A Frank and Sobering interview with Milton Friedman

September 17, 2003 1:05 PM

A Frank and Sobering interview with Milton FriedmanIn fact, all of the progress that the US has made over the last couple of centuries has come from unemployment. It has come from figuring out how to produce more goods with fewer workers, thereby releasing labor to be more productive in other areas. (via Econlog)
posted by trharlan (50 comments total)

If you move jobs overseas, it creates incomes and dollars overseas. What do they do with that dollar income? Sooner or later it will be used to purchase US goods and that produces jobs in the United States.

I personally have no problems with other countries undercutting US workers (well maybe some regarding working conditions), but I find it difficult to imagine a weaker argument than this that it is to the advantage of the US.
posted by biffa at 1:19 PM on September 17, 2003

I've been getting more productive in other areas for over two years now. You gotta love spin.
posted by AstroGuy at 1:21 PM on September 17, 2003

An interesting read. I enjoy reading Milton even though I disagree with much that he has to say. He is an intelligent and well-spoken man. The dig on Dean (even though it was a total set-up) was very unnecessary though. And I think you'll find most economists nowadays, even the more moderate to conservative ones, will give at least partial credit to the New Deal for helping end the Great Depression. Friedman does wear his "free market" blinders proudly.
posted by Ufez Jones at 1:25 PM on September 17, 2003

Well I agree with Friedman that you can't save the poor by ruining the rich. However, there is a serious leak between the economy and the government that has to be stopped up, and I wish some economists would address that. Free markets are all well and good, but most of our industries are regulated by the powerful investors that dominate them, to the point where the government is no longer elected by the people, and is certainly not for the people. The government is currently elected by the mega-rich, and is for the mega-rich.

Essentially, we have a democracy, but people are not its citizens, dollars are.
posted by zekinskia at 1:26 PM on September 17, 2003

Even if you don't agree with the conclusions, it is an interesting perspective and one I hadn't seen before. Thanks for the link, trhalan.
posted by cell divide at 1:26 PM on September 17, 2003

Sobering? Hardly.

"Why don't we just have exorbitant taxes on the rich and minimal taxes on everyone else"? What would that do to the economy?

Milton Friedman: That would eliminate the rich.

Puh-leeeze. Certainly there is some middle ground between today's policies (that cause to widen the chasm between rich and poor) and a "communist" state. This is thinking is simplistic as to be infantile.

Also, I think that our policy with respect to drugs is fundamentally immoral and it's really disgraceful that we cause thousands of deaths in South America because we cannot enforce our own laws.

Even though I agree with this statement, it's almost laughable considering its source. Uncle Milty directly served Pinochet's regime as an advisor, a man responsible for considerable deaths in South America in his own right.
posted by psmealey at 1:31 PM on September 17, 2003

If you move jobs overseas, it creates incomes and dollars overseas. What do they do with that dollar income? Sooner or later it will be used to purchase US goods and that produces jobs in the United States.

This intrigued me as well. My knowledge of econ is scantly larger than "buy low/sell high" but if we've ceased producing a product or service here because it's cheaper to create abroad, how is there a US version of the good/service to purchase?

I suppose one man's sweatshop is another man's "future US product buyer" organization.
posted by jalexei at 1:32 PM on September 17, 2003

Even more interesting is that he said this:

"I'd like to promote elimination of drug prohibition.
I think that our policy with respect to drugs is fundamentally immoral and it's really disgraceful that we cause thousands of deaths in South America because we cannot enforce our own laws. If we could enforce our own laws against consumption of drugs, there would be no drug cartels in South America. There would be no -- nearly a civil war in a place like Columbia."

More conservatives even are saying the same thing, even William F. Buckley Jr.
posted by monkeyboy_socal at 1:35 PM on September 17, 2003

I am favor of cutting taxes under any circumstances and for any excuse, for any reason, whenever it's possible. The reason I am is because I believe the big problem is not taxes, the big problem is spending. The question is, "How do you hold down government spending?" ... The only effective way I think to hold it down, is to hold down the amount of income the government has. The way to do that is to cut taxes.

