Practical Radical in the Age of the Mixed Economy
Friedman’s Radicalism Grew with Age
1912 was the year the Titanic sank, Woodrow Wilson was elected, and Fenway Park opened. Well, at least we can be glad that one of those three things came to pass that year! But something especially significant for economics and the cause of freedom also occurred in 1912: Milton Friedman was born. And fifty years later Friedman wrote one of the classics of classical liberalism, Capitalism and Freedom.[i]
This year, 2012, is thus the 100th anniversary of Friedman’s birth and the 50th anniversary of his broadside against the reigning political orthodoxies of his era. Of course, Capitalism and Freedom did more than merely attack the philosophy of government and the policies behind President John F. Kennedy’s call to “ask what you can do for your country.”[ii] It also developed a positive case for a “liberal” and free-market approach to politics and economics appropriate for a society of free men and women.[iii]
Given these dual anniversaries, it is worth reflecting on Friedman and his seminal text. In particular, I want to focus on the nature of Friedman’s political and economic thought. I will also discuss briefly how his views changed over time, especially after the publication of Capitalism and Freedom in 1962. It is my contention that the approach outlined by Friedman in this book was indeed a radical one (for good or for bad depending on your view) despite his frequently pragmatic approach to “real world” politics. Moreover, Friedman became even more radical over the course of his life – belying the conventional wisdom that people get more conservative as they grow older.
To many, Friedman’s radicalism is not in doubt. In 1968, Albert Krauss described Friedman in the New York Times as an “intellectual radical” operating in an era of consensus politics.[iv] More recently, Allan Meltzer noted that Milton and his wife Rose swam during their careers against a strong current.[v] Friedman himself argued that the ideas he espoused in Capitalism and Freedom were “very radical.”[vi] This would come as no shock to Naomi Klein and those on the left who associate many of the problems of the contemporary world with Friedman’s radical “capitalist” agenda.[vii]
However, that is not exactly how some libertarians saw it. Indeed, one of the reasons why the question of Friedman’s radicalism even comes up is that he was frequently excoriated for being too soft and statist by his more extreme libertarian brethren. For example, in 1971, Murray Rothbard – libertarianism’s deontological yin to Friedman’s more consequentialist yang – called Friedman “the Establishment’s Court Libertarian” and an “unofficial apologist for Nixonite policy.” Even worse, he argued that Friedman was a “technician advising the State on how to be efficient in going about its evil work.”[viii] Likewise, as Brian Doherty relates in his unparalleled history of the libertarian movement Radicals for Capitalism,[ix] Ayn Rand attacked Friedman and his co-author George Stigler as “two reds” for their comments on equality and their focus on efficiency in an early piece on rent control.[x] Doherty notes that some libertarians continue to judge Friedman “skeptically” despite his “anti-government bona fides.”[xi]
Another reason why it is worth noting Friedman’s radicalism is because he became so closely associated with conservatism and Republican/Tory politicians in America and the UK. Conservatives have deified him in their pantheon of intellectual sources despite his frequent rejection of conservatism as a moniker for his beliefs (not to mention his very un-conservative positions on issues such as the drug war and social policy). Indeed, Friedman’s world view should pose a challenge to traditional conservatives rather than accepting veneration.
Friedman’s radicalism is also noteworthy given that, unlike most radicals, he was not averse to incrementalism and prudence in the political realm. In particular, he believed it was important to move public policy in the direction of greater freedom rather than making policy fights into dialectical struggles with evil in which compromise is unacceptable. His high-profile moderation in these fights might obscure to the public the fact that his deepest philosophical commitments were anything but moderation in the defense of freedom (to paraphrase Goldwater’s 1964 convention speech).
So what is the evidence that Friedman was such a radical in 1962 (aside, that is, from his own acknowledgement!)? For that we must look to the policy prescriptions in Capitalism and Freedom, not to mention the overarching philosophical position he lays out therein.[xii]
In terms of the latter, Friedman thought that most things in life should be handled via the “voluntary co-operation of individuals.” However, he was not an anarchist. Friedman believed that government had a role to play in society and that its major function should be to “protect our freedom both from the enemies outside our gates and from our fellow-citizens: to preserve law and order, to enforce private contracts, to foster competitive markets” (2). It should also “enable us at times to accomplish jointly what we would find it more difficult or expensive to accomplish severally.” Yet he understood that this second function was “fraught with danger” and thus argued it should be primarily utilized to overcome the problems of “monopoly and similar market imperfections, and neighborhood effects” (28). Importantly, Friedman was willing to concede that sometimes even the problem of monopoly – compared to its potential solution – “may be the least of the evils” (28).
