Milton Friedman: Progressive Social Justice Thinker

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Barry Stocker’s Weblog (web.me.com) with visual content

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I’ll be posting a link soon to a summary I wrote of Milton Friedman’s book Capitalism and Freedom for LiberalVision.  I’d like to precede that with reasons why Friedman might not be the right-wing villain of much left-wing imagination, and indeed might not be what a lot of people on the right might want him to be, certainly the more socially conservative, authoritarian, national security-nationalist, and big business, orientated parts of the right.

Points listed below, mostly referring to Capitalism and Freedom, but some others as well.

Friedman argues that businesses are guilty of trying to rig markets and get economic favours from governments.  This increases inequality as economic resources are directed to those who are already rich and powerful.

Government should create an unconditional basic income, he teferred to as ‘negative income tax’, because the income information on tax forms would e used to establish a basic income for those with low or zero earnings.

Public housing is bad because it inevitably groups together a disproportionate number of the socially and personally dysfunctional, since some proportion of the poor have low income because of those kind of problems.  Friedman certainly did not suggest that is the only, or main, reason the poor are poor, but obviously it is a factor and Friedman thought that a very negative atmosphere would be created for the poor by concentrating such people together.

The poor should have a choice of schools, and not just those rich enough to afford private schools.  This is why Friedman advocated ‘education vouchers’ which can be used to purchase education at a number of schools.

Minimum wages are bad for the poor, because they make a few people better off while making others even poorer because they cannot find work at the legal minimum, depriving them of a chance to move up the ladder of income levels in the labour market.  This effects the poorest, most marginal, and most discriminated against groups the most.

Rent control is bad for the poor, because it reduces the incentive to rent out property, and build for rent.  Those who receive the benefits of lower rent are a minority and find that low rent leads to bad service from landlords who are not making money.  Everyone else loses out even more because less housing is available.

Government should provide public goods, which Friedman referred to as positive neighbourhood effects, that is generalised goods which cannot be charged for in any kind of practical way.

Government should act against public bads like pollution, bad neighbourhood effects, because the more individualistic reactions to them as in court action cannot hope to compensate everyone harmed.

Inflation control should be at the centre of economics.  This protects the incomes and savings of the poorest, the people who are closest tot he margin of destitution if the value of incomes and savings rapidly diminishes.

High income taxes for the richest entrench inequality and prevent social mobility, because if we lose most of every extra bit of income we earn as we move up the income scale incentives are strongly reduced to make it into the highest income brackets.  High social mobility evens out inequality over time, though it can increase it at any one moment, because over time individuals move between income levels.

These objections to high taxes on high income were recognised by two Democratic presidents who reduced such taxes: John F. Kennedy and Lyndon Baines Johnson.  LBJ was the most left-wing president in office after Franklin Delano Roosevelt, and massively increased social spending in his ‘Great Society’ project.  Even under Reagan, one of the major tax cuts cam about through a bill co-sponsored by two Democrats: Richard Gephardt and Bill Bradley.

Highly regulated industries prevent competition, by making it more difficult for new and small businesses to enter the market, which raises prices for consumers and slows economic growth.  This had an influence on deregulation of airlines and road transport in the 1970s, sponsored by Senator Teddy Kennedy, one of America’s most famous left-liberal political figures in US history, and was supported from outside Ralph Nader, then a consumer rights activist, and now the most famous American politician to the left of the Democratic Party.

Friedman was a social libertarian who advocated legalisation of drugs and an end to military conscription in peace time.

Friedman, and free market ideas, have been adopted by the conservative tight,  but that does not tell you much about reality.  Friedman thought that some policies of Thatcher and Reagan were in line with his ideas, but definitely did not think that they had followed his position of a real break with the corporate-political  nexus, the way that regulation and intervention always suits entrenched interest groups.

A standard accusation thrown at Friedman is that he was connected with the dictatorship of Augosto Pincohet in Chile.  It’s true that some of Chile’s more market oriented policies were welcomed by Friedman, but he never endorsed the dictatorship.  It’s true that many regime economic advisers came from the economics department at the Pontifical Catholic University, where there was a partnership with the Chicago department where Friedman was a professor.  However, the Chicago department, then as now, was a large department with many big names in economics, so there is no way that links with Chicago could have turned the ‘Chicago boys’ in Chile into instruments of a Friedmanite plan. though they were certainly ell educated in his ideas.  Friedman visited Chile in the early years of the regime, and met Pinchet, but did not endorse the regime.   Advice is not endorsement.  The speeches Friedman gave in Chile mentioned the role of government in undermining centralised government, far from an endorsement of authoritarianism.  Later on Friedman made a explicit link between the economic advice he gave and the intended gaol of weakening the power of a strong state.  Friedman gave advice and lectures throughout the world in countries with every possible kind of government.  Though Friedman welcomed market oriented economic changes in Chile, how could he not welcome such changes in any country, some of Pinochet’s policies were in direct contradiction with his views, most obviously keeping the copper industry nationalised.  The massive corruption that Pinochet and his family were later found to have been engaged in, was exactly the kind of consequence of political intervention in the economy that Friedman warned against.