Ah, the way Bush's tax cut is preventing him from spending a quarter trillion on Iraq?
posted by badstone at 1:37 PM on September 17, 2003

Jalexi: This intrigued me as well. My knowledge of econ is scantly larger than "buy low/sell high" but if we've ceased producing a product or service here because it's cheaper to create abroad, how is there a US version of the good/service to purchase?

They wouldn't buy 'US versions' of the products they were manufacturing for cheaper, they would buy other US goods and services, such as entertainment -- music, movies, coca-cola, mcdonalds. Yes, yes, yes, all awful mega-interational-corporate crapola, but nonetheless, that's the point the author is trying to make.
posted by PigAlien at 1:42 PM on September 17, 2003

Or, I should say the point Milton is trying to make.
posted by PigAlien at 1:44 PM on September 17, 2003

Monkeyboy, I think that view (Buckley's and Friedman's) is much more in line with classic conservatism than it has to do with the quasi-moralist views of those folks currently calling themselves conservatives.
posted by psmealey at 1:45 PM on September 17, 2003

music, movies, software, and high-speed pizza delivery.
posted by badstone at 1:47 PM on September 17, 2003

One more question Mr. Friedman, would you describe the Clinton financial policy as fiscally naive and incompetent, or deranged drug-fueled psycho-bable?

But seriously, is it just me or is it incompatible to favor huge decreases in government spending but criticize public school systems for not performing.
posted by Dr_Octavius at 1:48 PM on September 17, 2003

Monkeyboy, I think that view (Buckley's and Friedman's) is much more in line with classic conservatism than it has to do with the quasi-moralist views of those folks currently calling themselves conservatives.

Wouldn't that be classic liberalism? Classic conservatism supports the expanded role of the state.
posted by thirteen at 2:00 PM on September 17, 2003

On the Euro - We're in the midst of wonderful natural experiment.
This sort of statement highlights where economists, particularly I think the Chicago school of economists, really frustrate me. They continually fail to see human being as individuals, they see them as commodities or cogs in a machine. They forget that whilst one course of action may be mathematically the best course of action, it could potentially have a devastating on an individual, or indeed whole communities as the miners found out after Thatcher's religious following of Friedman and Von Hayek.
I certainly don't disagree with a lot of what Friedman says, I just wish there was more of an attempt to find some balance between pure economic thought and socially aware policies.
The Euro may be a wonderful experiment to him, but it is also something that has the potential to fuck up the lives of millions of people.
posted by chill at 2:07 PM on September 17, 2003

Got me on that, 13. I think you're right. I was thinking classic conservatism in the von Hayek, Friedman, Goldwater sense... but I think this is more accurately termed liberalism in economic circles.
posted by psmealey at 2:19 PM on September 17, 2003

Hi Chill,

Groups are individuals. Large groups are comprised of more individuals than smaller groups.

The euro 'experiment' may 'fuck up the lives of millions of people,' but it may also greatly enrich the lives of many more if it succeeds. Conversely, if it fails, it may have prevented an even larger experiment down the road.

There's really only way to find something out, and that's to give it a go. Every time you create a child, that's what you're doing. Genetics recombine DNA code to see which variations produce the best, most fit results.

The more economic systems we have in the world, the better we can determine which economic system brings the most wealth to the most people.
posted by PigAlien at 2:23 PM on September 17, 2003

I read this yesterday and let me just say, "Holy leading questions, Batman." Then again, this is a link to rightwingnews.com where Bush and Reagan praises are something of a prerequisite.

Regardless, Milton sidesteps a lot of these, except with his absolute statement on taxes. Any tax cut he supports? Well following his logic he would repeal every taxation imaginable which would be state suicide and an argument for anarchy.

He had no problem going down the logical extreme path with his "tax the rich == communism" rhetoric. I think its fairly obvious that we tax where the money is, and there's a difference between rich and super-rich. I've met people who make 400-500k a year and honestly call themselves middle class. Milton must spend too much time with these types.

The Pinochet connection as mentioned above is just something he can't shake. I wonder why he's against drug prohibition, perhaps because he saw his policies mixed with extremist political zeal cause 30,000 murders in Chile in the 70s?

More here:

Conservatives have developed an apologist literature defending Chile as a huge success story. In 1982, Milton Friedman enthusiastically praised General Pinochet (the Chilean dictator) because he "has supported a fully free-market economy as a matter of principle. Chile is an economic miracle." (1) However, the statistics below show this to be untrue. Chile is a tragic failure of right-wing economics, and its people are still paying the price for it today.

