“Freedom and Capitalism” by Milton Friedman

Introduction

During the last two centuries, capitalism has spread throughout multiple countries around the world, contributing to the expansion of political freedom, and becoming especially evident in the last hundred years. The economist Milton Friedman has made a significant contribution to the understanding of economic policies and free-market capitalism. The main principle behind his book, Capitalism, and Freedom, was that the government only existed for the will of the people, and thus served as the means towards a goal.

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Friedman’s Perspective

In Friedman’s view, the relationship between freedom and capitalism is associated with country-specific variables such as the educational level of the population and the per capita gross domestic product. Economic arrangements are important to freedom because they contribute to the dispersion and concentration of power. Competitive capitalism is the kind of economic organization that encourages the promotion of political freedom since it makes a clear distinction between economic and political power.

To support his argument, Friedman provided examples from history. The relationship between economic and political freedom is complex but not unilateral. For instance, at the beginning of the 1800s, the Philosophical Radicals and Bentham regarded political freedom as a way of achieving economic success because of their belief that the enforced policies were too restrictive. Thus, the support for laissez-faire reforms in both politics and the economy was widespread (Friedman 2002, 10).

According to Friedman, government regulation is almost always a mistake because it contributes to coercing everyone to follow the choices made by elites, which significantly reduces the benefits to everyone (2002, 24). Regulation destroys the opportunities associated with innovation and wealth through rewarding political gamesmanship. In regards to market participants, increased regulation interferes with the signals about what people want or what makes them truly happy.

In discussing regulation, it is important to consider the opinions of other such economists as Kuttner, Etzioni, and Marglin, whose perspectives were similar to those proposed by Friedman, especially in terms of establishing a balance between economic and political freedom, and considering such principles as a community.

Kuttner’s Views on Deregulation

According to Robert Kuttner, deregulation had an adverse impact on the economy, with consequences such as inequality, financial crises, and less security being at the forefront. While deregulation of multiple industries was enforced to remedy stagflation in the 1970s, by the late 1980s, as well as during the Clinton era of the 1990s, the market economy became complicit in deregulation “and in the broader ideology of laissez-faire” (Kuttner 2008, lxxx). For instance, within electricity deregulation, the retail competition for the price of the services was much higher compared to the period when the solution had not been introduced (Kuttner 2008, 81).

In the deregulation of airline services, the outcomes included a dramatic drop in the quality of services, increased prices, and large hubs. In financial deregulation, excess leverage, insider conflicts of interests, and the lack of transparency were more apparent than ever. Thus, as argued profusely by Kuttner, despite the good intentions behind it, deregulation brought insecurity and inequality.

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Etzioni’s Views on Deregulation

Etzioni suggested that self-regulation by the market was not sufficient because even if a free market could have ever been constructed, “nobody would want to live with it” (2009, xl). Most businesses fear unregulated competition and favor regulations associated with zoning so that trade secrets can be kept quiet. However, when markets are given an opportunity to regulate themselves, it is likely that they will enforce filters and restrictions on the unregulated flow and exchange of information among the general public. For instance, the majority of book reviews on websites such as Amazon are written by authors’ friends, while the consumers’ rights league promotes the interests of the credit card industry. By giving these examples, Etzioni suggested that self-regulation could contribute to the lack of market sufficiency.

To prevent the regulators from controlling all procedures in the market, Etzioni proposed to “free the regulations from being regulated” (2009, lxxvi). To do so, the author suggested making regulations reflect the interests of the public rather than those of businesses.

However, accomplishing this goal is difficult because it encompasses a wide range of possible changes; for example, restricting the number of money politicians can spend on their election campaigns. Ensuring success in this endeavor is only possible through conducting a complete overhaul in the way elections are run. Instead of elected officials, salaried and tenured civil servants should be responsible for supporting the interests of the public. Letting the voter “beware” is among one of the most powerful strategies to achieving the level of regulation desired by the public (Etzioni 2009, 46).

Marglin: Markets Undermining Communities

According to Marglin, who opposed Friedman and Hayek’s opinion that more markets are better, “markets have undermined all that is good about community” (xxiii). He supported this claim by stating that the idea of freedom as an absolute was taken to an extreme.

Any real relationship, whether with parents or friends, is considered an abridgment of freedom. The author said that one should take the concept of community seriously and that it should be factored into decisions associated with markets, healthcare, technology, and other social affairs. However, taking the community into account goes against everything for which mainstream economics advocates. The key principles of economics thus constructed make it impossible for the ideas of community to be included in the discussion when asking and answering questions about existing policies: “the very assumptions of economics make the community invisible” (Marglin 2008, xxiii).

Wisman: Economic Role of the State

In the discussion about community and the need for establishing new guidelines in the elections of public officials, taking into account the economic role of the state is paramount. Opinions that economists hold about the role of the state vary significantly. Understanding their views is crucial in order to have a better idea of the different sides of the argument about Keynesian economics. According to Wisman, the mainstream spectrum of views on the state suggests that a sovereign has three obligations: protecting citizens from violence and invasions, restricting injustice, and maintaining and erecting certain public institutions and works (1986, 2). This view leans toward Smithian guidelines of the economy, which have been criticized for being too broad.

The perspective of a private-public mix of economic goods is characterized as laissez-faire capitalism, which presumes that there are few such pure, or almost pure, public goods. This model aims to resolve the opposition between the individual and the collective, thus achieving harmony and justice. From the human nature perspective of economics, human behavior is seen as an issue of nature as opposed to nurture, and private property is seen as the most efficient way of shielding oneself from others.

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Summary

To conclude, views on freedom and capitalism vary among economists. While Friedman suggested that capitalism was a necessary, but inadequate, determinant required for achieving political freedom, Kuttner considered deregulation a failure in many spheres of business. Marglin was concerned with capitalism undermining the idea of communities, which is an important point to consider when it comes to proposing new methods of making governments serve people, rather than large businesses.

Works Cited

Etzioni, Amitai. “The Free Market Versus a Regulating Government.” Challenge, vol. 52, no. 1, 2009, pp. 40-46.

Friedman, Milton. Capitalism and Freedom. University of Chicago Press, 2002.

Kuttner, Robert. “The Squandering of America’s Assets.” Challenge, vol. 51, no. 1, 2008, pp. 78-90.

Marglin, Stephen. “Why Thinking Like an Economist Can Be Harmful to the Community.” Challenge, vol. 51, no. 2, 2008, pp. 13-26.

Wisman, Jon. “Keynesian Economics and Economists’ Views on the State.” Forum for Social Economics, vol. 16, no. 3, 1986, pp. 1-15.

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StudyCorgi. (2021, April 30). "Freedom and Capitalism" by Milton Friedman. Retrieved from https://studycorgi.com/freedom-and-capitalism-by-milton-friedman/

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1. StudyCorgi. ""Freedom and Capitalism" by Milton Friedman." April 30, 2021. https://studycorgi.com/freedom-and-capitalism-by-milton-friedman/.


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StudyCorgi. ""Freedom and Capitalism" by Milton Friedman." April 30, 2021. https://studycorgi.com/freedom-and-capitalism-by-milton-friedman/.

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StudyCorgi. 2021. ""Freedom and Capitalism" by Milton Friedman." April 30, 2021. https://studycorgi.com/freedom-and-capitalism-by-milton-friedman/.

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