Word
Gems
What is a
man but the sum of his thoughts?
Economics:
Milton
Friedman's
Free
To Choose
#10: The Tide Is Turning
Friedman: Every day hundreds of people flock to the capital in Washington, D.C.
attracted only by power. That power has accumulated here over the past 50 years at the
seat of government of the most powerful nation on Earth.
Worker: How do you do? Glad to meet you. How are you? How's it going? What are you
talking about? Guns?
Warren Richardson: Hello, this is Warren Richardson. Oh Mary, yes, what's on your
mind?
Friedman: Warren Richardson makes his living by knowing who has power and
influence to trade.
Warren Richardson: I'll be waiting for you.
Friedman: He's a lobbyist.
Warren Richardson: Thanks a lot. Bye.
Unidentified Member of the House: The official administration position on this
bill, however, is that its consideration would be premature in view of the President's....
Friedman: He trades with people like these. Members of the House Committee on
Agriculture. They make some of the laws and regulations that among other things, control
the food we eat. They are elected officials who have the power to spend billions of
dollars of our tax money.
Mr. Baldus: It's all of page two. It takes all of page three.
Friedman: Naturally, lots of people would like to get their hands on that money.
Mr. Baldus: That's the kind of stuff that ought never go into the statute books.
And I think anybody who's practicing justice court knows it.
Unidentified Member of the House: Bill, the way you get common sense
administration is by having common sense administrators. And it seems like there's more
common sense administration in agriculture.
Michael Masterson (Congressional Aide): Access is all important and how you gain
access. It used to be there were only a few hundred lobbyists in this town, now we record
up to 15,000 lobbyists plus ancillary personnel, secretaries, receptionists and typists
and the researchers that go with that. They are calling upon all the law firms imaginable.
So there is a tremendous support base out there for the lobbying effort.
Friedman: You don't have to walk these corridors for very long before you begin to
realize that the concentration of power in the hands of a few people, however well
intentioned, is a real threat to the freedom of the individual. Of course, Warren
Richardson doesn't see it that way. Over the years he's successfully lobbied for special
interest groups in energy, environment, wages and prices. Today he's arguing the case for
another special interest. The National Action Committee on Labor Law Reform, hoping to
swing influence his way.
Warren Richardson: When the bill goes overboard in terms...much, much too far.
Friedman:There's hardly a time when the corridors of Congressional Office
buildings are not peppered with people waiting for their chance to see and influence the
elected man at the center of power.
Unidentified Member of the House: Within that legislation for funds for
communities of 50,000 and under, the goals of the existing law and certain statutory
paperwork requirements are often very unrealistic for smaller communities.
Friedman: The deals made here effect all of us and sometimes in ways we don't
like. But don't blame the people making the deals. They're just pursuing their own
self-interest which may be as narrow as making a buck or as broad as trying to reform the
world. We, the citizens, are to blame because we've handed over much of our lives of
personal decision making to government. And we now find that was government does severely
limits our freedom.
The leather and wood paneled official offices of a Congressman in Washington, D.C.
It's the mecca of those who try for behind the scenes influence. Weaving his way between
special interest groups can be tough for a politician. To stay in office he needs votes.
To get votes he often has to make deals.
Unidentified Politician: The chances of our party regaining the White House.
Republicans. If the President sends the policies to the public .....
Friedman: It's frequently a frustrating business.
Michael Masterson: When you have people who are coming in not for purposes of
debate and dialogue and discussion on something, but merely they demand their special
interest or their single issue concern. That's where it becomes extremely difficult
because there might be an equal number on the opposite side of the coin.
Friedman: Every time I come to Washington I'm impressed all over again with how
much power is concentrated in this city. But we must understand the character of that
power. It is not monolithic power in a few hands like the way it is in countries like the
Soviet Union or Red China. It is fragmented into lots of little bits and pieces and with
every special group around the country trying to get its hand on whatever bits and pieces
it can. The result is that there's hardly an issue in which you won't find government on
both sides. For example, in one of these massive buildings spread, scattering all through
this town filled to the bursting with government employees, so of them are sitting around
trying to figure out how to spend our money to discourage us from smoking cigarettes. In
another of the massive building, maybe far away from the first, some other employees,
equally dedicated, equally hardworking, are sitting around figuring out how to spend our
money to subsidize farmers to grow more tobacco. In one building they're figuring out how
to hold down prices, in another building they've got schemes for raising prices. The
prices the farmers receive or import prices or keeping out cheap foreign goods. We set up
an enormous Department of Energy with 20,000 employees to encourage us to save energy. We
set up an enormous Department of Environmental Protection to figure out ways to get
cleaner air involving our using more energy.