Frank and sobering? Not quite. More like ideologue spews ideology. He's still a de-regulate everything/the invisble of the hand of the market works in all things dinosaur.

Honestly, I was surprised to find out he was still alive.
posted by skallas at 2:24 PM on September 17, 2003

Milton had his time in the policy sunshine a couple of decades ago, and monetarism is no longer a magic word. What gets me about these free marketeers is that the social efficiency of free markets depends on perfect competition, which means no single economic actor is large enough to affect the price. Needless to say, that's not what we have now in many markets.

So the whole moral foundation of the free market, that it can take us close to an objectively optimal pattern of production and consumption, is sliding down the slippery slope of oligopoly. In fact it is being pushed down that slope by those who pay the most lip service to it.
posted by anewc2 at 2:53 PM on September 17, 2003

>The more economic systems we have in the world

Yet, start a competiting economic system and your government may suddenly collapse from a CIA backed rebel overthrow. I don't think the world has seen many full scale economic experiments and the US's history in attacking these economic systems, especially in Latin America, is inexcuseable

They tried United Fruit. But the US using the CIA bombed Guatamala city and overthrew the government. Hmmm..

They tried a worker's revolution in Chile. The CIA backed mass-murderer Pinochet and put the U of Chicago boys in charge of its economy while Pinochet was mass purging tens of thousands of people.

Dominican Republic.

Grenada

Not to mention Cuba and the bay of pigs incident.


Timeline here

---

Also, I dont even think it would be legal to print one's own money and start an autonomous zone in the US to test different economies. This would also probably be met with military force.
posted by skallas at 2:54 PM on September 17, 2003

Well following his logic he would repeal every taxation imaginable which would be state suicide and an argument for anarchy.

That's not a refutation of neoliberalism so much as a restating of its core principle. Bad economics is the same as bad science, and the Chicago School neoliberals are looking a lot like Henry Huxley and the other "scientists" who twisted around Darwin's work to further assertions of racial superiority: they are, above all, accountable to their assumptions above and beyond the process. At least the fact that Friedman can continue to herald the "economic miracle" with a straight face suggests that he is more delusional than earnestly nasty.

Honestly, I was surprised to find out he was still alive.

I know someone who stink-palmed him in 1999. True story.

on preview:
What anewc2 said. Well-said, yo.
posted by Ignatius J. Reilly at 2:55 PM on September 17, 2003

why are Frank and Sobering capitalised?
posted by carfilhiot at 3:12 PM on September 17, 2003

carfilhiot: Frank and Sobering is the accounting firm that is interviewing him. At least that's the way I interpreted it.
posted by Joey Michaels at 3:15 PM on September 17, 2003

Essentially, we have a democracy, but people are not its citizens, dollars are.
posted by monju_bosatsu at 3:18 PM on September 17, 2003

While I'm at it, some think the US had a hand in the attemped coup in Venezuela.

> why are Frank and Sobering capitalised?

I think trharlan was trying to parody my post about an interview with economist and NYTimes writer Paul Krugman.
posted by skallas at 3:22 PM on September 17, 2003

ok serious comment now.
Saying that all america's progress comes from unemployment is simply daft. it's rhetoric, it's a sound-bite argument. it's something that just popped into his head and he thought 'wow that sounds good'. What he meant to say was innovation. food isn't produced by 2% of the population because the rest simply decided to leave their farms - that's absurd. innovation created new ways of doing things - not unemployment. innovation and hundreds of other factors, like population growth, raw materals etc etc etc. to say something as glib as mass unemployment is good, just shows him to be stupid.

of course the only reason he's spinning this argument is cause it's election propaganda. we need to make people think that unemployment is not that bad.
posted by carfilhiot at 3:22 PM on September 17, 2003

