Milton Friedman Speaks – The Future of Our Free Society


Dr. Milton Friedman’s international standing
and impressive credentials are well known to you. He is a senior research fellow at
Hoover Institution on War, Revolution and Peace based at Stanford. He is a columnist
and contributing editor of Newsweek; a member of the research staff of the National Bureau
of Economic Research and Paul Snowden Russell distinguished service professor of Economics
University of Chicago. Dr. Friedman earned his PhD from Columbia University, but at least
11 others have chosen to recognize his outstanding contributions by conferring honorary degrees.
His teaching and research posts, his extensive writings, his role as advisor to presidents
and other heads of state have earned him a unique place as perhaps the leading economist
of our times. The Nobel Prize in economics awarded to Dr. Friedman in 1976 is one of
the latest in a long list of his prestigious awards. When Dr. Friedman speaks the nations’
leaders take notes. Dr. Friedman, we are honored to have you with us. We will listen closely
now to a subject very vital to all of us. The future of our free society. Dr Friedman. (audience applause) Thank you very much Mr. Counts Maybe they
listen, but I don’t think they take note-. except to do the opposite most of the time. (laughter) I’m very glad to be here with you. People
assembled in this room, representatives of the National Association of Manufacturers,
of your congress, are among the greatest resources in this country today to promote a continuation
of the great record of progress that this country has had over 200 years. You are also,
unfortunately, one of the great obstacles to that progress in ways which I shall come
to in the course of the talk–not because you intend to be, of course; but the great
lesson which history teaches is that bad results seldom are produced by men of bad intentions.
There is a famous biblical quotation about a road that is paved with good intentions. I shall come further to that point in a few
minutes, but let me start and give my theme by quoting to you from the speech which Abraham
Lincoln gave in 1858 when he was nominated for the Senate. It’s his famous “House
Divided” speech and he said, and I quote, “A house divided against itself cannot stand.
I believe this government cannot endure permanently half slave and half free. I do not expect
the house to fall, but I do expect it will cease to be divided. It will become all one
thing or all the other.” Lincoln was prophetic for his time, but his
words are as applicable to our time as they were to his. Only the form of slavery has
changed. We in this country in the past half century have been moving away from a free
society and toward an increasing degree of slavery. Not the kind of slavery that Lincoln
talked about, but a kind that is no less destructive of the basic greatness and freedom of this
country, a slavery in the form of an increasing role of government in our economy, of an increasing
extent to which we are the subjects and the government the master, instead of the other
way around. The question I want to discuss today is whether we shall continue this trend
or will halt and reverse it. If we continue the trend to a collectivist
economy, continue the trend to a society controlled by government, we shall lose not only our
economic advantages but also our freedom, our political liberty. We cannot continue half slave and
half free, and if we continue in the direction of slavery we shall end up as a collectivist
totalitarian society. It will have a different form than others; America is different from
others. However, we need not continue in that direction. We are masters of our own destiny.
We can take thought and halt it, and the question is, shall we halt it? Shall we move toward
a greater degree of freedom and reduce the extent to which we are being controlled? If you want to see a clear sign of the direction
in which we have been moving, it is the fact that this meeting today is being held in Washington, D.C.. There have been eighty-one, I am told, previous congresses of the National Association
of Manufacturers. Not a single one was held here; most of them were held in New York.
You have now moved your offices and, a few years later, this congress to Washington.
Why? Because you have recognized increasingly that your masters are no longer primarily
your customers, but increasingly government bureaucrats, elected and non-elected. I don’t blame you for recognizing the change.
You would be myopic in the extreme if you did not recognize that that is what happened. It is
understandable that you choose to hold your meeting where the real power is, but it is
a very clear sign of what has been happening in this country. As I’ll come to later,
I do blame you–again, not as individuals and not as intentionally. I do blame you for helping to bring about the shift in power from the market to the government. Make no mistake about it: human freedom cannot
exist–human freedom has never existed–without a viable, healthy, free market economy. And
that is what is being destroyed. That is what is being destroyed as much by its alleged
friends, including many in this organization, as by its announced enemies. This country
remains predominantly a free country; it remains the freest major country in the world. There
are some minor countries that have a greater degree of freedom, but among the major countries
we remain the real stronghold of freedom. Yet, it is worth taking a few moments to look