Now, many of these effects cancel out but that doesn't mean that these programs
don't do a great deal of harm and that there aren't some very bad things about it. One
thing you can be sure of, the costs don't cancel out, they add together. Each of these
programs spends money taken from our pockets that we could be using to buy goods and
services to meet our separate needs. All of these programs use very able, very skilled
people who could be doing productive things. They, all of them, grind out rules,
regulations, red tape, forms to fill-in. I doubt that there's a person in this country who
doesn't violate one or another of those rules or regulations or laws everyday. Not because
he wants to or intends to, but simply because it's impossible for anybody to know what
they all are. Those are the bad things. But there's something good about this
fragmentation of power too. And that is, that it enables us to do something about it.
If power were really concentrated in monolithic in a few hands, it would be
hopeless to reform the system. But because it's fragmented, because it's split up, we can
see how much waste there is, we can see how inefficient it is, how the left hand seldom
knows what the right hand is doing.
It wasn't always like this. The armies of bureaucrats administering our lives
making our decisions spending our money, all supposedly for our good. Our nation was
founded with something fundamentally different in mind.
Almost 200 years ago a remarkable group of men gathered in this room to write a
Constitution for the new nation that they had helped to create a few years earlier. They
were a wise and learned group of people. They had learned the lesson of history. The great
danger to freedom is the concentration of power, especially in the hands of a government.
They were determined to protect the citizens of the new United States of America from that
danger. And they crafted their Constitution with that in mind. That Constitution has
served us well. It has enabled us to preserve our freedom for close on to 200 years. But
in the past 50 years, we have been forgetting the lesson that these wise men knew so well.
From regarding government as a threat to our freedom, we have come more and more to regard
government as a benefactor from which all good things flow. We have assigned increasing
tasks of great importance to government. We have turned over to government a larger and
larger fraction of our income to be spent on our behalf and the results are plain for all
the same they are disappointing. The great expectations have not been achieved and our
freedoms have suffered in the process.
Where did it all go wrong? Government began to take an increasing part in our
personal affairs nearly 50 years ago. It was 1933, at the lowest point of the worst
depression in history. The idea took root that capitalism had failed and that failure was
responsible for the human and economic tragedy. In the early 30's, Franklin Delano
Roosevelt and his advisors met here to devise programs to meet the problems of the
depression. Their answer was to give central government more power. Out of that beginning
came today's welfare state.
This Empire State Plaza in Albany, NY is a fine example of the difference between
public political power and private economic power. It was constructed while Nelson
Rockefeller was Governor of the state of New York. The Rockefeller family has spent
millions of its private money on good causes. It has endowed universities like my own, at
the University of Chicago, financed medical research, reconstructed Williamsburg, yet not
all the private money of the Rockefeller family gave them anything like the amount of
power that Nelson Rockefeller was able to have as Governor of the State of New York. He
constructed monuments like this all over the state, using every expedient he could think
of to finance them. When he left office, taxes per persons in New York State were higher
than in any other state in the country excepting only Alaska. And there was a monumental
debt besides. So much so, that his successor, who had the reputation as a Democratic
congressman of being a big spender, had to use his inaugural speech to preach the virtues
of austerity and to say the time of wine and roses is over.
Look at this skyline. It's Chicago and I think it's very beautiful. Much of it is
less than 20 years old. Those tall buildings were built by private enterprise for use by
private enterprise. Not by government for use by government bureaucrats. These are
productive monuments, not a burden on the taxpayer, a burden that has almost bankrupted
New York City. The irony is that for the most part it was good intentions that led us to
where we are today, a nation governed by bureaucratic empires. I wonder whether when they
built this building, they realized that it was going to come out looking like a fortress.
From modest beginnings in 1953, the Department of Health, Education and Welfare has grown
into a veritable empire. Only a small part of its total staff is housed in this
headquarters building, a mere 2,000 bureaucrats. Its budget is the third largest budget in
the whole world exceeded only by the entire budget of the United States and of the Soviet
Union. It employs directly 150,000 full time people and the empire it rules employs
another million. More than one out of every 100 people in the U.S. works in the HEW
empire.
As we have seen in this series, the Department of Health, Education and Welfare is
spending increasing amounts of our money each year on health. One effect is simply to
raise the fees and prices for medical and hospital services without a corresponding
improvement in the quality of medical care that we receive. It is controlling more and
more of the food and drugs we buy. In the process, discouraging the development and
preventing the marketing of new drugs that could be saving tens of thousands of lives a
year. In the field of education the sums being spent are skyrocketing. Yet by common
consent, the quality of education is declining. More and more money is being spent and
increasingly rigid controls imposed to promote racial integration. Yet our society is
becoming more fragmented. In the field of welfare, billions of dollars are being spent
each year, yet at a time when the standard of life of the average American is higher than
it has ever been in history, the number of people on welfare roles is growing. Social
Security, the budget is colossal, yet it is in deep financial trouble. The young complain
and with considerable justice about the high taxes they must pay and those taxes are
needed to finance the benefits that are going to the old, yet the old complain and also
with justice that it is difficult for them to maintain the standard of life that they were
led to expect. A system that was enacted to make sure that the old never became objects of
charity sees an increasing number of our older folk on the welfare roles. By its own
accounting, HEW in one year lost through fraud, abuse and waste and amount of money that
would have built well over 100,000 houses costing $50,000 a piece. Little wondered that
those initials are increasing coming to stand for "How to encourage waste."