The euro 'experiment' may 'fuck up the lives of millions of people,' but it may also greatly enrich the lives of many more if it succeeds. Conversely, if it fails, it may have prevented an even larger experiment down the road.
I agree with that entirely, it's just the rather glib language that rubbed me up the wrong way, as if it's just a side show for the enjoyment of economists. For the record I've typically been in favour of the Euro as a principal, but of late have begun to seriously question it's validity for exactly the reasons Friedman alluded to.
posted by chill at 3:23 PM on September 17, 2003

skallas.
oh right. i was wondering because this interview is hardly frank or sobering. in fact it sounds like they worked on the questions and answers for some time.
posted by carfilhiot at 3:29 PM on September 17, 2003

to say something as glib as mass unemployment is good, just shows him to be stupid.
>

Well I wouldn't go that far. I have great respect for Mr. Friedman and I think he was probably just over-simplifying his statement for the audience. I think his response would be slightly different if he was being interviewed by an economics journal, for example.
posted by gyc at 3:34 PM on September 17, 2003

Milton Friedman is a truly brilliant man and, being devoid of patronizing feelings, never fails to the invite the reader to think about life as it is and (within the limits imposed by natural inequalities) how to improve it. Excellent post.
posted by 111 at 3:39 PM on September 17, 2003

In fact, all of the progress that the US has made over the last couple of centuries has come from unemployment.

that is absolutely ridiculous. if this were true, then everyone could simply cease their employment, and the resulting unemployment would propel us into progress beyond our wildest dreams. totally erroneous. cart before horse.
posted by quonsar at 3:45 PM on September 17, 2003

Before any economist is allowed to speak, he should be hit in the testicles with a softball, thrown by a person fortunate enough to be unemployed. The pain might cause the economist to consider the people, he is theorizing about.
posted by larry_darrell at 3:56 PM on September 17, 2003

For me this part was the hardest one to swallow:

Different countries are in different stages of development. It('s) appropriate for them to have different patterns, different policies for ecology, labor standards, and so forth.

Maybe I'm just too goddamn idealistic but I thought that human rights and nature were somehow, u'know, universal?
posted by hoskala at 4:52 PM on September 17, 2003

Maybe I'm just too goddamn idealistic but I thought that human rights and nature were somehow, u'know, universal?


I think what he was getting at was that during the West's industrial revolution, we had pretty loose labor and environmental standards. That was what made it easier for us to quickly industrialize. It would be unfair now to hold developing countries to our current standards during their own industrial revolution.
posted by gyc at 4:57 PM on September 17, 2003

Some thought that those labor practises were unfair even then (Marx...).
posted by hoskala at 5:11 PM on September 17, 2003

It would be unfair now to hold developing countries to our current standards during their own industrial revolution.

Yeah, and because America has had lots of slaves, it shouldn't criticize slavery elsewhere. It's just part of the natural development of civilizations. The world according to Friedman.
posted by Eloquence at 5:18 PM on September 17, 2003

Milton Friedman is a truly brilliant man and, being devoid of patronizing feelings, never fails to the invite the reader to think about life as it is and (within the limits imposed by natural inequalities) how to improve it. Excellent post.

I have to disagree, your post sucked.
posted by carfilhiot at 5:28 PM on September 17, 2003

I've hated Uncle Miltie ever since he invited me out to lunch and stuck me with the check.
posted by yerfatma at 5:28 PM on September 17, 2003

Maybe I'm just too goddamn idealistic but I thought that human rights and nature were somehow, u'know, universal?

In theory, yes, in practice, no. If the labor is relatively cheap and there are no restrictions, I (speaking as a good manager) would "hire" slaves. The restrictions are usually imposed by people (and by many of them), but since they are now working only for food, they have no power, so no rights. And, if one has a strong preference of air-conditioning in SUV over natural fresh air, nature is guilty and deserves to be punished. And finally, the last argument, those rights are not static; they did not exist (in practice) 2000 years ago. Could you imagine what we will come up with in 1000 years (yeah, assuming we are still around and doing well)?

Eloquence: "Yeah, and because America has had lots of slaves, it shouldn't criticize slavery elsewhere. It's just part of the natural development of civilizations. The world according to Friedman."

There is no good method to transfer social skills across groups of people. We cannot handle well even small individual advantages, such as inventions. Every time there is something new, say automation showed up, few people were better off but many others were fired (personally I would prefer money to go to acquiring new skills while at work rather than to Social Security.) And, when it comes to social skills, almost all the advances, from the Bill of Rights to labor unions, were paid in blood. A transfer of these skills occurs for example when one country has the same problems that a developed country had years before, and now, its people together decide to copy the solution of the developed nation (think how US constitution inspired many others). However, I do not believe social skills can be imposed on a group of people. You know, "team work" is still a novelty in the developing world.


