The Political Paternalists Take Aim at Milton Friedman

Published June 24, 2021

The cancel culture movement has caught wide attention with its insistence on “cleansing” the country of persons, statues, building names, or any other public monument accused of being in any way tainted by or identified with American slavery or racism, past or present. This has served as a “cover” to delegitimize virtually anyone not aligned with or acquiescent to the ideas of identity politics, critical race theory, and any number of other “politically correct” policy positions. 

The modus operandi is to assert that to hold a particular political or economic policy view is, in itself, demonstration of an explicit or implicit justification for or defense of racism, sexism, unjust social or economic inequality, or authoritarianism and elitism in its various ideological forms. Any attempt to deny and respond to such charges through reason or evidence is met with contemptuous smirks and sneers, making it clear that all such replies, in themselves, show that person’s unwillingness to see their own prejudices; or is someone consciously trying to defend the indefensible “privileges” of the male, white, capitalist oppressors and exploiters who deny “real freedom” and racial and gender “equity” to so many others in society. 

A catchphrase for “canceling” ideas or the person that runs counter to this new intolerant ideology is to say that the ideas reflect “neo-liberalism” and the proponent is a “neo-liberal.” This has become the political landfill into which all values, views, and voices are dumped that are in opposition to identity politics and systemic and critical race theory. 

Milton Friedman Condemned for His Politically Incorrect Views

The targets have been among some of the leading lights of free market, classical liberal thought in the 20th century, in particular Public Choice theorist James M. Buchanan, Austrian economists, Ludwig von Mises and Friedrich A. Hayek, and, increasingly, Chicago School economist Milton Friedman. Last year, a number of writers turned their pens to challenging Friedman’s argument from 50 years ago that the primary purpose of private enterprises, especially corporations, was to earn profits for their shareholders, and not to pursue “social justice” goals with the invested resources and wealth of others. 

Friedman was condemned for denying that businesses were obligated to use their capital and resources to further “politically correct” goals concerning the poor, its community “stakeholders,” and race and gender equity, as well as to sacrifice short-run profits to save the planet from the dangers of global warming. If companies did not take on these responsibilities on their own, well, that is what paternalistic government was for through its regulatory and fiscal means of persuasion. (See my articles, “Milton Friedman and the New Attack on Freedom of Choice” and “The Case for a Coercive Green New Deal?” and “The Nightmare Fairyland of the Green New Dealers” and “Stakeholder Fascism Means More Loss of Liberty”.)

The underlying premises of identity politics and systemic and critical race theory are that philosophical individualism, personal freedom, and economic liberty, as well as the political and constitutional order connected with these ideas, are all ruses for white males to gain and maintain their power and control over others. To do so, they use such institutional devices as private property in the means of production, free market exchange based on voluntary association and consent, and civil liberties such as freedom of speech and the press or religion, as the tools through which the ruling racist and misogynist elite manipulate reality and create a “false consciousness” of passive acceptance of oppression and exploitation by women and “people of color.” 

This latest brand of tribal collectivism insists that human beings cannot be reduced to and should not be viewed as distinct individual persons. Your “identity” is inseparable from your race, gender, and sexual orientation. Thus, your identity is inescapably interconnected to a collective group possessing one or more of these racial or gender or social characteristics. All of modern history going back centuries, it is argued, is defined by and is the product of male, white racism. This is so embedded in the societal structures that those obtaining some forms and degrees of white and male “privilege” at the expense of others are not often aware of it; and such people take it so much for granted that they cannot or will not easily face up to the unfairness and injustice of a system from which they benefit in various ways, great and small. (See my articles, “An ‘Identity Politics’ Victory Would Mean the End to Liberty” and “The New Totalitarians” and “Save America from Cancel Culture” and “‘Systemic Racism’ Theory is the New Political Tribalism” and “Self-Censorship and Despotism over the Mind” and “Welcome to Word Tyranny and Cultural Balkanization”.)

Milton Friedman’s Claimed Bad Influence on Economic Policy

Now a more full-frontal attack on Milton Friedman has been offered in the pages of The New Republic (June 17, 2021) by Zachary D, Carter, “writer in residence” with the Omidyar Network and the Hewlett Foundation, with the assurance that we have reached “The End of Friedmanomics.” America and, indeed, the world, Mr. Carter declares, have been the victims of Friedman’s perverse, naïve, and long out-of-date ideas about individual liberty, free markets, and limited government as the best and most ethical avenue for a better and more prosperous society for all. 