Mill: Liberty/Socialism in Principles of Political Economy

Primary version of this post, with visual content, at Barry Stocker’s Weblog.

Since I worked out that John Stuart Mill’s Principles of Political Economy contains ideas in contrast with those of On Liberty I have obtained two copies of the book. Getting a definitive edition of the Principles is more difficult than I realised. I bought the OUP Oxford World’s Classics edition before realising that it had left out the first two books, though it did add Chapters on Socialism which were written at the time of the 7th edition of the Principles. The OUP edition is based on the 7th edition, and I suppose the original 7th edition left out the first two books, but I’m not sure. If that is not the case then OUP’s behaviour is very poor. The only way, I am aware of, for getting a definition version with all variations from all editions is the to get the Liberty Fund edition in two volumes. Liberty Fund editions are very cheap but not widely distributed. Their edition is also freely available online at the Online Library of Liberty.

I am looking now at a rather interesting edition a friend lent to me. It is edited by J. Laurence Laughlin and published by D. Appleton and Company of New York in 1901, though as Laughlin’s preface is dated 1884, I presume this is a reprint. The notable thing about Laughlin is that he was the founding chair of the Department of Economics at Chicago University. That means he founded one of he world’s great economics departments, associated most famously with Milton Friedman. Other major economists associated with the department include Hayek, Robert Lucas (the biggest figure in Rational Expectations), Gary Becker (the biggest figure in Behavioural Economics) and many other significant figures.

Laughlin provides a bridge between Mill and those figures, and seems to have been a major figure in market orientated thinking in his own time. Laughlin edits Mill’s Principles as part of the cycle in which the book was a major economics text book. Laughlin’s appropriation is somewhat crude, he adds an essay on the history of economic thought. interpolates his own comments, maps and charts, mostly referring to the United States. On some occasions he says he has deleted comments by Mill and replaced them with his own. It wouldn’t happen now, fascinating to see how it happened then.

The main points I have picked up from my reading so far, and checking through the online version is that Mill is less of what we would now call a free market libertarian in his economics than in On Liberty. This is surprising, at least by present standards, because on the whole economists are much more inclined towards free market thinking than other social scientists. Surveys show most academic economists to be left of centre, but nevertheless favour market mechanisms over collective and state solutions in ways which would startle most of the left inclined.

What I’ve noticed so far is that Mill does explore socialism, or even communism, favourably as a hypothesis, and became more influenced by this hypothesis over time. He never abandoned a belief in markets but thought distribution of income could be detached from the market mechanisms of prices. What I also notice is the élitism and anti-liberalism compared with On Liberty. In the Principles, Mill suggests that labourers cannot regulate their own lives and expenditure competently and that there should be laws to prevent the poor from marrying early and producing too many children. Mill’s socialist side is very patronising, arrogant and tends to deprive workers of freedom. It fits into the criticisms that classical liberals/libertarians make of socialists. It’s quite close to what Hayek accuses socialism of leading towards in The Road to Serfdom, The even greater irony is that Hayek was a real Mill fan in his earlier years, following Mill’s journeys and editing some of his letters.

The Turkish Army and Economic Liberalism: Major Turkish Bank founded by Army Pension Fund is Sold to Foreign Investors

Readers who take an interest in Turkish society, politics and economics will be aware that the Armed Forces (English language website) are often linked with statist nationalist economics; and will have noticed that the present governing party AKP (English language website) is often credited with a contrasting spirit of economic openness. However, today I see that Oyak Bank (English language website) is going to be bought by ING. They announced it on their website a few days ago, but I picked up the news today from the print version of Cumhuriyet newspaper. Oyak is the pension fund of the Turkish army (a body of over a million members) and also provides general banking services to the public. The news has yet to be finalised but ING seem very confident and very happy.

This really does refute the idea that from an economic liberal point of view that AKP is good and the Turkish Army is bad. It is true that AKP has privatised and opened up the economy, but that has been the continuation of the policies of the previous government led by the arch statist-nationalist leftist Bülent Ecevit. AKP, like previous government parties, has expanded public employment to give jobs to its supporters.

The symbolism here is very rich. ING is Dutch in origin, tracing its history back to the Eighteenth Century. Therefore it comes from the Dutch commercial-financial-trading tradition, a tradition that goes back to the early years of the independent republic, the United Provinces, an inspiration to Early Modern Republicanism and the pioneer of stock markets and government finance through debt sold to private investors. That tradition strongly influenced British policy, including the development of the Bank of England and the London Stock Exchange, particularly after 1688 when William of Orange was invited by Parliament to rescue it from royal absolutism.

While I doubt that you would find many enthusiasts for pıre economic liberal doctrine in the General Staff of the Turkish Armed Forces, no doubt they would explain this in terms of strengthening the nation-state and no doubt political bargaining is part of the background, responsible people in Turkey and internationally can no longer refer to Turkey’s Armed Forces, who continue to be political players in Turkey, of being a barrier to economic liberalisation and internationalisation.