The Founders of Neoliberalism: Milton Friedman
Your weekly excerpt from one of my books. This week: "The Hidden History of Neoliberalism: How Reaganism Gutted America and How to Restore Its Greatness"
Milton Friedman
The American among the Three Musketeers of neoliberalism was Milton Friedman, who taught for years at the Chicago School of Economics and has become a figure of cult worship on the economic and political right in America.
He was a speechwriter for Barry Goldwater’s 1960 campaign for president, and a formal advisor to, among others, Richard Nixon, Ronald Reagan, Margaret Thatcher and Donald Rumsfeld (who he pushed Reagan to take on as his VP instead of GHW Bush in 1980).[xli]
Friedman was the functional theologian among the three; he absolutely believed that there was a near-mystical power to unregulated markets and that virtually any sort of governmental intervention in or regulation of the marketplace produced economic distortions that prevented capitalism from working its magic.
When, in his first inaugural address on January 20, 1981, President Reagan said, “Government is not the solution to our problem, government is the problem,” he was merely echoing Friedman.[xlii]
Twenty years earlier, Friedman had watched John F. Kennedy give his inaugural address and cringed when Kennedy hit his most memorable high point.
“In the long history of the world,” Kennedy said, “only a few generations have been granted the role of defending freedom in its hour of maximum danger. I do not shrink from this responsibility — I welcome it. I do not believe that any of us would exchange places with any other people or any other generation. The energy, the faith, the devotion which we bring to this endeavor will light our country and all who serve it — and the glow from that fire can truly light the world.
“And so, my fellow Americans: ask not what your country can do for you — ask what you can do for your country.”[xliii]
Kennedy’s speech sent Friedman into such a paroxysm of fury that he opened his 1962 book Capitalism and Freedom by attacking it on page one.
“In a much quoted passage in his inaugural address,” Friedman writes in the opening paragraph of his book, “President Kennedy said, ‘Ask not what your country can do for you – ask what you can do for your country.’
“Neither half of the statement expresses a relation between the citizen and his government that is worthy of the ideals of free men in a free society. The paternalistic ‘what your country can do for you’ implies that government is the patron, the citizen the ward, a view that is at odds with the free man’s belief in his own responsibility for his own destiny. The organismic, ‘what you can do for your country’ implies the government is the master or the deity, the citizen, the servant or the votary.”[xliv]
Friedman’s devotee Margaret Thatcher famously told Women’s Own magazine in 1987, “And, you know, there is no such thing as society. There are individual men and women, and there are families, and no government can do anything except through people, and people must look to themselves first.”[xlv]
She got it from Friedman’s 1962 book Capitalism and Freedom, whose next sentence after his anti-Kennedy rant was: “To the free man, the country is the collection of individuals who compose it, not something over and above them.”
If it sounds like they’re both echoing Jefferson in saying that a government should only function by “the consent of the governed,”[xlvi] they very much are not.
If the “governed” want a social safety net, for example, or want Social Security, a national health care system, or unemployment insurance then, both Friedman, Thatcher and today’s American Republican Party argue, that is something they should be denied because it will lead to communism (Mises/Friedman) or Naziism (Hayek).
Neoliberalism, instead, explicitly demands a “free market” system where all social needs are met by the magical marketplace and the morbidly rich who control it rather than by people banding together and taxing themselves to provide such benefits through government. No matter what percentage of the population likes those “free” things, they all lead, neoliberals will tell you, to bondage.
As Friedman wrote in the paragraph following his anti-Kennedy rant, “The free man will ask neither what his country can do for him nor what he can do for his country.”
Even the most kinds of basic government regulation that most people want will destroy “freedom,” Friedman argued, saying, for example, that even licensing doctors to practice medicine is a step too far.
In his chapter on Occupational Licensure, Friedman writes, “The medical profession is one in which practice of the profession has for a long time been restricted to people with licenses. Offhand, the question, ‘Ought we to let incompetent physicians practice?’ seems to admit of only a negative answer. But I want to urge that second thought may give pause.”
He then goes on to rant about how licensure isn’t about protecting the public but about greedy elites trying to keep “free people” from doing whatever they want while keeping the income for doctors high. This applies, Friedman says, for everything from plumbers’ unions to the AMA.