"Well, they only consider half of the problem. If you move jobs overseas, it creates incomes and dollars overseas. What do they do with that dollar income? Sooner or later it will be used to purchase US goods and that produces jobs in the United States."

Economics is not only about what is going to happen, but also about when. Friedman has the luxury to take the long view. In the long run, tens, hundreds of years, of course it will be good for US. Until then … Growth convergence itself is an interesting (Chinese saying meaning) field in economics.


"It's an interesting thing. If you ask yourself, "what tax system would be best for the low income group," it's the opposite of what they're saying there. It would be a system with a maximum amount of taxation rather than a minimum."

Yeah, but he is not considering the real life utility function. Instead of being only an increasing function in the number/quality of goods consumed, the utility function should also be decreasing in the wealth of others. If others have more than I have, I "feel poor"; I do not care that I can buy ten times the amount of goods my grandfather was able to buy 50 years ago, when my neighbor just bought this new BMW. After all, we are just human.
posted by MzB at 6:55 PM on September 17, 2003

Friedman wasn't saying food is produced by 2% of the population because the rest decided to leave the farms. If you read what he's saying, he's saying that if it takes 19 people to feed 20 people, it's really not possible to have major industries outside of agriculture.

The argument mostly makes sense as a retort to the notion that increasing productivity is a bad thing because it forces a percentage of workers to leave the industry, which is not a fun thing personally if it's all you've done, but it's absolutely vital to economic, scientific, and technological progress.
posted by dagnyscott at 7:28 PM on September 17, 2003

"Government spending now amounts to close to 40% of national income not counting indirect spending through regulation and the like. If you include that, you get up to roughly half."

Exsqueeze me? Is this nitwit seriously suggesting that federal spending as a percentage of the GDP is 40%?

It's more like 20%.

An interesting note about the link above-- the graphs in that article are using correct data, but they don't support the article's conclusion. The House page concludes:

"Today, federal spending is nearly 10 times greater than it was in 1940, even after adjusting for inflation and population growth."

This is utter bullshit. From the graphs, we see that spending relative to GDP is less than half of the level in 1940.

Lies and the lying liars who tell them.
posted by Cerebus at 8:09 PM on September 17, 2003

What gets me about these free marketeers is that the social efficiency of free markets depends on perfect competition, which means no single economic actor is large enough to affect the price.

A free market also implies that labor is free to seek the highest wages possible, just as capital is free to seek the lowest. That's the only way the system is ever fair.

Needless to say, labor isn't free to move at will. Even hinting to a right winger that one way to, say, correct the flight of industry to Mexico would be to open the border, and he'll have an aneurysm.
posted by Cerebus at 8:15 PM on September 17, 2003

Government spending now amounts to close to 40% of national income not counting indirect spending through regulation and the like. If you include that, you get up to roughly half."

Exsqueeze me? Is this nitwit seriously suggesting that federal spending as a percentage of the GDP is 40%?

It's more like 20%.

No. He doesn't suggest that federal spending is 40% of the GDP. He states that government spending nearly is-- a fact that anyone with a basic grasp of arithmetic could infer from the "Government Expenditures" chart in your link.

I mean, you're free to deem all the Nobel winners nitwits if you'd like, but your invective does little for the strength of your argument when the assumptions upon which you base it are completely unsubstantiated.
posted by trharlan at 9:39 PM on September 17, 2003

Cerebus, look at the graphs again. Look at them closely.

Federal spending skyrocketed during WWII, for obvious reasons. 1940 was before the US entered the war, and it looks like Federal spending was a little under 10% of GDP.

To get the total percent of GDP spent by government, you have to add the Federal and State/Local numbers. (Taxes aren't any less real just because they're collected by the State or the school district.)

Federal government spending this year is expected to total nearly 20% of GDP, up from 18.4% just two years ago.

Which is what the graph shows. If you add that to the State/Local percentage, you get close to 40%.

