Capitalism And Freedom

Milton Friedman is one of the most famous economists that ever lived, yet reading his most famous book, Capitalism And Freedom; it is hard to see why. The book is surprisingly basic and doesn’t offer much of an argument. Friedman merely states things (such as the minimum wage causes unemployment) without offering any supporting evidence. It is as though simply saying it was enough to make it true. There are hardly any references or citations in the book, which makes it very difficult to know if any of what he says is actually true. There is no reference to history or current affairs or if any of his ideas have worked before or if his criticisms reflect reality.


As the title of the book suggests, Friedman believes Capitalism and Freedom are intrinsically linked and even goes as far to claim that capitalism causes freedom. He believes that as countries become more capitalist they become freer. As this is the central claim of the book, you would think he would offer a detailed argument for it. Friedman does nothing of the sort. He merely states his opinion in a few throwaway remarks and leaves it at that. Brief mention is made of Fascist countries that were capitalist yet repressive, but Friedman does not view this as a contradiction of his thesis. The later example of capitalist South American dictators and East Asian countries that grew rapidly without being free societies, also dent his thesis. He also ignores the common saying that correlation is not causation. Sure Western countries have grown freer over time but they have also grown less religious. Might this be a bigger driving force than capitalism? The state has also grown in size over the last two centuries as freedom grew; drawing a link between these two is no more spurious than Friedman’s thesis.

Considering the topic, it is unusual that Friedman pays little attention to economic freedoms but merely restricts himself to personal freedoms. So he stoutly defends the right to property and contracts but says nothing of the right to housing, employment, education or healthcare. Friedman uses the example of capital controls preventing a British citizen from travelling as no different from restrictions on travel in Communist countries. Hyperbole aside, he seems to suggest that if the end result is the same than there is little difference in the means. But what if poverty prevents ethnic minority students from attending college, is that the same as laws preventing them? Is there a difference between schools that are all-white due to racist laws and ones that are due to socio-economic factors? Are the poor minority students not unfree in both cases? These are important questions to grapple with, yet Friedman ignores them for a simplistic capitalism-is-super-for-everyone argument.

Friedman has had a massive influence on libertarians that continues to this day. His arguments and style of writing is the model for libertarian authors and bloggers whether they realise it or not. For example, he never uses references, sources, history or any real life examples apart from the occasional anecdote. Merely stating unions or minimum wages are bad is enough, no evidence is necessary. Likewise he never cites any opponents or the people he criticises and as a result debates arguments that government advocates don’t actually make, while ignoring the ones they do. He subscribes the belief that democracy is a means of the poor voting to rob the rich and other such 19th century views. He has a naive and unwavering belief in the market as the solution to every possible problem without exception; a dogmatic stance modern libertarians have inherited. He also seems to be the source of common misconceptions among libertarians such as the belief that big government mainly benefits big business. This is regularly stated by libertarians despite the fact that reality suggests otherwise. If this was true why would business groups oppose the expansion of government, support right wing parties and call for deregulation? If government regulation really helped business as much as libertarians claim, wouldn’t the top businessmen all be avid socialists? Likewise it is claimed that progressive taxation makes the poor poorer and forces them to pay more than they receive in welfare, a position that defies logic.

All of which is rather annoying, but it is not until chapter 8 that I reached what has to be one of the worst written discussions of discrimination in my life. The book was written in 1962 at the height of the Civil Rights Era and right as Martin Luther King was leading marches and protests. In response Friedman throws all sense of reality, common sense and intelligence out the window. He turns into a mindless ideologue spouting his mantra of market-good-government-bad regardless of ridiculous it sounds in this situation. He argues that racist employers harm themselves by refusing to hire qualified black employees. He states that these firms will be driven out of business by non-racist firms who hire based on talent. Now this sounds nice on paper but he gives no consideration at all to the fact that this obviously had not happened and racist businesses were still rife in America.