For decades, Mr. Carter insists, politicians and governments have been misinformed and misdirected by Friedman’s ideas in following policies of smaller government, greater economic freedom, and restrained monetary and fiscal policies. These policies have delayed “social progress,” fostered inequality, facilitated racism and sexism, and dehumanized everyone in society. Mr. Carter must reside in some alternate universe if he believes that the last 40 to 50 years have been decades of dedication to free market liberal principles and policies, given the continuing growth in the size and scope of the government during all this time. But maybe we’ll just let it pass and allow him the fiction of “poetic license” and a vivid imagination. (See my articles, “Fifty Years of Statist Policies and Economic Fallacies” and “Freedom versus Paternalism in the Coming Decade”.)

After condemning Friedman for all these bad effects on modern America, it should be pointed out that Mr. Carter does not accuse Friedman of beating his wife or kicking every dog he came across. But, maybe that charge will appear in a possible next installment of his critique of the social trials and tribulations imposed on humanity by Milton Friedman because of this contemptible notion that human freedom works better than governmental coercion. 

Staining Friedman as an Apologist for South African Racism

Mr. Carter opens his essay with an interpretive summary of Friedman’s trip to South Africa and Rhodesia in 1976. Reading his version of Friedman’s time in southern Africa you would think that he was there to rationalize apartheid and oppose the very idea of democratic politics. Kindly, Mr. Carter does not accuse Friedman of believing in biological racism, but that is about the most favorable word he has to say. 

He is aghast that Friedman could so absurdly believe that the fundamental problem surrounding race relations in South Africa was government intervention in imposing highly rigid social and economic segregation laws between whites and blacks in practically every aspect of everyday life. Mr. Carter seems to have not done any homework on other writings that explain in great detail how apartheid came about in the 1940s, and for what economic purposes to benefit selected groups in the white community. 

He might have had a better understanding if he had looked through William H. Hutt’s The Economics of the Color Bar (1964) or Walter E. Williams’ South Africa’s War Against Capitalism (1989). He would have discovered that it was precisely to prevent the integrational opportunities and outcomes that open and competitive markets make possible that segments of the white community turned to the anti-competitive and race-separating coercive powers of the state. After all, if separation of the races came “naturally” to different peoples, and if white farmers, professionals, manufacturers, and workers were really “inherently” superior to blacks, then why was it necessary to impose domestic monopoly protectionism on so many segments of the society to ward off potential black competitors? (See my article, “South Africa and Ending Apartheid: The Free Market Road Not Taken”.)

Mr. Carter is bewildered and shocked that anyone can actually believe that freedom of association is superior to imposing “solutions” on social problems through government command and control. Friedman told political leaders in South Africa that, “The first thing you ought to do is to eliminate the barriers which you now impose on equal movement, on equal opportunity, for the various groups.” He also remarked that, “One of the beauties of the market mechanism is that it is color blind.” (See Art Carden’s article, “Milton Friedman Goes to South Africa”.)

Friedman’s Case for Free Markets to Overcome Discrimination

This was the same theme that Friedman had argued in Capitalism and Freedom (1962) in a chapter devoted to “Capitalism and Discrimination.” He explained his own classical liberal perspective:

“I believe strongly that the color of a man’s skin or religion of his parents is, by itself, no reason to treat him differently; that a man should be judged by what he is and what he does and not by these external characteristics. I deplore what seem to me the prejudice and narrowness of outlook of those whose tastes differ from mine in this respect and think the less of them. But in a society based on free discussion, the appropriate recourse is for me to seek to persuade them that their tastes are bad and that they should change their views and their behavior, not use coercive power to enforce my tastes and attitudes on others.” (p. 111)

Friedman did not presume that that was the end of the matter. A free market teaches lessons to racially biased people, including the costly trade-offs that following their prejudices can cause them to have to deal with. Various individuals may have strong prejudices and dislikes for others based on such distinctions as race, religion, language, or custom. The benefits of free and competitive markets is that those who choose to follow their personal biases bear personal costs that cannot be ignored, Friedman and others have explained. 