Martin Anderson: We found in some cities that upwards of 20_25% of all the people
currently receiving welfare are either totally ineligible for welfare or are receiving
more than they should be receiving. And it appears in looking into this that the main
reason for this is not the welfare laws themselves, but the way they are administered.
They are administered in a very lax and loose manner. One of the most famous cases, in
fact it just happened last week, they arrested a woman in southern California, they
referred to her as the Welfare Queen. And over the past six or seven years she has
received $300,000 in welfare payments. Which of course is on an after tax basis, so if you
put her on a before tax basis, it might be equivalent to over a million dollars in before
tax income. And, she and her husband were living in a nice $170,000 home, nice cars, and
she used a very simple technique. She just used alias, used false names, and signed up to
get countless different welfare agencies and departments and drove around and collected
her checks.
Friedman: Something had to be done about this scandalous state of affairs. What
better bureaucratic decision than to set up a special department crammed with computers
and civil servants all dedicated to tracking down waste using taxpayers money, of course,
in the process. $27.5 million in the first year. As Adam Smith wrote over 200 years ago,
in the economic market people who intend to serve only their own private interests are led
by an invisible hand to serve public interests where there was no part of their intention
to promote. In the political market, there is an invisible hand operating as well. But
unfortunately it operates in the opposite direction. People who intend only to serve the
public interest are led by an invisible hand to serve private interests that was not part
of their intention to promote. The reason is simple, as we have seen in case after case,
the general interest is diffused among millions and millions of people with special
interest its concentrated. When reformers get a measure through they go on to their next
crusade leaving no one behind to protect the public interest. But they do leave behind
some money and some power and the special interests that can benefit from that money and
from that power are quick to gain it at the expense of most of the rest of us. By now,
after 50 years of experience, it is clear that it doesn't really matter who lives in that
house. Government will continue to grow so long as the rest of us believe that the way to
solve our problems is to turn them over to government.
Yet there are many people who want to solve their own problems, who want to use
their own skills and energy and resources. We found such a person here in southern
California.
John McCalm, a fireman, was planning his retirement. He decided to fulfill his
life's ambition, he built his own house with his own hands. He bought a site with a
magnificent view, cleared the ground and realized that he was the first man who ever
cultivated this land. It made him feel good. He pulled a trailer on to the edge of his
plot and moved in with his wife to live there while they worked on the house. He made his
own adobe bricks, he planted avocado trees, learned about carpentry and plumbing. It was
going well when one day a local official arrived with a warning. It was alright to build a
house he said, but it was against regulations to live in the trailer any longer. The
McCalms thought that the rules were bureaucratic and foolish and they resented them. They
decided to leave the trailer exactly where it was and defy the authorities.
Pat Brennan became something of a celebrity in 1978 because she was delivering
mail in competition with the United States Post Office. With her husband she set up
business in a basement in Rochester, NY. Soon it was thriving. They charged less than the
post office and they guaranteed delivery the same day of parcels and letters in downtown
Rochester. There is no doubt now that they were breaking the law as it stood. The post
office took them to court. The case against them was simply that they should not be
handling letters. The Brennan's decided to fight and local businessmen provided the
financial backing.
Pat Brennan: I think there's going to be a quiet revolt and perhaps we're the
beginning of it. That you see people bucking the bureaucrats where years ago you wouldn't
dream of doing that because you'd be squelched. Now, with tax revolts and with what we're
doing, people are deciding that their fates are their own and not up to somebody in
Washington who has no interest in them whatsoever. So, it's not a question of anarchy, but
it's a questions of people rethinking the power of the bureaucrats and rejecting it.
Friedman: The Brennan customers were clear about one thing. After all, the
Brennan's service was cheaper than the regular mail.
Thomas O'Donaghue (storekeeper): We're not sure that they have done anything
illegal and I'd like to know more about this and I hope that this gets further into the
courts than it has already. And someone will listen to their appeal because when we use
the Brennan's we know for a fact that same day delivery is going to be happening day after
day after day, whereas with the other guy, you're not sure and you're sure what kind of
shape it's going to get there in. So I am behind the Brennan's 100% and anything I can do
to help them, I will.
Pat Brennan: Well, the questions of freedom comes up in any kind of a business.
Whether you have the right to pursue it and the right to decide what you are going to do.
There is also the question of the freedom of the consumers to utilize the service that
they find is inexpensive and far superior. And according to the federal government and the
body of laws called the Private Express Statutes, I don't have a freedom to start a
business and the consumer does not have the freedom to use it. Which seems very strange in
a country like this that the entire context of the country is based on freedom and free
enterprise.
