Milton Friedman. Eamonn Butler

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СКАЧАТЬ becomes the politically inevitable.”

      – Milton Friedman, Capitalism and Freedom, Preface to 1982 edition

      The passing of the revolutionary communist Mao Zedong saw China opening up to Friedman’s economic thinking too. In 1980, just over a year after the reformist Deng Xiaoping became China’s ‘paramount leader’, Friedman was invited there to lecture on the use of market mechanisms within a planned economy. Today, China’s adoption of market mechanisms has seen it storming up the league table of world economies, and has improved the lives of hundreds of millions of its citizens.

      Meanwhile, a billion people in India are enjoying another huge economic boost, following the country’s economic liberalisation of 1991, which ended price controls, cut taxes, abolished public monopolies and scrapped regulations. India’s free-market reforms made it one of the fastest-growing economies in the world, and brought its people rising literacy and life expectancy. The people of India and China may not realise it, commented Nobel economist Gary Becker, but “the person they are most indebted to for the improvement of their situation is Milton Friedman.”

      On the other side of the world, Friedman’s influence can also be seen in Chile. After the military coup that ended the socialist government of Salvador Allende, Friedman accepted an invitation to lecture there on the merits of economic freedom; and he wrote to the military dictator, Augusto Pinochet, outlining a programme to end the country’s hyperinflation and establish a market economy. Pinochet promoted a number of young Chilean economists – dubbed the Chicago Boys – who had studied at the University of Chicago, where Friedman was a professor. They cut import tariffs, replaced the failing state pension system with one based on personal savings and accounts, privatised farms, stabilised the currency and liberalised the financial sector. Their reforms turned Chile’s economic crisis around, making it one of Latin America’s most thriving economies.

      Ongoing impact

      Today, in countries as diverse as Estonia, China, India and Chile, we can see the benefits of the economic prosperity and personal freedom that have followed the adoption of Friedman’s ideas. Alan Greenspan summed up Friedman’s legacy, saying that: “His impact is not only on the 20th century but on the 21st, and I suspect ongoing.”

      Friedman was engaged in all the late 20th century’s most bitter but pivotal intellectual conflicts over the role of government in economic and social affairs. For most of that time, his views were very much in the minority. From the upheavals of the 1930s, through the New Deal, to the economic ‘fine-tuning’ and planning of the postwar years, a belief deepened that government activism in the economy was both essential and inevitable – a belief given credence by the writings of the time’s most prominent economist, John Maynard Keynes. Further afield, the Soviet Union was dominating Eastern Europe and exporting international socialism to Asia, Africa and Latin America, in an onslaught that seemed unstoppable.

      Though it often seemed hopeless to resist these sweeping movements, Friedman joined the intellectual battle with enthusiasm. He relished a good argument, and took on even his sternest opponents in a characteristically cheerful manner – his common-sense, optimistic style winning him many supporters. A naturally brilliant teacher and communicator, he spoke to the wider public in popular books, magazine articles and interviews, and through a widely influential worldwide television series, Free to Choose. He was the world’s leading exponent of personal and economic freedom.

      Friedman’s economic impact

      Friedman won important battles in economic science, too. He is best known for his part in the fight against inflation, where his ideas were hugely successful. Through following the high-spending policies of Keynes and his followers, postwar governments had quickly found their finances getting out of control, their currencies losing their value and prices escalating. By the time the Berlin Wall fell in 1989, world inflation was a staggering 19% and rising. At that rate, prices double every five years.

      “Inflation is a disease”, wrote Friedman: “a dangerous and sometimes fatal disease that, if not checked in time, can destroy a society.” It could not be endured or safely traded off against other economic objectives like employment, as mainstream economists believed. He argued that there was a “natural rate” of unemployment, which reflected the realities of the labour market. When governments adopt high-spending policies to expand employment beyond this level, they succeed only in making things worse. Their policies raise inflation, which undermines the delicate workings of the market economy, and so causes more unemployment.

      Friedman was blunt: the source of this disease could be explained in a single sentence – “Inflation is always and everywhere a monetary phenomenon.” To cure inflation, governments must take more care with money. It was a simple message from a brilliant communicator that eventually the world came to understand. As more and more governments adopted Friedman’s advice, world inflation plummeted, from a peak of nearly 29% in 1994 to just over 3% a decade later. With that came a significant rise in peace and prosperity. And most of the credit belongs to Milton Friedman.

      The Making of an Economist

      Though a staunch defender of free-market capitalism, Friedman came from a poor background. He was born in Brooklyn, New York, in 1912, to Hungarian Jewish immigrant parents. His father traded goods and took work as he could get it, while his mother sewed garments in a New York sweatshop. Some 68 years later, Friedman would take his Free to Choose television audience to exactly the same sort of workshop – this time in Hong Kong – to make the point that, while the pay and conditions might be poor, such places gave unskilled and often unloved immigrants their first step onto the ladder of self-improvement.

      “My mother came to this country when she was 14 years old. She worked in a sweatshop as a seamstress, and it was only because there was such a sweatshop in which she could get a job that she was able to come to the US. But she didn’t stay in the sweatshop and neither did most of the others. It was a way station for them, and a far better one than anything available to them in the old country. And she never thought it was anything else. I must say that I find it slightly revolting that people sneer at a system that’s made it possible for them to sneer at it.”

      – Milton Friedman, Playboy interview (1973)

      From this foothold, the Friedmans were eventually able to move to a new home, 20 miles from New York, where they lived over the dry-goods store that his mother now ran while his father worked in New York. In Friedman’s early years, the family never earned enough to be above what today would be considered the poverty line; but through hard work they improved their lives.

      Perhaps significantly for his subsequent career, Friedman’s parents spoke English, not their native Hungarian, in the home. Milton entered school earlier than most other children, and was a voracious reader. At 16, he won a scholarship to study mathematics at Rutgers University. And in addition to what he learnt in class, Rutgers also taught him something about the market. Freshmen at Rutgers were expected to wear green neckties: Friedman and a friend made some money by buying up a stock of these ties and selling them door to door. The next year they did a deal with Barnes & Noble to buy their classmates’ used textbooks and supply new ones.

      But the big intellectual issue of the time was the stock market crash of 1929 and the Depression that followed it. Two of Friedman’s professors, Arthur Burns and Homer Jones, passed on to him their enthusiasm for how economics might explain these events and prevent them happening again. So Friedman turned to the study of economics.

      He entered graduate classes at the University of Chicago, under the tutelage of the economists Jacob Viner, Frank Knight and Henry Simons – founders of what СКАЧАТЬ