Thus Friedman had a relatively limited vision of what government could legitimately do, especially compared to other public intellectuals in his era.[xiii] This becomes particularly obvious when you see exactly what types of policies Friedman ruled out according to his political theory (and compare this to the policies espoused by Lyndon Johnson, Richard Nixon, Paul Samuelson, and John Kenneth Galbraith). In particular, he thought that none of the following could be justified: agricultural price supports, tariffs and export restrictions, minimum wage laws, “detailed” banking regulations, the FCC, social security, occupational licensure, public housing and housing subsidies, national parks, and public toll roads. Furthermore, he added that this list was “far from comprehensive” (35-36). Lastly, it should be noted that Friedman also considered conscription an unjustified use of government power (at least in the US) – something that wasn’t even so obviously a bad idea in 1962.
Friedman’s more detailed policy prescriptions also evince his radicalism. He advocated a flat income tax, the abolition of corporate income taxes, and the replacement of numerous extant welfare measures with a negative income tax. He helped father the idea of school vouchers by proposing the separation of educational financing from school administration (though admittedly many libertarians thought that this didn’t go far enough).[xiv] He opposed both right to work laws and yellow-dog contracts as inimical to freedom of contract while even opposing the licensure of physicians. Although he thought government had a role in terms of money, Friedman wanted to end the Fed’s discretion and impose a monetary rule to determine the supply of money. Lastly, he denied that there was any social responsibility of business (and labor) other than adhering to the law and satisfying the interests of stockholders (or for unions, their members).
One could argue – as I’m sure anarcho-capitalists such as Milton’s son David would – that Friedman was not radical enough. However, relative to the consensus around the mixed economy that existed in his time and remains dominant even in ours, Friedman certainly offered up a fairly radical vision of the proper role of government in our lives. In “Uncle Miltie’s” World, government – especially the federal government – would do very little of what it currently does.
Lastly, it is worth noting that Friedman got even more radical as he grew older. Of course, on a number of issues, his views remained remarkably consistent across a very long time (Friedman wrote his first academic piece in 1935 and his last popular piece 70 years later!). Indeed, while writing a biography of Friedman, I was struck reading his massive corpus and listening/watching so many of his numerous interviews how consistently “on-message” he was. Nonetheless, Friedman didn’t close his mind to new possibilities once his classical liberal commitments solidified in the late 1940’s and 1950’s and fully-bloomed in Capitalism and Freedom.
One key area in which Friedman became more radical was education policy. His views in this realm shifted significantly between 1955 (largely repeated in 1962) when he proposed his school choice plan and the 1980’s when he admitted that vouchers were only a “partial solution.” Instead, he (and Rose) favored “going much further.”[xv] Indeed, even in Capitalism and Freedom, Friedman’s tone in reference to “schooling” had darkened slightly, presaging the later more radical turn. By 1998, he and Rose related that they had over time “been persuaded by the empirical evidence on the extensiveness of schooling in the absence of government involvement that neither [compulsory schooling or public financing] is justified.”[xvi]
Another area where Friedman was open to more radical ideas as he grew older was the government’s role in money. In 1984, he thought that the “best real cure” to problems related to money and banking was to “abolish the money-creating powers of the Federal Reserve, freeze the quantity of high-powered money, and deregulate the financial system.”[xvii] He also flirted with the ideas of competitive currencies or even getting the government out of the money business altogether. Other examples outside education and money and banking include Friedman’s ultimate questioning of whether even a negative income tax was theoretically justifiable or whether drug use itself might be wrong.[xviii]
When the world a public intellectual conjures up for his contemporaries is one they would hardly recognize or see as a live option, a good case can be made that that image is a radical one. Friedman certainly offered such a vision in Capitalism and Freedom. And thus, to paraphrase Brian Doherty, Milton Friedman was a radical for liberty.
