Capitalism and Freedom by Milton Friedman

Last summer, I read another book by Friedman called Free to Choose, and was rather unconvinced by his ultra-liberal economic and political viewpoint. I was left with the impression that he deemed almost all government intervention unnecessary and even disruptive of the market, which he thinks is perfectly capable of readjusting itself. I felt that the recent crisis demonstrated the disastrous implications that the lack of government moderation can have on the global economy, and thus Friedman's argument seemed problematic to me.

Capitalism and Freedom differs from the previous book in that it summarizes Friedman's economic and political philosophy in a more logical manner. His argument is still extremely liberal and even though I consider myself both fiscally and politically liberal, I could not help but disagree with some of his ideas. For example, he lists some of the activities/role of government that most liberals consider unacceptable that he feels are unjustified:

1. Parity price support programs for agriculture

2. Tariffs on imports or restrictions on exports

3. Government control of output such as through the farm program

4. Rent, price and wage control (such as during and after WW2)

5. Legal minimum wage rates

6. Detailed regulation of industries such as transportation

7. Control of radio and television

8. Social Security programs

9. Licensure provisions

10. "Public housing" and other subsidy programs that foster residential construction

11. Military conscription

12. National parks

13. The legal prohibition on the carrying of mail for profit

14. Publicly owned and operated toll roads

His list includes a handful of public goods and social welfare policies, except for maybe, education. In the subsequent chapter, he argues against such practices undertaken by the current US government. The overarching premise for his argument is that "my freedom to move my fist must be limited by the proximity of your chin." In other words, men's freedom can conflict and that one man's freedom must be limited to preserve another's. Is he trying to suggest that increased authority bestowed upon government will always limit people's freedom? It seems like he is forgetting one key role of government: income distribution.

He then goes onto argue that government should have less control over foreign exchange, monetary and fiscal policies. He supports free trade unhampered by any type of trade barrier, even exchange rate adjustments; argues that inflation control gives individuals "an incentive to misuse and misdirect resources and distort the investment of new savings"; he claims that Keynesian multiplier effect is an erroneous concept.

On the issues of education and income distribution, Friedman comments that government administration creates more harm than benefit. He believes that income inequality itself is a product of imperfections of the market (i.e. monopoly power of government).

I find a lot of his arguments a bit too far-fetched and overly optimistic about market forces. Not all economies are identical in terms of the natural resources, demographics and fiscal history. Each one has different economic goals and therefore must implement different methods in order to achieve those goals. The role of government is crucial in that it directs, not controls, the allocation of certain resources and implements policies which facilitate such process. What kind of government deliberately makes its citizens and economy worse-off? More often than not, government intervention expedites an economy's growth, and does its best to arrive at equitable income distribution.