at how far we have come from a truly free economy, a truly free society. If we look at the problem of enterprise, of the business
world, of free enterprise, we are all of us prone to get on the lecture platform and talk
about the virtues of free enterprise. What does free enterprise mean? It does not mean
what it is often taken to mean: it does not mean that private enterprises shall be free
to do what they want, including restricting markets and keeping out competitors. That
is not the fundamental meaning of the term or the meaning it has always had. Free enterprise
means that anybody shall be free to set up an enterprise, to start small and grow big.
And yet, in that sense, you are not free in this country to set up a bank, unless you
can get a certificate of convenience and necessity from a governmental official. You are not
free in almost every city, with possibly the exception of Washington, D.C., to enter the
taxicab business, unless you either get a permit from city hall, or currently buy such
a medallion or permit to operate from somebody who was lucky enough to get it some years
back. You are not free to become a lawyer or a physician or a plumber or a mortician,
or a host of other occupations, unless you can get a license from a state body certifying
that you may offer your services for sale. You are not free to go into the business of
delivering mail, or of offering electricity or telephone service without getting a permit
and permission–in the case of the mail, obviously obviously a nationalized monopoly; in the case of the
telephone and electricity, local monopolies but franchised by the state. You are not free
to go and raise money on the capital markets, unless you will fill out the 400 or more pages
of forms that SEC will demand of you at a cost which has had as one of its major effects
a strong handicap to the emergence of new small enterprises in this country. In one
of the most recent extensions of government power, you are not even free to make a bet
with somebody on an organized exchange about what the price of wheat will be a year from
now, since we have now set up a commission to control the commodity future exchanges.
I could go on and on. You people in this room can name, far better than I can, the enormous
limitations which there are on your opportunity to engage in free enterprise in the true sense. If we go from the area of enterprise to control
over your income and your property, every individual in this country works from the
beginning of January to the end of May, roughly, in order to support governmental expenditures.
Over 40 percent of the income of the American people is now spent on their behalf by civil
servants, bureaucrats, others whom they have chosen to spend their money for them.
This may be good. It may be bad. But with respect to freedom, it clearly means that
we have given up control over 40 percent of our resources. We talk about how we must avoid
socialism, yet every corporation represented in this room is owned to the tune of 48 percent
by the U.S. government. We are 48 percent socialist. What does it mean if I own 1 percent
of a corporation? It means that I am entitled to 1 percent of its profits and must share
1 percent of its losses up to the extent of my limited liability. But the corporate income
tax says that out of every dollar of profits the government gets 48 cents; out of every
dollar of losses, the government loses 48 cents up to the amount of profit that has
been carried over–limited liability again. So in a meaningful sense, not in terms of
words, we are 48 percent socialist. Let us go away from the area of economic freedom,
of the freedom to set up an enterprise, the freedom to control your own resources and
your own income. Let’s look at the political area. What has happened to the area of political
freedom? Is there a corporate executive in this room who has free speech? I don’t believe
it. There is hardly a one of you–maybe there is an exception in this room–who would get
up and make a speech without giving considerable thought to what effect that would have on
the IRS, on the Justice Department–you name the other departments. Let me quote from a
letter that I received a while back from an executive vice president of an oil and gas
association. In the modern spirit, it was a she and so she wrote: “With increasing
regulation as the Big Brother looks closer over our shoulder, we grow timid against speaking
out for truth in our beliefs against falsehoods and wrongdoing. Fear of IRS audits, bureaucratic
strangulation, or government harassment is a powerful weapon against “freedom of speech.”
In the October 31, 1977 edition of U.S. News & World Report, she went on to say, “the
Washington Whispers section noted that “Oil industry officials claimed that they have
received this ultimatum from Energy Secretary James Schlesinger,” to whom as I gather
you listened this morning, and his message was, ‘”Support the administration’s
proposed tax on crude oil, or else face tougher regulation and a possible drive to break up
oil companies.’” Is that freedom of speech? Taking another more immediate example. I am
living at the moment in California and there is in California a proposed amendment to the
state constitution, the Jarvis-Gann Amendment. It’s an amendment which is not the amendment
I would write; it’s not a perfect amendment. It has defects, but it is an amendment that
offers the most promising chance in many a year to set a limit on state governmental
expenditures and state taxes. I am told that businessmen around the state have been subjected