Friedman: The post office won the case. It went all the way to the State Supreme
Court and the Brennan's were closed down. Put out of the business of delivering mail.
What we've been looking at is a natural human reaction to the attempt by other
people to control your life when you think it's none of their business. The first reaction
is resentment. The second is to attempt to get around it. And finally there comes a
decline in respect for law in general. There's nothing especially American about this. It
happens all over the world whenever some people try to control other people. For example,
take a look at what's happening to the British.
For most of the past century Britain was known throughout the world for the
respect which its citizens gave to the law, but no longer. Graham Turner (Author
"Business in Britain) Nothing is perfect that we have become in the course of the
last ten or fifteen years, a nation of fiddlers. How do they do it? They do it in a
colossal variety of ways. Lets take it right at the lowest level. Take a small grocer in a
country area, say Devon. Very small turnover. How does he make money? He finds out that by
buying through regular wholesalers he's always got to use invoices. But if he goes to the
cash and carry and buys his goods from there, and the profit margin on those goods can be
untaxed because the tax inspector simply don't know he's had those goods. That's the way
he does it. Then if you take it to the top end, if you take a company director, well
there's all kinds of ways they can do it. They buy their food through the company, they
have their holidays on the company, the put their wives as company directors even though
they never visit the factory. They build their houses on the company by a very simple
device of building a factory at the same time as a house, it goes absolutely right through
the range from the ordinary person, the ordinary working class person, doing quite menial
jobs right to the top end, businessmen, senior politicians, members of the Cabinet,
members of the Shadow Cabinet, they all do it. I think almost everybody now feels the tax
system is basically unfair. And, everybody who can tries to find a way around that tax
system. Now, once that happens, once there is a consensus that the tax system is unfair,
the country in effect becomes a kind of conspiracy. And everybody helps each other to
fiddle. You've no difficulty fiddling in this country because other people actually want
to help you. Now 15 years ago that would have been quite different. People would have
said, hey, you know, this is not quite as it should be. So that's the first reason. A very
high level of taxation. But I think personally there's another fact that comes into it.
And that is that over the years we've had a huge growth in bureaucracy, government
expenditure, cotton wool, if you like, to protect people from the slings and arrow of
ordinary life, you know, health service, all kinds of benefits of one sort or another. And
I think this comes into the consciousness of people almost a sort of new factor feeling
that things don't quite have the value that they did that money is not a thing of value,
if your short you get it from some government body or other
Friedman: Criminal tax evasion in Britain, laws and regulations defied in the U.S.
It's nothing to celebrate. The hopeful thing is that throughout the free world the public
is coming to recognize the dangers of big government and is taking steps to control it.
But it will be no easy task to cut government down to size. Today in country after country
the strongest special interest has become the entrenched bureaucracy. Whether at the
national or at the local level. In addition, each of us gets special benefits from one or
another governmental program. The temptation is to try to cut down government at someone
else's expense while retaining our own special privileges. That was a stalemate. The right
approach is to tackle head on the explosive growth in government spending. Lets give the
government a budget the way each of us has a budget. A movement in this direction is
already underway in the U.S. with the many proposals for Constitutional Amendments
limiting government spending. Several states have already adopted such an amendment. There
is strong pressure for a similar amendment at the federal level. Those amendments would
force government to operate within a strict budget. Each special interest would have to
compete with other special interests for a larger share of a fixed pie instead of all of
them being able to join forces at the expense of the taxpayer.
This is an important step, but it is only a first step. No piece of paper by
itself can solve our problems for us. What we need is widespread public recognition that
the central government should be limited to its basic functions. Defending the nation
against foreign enemies. Preserving order at home. Mediating our dispute. We must come to
recognize that voluntary cooperation through the market and in other ways is a far better
way to solve our problem than turning them over to the government.
This is where much of the future strength of the United States lies. In places
like Utuma, Iowa where ordinary hardworking American people live. People of all economic
levels live in Utuma, but there are no extremes of either wealth or poverty. All are part
of a community. Each part of which depends on the others for a stable and happy life worth
living. This is a kind of community that formed the character of democratic America.
We began this series by stressing two ideas, the idea of human freedom as embodied
in Thomas Jefferson's Declaration of Independence, the idea of economic freedom as
embodied in Adam Smith's Wealth of Nations. Those two ideas working together, came to
their greatest fruition here in the heartland of America. But the basic character of the
society that they created has been changing as a result of the rise of another set of
ideas.
We have forgotten the basic truth that the founders of this country knew so well.
That the greatest threat to human freedom is a concentration of power whether in the hands
of government or anyone else. Throughout the Western world, more and more of us are coming
to recognize the dangers of an over-governed society. But it will take more than a
recognition of danger. Freedom is not the natural state of mankind. It is a rare and
wonderful achievement. It will take an understanding of what freedom is, of where the
dangers to freedom come from. It will take the courage to act on that understanding if we
are not only to preserve the freedoms that we have, but to realize the full potential of a
truly free society.