[i] All in-text references are to Milton Friedman. Capitalism and Freedom. Chicago: University of Chicago Press, 1962.
[ii] For those unfamiliar with this book, it begins with an attack on JFK’s famous inaugural address.
[iii] Friedman liked to call himself as a “liberal” and tried to revive this moniker as the most suitable one to describe his views and those of others who advocated for individual liberty and free markets. See Capitalism and Freedom, pg. 3-6. Among many other examples, also see his 1975 television interview on the show “Open Mind” (link no longer available) where he called himself a liberal in opposition to the “true conservatives” who maintained their support for the New Deal and “ever bigger government.” Friedman eventually accepted the term “libertarianism” as a stand-in for “liberal” and as a descriptor of his views. However, he explicitly distanced himself from both the Libertarian Party and the anarchist strain of libertarianism.
[iv] Albert L. Kraus. “Friedman: A Challenger.” New York Times (November 13, 1968): 61, 63.
[v] Allan H. Meltzer. “Choosing Freely: The Friedman’s Influence on Economic and Social Policy.” In The Legacy of Milton and Rose Friedman’s Free to Choose, ed. Mark A. Wayne, Harvey Rosenblum, and Robert L. Formaini, 191-205. (Dallas: Federal Reserve Bank of Dallas, 2004), 204.
[vi] Library of Economics and Liberty. “An Interview with Milton Friedman.” September 4, 2006. Accessible on-line at http://www.econlib.org/library/Columns/y2006/Friedmantranscript.html
[vii] Naomi Klein. The Shock Doctrine: The Rise of Disaster Capitalism. New York: Metropolitan Books, 2007. Also see critics of the Milton Friedman Institute at the University of Chicago who lambasted his “free-market fundamentalism.” See Peter Schmidt. “U. of Chicago Plans for Milton Friedman Institute Stir Outrage on the Faculty.” The Chronicle of Higher Education. June 1, 2010. Available at http://chronicle.com/article/U-of-Chicagos-Plans-for/65737.
[viii] Murray N. Rothbard. “Milton Friedman Unraveled.” Journal of Libertarian Studies 16:4 (Fall  2002): 37 and 40.
[ix] Leaving aside, of course, Leonard Liggio’s memory given that he seems to know just about everyone and everything related to the history of libertarianism!
[x] Brian Doherty. Radicals for Capitalism: A Freewheeling History of the Modern Libertarian Movement. (New York: Public Affairs, 2007): 191.
[xi] Ibid., 456.
[xii] For more on his political thought, see William Ruger. Milton Friedman. (New York and London: Continuum, 2011): 93-103.
[xiii] For a discussion of the decline in the use of the term mixed economy, see David Henderson’s “What Happened to the Mixed Economy?” Available on-line at http://econlog.econlib.org/archives/2011/08/what_happened_t_1.html. Its existence – for good or bad – is hard to deny, then or even now.
[xiv] He first proposed this earlier in 1955 but he continued his advocacy to a much broader audience in Capitalism and Freedom. For the earlier statement, see Milton Friedman. “The Role of Government in Education.” In Economics and the Public Interest, ed. Robert S. Solo, 123-144. (New Brunswick, NJ: Rutgers University Press, 1955). Available at http://www.friedmanfoundation.org/friedmans/writings/1955.jsp.
[xv] Milton Friedman and Rose D. Friedman. Free to Choose: A Personal Statement. Harvest Edition. (San Diego, New York, and London: Harcourt,  1990), 161.
[xvi] Milton Friedman and Rose D. Friedman. Two Lucky People: Memoirs. (Chicago: University of Chicago Press, 1998), 628 fn. 18.
[xvii] Milton Friedman, “Monetary Policy for the 1980’s” In To Promote Prosperity: U.S. Domestic Policy in the Mid-1980’s, ed John H. Moore. Stanford: Hoover Institution Press. Reprinted in Kurt R. Leube, ed. The Essence of Friedman. (Stanford: Hoover Institution Press,  1987), 425.
[xviii] Interview with the Marijuana Policy Project. Available on the internet at http:tv.mpp.org/shorts/profiles-in-marijuana-reform-milton-friedman-part-1 (link no longer available).