Sunday, November 6, 2011

Friedman's Capitalism and Freedom

A good week and a productive one: I finished the two paper proposals and sent them on their way, which meant that I finally had a chance to read Milton Friedman's Capitalism and Freedom--something I've been meaning to do since July, actually.

I'm not an economist, obviously, so my observations are just that: my observations.  I think Friedman's ideas are interesting, actually, but I also have some issues with them, so I'm going to be true to my moniker and write my impressions as a thinker who is still thinking about Friedman's philosophies and arguments.

I was not happy with the first chapter of Capitalism and Freedom.  Actually, I came dangerously close to having a conniption, but luckily, things settled down in the second and following chapters. 

I was left wondering whether a lot of people simply read the first chapter of Capitalism and Freedom, actually, because I'm pretty sure I've heard some of that chapter one mularky out there and I think it isn't really representative of Friedman's overall ideas and argument. 

I think this speaks to both the appeal and the danger of Friedman's style.  On the one hand, his ideas are very accessible and he expresses them clearly and forcefully.  I like that.  He clearly agrees with Einstein's adage, "If you can't explain it simply, you don't understand it well enough."

On the other hand, there's a danger in Friedman's style and approach.  It seems to me that, at times, he simplifies complex issues, not to make them understandable, but in order to create a very specific rhetorical effect and promote a very specific political agenda. 

He has clear biases (as we all do), but I think that his style makes it easy to miss the inconsistencies in his more propagandistic (if that's a real word?) statements.

An example.  He claims that "intellectuals" tend to be biased against economic freedom.  He states, "They tend to express contempt for what they regard as material aspects of life, and to regard their own pursuit of allegedly higher values as on a different plane of significance and as deserving of special attention" (8).

Come again?  I'll admit, this kind of statement is always going to tick me off, because I think that historically, Americans have often been anti-intellectual (and unfortunately, a lot of intellectuals have earned this negative reputation, obviously) to an extent that isn't present in a lot of other nations and cultures. 

I don't think tapping into that negative preconception serves any real purpose, though, and I object to it being used by someone who was a PROFESSOR at The University of Chicago... for 30 years.  After he studied at Rutgers and Columbia.  And he won the Nobel Prize in Economics too, for heaven's sake.

Friedman is an intellectual (and an academic), in my book.  Big time.  So he has no cause to be invoking derogatory labels about "intellectuals" and acting like he's not part of the academic system that clearly rewarded him.

In general, this was my primary complaint with the first chapter of Capitalism and Freedom: it made sweeping proclamations that paid no attention to historical nuance and at times, I felt it played fast-and-loose with facts in service of a larger political rhetoric. 

At times, I felt that, in order to make his political arguments, Friedman banked (sorry, can't resist the pun) on the fact that most people won't know he's broadly overstating or oversimplifying historical realities.

For example, I know of no Classics scholar out there who would blithely suggest that Ancient Greece was a capitalist society and that this explains the extensive political freedoms that Greek citizens enjoyed.  Such an assertion overlooks the fact that Ancient Greece was comprised of a variety of very different city-states (think "Athens" vs. "Sparta"), all of which were organized around very different political frameworks. 

It also overlooks the fact that the question of whether or not these different Ancient Greek civilizations participated in a market economy (as we understand the concept), has been extensively debated for years-- by Classical historians and economists alike.

So this is my main gripe with Friedman's overall approach.  I don't think it's acceptable to oversimplify a complex historical situation simply to make the rhetorical argument that you want to make for a general audience. 

It seems to me that this is using your intellectual knowledge to take advantage of your audience.  They won't know what they don't know, but you do, and you're using their potential lack of information for your own benefit.

All that said, I find the rest of Capitalism and Freedom interesting.  Friedman seems a bit idealistic about market economies in my opinion: he repeatedly identifies the market as a system of "voluntary cooperation" between the parties to an exchange. 

This would be nice, but I'm just not sure it's ever been the reality.  Friedman does address one of the main objections to his argument--namely, the formation of monopolies--but I think he tends to downplay the effects of monopolies on consumers. 

As I've said, I'm no economist, but my sense is that the goal of capitalism is to "corner the market"--to generate demand and engage in business practices that ultimately ensure that you are the primary (if not the sole) supplier of goods and services so that you can make a honking big profit at the end of the day.

As I read Friedman's philosohy, I kept trying to think of a single time when I've heard a competitive capitalist say, "Gosh, I'm just so glad I have so many darn competitors in my line of business.  It means that there is just that much more chance for all kinds of voluntary cooperation among buyers and sellers.  That's really what it's all about, after all."

Friedman also seems to believe that ultimately, a capitalist market can and will stabilize itself, if left to its own devices.  Although he's often caught in the philosophical dragnet of people who want to abolish the Fed and return to the gold standard, in fact, Friedman advocates neither of these courses of action in Capitalism and Freedom.

He's not a fan of the Federal Reserve, but his concerns primarily center around the ways in which, in the first half of the 20th century, the Federal Reserve made what were, in his opinion, bad decisions or failed to act when they should have, in order to avert financial crises.   They either did nothing or, when they did do something, they did the wrong thing. 

He doesn't suggest abolishing the Fed, though, just that it needs to be managed more effectively and that we should perhaps reconceptualize its role in the economy (a role that, in his opinion, should be minimal).

His chapter on fiscal policy in particular is quite interesting.  He objects to the use of the federal budget as a kind of "balance wheel" designed to offset a decline in private expenditures, and insists that, "[f]ar from being a balance wheel offsetting other forces making for fluctuations, the federal budget has if anything been itself a major source of disturbance and instability" (77).

So I find that, although I don't always like his tactics, many of Friedman's claims offer substantial food for thought.  For instance, he points out that, "In fiscal policy as in monetary policy, all political considerations aside, we simply do not know enough to be able to use deliberate changes in taxation or expenditures as a sensitive stabilizing mechanism" (78).

Seems to me like somebody ought to put that on a big old posterboard and wave it in front of everyone currently in power in Washington.

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