What Kool-Aid ? The Free-Market Kool-Aid. Call it neoliberalism, the Washington Consensus, the Chicago School or radical laissez-faire. It's Reaganism, Thatcherism or pro-business conservatism. It's a toxic blend of anti-democratic government-hating, tax-cutting, deregulating and privatizing that means suicide for the people of any country that tries it, and murder for any country that is forced to institute it.
No one did more to popularize, to legitimize, "free-market capitalism" than Milton Friedman. Hayek may have been there first with some of the ideas but Friedman's efforts as salesman were what convinced Presidents, Prime Ministers and voters that government is evil and that the private-sector will take care of everything. We can all see the results of putting these ideas into practice. The experiment has been tried and it has failed, here is how it began.
This diary is a brief look at the arguments and methods in Friedman's influential book Capitalism and Freedom. Those interested in his biography can see his Wikipedia entry. Paul Krugman wrote an excellent summary of Friedman's contributions for The New York Review of Books, here.
Capitalism and Freedom was written in 1962 and based on a series of lectures its author gave in June of 1956. Friedman came back and wrote new prefaces every 20 years, one in 1982 and another in 2002. The '82 preface has a triumphant tone. He had advised Ronald Reagan's presidential campaign and been a member of the President's Economic Policy Advisory Board. He had made a TV series, broadcast on PBS, called Free to Choose which spawned a book by that same title. His ideas were widely accepted and were becoming government policy in England and the US. The Kool-Aid was being passed around, many were drinking deeply. We can only wonder what the 2012 preface might have said given the recent spectacular failures that are the direct results of "limited government" and deregulation.
It has been said that "economics is politics masquerading as science" and this is certainly the case with Uncle Miltie's popular writings. C&F is not written for economists. It is written to persuade a general audience. It is a crude and over-simple anti-government screed. Consider this admission from the 1982 preface:
The ideas in our two books are still far from being in the intellectual mainstream, but they are now, at least, respectable in the intellectual community and very likely almost conventional among the broader public.
And so it was, and still is. Every wingnut you know, every conservative politician and MSM commentator still repeats Friedmans's garbage as though it were scientific fact. It is based on two ridiculous notions: the denial of private-sector economic power and the assertion that all government is tyranny.
The first thing that struck me upon diving into C&F was Friedman's annoying habit of referring to himself and his ideas as "liberal". He meant, of course, a "classical liberal", as in "libertarian". This archaic liberalism dates from before the rise of the modern business corporation when the only threat to freedom was the government. Reading Friedman you would never guess the private economic interests have any power at all. Monopoly is nothing to be concerned about and the largest banks and corporations are individuals, just like us. No need for what Galbraith the Elder called "countervailing power". You and me and Goldman Sachs and BP, we're all just individuals and we don't need the government telling us what to do or eroding our freedom.
For Friedman all governments are the same. He sees no difference between an absolute monarchy, a representative democracy with a bill of rights or a communist dictatorship. All are governments, all seek to enslave us. This is the main rhetorical device in Capitalism and Freedom. Whenever he mentions government, terms like "totalitarian" and "collectivist" are sure to appear. There are only two choices: unfettered capitalism or Soviet style communism; deregulation or the Gulag. It's the argument from black and white, the argument from extremes. Here's an example of the false dichotomy, the whole book in a nutshell:
Fundamentally, there are only two ways of co-ordinating the economic activities of millions. One is central direction involving the use of coercion - the technique of the army and of the modern totalitarian state. The other is voluntary co-operation of individuals - the technique of the market place.
Gee Uncle Miltie, couldn't our voluntary co-operation be in the form of a democratically elected government ? Couldn't we chip in together for schools and fire departments ? Couldn't we have our representatives write laws to prevent environmental or economic catastrophe ? I guess not, that would be totalitarian.
Those are the arguments then. Those are the simple-minded polemics that gave the book its power. There's more to it though. It's also the conservative's wish list. The Republican legislative agenda since 1980 is in this book. In the second chapter, "Government in a Free Society", he gives a list of 14 activities that the government should not be involved in. No.2 is tariffs on imports. No.5 is the minimum wage. No.6 is "detailed regulation of industries" including "detailed regulation of banking". No.7 is the FCC. No.11 is military conscription, I can go with that one, and No.12 is the national parks, a nasty bit of tyranny if I ever saw one.
It's all in there. He calls for tax-cuts for the top brackets and abolition of the corporate income tax. He rails against the graduated income tax and calls for a flat tax. He points out the harm done by unions and building codes. He advocates the privatization of Social Security and a voucher program for public schools. It's a blueprint for neo-feudalism. In case you have any doubts about what complete corporate control might be like, there's this on corporate responsibility:
Few trends could so thoroughly undermine the very foundations of our free society as the acceptance by corporate officials of a social responsibility other than to make as much money for their stockholders as possible.
So there you have it, the original source of the Free-Market Kool-Aid, Milton Friedman's
Capitalism and Freedom, from 1962. We've endured a 30 year class war that has all but wiped out the middle class. We've had the S&L crisis, the Enron collapse and now a global financial crisis that threatens to take down the entire planet. We may have allowed an unregulated oil company to kill every living thing in the Gulf of Mexico. All of it attributable to deregulation and "free-market" economics. Why did our elected officials drink the Kool-Aid, why are so many of our fellow citizens screaming for more ? Who knows ? Who cares ? It's probably too late.