By not hiring someone for a job because of their particular race or religion, the would-be employer passes up a worker who might have helped him supply a less expensive or better product to gain a competitive edge on his rivals, especially if any of his competitors do not share that bias or place it aside precisely to increase their own opportunities for greater revenues and market share. Likewise, by refusing to serve a potential customer due to the seller’s bigotry, he misses out on sales and revenues that otherwise could have been his, and, again, which he may lose to another seller who cares less about what the customer looks like and more about the “color” of the buyer’s money. 

To not have to volitionally weigh these costs and to not have to worry about any such would-be less prejudiced competitors on either the supply or demand side of the market is made so much easier by lobbying government to legally prohibit such voluntary and mutually agreeable acts among other consenting adults. That is, precisely by closing markets through apartheid and segregation laws that prohibit freedom of association and trade, inside and outside of the marketplace, the race or religion discriminator is not forced to put lost sales and revenues where his prejudices. Legal prohibitions of this type on others from buying and selling, employing and working, regardless of these external accidents of birth, relieves the racist of dealing with part of the costs of his own narrowmindedness. (See my articles, “Free Markets, Not Government, Improve Race Relations” and “Classical Liberalism and the Problem of ‘Race’ in America”.)

Wanting to Replace Coerced Segregation with Forced Integration

But Mr. Carter presumes in his interpretation of Friedman’s position that to oppose forced integration by government command means that the free market liberal is either tolerant or supportive of racism and social and economic segregation. That is, not to force people to associate with others when they might not wish to, means the opponent of coerced integration may be taken to tacitly endorse the preservation of racist and discriminatory practices. To call for and support the abolition of apartheid and segregationist legal restrictions and prohibitions is not enough. You must advocate the use of that same power of political coercion to force human associations, rather than “merely” supporting the negative of abolishing legally imposed segregation.  

He misses the very point of freedom to choose, which is the individual having the liberty not just to say “yes” to what people want him to do, but to say “no.” No, I will not work at the wage you are offering me, but I’ll look elsewhere for a job. No, I will not sit here silently when you spew your racist insults, and, instead, I’ll give you a good piece of my mind. No, I consider your views unacceptable and I will try to persuade others to reject your primitive tribalist views and repeal the laws that reflect them. No, just because you hold racist or sexist views, does not mean I must practice them, and I will interact and associate with people on the basis of judging them by the content of their character rather than the color of their skin. The right to say “No” is one of the most important principles and protections in any free society, even when we do not like what some neighbor may be saying “No” about.

Mr. Carter is affiliated with the Omidyar Network and the Hewlett Foundation, organizations dedicated to advancing the “progressive” agendas that are behind his criticisms of Milton Friedman’s views. I wonder how many classical liberals or social and economic conservatives are employed by either group; that is, practicing the “diversity” and “inclusiveness” both organizations say they wish to cultivate. But, no doubt, what is exclusively meant is race and gender and sexual orientation inclusive diversity, and not that of differing political and economic policy ideas. 

Given his angry dislike and disagreement for Friedman’s views, as reflected in the article’s rhetoric, he would likely be very much put out if these two organizations were told by the government that “equity” required classical liberals and conservatives to be hired on their respective staffs equal to the proportion of these two groups in the wider communities in which they operated. And, oh, no, what if a “Friedmanite” was assigned an office right next to Mr. Carter’s, and they had to share the same secretary or research assistant? And by the way, just how many classical liberals does Mr. Carter regularly invite over to his home for dinner, drinks, or a party? Or does he not socially mingle with, well, you know, “them?” Discrimination? Tell me it is not so!

Disapproving of Friedman’s Criticisms of Unrestrained Democracy

Mr. Carter is also offended by Milton Friedman’s doubts about unlimited and unrestrained democratic decision-making. He is equally contemptuous of Friedman’s insistence that the free marketplace is a far more “democratic” expression of people’s wants, wishes and desires, and their respective fulfillment. This, too, is a theme that Friedman emphasized in the opening chapter of Capitalism and Freedom, on “Economic Freedom and Political Freedom.” 

