Prof. Friedman Deals With An Enigma

Professor Milton Friedman of the University of Chicago is one of the members of the Research staff of the US National Bureau of Economic Research. He begins an article in the anniversary issue of Farmand (Oslo-Norway) with this remark: “There is a striking contrast between the record of performance of the free market and the attitudes held towards the free market by the public at large and the intellectual community.”

In his article, lie goes on to point out the incontrovertible actual experience of nations practising free economy and that of those living under directed economy and central planning. He points out that the common man has experienced a sustained rise in his well-being only in societies that have used free market techniques as the primary means for organizing economic activity. ‘This is true,” he says “in the broad survey of history—of ancient Athens and Rome as well as of Britain, Scandinavia, Western Europe and the United States in the nineteenth and twentieth centuries. It is true around the world today: contrast West Germany with East Germany; Malaysia and Singapore with India and Indonesia; Thailand with Burma; Hong Kong, Formosa, and Japan with Red China; pre-Castro and post-Castro Cuba.” The professor does not exaggerate when he says:

I do not know of a single example of a predominantly collectivist and centrally planned society in which the ordinary citizen has achieved a major and sustained improvement in the conditions of his everyday life, or a real hope for the future of himself or his children—though many such societies have produced impressive monuments, ranging from the Pyramids of ancient Egypt to the steel mills and international airline of modern Egypt, which demonstrate the power of centralized authority to wrest resources from the populace for purposes of its choosing.

We are naturally interested deeply when he puts down what he saw in Asia:

A striking example of this contrast between facts and attitudes was impressed on me some years ago when I was in Malaya. Malaya and Singapore are islands of prosperity in a sea of misery. On the one side is India, on the other side, Indonesia. Both have relied on the techniques of central planning as the primary instrument to achieve economic growth. Both have failed. In Indonesia, there has been an absolute deterioration in the condition of the people since Independence; in India, at best, minuscule growth if not stagnation. The ordinary people in Malaya and Singapore have a level of living four or more times as high as the level in India or Indonesia. And this high level has been produced entirely through free market arrangements. Singapore is a free port, and owes its prosperity to that fact. Malaya’s main industries are tin and rubber. The tin mines were developed entirely by private enterprise. The rubber tree is not even native to Malaya and none grew there 70 years ago; rubber trees were imported into Malaya from South America and their cultivation developed entirely by private enterprise.

Prof. Friedman is distressed to note that Malaysia too has now started on the wrong path, “turning its back on its own past and imitating the policy of India and Indonesia”.

Why is this intellectual opposition to an economy which has everywhere been more successful not only in production but also in helping the poor? Dicey gave an answer which Prof. Milton Friedman quotes:

“The argument for intervention is simple whereas the argument for non-intervention is subtle. If something is wrong, it is easy to argue that a law should be passed to set things right. It is more subtle to argue that such a law is likely to have indirect harmful effects that will more than offset any good done directly. Almost all economic fallacies arise because of the neglect of indirect effects. People favour a tariff because they see that it helps a specific industry. They do not see the harm it does. Men who, because of a tariff, are out of work, do not even know that they are out of work because of the tariff.”

To what Dicey has said, Prof. Friedman adds another reason— that the free market has no press agents such as the governments have, to do propaganda for State enterprises.

There are always government officials who give out press handouts to glorify the agencies they represent, or to take credit for what occurs. There is no agent who distributes handouts about the anonymous workings of the free market, and no group that has a strong personal interest in hiring such press agents. And who can blame the harried news-paper reporter who takes advantage of the official story?

Here is an interesting paradox set out by the eminent professor:

It has often seemed to me that the two greatest enemies of the free market are businessmen and intellectuals, for opposite reasons. The businessman is always in favour of free enterprise—for everybody else; he is always opposed to it for himself. The intellectual is quite different; he is always in favour of free enterprise for himself, always opposed to it for everybody else. The businessman wants his special tariff or his special governmental commission to interfere with free enterprise, in the name, of course, of free enterprise. The intellectual, too, wants such commissions to control the rapacious man. But he is against the idea of any interference with his academic freedom, or his freedom to teach what he wants—which is simply free enterprise as applied to him.

Prof. Milton Friedman winds up his impressive article with a shrewd attack on the intellectuals, attributing to them a weakness of which they may not be aware but which all the same compels them to proceed in that direction as Bhaga vat Gita puts it. Your interests drive you to take up an attitude without your being conscious of so being driven. The role of the intellectual is much more limited in a free society than it is in a controlled society. “I was most impressed with this as I talked to the able, intelligent people at the University of Malaysia” says Prof. Friedman. “In a planned, collectivist society, they (the intellectuals) are the ones who are going to sit in the seats of power and to whom the businessmen are going to have to come for import permits, Iicences and so on. They are the ones who are going to attend the international conferences and meetings. Let Malaysia follow the path of a free society and their role will be very different. In a free-market society, the minority Chinese in Malaysia, being take most effective and energetic businessmen, will be in the positions of power. The intellectuals will be reduced to being their advisers or simply teachers in a university. Of course, no intellectual will say it explicitly, but implicitly he thinks that he can run the country better than the others can.”