And 'spending' is different from 'percentage GDP'. Friedman is talking about spending in terms of GDP. The House Policy Committee appears to be talking about spending in inflation-adjusted dollars. Because GDP rises, federal spending can be 10 times greater in real dollars than in 1940, while still being only twice the percentage of GDP.

BTW, the worksheet the HPC site links to shows that Federal outlays, inflation adjusted, in 1940 were 94 billion. In 2001 they were 1693 billion, which is actually about 18 times higher; but they say they're adjusting for population, too.

Lies and the lying liars who tell them.

Care to apologize for that?

on preview: trharlan beat me to it.
posted by Slithy_Tove at 9:45 PM on September 17, 2003

"....I am favor of cutting taxes under any circumstances and for any excuse, for any reason, whenever it's possible. The reason I am is because I believe the big problem is not taxes, the big problem is spending." - Tell that to GW Bush, Mr. Friedman

Friedman's track record is a textbook example of the vast gulf between theory and reality. I don't believe that he intentionally sanctioned death squad activity in Chile, or that he condoned the looting of IMF loan money from the national treasuries of developing world nations .....No, Friedman just couldn't imagine these possibilities.

But he was more than willing to turn the screws on developing world countries to force those nations' poor classes to cough up payments (on loan money which had been rather blatantly stolen by the elite classes).

But Cerebus pegged the gaping hole in Friedman's arguments (by way of Adam Smith) - "A free market also implies that labor is free to seek the highest wages possible, just as capital is free to seek the lowest. That's the only way the system is ever fair."

Corporations can relocate - to Bangladesh, Mexico, Thailand or China - with ease. But - please - wake me up when 2 billion desperately poor developing world people come knocking on the USA's door looking for better paying work. NOT.

Friedman is a fossil. Stick him in a glass case as "exhibit A: Economist, Chicago School".
posted by troutfishing at 1:26 AM on September 18, 2003

Someone remind me to use a ruler the next time I look at a graph with unmarked grids. Oops. Mia culpa.

However.

When most people talk about "government spending" it's usually in the context-- as this article was-- about federal spending. If Friedman meant government & state spending, he should be more explicit.

Looking at the graphs (with a straight-edge this time, honest!) 1940 expenditures by both state and federal governments was slightly more than 20%; whereas as of the end of the graph (late 1990's), it's about 37-38%.

While I understand that outlays *are* higher in adjusted dollars, so too is the GDP. A more correct way of looking at government spending is as a percentage of GDP, not dollar amounts. It's the only way a fair comparison can be made.

By way of example, I spend far more now on my housing than I did when I was poor and living in a crappy apartment, even adjusted for inflation and the increasing size of my family. However, as a percentage of my *income*, the expense has remained flat in those terms (actually, now that I think of it, I spend somewhat less as a percentage now than I did then).

So either he's 1) being intentionally deceptive, or 2) fundamentally incorrect about the nature of his data. Either way, it speaks not well of Mr. Friedman, Nobel prize or no.

And of course I'd still like to hear reasons from the Right as to why capital should be freely mobile but labor should not. After all, Adam Smith, the chief God of the Free Market pantheon, said *exactly that*. That makes y'all heretics, I should think.

But I'm not expecting answers.
posted by Cerebus at 5:57 AM on September 18, 2003

Can anyone tell me what was so great about America in 1940 that would cause me to some way benefit from the country being like that, again, compared to the state of the country now?
posted by deanc at 6:25 AM on September 18, 2003

the big problem is spending." - Tell that to GW Bush, Mr. Friedman

Yes but over spending is actually the Democrats fault, because they are not stopping Bush from spending ;) Just like it was the republicans who can take all the credit for Clintons low spending. Just like it was Ronald reagan who can take credit for the strong economy during Clintons years. Notice a pattern here?
posted by carfilhiot at 8:24 AM on September 18, 2003

I don't see how including state spending is in any way deceptive. You're talking about the whole economy, you might as well talk about the whole government. Besides that, he specifically said that that's not counting corporate and personal expenditure to keep up with new regulations, so you can assume that he wants to include everything except that. If you want to talk about federal spending, say federal spending, not government spending. Spending by the states is an incredibly important part of the argument, especially considering the number of unfunded mandates from the feds to the state.
posted by dagnyscott at 5:03 PM on September 18, 2003