Lawrence E. Spivak: Milton, all through your discussions, you hammer away at two
things, the theories of Adam Smith on the free market and of Thomas Jefferson on central
power. One thing that troubled me a little bit about your discussions is that it seemed to
me that you are little bit the way psychoanalysts used to talk about Freud. That you
believe they had given us the word and that even thought 200 years have gone by, it was
still in the world, that circumstances had not changed the meaning anyway. Are you that
fixed about their ideas?
Friedman: There's a great difference between principles and the application of
principles. The application of a principle has to take account of circumstances. But the
principles that explain how it is that an automobile operates, are no different from the
principles that explain how a horse and buggy operated or how a bow and arrow operated.
The principles that Adam Smith enunciated, the philosophy that Thomas Jefferson
enunciated, are every bit as valid today as they were then. But the circumstances are
different and therefore the applications in many cases are very different. In addition,
there has been a great deal of work and study and scholarly activity that has gone on
since then. We know a great deal more about the way in which an economy works than Adam
Smith knew. He was wrong in many individual details of his theory but his overall vision,
his conception of how it was that without any central body planning it, millions of people
could coordinate their activities in a way that was mutually beneficial to all of them.
That central concept is every bit as valid today as it was then, and indeed, we have more
reason to be confident in it now than he had because we've had 200 years more experience
to observe how it works.
Lawrence E. Spivak: Let's go back to Jefferson. You say cut the functions of
central government to the basic functions advocated by Jefferson which was what? Defense
against foreign enemies, preserve order at home, and mediate our disputes. Now, can we do
that in the complicated, the complex world we live in today, without getting into very
serious trouble.
Friedman: Suppose we look at the activities of government in the complex world of
today. And ask to what extent has the growth of government arisen because of those
complexities? And the answer is, very little indeed. What is the area of government that
has grown most rapidly? The taking of money from some people and the giving of it to
others. The transfer area. HEW, a budget 1_1/2 times as large as a whole defense budget.
That's the area where government has grown. Now, in that area, the way in which technology
has entered has not been by making certain functions of government necessary, but by
making it possible for government to do things they couldn't have done before. Without the
modern computers, without modern methods of communication and transportation, it would be
utterly impossible to administer the kind of big government we have now. So I would say
that the relation between technology and government has been that technology has made
possible big government in many areas, but it's not required it.
Lawrence E. Spivak: I know, I believe, I say I know, I think I know, but I'll say
I believe that you felt, you blame the government for the Great Depression of 1929 through
1933 and of course, you had to blame FDR for all he did, but most people feel that he
saved this free economy of ours.
Friedman: Given the catastrophe of the Great Depression, there is no doubt in my
mind that emergency government measures were necessary. The government had made a mess.
Not FDR's government, it was the government that preceded him. Although it was mainly the
Federal Reserve System which really wasn't subject to election. But once FDR came in he
did two very different kinds of things.
Lawrence E. Spivak: Well, had the government made a mess by what it did or but by
what it didn't do.
Friedman: By what it did. By it's monetary policies which forced and produced a
sharp decline in the total quantity of money. It was a mismanagement of the monetary
apparatus. If there had been no federal reserve system, in my opinion, there would not
have been a Great Depression at that time. But given that the depression had occurred, and
it was a catastrophe of almost unimaginable kind, I do not fault at all, indeed on the
contrary I commend Roosevelt for some of emergency measures he took. They obviously
weren't of the best, but they were emergency measures and you had an emergency you had to
deal with. And the emergency measure such as relief programs, even the WPA which was a
make work program, these served a very important function. He also served a very important
function by giving people confidence in themselves. His great speech about the only thing
we have to fear is fear itself was certainly a very important element in restoring
confidence to the public at large. But he went much beyond that, he also started to
change, under public pressure, the kind of government system we had. If you go beyond the
emergency measures to the, what he regarded as reform measures, things like NRA and AAA,
which were declared unconstitutional, but then from there on to the Social Security
system, to the ...
Lawrence E. Spivak: Take the Social Security System for a minute. The people
wanted that, they wanted that protection. They were frightened, they wanted welfare.
Friedman: Not at all.
Lawrence E. Spivak: When you said pressure, who, pressure from whom?
Friedman: Pressure from people who were expressing what they thought the public
ought to have. There was no widespread public demand for Social Security programs. The
demands.......
Lawrence E. Spivak: No demand for welfare with 13 million people .......
Friedman: There was a demand for welfare and assistance I was separating out the
emergency measures from the permanent measures. Social Security in the first 10 years of
its existence, helped almost no one. It only took in money. Very few people qualified for
benefits. It wasn't an emergency measure. It was a long term measure. And it had to be
sold to the American people primarily by the group of reformers, intellectuals, new
dealers, the people associated with FDR. The Social Security is one of the most misleading
programs. It has been sold as an insurance program. It's not an insurance program. It's a
program which combines a bad tax, a flat tax on wages up to a maximum with a very
inequitable and uneven system of giving benefits under which some people get much, some
people get little. So that Social Security....
