Capitalism and Freedom: Fortieth Anniversary Edition First Edition

Here in the United States (and to a larger extent the modernized western world) we are fortunate to exercise a variety of freedoms. The freedoms of speech, press, and religion are the obvious ones, but also others like the freedom to send our children to the schools of our choosing or the freedom to relocate to another state if we so desire. In addition to these, we also value our freedom to spend our own money where and how we choose.The central principle to this book is that free market capitalism is the surest way to achieve maximum freedom for the people. While this is true in theory, Friedman shows how this has become less and less an actual reality. Governmental policies and interventions have gradually eroded our economic freedoms and we have largely been blind to this truth because these freedoms are lost incrementally slowly over long periods of time and are thus hard to recognize.The first major governmental move into the economy came with the establishment of the Federal Reserve. When it was first established (1913) the global economy was backed by a gold standard. However, within only a few short years, the First World War occurred and that standard was quickly abandoned. With these developments, the Fed was given the unfettered ability to print money and put it into circulation. As the quantity of dollars has increased, the relative value of each dollar has decreased. Unless your income has also gone up, this means that you are poorer.Ever since then, the government has gotten its sticky fingers farther and farther into the pocketbooks of its citizens. This is evidenced by implementations such as tariffs, fair-trade laws, import quotas, production requirements, and trade union restrictions on employment. Things like registration, certification, and licensing requirements across a spectrum of viable potential occupations and job opportunities hinder people from pursuing them (Think about qualified doctors who emigrate to a new country and are unable to practice medicine because their new home-country requires renewed certification, something that can take years and lots of money.) Governmental approval of new taxes and hikes in existing taxes all to pay for publicly funded programs have often been endorsed with little to no forethought as to the potential negative ramifications (for example, if you set welfare benefits at a particular income level, does it incentivize people to remain just below that level so as to continue getting governmental monetary assistance, thus further motivating people to remain unmotivated towards improving their economic standing in society?) And when the time comes for unnecessary programs to be eliminated, how often are they kept well past their expiration date?One of the more well-known programs that gets the most scrutiny is Social Security, and depending on the lens with which you view it, determines its importance to you. Friedman makes two such arguments. On the one hand, it seems to be an imposition on our financial freedom to make Social Security payments mandatory. If an individual prefers to live for today and not save for later in life, shouldn’t that be their prerogative? We can suggest that they don’t make such choices, but ultimately it should be up to them. It is wrong for the government to decide on our collective behalves, and to subsequently take money out of our pockets to enact the program. For the other side of this argument, Friedman writes: “The man who does not provide for his old age will become a public charge. Compelling him to buy an annuity is justified not for his own good, but for the good of the rest of us.” Through this lens, the government has a well founded argument for its implementation of Social Security, because its aim is to take care of society as a whole.Friedman suggests, and I agree, that there are only two areas in which the government should impose itself economically. The first is in setting up the rules of the ‘game’ and regulating them. Even a free market economy can become victim to cheaters and swindlers, and the government should act as the enforcer of the rules. The second is to limit the monopolization of any one industry. If a single entity has control over a particular segment of the market, they can unfairly exercise control over it. Historical examples include Andrew Carnegie’s Steel Company and John D. Rockefeller’s Standard Oil. Today, monopolies are even more prevalent and predatory than ever. Wal-Mart, Amazon, and Target own our commercial goods business. Google, Facebook and Twitter own our information and communications. The Walt Disney Company alone owns ABC, ESPN, FX, Hulu, the entire Marvel universe (including toys, movies, and theme park rides,) Star Wars, Pixar, and more. Friedman equates monopoly and government when he writes: “Our minds tell us, and history confirms, that the great threat to freedom is the concentration of power.”We all know that we need the government because without it we would have anarchy, but what is the right amount? It seems clear that as it currently stands, governmental intervention is too broad and needs to be scaled back. This is exemplified by a quote close to the end of the book: “state help kills self-help.” The more we ask the government to do for us, the less we do for ourselves (and the more we take for granted.) Let us not forget another old adage: “Give a man a fish and you feed him for a day; teach a man to fish and you feed him for a lifetime.” With the implementation of Social Security, the government has decided to give us all fish. In order for our society to survive longer and prosper into the future, we the people must learn to fish for ourselves.

Nobel laureate Milton Friedman is quite possibly the most brilliant economist in the world today and a man on the cutting edge of libertarian (classical liberal) thought. And in "Capitalism and Freedom" he lays out a basic political philosophy in the classical liberal tradition in the first two chapters of the book and alternately defends and expands upon that premise for the remainder of the work. In much the same way that F. A. Hayek - an ideological predecessor - spelled out his basic thesis in one concise book and then fleshed it out in another, Friedman provides the basics here and fleshes them out in the larger (and somewhat better written) "Free to Choose". In addition, while not wishing to rehash some of the detailed support for his assertions, he does - through footnotes - provide the reader with opportunity to delve deeper.Given the nature of the subject matter and the expertise of the author, the writing can be dry and may appear difficult to approach, particularly in the initial chapters, but the reader who sticks with it will be well rewarded. Subsequent chapters, largely adapted from lectures by the author, are easier reads. And Friedman avoids, for the most part, the economic jargon that can make works such as this hopelessly confusing to the layman.Friedman is often tagged with the "monetarist" or "supply-side" labels (if you don't believe me, read some of the other reviews), largely because he believes that these methods of economic manipulation are infinitely preferable to the fiscal manipulation that has been the norm in this country. Those who actually READ this book will find that he advocates intervention by neither means, preferring instead stable monetary growth removed from the hands of either fiscal or monetary interventionists.He provides one of the most succinct explanations of the monetary actions (of the Fed) that created and worsened the Great Depression that I have ever come across, though mentioning only briefly the fiscal policies that subsequently lengthened it considerably: the New Deal and, to a much lesser extent, Smoot-Hawley. This alone makes the work valuable.He goes on to examine a number of things that are now taken for granted in this country (the Welfare State, Social Security, public education, licensing requirements) and asks the question, "Have these government actions made things better or worse?" The record is less than stellar (especially in the subsequent 40 years since this was written). And he proposes some alternatives such as the negative income tax and other alternative roles for government that are, arguably, less intrusive on the liberty of the citizenry.And he uses examples that are easy to follow and understand including one about men stranded on desert isles that is NOT as presented in another review.As an economist, I would say that this work has aged remarkably well. The analysis has clearly not become dated as have those of Galbraith and, to a certain extent Keynes. [Keynes WAS a genius, providing the mathematical and econometric bases for much of current economic thought, but, contrary to the assertion by another reviewer, much of what he proposed should be done by the state has been discredited.] Friedman, for example, was one of the first to advocate a school voucher system, which is only now receiving serious attention.It is noteworthy that a number of economists from the left have criticized Friedman in general and this work in particular. But those attacks (by Krugman, Herman and Diesing, among others) have proven to be, for the most part, without merit.If you accept the basic premise that freedom is vitally important and that the actions of the state should be viewed from that point of view, you will find this work to be invaluable. If not, you will certainly not be pleased. And if you believe the utter nonsense that capitalism is in any way "oppressive", well, if you can't see reality...