Under political democracy, the outcomes are often “winner take all.” That is, the party (or coalition of parties) that gain a majority of the vote widely have their way for their period in office over the passage and enforcement of laws and legislation. They have the ability to impose their preferences and policies on the voting minority that lost, even if that minority is 49.9 percent of the electorate that entered the voting booths. The minority has to wait for the next cycle of elections to have any chance of changing, reversing or modifying the laws and legislative and regulatory acts passed and implemented by that majority; and they only have a chance for their policy preferences to be imposed on everyone, instead, if they succeed in getting a sufficient number of voters to change their minds from when they last visited the polling places. 

In the free marketplace, outcomes are widely pluralistic rather than majoritarian. Just because a majority wants goods and services “A,” “B,” and “C,” does not preclude or prevent the different and diverse tastes and preferences of those in the minority of consumers and demanders from being widely fulfilled simultaneously, as well. A majority that wants cold cereal for breakfast does not mean that shopping minorities cannot have their ham and eggs or hot porridge, as well. Or some might decide not to eat breakfast at all, without having to spend any of their own income for something they do not want or to be taxed to subsidize someone else’s preferred morning eating fare. 

The same applies to what goes under the general category of “social problems” for which people look for solutions outside of the everyday marketplace of supply and demand. First, not everyone agrees with what are the “social problems,” or their relative importance; and second, not everyone concurs on the best means and methods to ameliorate them in society. The political avenue imposes “one solution on all,” based on, again, whose preferences have won on Election Day, and all are compelled to finance and follow the government-decided and directed answers to the problems through taxes that all are required to pay. 

The classical liberal answer to these issues has traditionally been the role of the peaceful and voluntary institutions of civil society. Individuals form associations and organizations to pursue shared values and goals, and to find solutions to social problems that they identify as important to them and others. This includes much of what has been coopted by government under the title of the welfare state. Mr. Carter seems to have little patience or regard for such noncoercive and voluntarist avenues, even though much of his own activities, it seems, are through two such organizations of civil society. Yet, clearly, his end goal is to impose government answers and strictures on the actions and choices of others. The more classical liberal era of the 19th century, about which Mr. Carter has a good deal of contempt, demonstrated the many ways that civil society handled the problems for which he only sees and demands the heavy and imposing hand of government. (See my articles, “A World without the Welfare State” and “The Secret History of the Monopolization of Welfare by the State”.)

Friedman on the Links Between Economic and Political Freedom

Friedman, additionally, strongly believed a free marketplace was also essential for the preservation of personal liberty and political freedom. Again, from Capitalism and Freedom

“Viewed as a means to the end of political freedom, economic arrangements are important because of their effect on the concentration and dispersion of power. The kind of economic organization that provides economic freedom directly, namely, competitive capitalism, also promotes political freedom because it separates economic power from political power and in this way enables one to offset the other . . .

I know of no example in time or place of a society that has been marked by a large measure of political freedom, and that has not also used something comparable to a free market to organize the bulk of economic activity.” (p. 9)

When the government owns or heavily controls and regulates the means of production, political power can determine or greatly influence what, for instance, gets printed and published, since access to needed inputs can be narrowly allocated or restricted in reaching the hands of those expressing opposition views. Back in the 1980s, the Sandinista socialist government in Nicaragua insisted that there were no limits on the freedom of the press. However, the opposition newspaper, La Prensa, could print only limited numbers of its paper for distribution and sale because the government allocated a relatively small amount of newsprint paper to the publication. Thus, it reduced their ability to reach its readership with opinions different from the official government “party” line.  

Friedman also made the point a number of times that a vibrant and autonomous private sector protects the dissident or critic from life-threatening oppression by the state. He used the example of the Hollywood blacklists of screenwriters and others targeted in the 1950s as “subversives” and fellow-travelers of the Soviet socialist cause. In the Soviet Union, “enemies of the state” were deprived of employment and often ended up in the Gulag, the forced labor camps – if not just shot. In the United States, those labeled as “un-American” may have lost their jobs in the movie industry due to government pressure, but they could and did find alternative employments and ways of earning a living due to private enterprises not directly controlled or pressured in the same way not to hire such people. Capitalism supplied an employment lifeboat for some who dreamed of a socialist future for America. 