“The American Medical Association is perhaps the strongest trade union in the United States,” he writes. “The essence of the power of a trade union is its power to restrict the number who may engage in a particular occupation. This restriction may be exercised indirectly by being able to enforce a wage rate higher than would otherwise prevail. If such a wage rate can be enforced, it will reduce the number of people who can get jobs and thus indirectly the number of people pursuing the occupation. … the American Medical Association is in this position.”[xlvii]
And if there’s anything that Milton Friedman wanted to destroy it was trade unions and the government regulation that made it possible for them to legally withstand often-violent assaults from employers.
Along those same lines, in 1946 Friedman got into (metaphorical) bed with Herbert Nelson, “the chief lobbyist and executive vice president for the National Association of Real Estate Boards, and one of the highest paid lobbyists in the nation” and a co-founder of the Foundation for Economic Education (FEE), which invented the Libertarian Party as a political rationale to deregulate the real estate industry. [xlviii]
No fan of actual government, at least as understood by most Americans, Nelson famously said, “I do not believe in democracy. I think it stinks. I don’t think anybody except direct taxpayers should be allowed to vote. I don’t believe women should be allowed to vote at all. Ever since they started, our public affairs have been in a worse mess than ever.”[xlix]
Friedman co-wrote a booklet for Nelson’s FEE trashing the idea of rent controls titled Roofs and Ceilings. FEE had amassed a multi-million-dollar war chest, according to author Mark Ames, and while the amount Friedman was paid for his work (the FEE ordered a half-million copies printed) has never been disclosed, it represented Friedman’s entrée into the world of big business, which embraced him with vigor.
Friedman jumped right into the fray on behalf of big business, repeatedly arguing that when a corporation put social responsibility over profits it was engaged in the most wicked form of socialism. Regardless of the harm to the environment, workers, society or even democracy, any legal thing a corporation did to increase its profits was necessary to prevent collectivist communism from emerging in America.
As he wrote for the New York Times in 1970:
“[T]he doctrine of ‘social responsibility’ taken seriously would extend the scope of the political mechanism to every human activity. It does not differ in philosophy from the most explicitly collective doctrine. It differs only by professing to believe that collectivist ends can be attained without collectivist means. That is why, in my book Capitalism and Freedom, I have called it a ‘fundamentally subversive doctrine’ in a free society, and have said that in such a society, ‘there is one and only one social responsibility of business--to use its resources and engage in activities designed to increase its profits so long as it stays within the rules of the game, which is to say, engages in open and free competition without deception or fraud.’”[l]
Friedman also believed that because most citizens of developed countries liked their governments regulating things that affected their safety and providing them with a larger social safety net, it’s necessary to either use natural disasters or create crises to bring about the unpopular imposition of neoliberalism. As he wrote in the preface to the 1982 edition of Capitalism and Freedom:
“There is an enormous inertia – the tyranny of the status quo – in private and especially government arrangements. Only a crisis – actual or perceived – produces real change. When that crisis occurs, the actions that are taken depend on the ideas that are lying around. That, I believe, is our basic function: to develop alternatives to existing policies, to keep them alive and available until the politically impossible becomes politically inevitable.”
Thus was born what author Naomi Klein famously termed “The Shock Doctrine,” the title of her seminal and bestselling 2007 book,[li] laying out how giant corporations took advantage of a wide spectrum of crises, natural and man-made, to eliminate the socially protective functions of government and replace them with neoliberal rule by the rich and the corporate.
Friedman’s philosophy has caused most people a tremendous amount of economic damage. They won’t understand until it implodes upon them.
There are two kinds of researchers: those who do studies to find out, and those who do studies to prove. I was groomed in grad school to view the latter group as not scientific. Friedman was clearly one of the latter types. They become so certain that their theories are correct that they spend their careers trying to prove they are right. Results from colleagues whose data call their notions into question are accused of not fully understanding the genius of their theory. Their theories become academic dogma when they prove useful to powerful political groups.
My experience while a deep state Navy officer, and later as an NIH official, is that the vast majority of politicians are not deep thinkers and sometimes even useful idiots. They are readily persuaded by lobbyists and other powerful influencers. On more than one occasion, I was able to get congressmen to amend proposed legislation by pointing out the unintended consequences of their bills. I recommended changes that would avoid unforeseen negative impact on donors, voters, and DOD, and later in my career, on public health.
Clearly, Friedman’s notions overlook the unintended consequences of his dogma. We might point to emerging trillionaires as one big unintended negative consequence – at least in the minds of most Americans.