However, it gets worse. Much worse. Friedman writes that racist consumers who only shop at white-only stores are merely buying a specific product (and one they would have to pay more for). He writes that: “It is hard to see that discrimination can have any other meaning than a “taste” of others that one does not share.” (page 110) He says that preferring to be served by white rather than black staff is no different than preferring to listen to blues music over opera. My jaw dropped at the mind-numbing stupidity of this. How could anyone in their right mind think this? Here, at the same time that segregation is being challenged, Friedman is offering a justification and apology for discrimination.

He furthermore criticises fair employment legislation (you know, the ones with the crazy requirement that you cannot hire people on the basis of race) as interfering with “the freedom of individuals to enter into voluntary contracts”. (page 111) So if employers insist on paying black workers less than white workers and the black workers are compelled by poverty to accept, then Friedman sees no problem. Friedman’s perverse notion of freedom seems to include the freedom to discriminate but not the freedom to earn the same as people of a different skin colour doing the same work. He then decides to leave his brain at the door and claim (on page 113) that fair employment laws are no different than Jim Crow laws or Nuremburg Laws as they both involve imposing certain beliefs about race by the majority onto individuals. It defies all logic how a man who many consider to be intelligent (though I certainly don’t after reading his book) could be an apologist for blatant discrimination.

Friedman is also flippant, naive and ridiculous when discussing inequality. He firstly claims that a society where everyone had exactly the same income is not feasible, a point obvious to every egalitarian who ever existed. He then claims inequality is due to people’s choices, namely some people choosing to work hard and others choosing to have more leisure time. The fact that this in no way represents the working world does not cross his mind nor the fact that it is usually the lowest paid who work the longest hours in the most physical jobs. He further scrapes the bottom of the barrel by claiming that life is like a lottery and that we cannot begrudge those who win or redistribute the winnings (he ran out of arguments pretty quickly). Not content with absurd arguments, he moves on to downright untruths. He claims that the more capitalist a country is, the less inequality there is and that the US has less inequality than Britain which has less than France. This completely untrue and in fact it is the other way around. Likewise, countries with large welfare states (which Friedman considers converse to capitalism) have the least amount of inequality. These points should be obvious to a professional economist who has done to most basic of research and it is strange that Friedman missed them.

Before I read the book, I knew I would not agree with it. Even still, I was shocked at how poor an argument Friedman makes and his complete aversion to using evidence to support his claims. His defence of discrimination is disgraceful and unbelievable. The book consists less of arguments than of mere statements of belief as though ‘thus Friedman said, so it must be’. It makes me wonder how he came to be regarded as such an eminent and well respected economist considering he writes at the level of a standard blogger. Make no mistake about it; Friedman is only concerned about the freedom of some.


Filed under Books, Economics

19 responses to “Capitalism And Freedom

  1. While the Irish education system has its faults, even at Junior and Leaving cert level you have it drilled into you to provide evidence for your statements, its not enough to say the poem is good or bad, you have to back it up.

    Sounds like Friedman could have with more facts to back up his opinions.

  2. Milton Friedman was Jewish. He likely owes his college education and entire career to the fact that top colleges removed the quotas on Jewish applicants just a couple of decades before he was getting admitted to colleges – but during his lifetime If discrimination against Jews was still in effect, he’d have to go to a second rate college, (if he even had been allowed the opportunity), likely not given fellowships and tenure, and likely never been called the most influential 20th century economist by anyone. I wonder if he’d still be making the same argument about discrimination then.
    BTW, while googling Friedman, found this interesting article:

    • Yeah its strange that he would defend discrimination is such ignorant considering his heritage. I wonder if he considers anti-Semitism merely a taste he does not share? At the very least his heritage should have informed him a little about how terrible a thing discrimination is.

      On the article, I think I came across a ridiculous attempt by him to claim that businesses should only care about profits in the book too. It was poorly argued, didn’t make much sense and little more than an excuse for greed.

  3. What the Emperor has no clothes? Never had? Modern economiics has has to wrap itself in spurious mathematics to gain some credibility but still their arguments are filled with, shall I say, unusual even outlandish assumptions. Mr. Friedman was no exception.

    • Friedman was not only no exception, it is due to him that economics is in such a mess. Many of the ridiculous theories with unrealistic theories were either created or promoted by him. In fact he argued that it was completely irrelevant whether or not a theory was realistic.