to increasing pressure from Sacramento to come out in opposition to the Jarvis-Gann
Amendment. Now many of them will resist the pressure, but do they really have effective freedom
of speech? If I were giving this talk before some of
my academic colleagues, they would say to me at this stage, “Well, what are you worrying
about? Those are only businessmen. What difference does it make if they have freedom of speech?
What really matters is the intellectuals.” But do my fellow academics have freedom of
speech? If you were a professor in a medical school in any university in this country,
do you suppose that you wouldn’t think three times before you gave a speech against socialized
medicine, when half of your budget is coming from the National Institute of Health? If
you were one of my colleagues, even in the field of economics, who was receiving grants
from the National Science Foundation to support his research, don’t you suppose that would
affect your willingness to give a speech about how undesirable it is that government should
be subsidizing that kind of research? If you look at what is happening on the universities
today in the area of affirmative action, if it weren’t so important it would be humorous
and enjoyable, because there is no group in this country that has it more coming to them.
But it is too serious to take satisfaction in that. The extension to universities of
control by HEW of employment and other practices is no more justified, and no less justified,
than is the extension to industry. It’s unjustified in both cases. A free enterprise
economy means that you have freedom to hire and fire, to make such contracts with other
people. The mission of a university cannot be maintained and cannot be expressed if it
has to have a quarter of a professor who is of Japanese origin, two-thirds of a professor
who comes from the Baltic states, and so on down the line. And yet, what is happening
on the campuses? Leave aside for a moment the academics and
go to the area that we have always put most emphasis on, the area of free press. There
are representatives of the press here. Do you have freedom to speak? There was a story
a while back in England that is a portent of the future. A union of pressmen on The
London Times closed down the publication of The London Times for a day or two–I’ve
forgotten for how long–because The London Times was proposing to print a news article
which had some unfavorable comments about that union. Is that freedom of press? We can go farther and farther but the record
is clear: we are predominantly a free society but we have an enormous range of restrictions
on our freedom, and those restrictions will grow and grow unless we can somehow bring
a halt to this expansion of government power. The closest approximation we ever had to a
free society in this country was unquestionably in the nineteenth and early twentieth century,
a period about which myth has become more dominant than reality. It was a period of
the greatest progress in the well-being of the ordinary man that the world has ever seen,
and yet it has become enshrined in myth as a period when robber barons were going around
the country grinding the poor people under their heels out of sheer malice. The interesting question is what produced
the shift from that nineteenth century relatively free society to our present 48 percent socialist
society? What produced the shift? It was not produced by evil people for evil purposes.
There was no conspiracy. Very seldom, as I said at the outset, do bad things come from
bad intentions. What produced the shift, in my opinion, was an unholy coalition of well-meaning
people seeking to do good and of special interests trying to use the power of government to promote
their own particular immediate interests–reinforced by a change in political philosophy, a change
in political philosophy from an emphasis on individual responsibility to an emphasis on
social responsibility. That shift started in the nineteenth century,
but it did not really take off until the New Deal in the 1930s, and in the past fifty years
it has gone very far. In 1928, total government spending at all levels was 10 percent of the
national income–two-thirds state and local; the federal government spent 3 percent. The
National Association of Manufacturers would never have contemplated meeting in Washington.
Today, government spending at all levels is 40 percent of our national income and two-thirds
of that is federal spending. That’s only one index, not necessarily even the most important. The question is: where do we go from here?
Can we reverse that process? Many people will say, “Well you can’t reverse the process.
Technological change, the development of more complex and sophisticated economy, requires
big government.” That is another of those myths that needs to be punctured. If you look
at where government has grown, it has not grown in those areas which can in any way
be attributed to technological change. It has grown in the area of welfare transfer
expenditures, of taking money from some people to give to others. And the only respect in
which technological change has played a role in that is through the invention of the computer
and similar devices which make it more nearly practicable for the federal government to
take from everybody and send checks to everybody. In the areas which you might have supposed
technology would affect, technological change has done as much to reduce the need for government
as to increase it. In an earlier day when transportation was more difficult and more
