Wednesday, February 08, 2006

Milton Friedman

(Special thanks to Jon Henke over at Q and O for tipping me off on this.)

Big news! There is a Milton Friedman interview over at NPQ. The 93 year old Nobel Prize-winning economist is one of those people who should be listened to whenever he speaks.

I will take issue with one thing Dr. Friedman said:

"The big issue is whether the United States will succeed in its venture of reshaping the Middle East. It is not clear to me that using military force is the way to do it. We should not have gone into Iraq. But we have. At the moment, the most pressing issue, therefore, is to make sure that effort is completed in a satisfactory way."

Iraq was a situation where we could go in now with minimal loss of life, or go in later with tremendous loss of life. We made the right call.

At least he recognizes we have to finish the job there.

However, I fully support the rest of what Dr. Friedman says. Following are a few gems of his wisdom:

"The great virtue of a free market is that it enables people who hate each other, or who are from vastly different religious or ethnic backgrounds, to cooperate economically. Government intervention can’t do that. Politics exacerbates and magnifies differences."

On China:

"The same thing will happen in China that happened in Chile. Political freedom will ultimately break out of its shackles. Tiananmen Square was only the first episode. It is headed for a series of Tiananmen Squares. It cannot continue to develop privately and at the same time maintain its authoritarian character politically. It is headed for a clash. Sooner or later, one or the other will give.

If they don’t free up the political side, its economic growth will come to an end—while it is still at a very low level.

The situation is not all bleak. Personal freedom has grown greatly within China, and that will provoke ever more points of conflict between the individual and state. There is a new generation that is educated and travels abroad. It knows firsthand the alternatives out there. So, the authoritarian character is softening somewhat.

Hong Kong is the bellwether. If the Chinese stick to their agreement to let Hong Kong go its own path, then China will also go that way. If they don’t, that is a very bad sign. I’m optimistic.

I like it when a Nobel Prize winning economist sums up what I have been thinking all along. Although he put it much better than I would have.

On the Internet:

"The Internet is the most effective instrument we have for globalization."

On inequality in free markets:

"On the question of whether inequality of the market might lead the less-well-off democratic majority to push for state control, I’m not so sure. The important issue is not how much inequality there is but how much opportunity there is for individuals to get out of the bottom classes and into the top. If there is enough movement upward, people will accept the efficiency of the markets. If you have opportunity, there is a great tolerance for inequality. That has been the saving grace of the American system."

I added the bold. As long as opportunity is present, the Democrats may as well be screaming their big government solutions to a wall. Of course, the Republicans need to be aware of this too. On the U.S. fiscal deficit, Friedman added:

"If the US government spends 40 percent of the nation’s income, as it does through either borrowing or taxes, that income is not available for people to spend. The deficit is an indirect method of taxation. Of course, politicians prefer to borrow instead of tax because then someone down the road has to deal with the consequences."

In other words, if the Republicans don't get their spending habits under control, they will eventually have an adverse effect on the economy, thereby limiting opportunities available, and giving the Democrats an opening to get into power.

All in all, a very thought-provoking interview with Dr. Friedman.

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