"Some people think the Federal Reserve Banks are US government institutions. They are not... they are private credit monopolies which prey upon the people of the US for the benefit of themselves and their foreign and domestic swindlers, and rich and predatory money lenders. The sack of the United States by the Fed is the greatest crime in history. Every effort has been made by the Fed to conceal its powers, but the truth is the Fed has usurped the government. It controls everything here and it controls all our foreign relations. It makes and breaks governments at will." ~ Louis McFadden
Exclusive to STR
November 18, 2006
The world of freedom lost a champion November 15th with the death of Milton Friedman at 94.
He never became an anarchist, yet he is the reason I, for one, am here; for his Capitalism and Freedom was the first book I read that made such brilliant economic sense that I had to look further into the philosophy of freedom. At $12.95 from Laissez Faire it remains an excellent primer to offer those starting to express interest in ideas of liberty.
Like most of us, he did not start adult life promoting individual liberty; he was as much a victim of government schooling as anyone, and in the late '30s and '40s, he worked for the Feds with what he admits was a typically Keynesyan bias--even helping design the "income tax" withholding system that was supposed to be repealed when WWII ended. But unlike most of his contemporaries such as J.K. Galbraith, he did not let his enjoyment of manipulating the economy during the war years go to his head; he kept researching.
The result--as well as a Nobel Prize--was a bombshell, that so discredited Keynes' world view that while Establishment economists still follow it, they seldom admit the fact. Friedman's work on money (fiat money, that is) proved conclusively that inflation was caused by increase in its supply; something that, after he had proved it, seems perfectly obvious. Keep the supply of goods and services constant but pump in 50% more tokens of currency, and--duh--prices will shortly rise by 50%. Why did it take a Nobel Prize winner to point that out?
His proof hit public attention at just the right time--the late '70s--and propelled him to public prominence and influence. Carter appointed Volcker to head the Fed and he was succeeded by one-time Randian Alan Greenspan. Both understood Friedman's findings, so the inflation rate tumbled fast from nearly 20% a year to below 4%, where it remains. The relative prosperity of the last 30 years is therefore due in large part to Milton Friedman.
His influence was worldwide; the people of Chile can now retire on a privately funded pension, thanks to Friedman's success in showing the government there how to wind down its "Social Security" scheme. He was an advisor to the Thatcher governments in the UK, which led to her breaking the stranglehold of unions and State-owned "enterprises" and so caused the Labour Party to do in 1990 what the US Democrats may now be doing: reinventing themselves as "blue dogs" (there, "New Labour") to recognize some economic realities.
In 1980 he broadcast one of the most successful PBS programs ever--the 13-part miniseries "Free to Choose"--and it has had enormous influence, including helping get Reagan elected on the strength of Libertarian-sounding promises. It had a wide range, scorning the idea that government can do anything useful or beneficial; politicians have yet to take note of it, but he showed for example that government can never, ever, "create jobs"--because the money to pay the wage of the apparently new job must come from a transfer of funds previously used to pay wages elsewhere. Again, perfectly obvious once it's pointed out.
Milton 's mistake was not so much in his analyses of the problem, as in his prescription to solve it. I say "mistake," but it was a conscious choice, and can be defended on the grounds that anyone can look back and see positive results (such as the low inflation rate, above). But he did not see fit to challenge the root cause of our ills: government itself. He reckoned to fix things without calling for its abolition. Without doubt, had he done the latter, all the media would have shut him out, and "Free to Choose" would never have aired; but it would have been consistent. Instead of calling for an outright abolition of the government school monopoly, for example, he boosted the "voucher" idea--and with some success, for all over the country "Charter Schools" now operate in ways that put regular schools to shame. But government still funds them with taxes, so the solution is inadequate--and would still be so, even if voucher-based funding were universal. Friedman could have called for a full separation of school and state.
Similarly, he could have called for a separation of money and state, so that a free market would determine what is to be used as "money" and what its value and quantity shall be--presumably, gold. Instead, this former bureaucrat advised careful control of the supply so as to just slightly outpace the growth in goods and services; perhaps that's very close to what free-market gold would have done, but by Friedman's advice, it has continued to be managed, not free. He wanted some kind of government governor (such as a Constitutional Amendment) to limit the growth of money supply to that expected of goods and services; he never acknowledged the fatal contradiction in supposing that anything can ultimately limit government.
In the last analysis, therefore, Milton Friedman understood and taught what freedom is about, but never acknowledged that government is needless as well as destructive, and set out to make it "work" as well as possible. To the extent that he succeeded, he may have helped prolong its miserable existence--but also demonstrated how much better things would be if there were no government at all; that he ultimately failed to strike the root demonstrates that at the end, he was no more than the very best of the minarchists, hacking only at the branches of evil.