costly, you could have a wide range of local monopolies. That’s almost impossible today.
You can have competition not only from all over the country but from all over the world.
Communication is faster. There is no one-way street from technology. Nonetheless, there are many unfavorable signs
about which way we are moving. It is far easier to enact laws than it is to repeal them. The
very people who opposed the enactment of a law will ultimately end up opposing its repeal,
because, once you enact a law, people get special vested interests in what’s going
on–not least of all the bureaucrats who enforce the laws. Again, you have the problem of the political
power of special interests. It used to be that anybody who talked along these lines
fifty years ago would have talked of the special interests as being primarily business. But
that’s no longer the case. Today, increasingly governmental officials who are desperate to
keep their jobs and their influence are a major special interest preventing an elimination
of bad programs and the reduction in the role of government. To take the most dramatic example,
in 1970-71 then-President Nixon proposed a major reform of the welfare system. He proposed
something called a Family Assistance Plan. I recommend to you the book by then Pat Moynihan
at the White House, now Senator Moynihan, on the politics of the program in which he
points out that that reform was defeated primarily by the welfare establishment, by the people
who were involved in running the many, many programs that would have been consolidated
and eliminated under that reform. Again, in California, in Michigan, and in
many other states–but California and Michigan are the two cases I know about personally–we
had attempts to get constitutional amendments adopted limiting government spending, the spending of the state
governments in those cases. Who defeated them? The most important single force defeating
them was, in Michigan, the Michigan Education Association and, in California, its counterpart,
the bureaucrats in the educational establishment. Now again, they were not doing it out of evil
motives. Every individual has the capacity to rationalize his own interest as being the
national interest. That goes for you and me, and let’s never forget it. So that they weren’t doing it out of- I’m not attributing it to malice or anything else, but they now are in a position where they are a very strong
special interest. Let me turn to this audience, to business.
I cannot complain, as a believer in a free enterprise society in which human progress
comes through the attempt by individuals to better their own lives, through Adam Smith’s
famous “invisible hand,” I cannot complain if business pursues its self-interest rationally and in an informed
way. That is the main motive of every system. But I think I can complain and I am impressed
with the extent to which business, when it turns to matters of public policy, is shortsighted
and operates against its own interest. I have been struck time and again by the contrast:
a businessman dealing with his own firm will look thirty or forty years ahead, he will
make long-range plans; he will not conduct his business in terms of what’s going to
happen in the next six months, but when he comes to the area of public policy, well six
months is a long time ahead to look. Let me give you some examples. In 1971, President Nixon imposed price and
wage controls–in my opinion, by far the action he took which did the greatest harm to this
country. One of the main reasons he imposed it, and was able to impose it, was because
a large fraction of the business community supported it. I do not know how many people
there are in this room who supported it, but I do know that at meetings of major businessmen
before this was imposed, two-thirds or more were in favor of price and wage controls.
They thought it would be wage control but, apparently, conducting even a major business
does not mean you know how to count. You count the votes and you know it’s not going to
be wage control; it’s going to be price control. Businessmen have learned that lesson,
have they? I’m not sure. They are capable of doing the same thing again. We have the
steel industry right now. Can the steel industry say it’s against price and wage controls?
It cannot, not when it welcomes government setting a minimum price on imported steel.
If it approves a minimum price on imported steel, with what straight face can it oppose
a maximum price on domestic steel? What’s sauce for the goose is sauce for the gander. Does the banking industry oppose price and
wage controls? If I asked people in the banking industry, they’d say yes. But then are they
really uniformly opposed to the maximum price of zero on the price they may pay for their
main raw material, which is demand deposits–legal prohibition on the payment of interest rates?
It was the New York banking community some years ago, with a few conspicuous exceptions,
that stood out to the last minute for trying to peg the price of the dollar in foreign
exchange markets which produced the Eurodollar market and the exodus of international financial
business from New York. In both of these cases I think this is shortsightedness. The steel
industry may think it is getting some benefits currently; it will pay a very large price
in the future for supporting a policy which is adverse to the national interest. Don’t
kid yourself. It is not in the national interest to make steel more expensive to consumers.
It is not in the national interest to reduce the jobs available in the export industries.
