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Milton Friedman, A Modern Galileo

By Michael Strong

Milton Friedman, whose life I fondly commemorate with this article, was probably responsible for more human happiness and well-being than any other individual in the 20th century. And yet his tireless efforts on behalf of humanity were, for much of his life, greeted with taunts, ridicule, and abuse.

Friedman was not alone in keeping the idea of free markets alive, but he was the only figure who combined rigorous academic evidence of the workings of markets with passionate public statements on the importance of freedom for all. Without Friedman, we might have had much of the work of the Chicago school of economics lost in academic economics journals, with a few Randians and Austrians defending markets in public but without the clear connection to a growing body of empirical evidence. No other individual combined Friedman's credibility based on scientific rigor with a powerful, heartfelt personal touch exemplified by sustained, patient, imaginative, and good-humored public advocacy of unpopular ideas. As a result, Friedman was single-handedly responsible for advancing the cause of liberty more than any other individual in the 20th century.

Defending free markets in the 20th century was a thankless task, to say the least. Although Friedman's technical economics won respect, his wide-ranging applications of free market principles was not highly regarded - people thought the notion of school vouchers absurd in the 1950s when he first suggested them. When he and Anna Schwartz published A Monetary History of the United States in 1963, the economics profession had almost universally accepted a Keynesian analysis of the Great Depression. Indeed, all of post-war economic policy throughout the developed world was based on Keynesian premises. Friedman and Schwartz' revival of 19th century monetary theory struck most economists as the equivalent of flat-earth theory, with the added distasteful aspect that Friedman's motivations were believed to be based in politically-incorrect conservative ideology. His public advocacy of free market ideas were regarded as even more bizarre and immoral, and confirmed negative suspicions.

By the 1970s, when stagflation dealt the final death blow to the Keynesian consensus in both theory and practice, the "rational expectations" school of macroeconomics led the way more than did Friedman's monetarism, which kept many formerly skeptical economists from openly acknowledging that Friedman had been correct about the monetary causes of the Great Depression. It was a crucial premise of much of leftist thought that the Great Depression had proven that unregulated markets fail and therefore must be guided by government. By showing that mistakes made by the Federal Reserve were actually responsible for the terrifying economic collapse, Friedman showed empirically that government meddling (here the Federal Reserve) was again the culprit, not the free market. Friedman showed that much of the political and economic thought of the 30s, 40s, 50s, and 60s was based on a false premise and was thus irrelevant to reality.

It is not surprising that most academics championed Galbraith, whose reputation within the economics profession was collapsing, rather than Friedman, whose ideas undermined their entire world-view.

Fortunately for Friedman-haters, Friedman tainted himself by traveling to Chile and meeting with General Pinochet, the most hated military dictator in the western hemisphere. The Left used Friedman's visit to Chile to brand him as a fascist, an accusation that was widely disseminated among universities around the world and which resulted in protests and disruptions at his Nobel award ceremony. This sentiment is alive and well today - The Democratic Underground's discussion of Friedman's death includes comments such as "Memo to Pinochet - Your buddy just went to hell and is waiting for you" among its less vulgar sentiments. When I entered Harvard in 1979, it was commonplace in most circles to refer to Friedman as evil without debate, reflection, or justification.

Now, of course, Chile has a democratic government, the strongest economy in Latin America, and a surging middle class - all legacies of Friedman's influence. More relevant to the claim that Friedman was tainted through his one conversation with Pinochet is the fact that he later went to China and gave very much the same advice to Chinese leaders as he had given to Chilean leaders - and no one even remarked upon the trip, despite the fact that the repression practiced by the Chinese government makes Pinochet look like an amateur. Friedman was, in fact, critical of the Pinochet regime and clearly stated that his goal was to alleviate human suffering based on economic dysfunction, which he did so superbly. By contrast, J. K. Galbraith visited Mao's China and praised Mao and the Chinese economic system, which had caused incomparable misery.

Focus on this: Friedman is tainted by one conversation with a dictator, whom he openly criticized, and the advice he provides ultimately brings great benefits to the people. Galbraith is not tainted by praising one of the most ruthless tyrants in human history, after disseminating his own advice, which has brought poverty to every developing nation which followed it. By any reasonable human rights standard, Galbraith's praise of China should be regarded with the loathing still associated in some circles of Friedman, whereas Friedman's support of successful economic policies in Chile should be regarded as far-sighted and heroic. But we must await another generation of historians to write justly and honestly about the 20th century before that is likely to happen.

Friedman's long-standing recognition of the economic policies that enriched Hong Kong, combined with his direct policy proposals to Chinese leaders, contributed to the spread of Hong Kong-like special economic zones across eastern China, which are now bringing a million people a month out of poverty. At current rates of economic growth, China is expected to reach a U.S. standard of living in 2030. India, after a shift from Galbraithian policies in the 50s, 60s, and 70s, began to embrace free market reforms in the 80s and 90s. At recent rates of economic growth they will reach a U.S. standard of living in 2050. If China and India had both followed Friedmanite policies in 1947, it is likely that each nation would be as wealthy as Hong Kong, which has a higher per capita GDP than Britain. (See Bill Easterly's article in this year's Fraser Institute Report on Economic Freedom for evidence on the correlation between economic freedom and per capita GDP).

