The immortality of Milton Friedman
Allister Heath salutes the radical thinker without whom there would have been no Reagan and Thatcher revolutions When John Maynard Keynes quipped that ‘in the long run we are all dead’, he was, as ever, not quite right. The greatest scholars live on through their ideas, enjoying an intellectual immortality of which the rest of us can only dream. One such giant is Milton Friedman, who died last Thursday at the age of 94 but will long be remembered for his pioneering economic ideas.
It is no exaggeration to say that Friedman was one of the most important thinkers of the past 100 years. Without him there would have been no Reagan and Thatcher revolutions and the Soviet Union would have hobbled on for a few more miserable years. His ideas on how the economy should be managed, and his commitment to radical freemarket reforms, improved the lives of hundreds of millions of people across the world by reducing inflation, boosting economic growth and improving living standards.
An academic first and foremost, Friedman earned his Nobel prize for his pioneering research at the University of Chicago. He demolished the simplistic Keynesian view that injecting additional public spending into an economy in recession would be enough to make it grow again. Friedman also argued that economies are too complex to be finetuned and that high inflation is no cure for unemployment or weak growth.
Equally widely accepted today is his once controversial view that governments should aim to keep inflation low and not try to iron out the vagaries of growth by fiddling with interest rates or public spending. He also showed that the great Depression of the 1930s was not caused by markets suddenly failing. Rather, the US Federal Reserve was to blame: it incompetently allowed the supply of money to collapse, triggering devastating deflation and depression.
The Chicago sage was best known for arguing that ‘inflation is always a monetary phenomenon’. By that Friedman meant that changes in the amount of money in the economy — coins, notes and cash in the bank directly determine the rate of inflation. While this mechanism is not now widely accepted, his work was nevertheless instrumental in convincing central banks to regain a grip of inflation through the use of monetary policy — and convincing governments to grant central banks their independence.
Together with his wife and co-author Rose, a brilliant economist in her own right, Friedman founded the school-voucher movement, campaigning for parents to have the right to send children to schools of their choice. He was the first modern economist to support a flat tax and privately-owned individual retirement accounts to replace state pension systems. His support for deregulation, privatisation, free trade and a drastic reduction in the size and scope of the welfare state inspired reforms around the world; they were deeply controversial at first but today even Gordon Brown at least pays lip service to such ideas.
But anybody still upset by Milton Friedman’s radicalism should stay well clear of his family. His son David, a dishevelled and bespectacled 61-year-old who looks like a slightly hippy version of his father, goes much further, arguing for the privatisation of streets, courts and money. His book, The Machinery of Freedom, includes sections entitled ‘Why anarchy is not chaos’ and ‘How to sell the state in small pieces’, earning him a cult following among libertarians. In an act of youthful rebellion, David refused to study any economics, choosing physics instead, but the lure of the dismal science was too strong to resist. He became a professor of economics at Santa Clara University and penned several bestsellers on economics, all arguing that his father had conceded far too much to socialism.
A commitment to radical capitalism appears to have wedged itself firmly into the Friedmans’ genetic make-up. Milton’s twentysomething grandson Patri, a programmer at Google, has adopted his father’s ideas but taken the counter-cultural aspect one step further. He lives an anarcho-capitalist lifestyle in a communally, but of course privately, owned house in California. Patri’s announcement of his grandfather’s death on his blog said it all: ‘A great thinker and champion of freedom during the dark days of the 20th century has left us, and the US and the entire world’s stock of human capital has been diminished with his passing.’ Not your traditional obituary, but exactly what one would expect of a Friedman.
Milton was on the side of the individual against the state, of the dissenter against the conformist, of the ambitious immigrant against the trade-union shop steward. He hated government rules and taxes not only because they kill jobs and make everybody poorer, but also because they restrict individual liberties and the right of consenting adults to engage in the activities of their choice. Contrary to what his critics alleged, the poor were his greatest concern, especially under-privileged children trapped in failing state schools.
One of his proudest moments was serving on the presidential commission that urged Richard Nixon in 1970 to end conscription. General William Westmoreland, who commanded US military operations in Vietnam, told the commission that he did not want to command ‘an army of mercenaries’. Friedman’s withering reply caught the public’s imagination. ‘General, would you rather command an army of slaves? If they are mercenaries, then I, sir, am a mercenary professor, and you, sir, are a mercenary general, and we are served by mercenary physicians, we use a mercenary lawyer and we get our meat from a mercenary butcher.’ Unlike some of his supporters, Friedman also endorsed the legalisation of all drugs and prostitution, partly on grounds of personal freedom and partly because he argued that banning them made a bad situation even worse. Friedman also supported a liberal immigration policy, though he believed that the main barrier to achieving this was the welfare state. He thought there should ideally be no restrictions at all on migration, just as there are none between Britain and the rest of the European Union. ‘If there were no welfare state, you could have open immigration, because everybody would be responsible for himself,’ he said earlier this year. ‘At the moment I oppose unlimited immigration. I think much of the opposition to immigration is of that kind — because it’s a fundamental tenet of the American view that immigration is good, that there would be no United States if there had not been immigration.’ Friedman’s immense influence was partly due to his outstanding ability to use logic to eviscerate his opponents in debate. Thanks to the internet, many of his television interviews, some decades old, are now freely available, showing him in full flow. But the most intriguing clip on Google Video is a recent performance by the Milton Friedman Choir, an improbable but entirely appropriate ode to capitalism. The great man is no longer among us, but his ideas will live for generations, helping to build a freer and more prosperous world.
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