This is where it all comes from!

Milton Friedman's Legacy

/ by Sam Jordison

I'm a book critic. The general idea of the job is that if I think a book is good, I'll suggest you might want to read it. And if I think a book isn't much cop, I'll warn you away from it. But now I want to do something entirely different. I want to recommend a very bad book to you. Not just bad, in fact. Wrong. Evil. Stupid. And I don't just recommend it. I urge you to read it.

 

This book is Free To Choose, the bestselling 1979 economics manifesto by the (in)famous Chicago School Economist, Milton Friedman, and his wife, Rose. It will only take a few pages before you realise how important this book has become - and how dangerous. Reading it provokes two frightening and paradoxical thoughts:

 

1) So that's where it all comes from.

and

2) But this comes from nowhere at all.

 

Briefly, Free To Choose is one of the foundation texts of the kind of economics that says state control of anything is bad, while free markets provide more than just an 'invisible guiding hand'. For the Friedmans, they provide a kind of impossible magic answer to everything.

 

Early on, the Friedmans explain their theory using the example of pencil manufacturing. There's a famous idea in economics that no one person knows how a pencil is made, because the various parts, like the lead, the rubber and the brass ferule, involve a separate series of mining and manufacturing processes too complex and geographically widespread for any one person to master. The Friedmans contend that there is also a pencil market controlled by a ‘price system’. And that this market is near-miraculous.

 

For pages and pages, they delineate the complexities of the manufacture, all the different contributions to the pencil, and the way these can vary – the way forest fires, for instance, can impact the price of wood. Which isn't as boring as it sounds. The Friedmans are actually pretty good writers, with a decent turn of phrase and ability to keep you going through some pretty abstruse theoretical work.

 

The real problem lies in the fact that they're fanatics - and correspondingly blinkered.

 

So, in that pencil analogy, they also maintain that consumers are always in control of things at the end - point of the process. If prices go up, they can choose to pay more – or choose to make their pencil last longer, or perhaps buy propelling pencils instead. Which sounds smart, until you actually think about it. Because the Friedmans miss the essential thing that any eight-year-old can tell you about the actual end-users of pencils. They don’t have any choice. Because they’re eight. They’re school children. They still have to do the same amount of writing, no matter how much the pencil may cost. The truth is that if the price of pencils goes up, most people can’t adapt, or look elsewhere. They just suffer.

 

Following this flawed example, the Friedmans insist on the primacy of markets, describing them as a kind of perfect system that will correct and control themselves, just so long as they are left well enough alone. They don’t allow for the fact that consumers don’t always have a choice. Or that sellers will often cheat those consumers.

 

In spite of these obvious problems, the Friedmans' thinking has led to market structures being imposed in all sorts of ways that they shouldn't. They spread the belief that competition will magically make the education sector more efficient, instead of turning a public service into another place where shareholders get to soak us. They taught that private providers should control our health systems. And so, the Friedmans’ many followers decided power companies with confusing tariff plans and ever richer owners are somehow better than nationalised utilities. And so on.

 

It’s terrifying to go back to the source material and see the specious nature of the writing that has had such an influence on our lives. There’s plenty more where that pencil theory came from. In Free To Choose, the Friedmans also ask, in all earnestness, how it was that Britain managed to expand its economy even more successfully than the United State in the late nineteenth century, given that Britain didn’t have comparable land and mineral resources? They answer even more earnestly that it’s because Britain had a small government and free market economic policy. They don't factor in the country’s huge coal reserves. Or, even more astonishingly, the fact that it had an empire on which the sun never set. Elsewhere, they present the Great Depression as originating ‘in large measure from Federal Reserve policy’. It wasn't the private economy that was ‘unstable’ - the government was the source of the problem. So, don't blame the market failure of 1929 and all the subsequent bank collapses. In spite of all the evidence...

 

Elsewhere, they just make things up. They loathed communism with an equal and opposite passion to the fervour they felt for free markets. Which is possibly why they thought it was okay to pretty much make up facts about the way things were operating in Soviet Russia, for instance. They were bullshitting us all long before fake news became a term.

 

And okay, in 1979 the Soviet Union was largely closed off, so few people could check the truth of the book's claims about a foreman's wages, the likelihood of being shot, the way the black market operated. But the Friedmans also made dubious claims about Western democracies that could be more easily scrutinised. ‘Physicians are fleeing the National Health Service’, they wrote. But physicians weren't. ‘Talented people’ were also ‘fleeing’ Sweden because of the ‘high taxes’ necessitated by the ‘welfare state’. Example gave they none.

 

It was transparent nonsense. But still, millions of people bought the book. It was the non-fiction bestseller in the USA in 1980 and right-wing politicians lapped it up. It gave them just the excuse they needed to start tearing into the apparatus of the state - and selling it off to whoever cared to bid for it. You can still blame the Friedmans for the privatised electricity companies and their huge bills. Blame them if you’ve heard a Republican politician talking with loathing of ‘big government’. Also, if you’ve lamented paying so damn much to catch a privatised train service. If your country has had its state gutted and sold off to ‘private’ robber barons.

 

In short, Free To Choose helped usher us into a world ‘governed’ by markets - which turned out to be a world that wasn't properly governed at all.

 

On Milton Friedman’s death in 2006, President George W. Bush said, ‘His work demonstrated that free markets are the great engines of economic development’. Two years later, those engines started grinding and chucking out black smoke. Friedman missed the 2008 financial crash his ideas helped bring about. Not to mention the subsequent decade of misery and insecurity we've all endured. But if you want to know why things went so wrong - and what we need to change to get out of this mess, Free To Choose is still a very good place to start.

....
Sam Jordison
is co-director of the award-winning independent publisher Galley Beggar Press, a journalist and the author of several books including Enemies Of The People and the best-selling Crap Towns series.

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