It is not in the national interest to allow government to step into still another industry
and run it in great detail. The oil industry objects–some segments of
it; some parts of it are supporting it–to energy policy right now. No industry in the
country has spoken in more glowing words about the virtues of free enterprise and done more
to undermine free enterprise. From percentage depletion to pro-rationing of oil in the various
states to oil import quotas in the 1950s, the oil industry has sought governmental intervention.
How can it then complain if government intervenes now on the other side? Businessmen in general have been very much
concerned, and rightly about the fact that in an inflationary period, tax treatment for depletion and for depreciation causes an overstatement of their taxable profits. They are right. How
do they fight it? By asking for special measures for business. Why don’t they have the foresight
and the farsightedness to ask for indexation of the tax system in general for both business
and private individuals, and join themselves to a national cause instead of trying to get
special benefits? I hear today all of this talk from the business
community about taxes on business. “We must lower the taxes on business.” There are
no taxes on business. Business can’t pay taxes. Business executives may sign the checks,
but the taxes are paid either by customers or by workers or by stockholders. Only people
can pay taxes. This building can’t pay a tax. There are no taxes on business. Instead
of the business community promoting that kind of talk, they ought to be promoting the opposite–they
ought to be talking about taxes. But there are also some favorable signs which
lead me not to despair of the preservation of a largely free society. The most favorable
of all, of course, is the inefficiency of government. If government were really spending
that 40 percent of our income, which it now takes efficiently, we’d be through. But
fortunately, it’s spending 40 percent of our income, which it now takes efficiently, we’d be through and getting 20 percent, roughly
a two to one ratio. And this in turn promotes a recognition on the part of the public of
the inefficiency of government and it promotes a reaction against government. That reaction
against government is very manifest. Its most promising sign today is the revolt of taxpayers
in various states. The most promising movement I see ahead of us as a possible way to halt
this trend is the movement toward constitutional amendments limiting government spending, and
I urge all of you to look into those a little bit more. The United Kingdom gives an example
that ought to give us a little bit of hope. The United Kingdom went down this road before
we did and went much farther. It is now backing up. A labour government in Britain has for
two years reduced government spending as a fraction of income. It hasn’t done it because
it has changed its philosophy but, because like every government, it does what is politically
profitable. Let me close by asking what is the role of
business and what can business do about it? Business qua business can do little except,
in my opinion, to become more sophisticated with respect to pursuing its own long-term
interests, to look farther ahead, not to be shortsighted, to take up the issues and see
where they are going to lead; to apply the same kind of planning, the same kind of analysis
to public policies that you apply within your own companies. But businessmen can do a great
deal. Businessmen are citizens; they are individuals. This country is a democracy; it is a representative
government. We are doing these things that many of us regret in Washington because it
has been politically popular to do so. And you and I can do our share as individuals
to persuade ourselves and our fellow citizens that this is a road to a collectivist state,
that this is a road which if long continued will destroy both our prosperity and our liberty.
If we do that, we can do a great deal to help turn the tide back. Thank you.

9 thoughts on “Milton Friedman Speaks – The Future of Our Free Society

  1. Early Neoconservative Fraud.

    "Free to Choose" was a grotesque corruption of centuries of free inquiry into economics.

    A statist wolf in libertarian clothing. There was a reason he was celebrated, he was stamped as kosher safe for consumption and no threat to the status quo. A straw man who spoke of freedom to the rubes and promoted corporate and national socialism.

  2. illicit drugs today are incredibly profitable due to the lack of supply caused by government intervention, if they were legal the profits will disappear along with the drug lords, murders, violent crime

    if by dystopia you mean totalitarian then as far as illegal drugs are concerned we are already there, thank our policy makers for the real dangers of drugs – murder wouldn't exist any more with legalizing these drugs as it does with alcohol today

    alcohol prohibition resulted in he same violence

  3. I dont think you heard what Friedman said. He always said corporations NEVER pay taxes. Even when taxed, the cost is passed to you. The government and the Fed are the issue and will be the issue until the people decide. It is your choice.

  4. Yet all the government intervention has done is grow the inequality. You know what they call trying the same thing over and over again with the same failed results? It's sad when most are either ignorant or insane.

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