Lawrence E. Spivak: Would you now abolish Social Security?
Friedman: I would not go back on any of the commitments that the government has
made. But I would certainly reform Social Security in a way that would end in its ultimate
elimination.
Lawrence E. Spivak: If you're not afraid then of the free market under any
circumstances, where cooperation which you find necessary which you believe all to come,
fails to come, where competition becomes so fierce and becomes very frequently corrupt and
where, all where it becomes stupid. Take for example what's happening in today's market,
the conglomerates. Which have been seizing up all sorts of, we happen to live in a hotel
that's run by a conglomerate. Why should ITT, for example, run a hotel and how are you
going to stop that.
Friedman: Well in the first place, once again,
Lawrence E. Spivak: Without government, without.....
Friedman: Once again, it's government measures that have promoted the
conglomerates. The only major reason we have conglomerates is because they are a very
effective way to get around a whole batch of tax legislation. Let me ask a different
question. Who is more effected by government regulations, by government controls?
Lawrence E Spivak: I thought I was supposed to ask the questions. But I was warned
that you might turn these on me.
Friedman: Well tell me, whose more effected the big fellow who can deal with it or
that have a separated department to handle the red tape, or the poor fellow?
Lawrence E. Spivak: The big fellow can always take care of himself under any
system.
Friedman: Right, and therefore he'll want a system which gives the big fellow the
least advantage. And the system under which he can get government to help him out, gives
him the most advantage, not the least. You say am I afraid of greed, of lack of
cooperation. Of course. But we always have to compare the real with the real. What are the
real alternatives? And if we look at the record of history, if we go back to the 19th
century which everybody always points to as the era of the robber baron who strode around
the land and ground the poor under his heel, what do we find? The greatest outpouring of
voluntary charitable activity in the history of the world. This University, this
University of Chicago is an example. It was founded by contributions by John D.
Rockefeller and other people. The colleges and universities throughout the Midwest. If you
go back and ask when was the Red Cross founded, when was the Salvation Army founded, when
were the Boy Scouts founded, you'll discover all of that came during the 19th century in
the era of unregulated rapacious capitalism.
Lawrence E. Spivak: I'd like to go back for a minute to the question of
conglomerates. Granted that what you say that the government policies concentration on
central government if you will, or whatever you want to call it, are responsible for the
growth of conglomerates. What would we, what should we do about them now? Government try
to undue them? Or should anybody try to undue them?
Friedman: No.
Lawrence E. Spivak: Or should you just let them fail?
Friedman: You should let them fail, of course. I am strongly opposed to government
bailing any of them out. You should let them fail. The best things you can do in my
opinion, are first to have complete free trade so you can have conglomerates in other
countries compete with conglomerates in this country. We may have only two or three
automobile companies, but there's Toyota, there's Volkswagen, competition from abroad is
effective. But in the second place...
Lawrence E. Spivak: When do you say complete free trade you mean all over the
world?
Friedman: No sir. I mean the U.S. all by itself unilaterally should eliminate all
trade barriers. We would be better off if all the countries did the same.
Lawrence E. Spivak: What do you think would happen if we just did it though?
Friedman: I think we'd be very much better off and a lot others would then follow
our example. That's what happened in the 19th Century when Great Britain in 1846 completed
removed, unilaterally, all trade barriers so that.....
Lawrence E. Spivak: You don't think this country would be flooded with goods of
all kinds from all over the world, maybe cheaper in that we wouldn't have great
unemployment in this country?
Friedman: What would the people who sold us goods do with their money? They'd get
dollars, what would they do with the dollars? Eat them. If they want to send us goods and
take dollars in return, we're delighted to have them. No. That's not a problem as long as
you have a free exchange rate. Because we cannot export without importing, we cannot
import without exporting. You would not have a reduction in employment, what you'd have
would be a different pattern of employment. You'd have more employment in export
industries and less employment in those industries that compete with import. But go back
to conglomerates, Larry for a moment. I just want to ask a very different kind of a
question. Conglomerates are not very attractive, I would much rather have a lot of small
enterprises. But there's all the difference in the world between a private conglomerate
and a government conglomerate. In general, the government conglomerate can get money from
you without your agreeing to give it to him. You and I pay for Amtrak and for the postal
deficit whether we use the services of Amtrak or the postal deficit or not. I don't pay
your conglomerate unless I rent one of their apartments. I get something for my money. So
bad as private conglomerates are, they're less bad than one of the alternatives.
Lawrence E. Spivak: Milton, suppose I agree with almost everything you say and say
it would be wonderful if we ... starting from scratch
Friedman:....If you agree with everything I say, you are a unique human being.