Tens of thousands of NGOs devote millions of hours and billions of dollars in the effort to alleviate poverty, empower women, reduce child prostitution, and reduce violent conflict. If every scholar at every university had promoted Friedmanite policies throughout the 20th century, most of this work would be unnecessary. Poverty in the developed world exists, but it is a "poverty" which often includes televisions, cell phones, refrigerators, air conditioning, and obesity. There are billions of truly poor people who would risk death by crossing deserts or oceans in order to achieve this kind of poverty.

Mart Laar, who became the prime minister of Estonia at the age of 32 after the Soviet Union dissolved, has said that he had only read one book on economics: Friedman's Free to Choose. Laar implemented as many of Friedman's policy proposals as he could, and now Estonia has the fastest growing economy of the former Soviet Republics. Other nations throughout the former Soviet East bloc have copied Estonia's flat tax, including Russia.

Ideas do matter. They are especially important in times of dramatic regime change, in which the interest groups and power structures of the past are thrown into disarray. After WW II, when many dozens of former colonies became independent nations, there was a unique opportunity to create new institutions. In almost every case, the newly liberated colonies implemented the policies that their western educated leaders had learned at western universities. These policies, driven by theories propounded by western academic intellectuals, consisted of either Marxist communism or Fabian socialism. Both of these policy paths are unambiguous failures, the first leading to poverty and mass death in nations such as China and Cambodia, the second leading merely to never-ending poverty, as in India prior to the 1980s.

A thought experiment: What if Milton Friedman, and other classical liberal economists, had been as widely read and as highly regarded in 1947 as were Marx and Lenin, Laski and the Webbs? What if every newly liberated nation had, in 1947, created institutions similar to those of Hong Kong or Mart Laar's Estonia?

If this had happened, there might well be no poverty on earth today. The institutions of economic freedom, which we are today so laboriously working to create in the aftermath of fifty years of cultural and institutional destruction caused by Marxism and socialism, could have been developed from the colonial institutions re-structured by indigenous leaders if schooled in classical liberal principles. A unique opportunity to create a better world was lost because classical liberal ideas were despised at the time.

In the 19th century these principles were well-known and substantially articulated by figures as diverse as J.S. Mill, Lord Acton, William Graham Sumner, and dozens of others. It was well-known that property rights, the rule of law, and freedom had provided the institutional foundations of the British and American economic growth miracles, the first such miracles in world history. These principles that resulted in the greatest improvement in the human condition that the world had ever known were subsequently dismissed as "conservative." Today, while cautiously speaking of "institutions," "governance," and "civil society," development experts are clumsily and awkwardly beginning to re-create what the great classical liberal thinkers understood more clearly a hundred and fifty years ago.

In antiquity, Aristarchus had developed a heliocentric theory which was intellectually coherent but which was ridiculed and dismissed. More than a thousand years later, Copernicus revived the heliocentric theory, but died without defending it in public. Galileo was the courageous figure who provided much stronger intellectual and empirical support for the theory while braving the censorship of the Catholic Church. After being told by the authorities to quit publishing in support of the Copernican viewpoint in his middle age, in his later years he gradually began to insinuate Copernican viewpoints in his writing until, after a formal trial, he was sentenced to house arrest in his senior years. He is an intellectual hero to whom we will always be grateful.

In the 18th and 19th centuries, classical liberal thinkers developed an intellectually coherent theory to explain and guide the extraordinary increase in human well-being taking place in Britain and the U.S. In the 20th century, this theory of human well-being was ridiculed and dismissed. Without pushing the analogy too far, it might be said that figures such as Mises and Hayek played the Copernican roles of breathing new life into ideas that had long been thought to have been dead. But Friedman, above all, combined intellectual and empirical support for classical liberal economics with unabashed public advocacy. For his leadership role, he was ridiculed and slandered. While Galileo suffered house arrest for his commitment to the truth, Friedman suffered public infamy decade after decade for his commitment to the truth. The Church at least treated Galileo respectfully, even generously, considering their official position at the time.

A few years ago I had the opportunity to have dinner with Milton and Rose. I asked him if the attacks had been difficult to take. He cheerfully denied that they had bothered him, stating that when he knew what the truth was it didn't bother him if people made absurd claims against him. But Rose was not so forgiving; she fully recognized how profound the injustice to him had been, and her eyes gleamed and her nostrils flared at the memories.

Milton is now in the heavenly firmament of the greatest thinkers in world history. It is to Rose that I offer this vindication of Milton, to alleviate however insignificantly the loss of a man who was surely among the greatest husbands in history, as well as one of the greatest human beings.

Michael Strong is CEO & Chief Visionary Officer of FLOW.

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