Milton Friedman

A lot of people think that the economist Milton Friedman (1912-2006) was a god. In his lifetime he was viewed as the god of the free market. His economic theories were adopted by, to name a few, Margaret Thatcher in Britain and Ronald Reagan in the U.S. Those economies, like may others, found new life in some of his suggestions, like tight monetary policy, tax cuts and privatization.

What first brought Friedman to prominence, and I think won him the Nobel Prize in Economics (1976), was his theory in monetary policy. He believed that the proper control of the money supply was the fundamental key to a healthy economy and a stable world. Good monetary policy was the key to keeping down inflation, an occurrence that has in the past caused great hardship and instability in many nations. Friedman's fame grew from his theory that if the U.S. had better managed its monetary policy or had controlled its currency better during the Great Depression, it may not have occurred. Likewise, it is believed that if Germany, after WW1, had not printed money like crazy in order to fulfill the financial demands put on it by its vanquishers, it would not have descended into the economic abyss it did and therefore become ripe for the despotism of Hitler.

My thought is that we learn from experience. So I think one should take Friedman's idea, that the Great Depression could have been prevented if the U.S. had managed it currency better, with caution and skepticism. What Friedman suggested, by the sounds of it, is that the U.S. and others, in the 1920's and 30's, had the wherewithal to be good monetarists, but failed to act on it. However, I think they had no such wherewithal in those days because people back then were still inexperience in such matters, such as prudent monetary policies. Nevertheless, people still insist on transposing the knowledge we have today on a less sophisticated world of the past. I mean, sure, with the knowledge we have today we probably could have prevented WW1 or WW2. But that was a different world, absent of the knowledge and the dynamics we have today.

Friedman's policies have railed against socialism. Now, I am not a socialist but I have socialist tendencies, like universal health coverage. Such coverage can lift an anxiety of people’s shoulders which potentially can free people to function better. And by what I see in the countries that do have it, for the most part, the practice of medicine works better than in the U.S. and the costs are lower, and life expectancy is longer. I thus believe in a mixed economy in which aspects of capitalism and socialism are mixed and balanced off against each other. And this type of governance is what is generally emerging around the world, including the US, albeit there, kicking and screaming all the way.

I appreciate and believe in some of Milton Friedman's ideas. And they would probably all work if the conditions were perfect. One thing he did believe is that if you have a free and open market in anything the facts and information about it should also be free and accessible. This is something that did not occur in the 'subprime market' and therefore the calamity that surrounds it. The information and facts surrounding subprime loans and their derivatives was not divulged or been honest. Instead, much of the facts and reality about the subprime market was manipulated by Wall Street and thwarted by the Bush administration in order to fulfill its own agenda of keeping money cheap so as to bolster its "ownership society".

Friedman realized that a measure of regulations and consumer protections had to be in place to keep markets honest and mutually beneficial. He knew that the unfetter market were not on their own the 'hole grail' because of the potential of human weaknesses and failures. This is something the present administration in Washington failed to see in its economic policies of free markets. In the process it has made the U.S. economy worse because it blindly believed that free markets left on their own could solve everything.

Milton Friedman's fundamental policies, in the wrong hands, have encouraged a naive and reckless approach to economic activity. They have also encouraged abuse. But he would be the first to recognize that that's what comes with the territory due to the natural capacity for humans to get things wrong.