Lawrence E. Spivak: I don't say I do agree, but I said suppose I agree for the
sake of argument. We can't start from scratch. How do we undo what we have done? How would
you undo it, not me?
Friedman: That's the hardest problem and I agree that is the real question. How do
we get from where we are to where we want to go? And we can't get there overnight, we
cannot get there by simply eliminating the things that should not have been done. As in
the case of Social Security, we have it. And we've got to live up to our obligations. So
we do have to develop a series of policies which will enable us gradually to move from
where we are to where we want to be. The first and most important step in my opinion, is
to stop moving in the wrong direction.
Lawrence E. Spivak: Milton, you said a few minutes ago that throughout the free
world, the public is coming to recognize the danger of big government and is taking steps
to control it. But how with the example of what freedom does before them, how do you
explain the new countries that have been coming up, all going in the direction of
dictatorship?
Friedman: The climate, the intellectual climate of opinion has an enormous
influence on what happens and the popular intellectual attitude within the free countries
for the poor countries has been that they have to have centralized government. And that
has served the interests of small elite groups within those countries. In one backward
country after another what has happened is they've gotten their freedom supposedly from
colonial rule, you've had a small elite take over and they have run that country for their
own benefit and at the expense of the poor. It's a tragedy of the modern era. Change the
climate of opinion in the major countries. As the climate of opinion is changing, as the
philosophy, the attitude what's being taught at the universities is different, and you
will see that these other countries, these backward countries will follow it and there
are, there is some evidence that way. If you look at the countries where the backward
countries which are doing best for themselves, they are places like Hong Kong, like
Singapore, like Taiwan, like Korea, they're not free countries in our sense of the term
but they have much larger elements of freedom. Much greater scope for individual
initiative. Many other countries of the world which have gone much further in the
Communist centralized controlled direction.
Lawrence E. Spivak: How, for example, Singapore in Taiwan, have had you say very
free economies. Now how do there economies, remain free but their politics and their human
freedom is still curtailed. And as I understand in many cases, rather severely curtailed.
They don't have any of the freedoms we have. Press, religion,
Friedman: Economic freedom is a necessary condition for a human, all humans, but
it is not a sufficient condition. You can have an economy that is largely free with large
elements of restrictions. For example, let me take the American experience before the
Civil War. We had a mixture of a largely free economy, with a segment of the population,
the slaves, held in the condition of involuntary servitude. But even where you don't have
complete political freedom in the case of a Singapore or a Taiwan, human beings are much
freer than they are in those societies where there is no economic freedom either. If you
compare the conditions of people in a place like Singapore with the conditions of people
in a place like Red China, or for that matter, Indonesia, you will see that the economic
freedom is a very important component of total freedom. It's not something different, it's
not something separate. Economic freedom is part of total freedom and for most people it's
the most important part. Freedom doesn't mean very much to a starving man. And if a free
society could not help the starving man, it would be very difficult for, to remain free
very long. That's why the ability of a free society to improve the lot of the ordinary
person is a very, very necessary condition for its remaining free but it's not the
fundamental reason why I want a free society. I want a free society for the human and
ethically and moral values that you stressed as pertaining to freedom. Freedom really
rests, the value of freedom.
Lawrence E. Spivak: But suppose the moral values mean a lot to me. But, again, as
I say, they mean nothing to the man who is hungry. It means absolutely nothing to him.
What are you going to.... well do you think it does mean something to him.
Friedman: No. At first I think it means something to many of them. Of course, many
men have died for their moral values, have put those moral values much above life itself.
But I, you and I are citizens of a free society, will not stand the sight of...
Lawrence E. Spivak: ... Well let me put it a different way, suppose you turn and
you made a speech to all the people on welfare and you said to them, look there are,
freedom is much more important than the welfare money that you are getting. Their ethical
concepts, their spiritual things about the, men have died for this things. What if you
told them all that and then said and we're going to withdraw welfare now. What do you
think would happen now?
Friedman: Would tell them something else. I would tell them.
Lawrence E. Spivak: I know also what you'd do.
Friedman: I tell them both what I would do and what I would tell them. I would
tell them welfare has been corrupting you. Look at what it is doing to you. Look at what
it's doing to your children. You would be far better off in every respect....
Lawrence E. Spivak: But suppose they said to you, I don't see that at all. Without
that welfare we'd be in an awful mess.
Friedman: Your wrong, you wouldn't be in an awful mess, but I understand your
feeling and I do not propose to withdraw assistance from you like that all at once. I
think it would be intolerable to throw the millions of people who are now depending on
welfare on to the streets. We've got to go gradually from here to there. That's why I
proposed a negative income tax as a transitional device. That it would enable us to give
help to people who really need help while not at the same time having the kind of mess we
have now where most of the benefits go to people who are not but look at the way in which
the welfare system has been corrupting the very fabric of our society. We have put people
in a trap which is of no part of your own making. I don't blame them, but they've been put
in a trap where we are inducing them to become dependents, to become children, not to
become independent human beings. The virtue and the desire of freedom is for what people
can do with their freedom. Freedom is not an individual value, it's a social value. A
Robinson Caruso on an island, freedom is a meaningless concept to him.
