Capitalism and Freedom

Milton Friedman’s Capitalism and Freedom was my companion during my trip to Australia recently. This book would challenge your capability to focus, if you read it in public spaces such as airports and planes like I did of some chapters. What impresses me most besides its content is its delivery, the meticulously articulated logic reasoning. Regardless whether you agree with the author’s verdicts, you can touch and feel the logical threads leading to them. I am not an economist nor a politician, but economics always fascinates me. Politics, exactly the opposite. This book broadens my view on the inseparability and strong inter-influence between economic freedom and political freedom. Later Milton Friedman added civil freedom to this dichotomy, in light of Hong Kong’s return to China from British sovereignty in 1997 and its subsequent development. In the book, Friedman also credited this instance for persuading him that: while economic freedom is a necessary condition for civil and political freedom, political freedom, desirable though it may be, is not a necessary condition for economic and civil freedom.

Describing what this book is about, Friedman wrote: its major theme is the role of competitive capitalism – the organization of the bulk of economic activity through private enterprise operating in a free market – as a system of economic freedom and a necessary condition for political freedom. Its minor theme is the role that government should play in a society dedicated to freedom and relying primarily on the market to organize economic activity.

Friedman wrote the following on the role of books like this one: First, to provide subject matter for bull sessions….The only person who can truly persuade you is yourself. You must turn the issues over in your mind at leisure, consider the many arguments, let them simmer, and after a long time turn your preferences into convictions. Second,…to keep options open until circumstances make change necessary. There is enormous inertia – a tyranny of the status quo – in private and especially governmental 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. Both arguments are convincing to me.

To summarize my overall understanding upon reading this book: increasing the economy freedom and decreasing the governmental intervenes in an overly governed state is the direction for further prosperity. Many policies do not deliver the outcome that aligns with our intentions when creating those policies at the first place, for example, minimum wage. A social environment that promotes diversity is far more advantageous than the ones not. Purely my extended understanding of the messages: while in doubt, it is better to rely on the free market mechanism than political interference in the long run.

A few more discussions from the book that I quote here and I think more people would benefit from reading, even if not reading the entire book:

The great advances of civilisation, whether in architecture or painting, in science or literature, in industry or agriculture, have never come from centralized government….no one of these opened new frontiers in human knowledge and understanding, in literature, in technical possibilities, or in the relief of human misery in response to governmental directives. Their achievements were the product of individual genius, of strongly held minority views, of a social climate permitting variety and diversity.

A common objection to totalitarian societies is that they regard the end as justifying the means. Taken literally, this objection is clearly illogical. If the end does not justify the means, what does? But this easy answer does not dispose of the objection; it simply shows that the objection is not well put. To deny that the end justifies the means is indirectly to assert that the end in question is not the ultimate end, that the ultimate end is itself the use of the proper means. Desirable or not, any end that can be attained only by the use of bad means must give way to the more basic end of the use of acceptable means.

Fundamental differences in basic values can seldom if ever be resolved at the ballot box; ultimately they can only be decided, though not resolved, by conflict…The widespread use of the market reduces the strain on the social fabric by rendering conformity unnecessary with respect to any activities it encompasses. The wider the range of activities covered by the market, the fewer are the issues on which explicitly political decisions are required and hence on which it is necessary to achieve agreement. In turn, the fewer the issues on which agreement is necessary, the greater is the likelihood of getting agreement while maintaining a free society.

A businessman or an entrepreneur who expresses preferences in his business activities that are not related to productive efficiency is at a disadvantage compared to other individuals who do not. Such an individual is in effect imposing higher costs on himself than are other individuals who do not have such preference. Hence, in a free market, they will tend to drive him out. This same phenomenon is of much wider scope. It is often taken for granted that the person who discriminate against others because of their race, religion, color, or whatever, incurs no costs by doing so but simply imposes costs on others. This view is on a par with the very similar fallacy that a country does not hurt itself by imposing tariffs on the products of other countries. Both are equally wrong. The man who objects to buying from or working alongside a Negro, for example, thereby limits his range of choice. He will generally have to pay a higher price for what he buys or receive a lower return for his work. Or, put the other way, those of us who regard color of skin or religion as irrelevant can buy some things more cheaply as a result.

The more capitalistic a country is, the smaller the fraction of income paid for the use of what is generally regarded as capital, and the larger the fraction paid for human services…The great achievement of capitalism has not been the accumulation of poverty, it has been the opportunities it has offered to men and women to extend and develop and improve their capacities.

Finally, I uphold my decision of not writing about China. But that is not to say I have no passion for my motherland. To the contrary, I eagerly wish that China progresses towards the right directions in all the economic, civil and political arenas. I part you with a passage in the preface written by Friedman in 2002:  

The introduction of market reforms by Deng Xiaoping in the late seventies, in effect privatizing agriculture, dramatically increased output and led to the introduction of additional market elements into a communist command society. The limited increase in economic freedom had changed the face of China, strikingly confirming our faith in the power of free markets. China is still very far from being a free society, but there is no doubt that the residents of China are freer and more prosperous than they were under Mao – freer in every dimension except the political. And there are even the first small signs of some increase in political reform, manifested in the election of some officials in a growing number of villages. China has far to go, but it has been moving in the right direction.


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