more government. ( NB DON )
My difference with MF is practical. We are not going to have a lot less govt in health care. Period. Consequently, by denying this political reality, you are helping keep our system in this middle ground morass that MF says is worse than more govt. That's my position. I'd prefer to do it in connection with a guaranteed income, as Charles Murray does in In Our Hands, but MF was correct. You must have one or the other.
If I thought that your view had a chance to get implemented, I'd be much more accepting of your view. But it doesn't, in my opinion. In the meantime, we're stuck with, as MF says, the worst of all worlds.
Don the libertarian Democrat
PS It's fine to disagree with MF. I just find that, on close inspection, many of his ideas are not what people seem to think that they are. That's why he's getting such bad and unfair press.