Lawrence E. Spivak: Milton, how bad is the state of freedom in this country today?
Friedman: It's a mixed bag. In some areas we have more freedom than we've ever had
before. In some other areas our freedom has been drastically reduced. Our freedom to spend
our own money as we want has been cut sharply. Our freedom to go into whatever occupation
we want has been reduced sharply. Our freedom to have various businesses has been reduced
sharply. And these restrictions in our economic freedoms have carried over to restrictions
on the freedom with which we speak and we talk, the activities we carry on, our attitudes
toward governmental officials and all the rest. In those areas, our freedoms have been
very seriously restricted.
Lawrence E. Spivak: What about your yourself? You as an individual and we really
have to do with, deal with millions of hundreds, two hundred million, two hundred twenty
million individuals. What about you? What freedom do you think you've lost?
Friedman: Well, I have been a very fortunate individual. I always have...
Lawrence E. Spivak: That sounds like a cop out.
Friedman: No, it's not a cop out because I'm going to add to it. I've always said
about the only people who have effective freedom of speech these days in the United States
are tenured professors at private universities who are on the verge of retirement or have
retired. And that's been my situation in these recent years. Consider the freedom of, for
example, a professor of medicine at any one of our great institutions. He's almost
certainly having his research financed by the Federal Government. Don't you suppose he'd
think two or three times before he gave a lecture on the evils of socialized medicine? Or
consider one of my colleagues at the University who happens to be getting grants of money
from the National Science Foundation. Do you think he really feels free to speak out on
the issue of whether government ought to be financing such research. Of course, you ought
not to have freedom without costs. But the costs ought to be reasonable. They ought not to
be disproportionate, there's no businessmen in this country today who can speak out. Why
is it, why is it that the businessmen today are so mealy-mouthed in what they say? There
are very few of them who are willing to come out and say openly what they believe. Why?
Lawrence E. Spivak: About what?
Friedman: About anything. Take for example the recent attempts by President Carter
to impose voluntary wage and price controls. There's hardly a businessman in this country
who doesn't think it's terrible. There are only about two or three businessmen who have
had the courage to stand up and say something about that. But again, as I say, go to my
academic colleagues. Many of them feel as I do that government is devoting altogether too
much money. That there's been altogether too much subsidization of state universities and
colleges all along the line. Yet very few of them are willing to speak out.
Lawrence E. Spivak: What about the generation that doesn't know what freedom is as
you knew it, and therefore, doesn't mind so much what has happened. Just takes for granted
what he's living under now.
Friedman: I think that's a very real problem. I think we're living on our
inheritance. We have inherited a philosophy and a set of attitudes and they tend to be
eroded. People get accustomed to what they know. There's an enormous tear in the status
quote and most people, most of the time, accept the circumstances that are around them.
There's a natural human drive for freedom which always expresses itself. But, its stronger
or weaker and I think a great danger in continuing along the path that we've been going on
is that we will lose still more of our inheritance, still more of our basic values of our
basic beliefs in freedom and that we will have still less protest as more and more
freedoms are taken away. The real value of freedom is that it provides diversity and
diversity is in turn the real protection of freedom. People who like to live in small
cities, can live in small cities. People who like the impersonality of the metropolis can
live in a metropolis. We have loyalties to our churches, we have loyalties to our
universities, to our schools, to our clubs, to our cities, to our states. It's this
diversity. That fact that there isn't a monolithic conformity imposed on us, that is, the
source of protection for our freedom and also the fruit of freedom. It's because freedom
protects diversity, allows, you will remember the phrase when Mao said he was going to
allow a 100 flowers to bloom. But of course he didn't. As soon as people spoke out and 100
flowers bloomed, he cut them off. But it's the blooming of many flowers, the fact that you
have all of these different expressions of people's individuality and produces the great
achievements of civilization and that provides the great hope a protection of our freedom.
Lawrence E. Spivak: Why are you saying that there are pockets of freedom still
existing in the countries?
Friedman: As I said before, the picture's a mixed bag. In certain respects we have
more freedom than we've ever had, but in other respects we've had very much less freedom.
Of course there are great pockets of freedom, this is predominantly still a free country.
We must not confuse the trend with the situation. We have been moving away from freedom.
Our freedom is in jeopardy but by no means has been completely destroyed. I believe that
there is a strong enough component of freedom in our society that we will be able to
preserve it, that we're going to turn this trend back, that we are going to cut government
down to size, we're going to lay the ground work for a resurgence for a, a flowering, of
that diversity which has been the real product of our free society.
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