Friedman on Rent Controls and School Choice

Mr. Carter presents a large number of other misconceptions, which space does not permit dissecting in sufficient detail. But among these are his scoffing at Friedman and George Stigler’s critical analysis of rent controls in the immediate post-World War II period, in their essay, “Roofs or Ceilings” (1946). He considers it “unsophisticated” to argue that if the price for something like a residential house is fixed a level below where a more competitive market suggests it should be, the result is a shortage of available places to live combined with disincentives for potential home and apartment builders to increase the supply over time. His vision seems to extend no further than thinking that if people need places to live it will never appear unless the taxing and spending hand of government makes it happen. (See my article, “Price Controls Attack the Freedom of Speech”.)

Friedman is also taken to task for his case for parental choice in schooling through charter and other private alternatives to government “public” schools. Mr. Carter dregs up Nancy MacLean’s argument in Democracy in Chains (2017) that economists like Friedman and James Buchanan were in favor of school choice in the late 1950s to offer a way for Southern racists to not have to send their children to desegregated public schools. But as critics have documented, it was the private schools that were seen as the best avenue at the time for more integrated classroom environments, free from the segregationist hold on local government schools. (See, Philip W. Magness’s articles, “Did School Vouchers Threaten Segregation in 1959 Charlottesville?” and “The Nutter-Buchanan School Choice Paper: Evidence from the Timeline” and “Sorry, Nancy MacLean. You’ve Got Your Facts Wrong About Another Virginia Economist”.) 

Portraying Friedman as a Power-Lusting Apologist for Racists

Everywhere Mr. Carter turns, he sees Friedman offering free market arguments for racists to hide behind and rationalize their segregationist desires. Friedman is just a frontman supplying part of the ideological superstructure of ideas to justify oppression, discrimination, and exploitation. In Mr. Carter’s eyes Friedman is beneath contempt, when in supporting Barry Goldwater’s campaign for the presidency in 1964, he knew he was entering a “political coalition with violent racists.” 

At the same time, if Goldwater lost, says Mr. Carter, his defeat in the election would be a gateway to purge remaining moderates in the Republican Party, meaning the “future of the party would belong to men like Milton Friedman . . . In just a few years, his gamble would pay off.” That is, Friedman is portrayed as a political and ideological power-luster playing in the pit of “dirty politics” to position himself to be a grand master of imposing his “market fundamentalism” on a country of people who could only be harmed by the very nature of free market capitalism.  

The idea that Milton Friedman might have espoused classical liberal and free market ideas from intellectual honesty and a sincere belief that such a free society was the best institutional environment within which to secure freedom, foster economic growth and betterment for the society as a whole, and alleviate the material and social misfortunes of many without the imposing hand of government power with all of its negative effects, is completely beyond Mr. Carter’s imagination. He sees a world of power plays, intrigues, and zero-sum games such that if the Friedmanite ideas prevail, a few white, privileged racist and sexist capitalists may win, but the untold remaining masses of people will lose. 

Mr. Carter also challenges Friedman’s writings on monetary theory and Federal Reserve policy. His default position in response to Friedman’s own work on Federal Reserve history, the severity of the Great Depression and the case for a more “rules-based” framework for central bank policy is simply restating the threadbare arguments for Keynesian-style monetary and fiscal discretion to manipulate the economy during a recession. 

It is Milton Friedman’s Classical Liberal Ideas that will Prevail

All this is now past, as far as Zachary Carter is concerned. We are living in the post-Friedman era with the arrival of the Joe Biden presidency. No need to fear massive deficits, exploding national debt, huge expansion of the money supply, or increasing government intervention, redistribution and planning. No, the political paternalists, social engineers and the central planners – of everything! – are back, and they will make a bright and beautiful world for all of us because they have the confidence and presumption to believe that in their well-intentioned hands all things are possible; only just believe. 

How very disappointed Mr. Carter will no doubt be, when the policies he espouses end up, once again, having the disastrous effects they have always produced in the past. Then out from the dustbin of history to which he wants to relegate the free market ideas of those like Milton Friedman, they will rise once more from the ashes to explain why the follies and foibles of the collectivist vision has led to nothing but stagnation, corruption, and fewer freedoms. Much to Mr. Carter’s chagrin, it will be Milton Friedman’s ideas on liberty that will be shown to be the far more enduring ones.

[Originally posted on American Institute for Economic Research (AIER)]