  4. Friedman and Rand. The fric and frac of free market ideology.

  5. Pingback: Link Love (2013-08-17) | Becky's Kaleidoscope

  6. GM

    To understand, it is necessary first to internalise the opinion of the other person.

    As a former member of the Left, I could make the same arguments for statism that you do. If I was feeling competitive, I’d say that I could probably put them in even more convincing terms than you do. I intimately understand the logic of the Left.

    Unfortunately, I don’t think that you understand the logic of libertarianism. Even if libertarianism is a load of rubbish, to debunk it properly you would need to be able to at least state what its arguments are in an accurate way. This blog post confuses positive and negative liberty on more than one occasion, making it elementary write-off material as far as getting a decent discussion of libertarianism going.

    • I would say I understand it and its appeals. I can understand why people grip about taxes, bureaucracy and government waste. I understand why the market seems appealing and why some think we should leave things to it. The problem is that libertarianism takes things to an extreme. While I agree that government mismanagement is a problem, I disagree that that means we should remove the government from the economy.

      That doesn’t apply to Friedman’s view on discrimination which is nonsense (though unfortunately reminiscent of my economics lectures taken to an extreme)

      • GM

        Do you understand the difference between positive and negative liberty?

        • Yes and that’s a major criticism I have of libertarianism. It only focuses on negative liberty and ignores positive liberty.

          • GM

            At least it understands the difference. Your blog-post is a write-off because it fails to accept the distinction.

            • To the contrary my third paragraph is dedicated to this point. For example I say “it is unusual that Friedman pays little attention to economic freedoms but merely restricts himself to personal freedoms.”

              I am well aware of the distinction and part of my argument is that Friedman is not (or at least not in this book)

              • GM

                That statement alone indicates a problem with your comprehension of the concepts at this point.

                Economic freedom refers to those interactions which involve one party paying another party, while personal freedom refers to interactions not involving payment.

                OTOH, negative freedom means the ability to act without having an externally imposed obligation to do something according to the wishes of somebody else, while positive freedom means the ability to satisfy your desires. Negative freedom is measured relative to the interference by others in your life, while positive freedom is measured relative to your vision of the perfect life.

                • You have a strange tendency to talk past me whenever we debate. Instead of dealing with what I said, you redefine words to mean whatever you want. So you create a new definition of economic freedom and complain that I don’t share it.

                  • GM

                    I’m not redefining words. I gave you the most common definitions of a number of different terms which you clearly mixed up and which helps to explain why you don’t “get” the arguments for freedom.

  7. Friedman and other right-wing libertarians do actually get one thing right (though not for the reasons they may think) government really does benefit big business.

    To take the USA as an example, nearly 90% of all elections to state offices are won by the candidate who raises the most money to fund their campaign. Unions, NGOs, and certain special interest groups make up a share of donations to campaigns, but by far the largest group contributing to political candidates are private corporations.

    They fund candidates who they know will represent their interests when they take political office and though lobbying and mass media relations direct the entire course of political debate. Meaning that the entire political establishment in pretty much every representative democracy is controlled indirectly by the business class. This doesn’t even go into the infamous “revolving door” between politics and business.

    Social democrats typically see the years post WWII to the end of the 70s as a brief period where benevolent government was able to tame big business and either put it to good use or mitigate its negative effects through regulation and the welfare state. However, considering how the elite were negatively affected by the depression caused by too much laissez-faire leading up to that point, it’s far more likely that they simply went along with the Keynesian consensus and the construction of welfare statism as they considered it the best way to save capitalism from itself.

    They simply switched sides and opted for the then emergent ideas of neoliberalism in the mid-to-late 70s after the 1973 oil crash showed how Keynesianism was no longer working in thier interests. Nixon Taking the US off gold was also likely a factor.

    Social democracy may have done good things in providing a socio-economic safety-net for the those on the bottom – which greatly expanded positive freedom and decoupled the poor to a large extent from their dependency on the wealthy – but it also had the negative effects of:

    (1) Creating a new dependency on the state

    (2) Instilling a new technocratic manageralism into the structure of the economy.

    When the British Labour Party was in power from 1945-1950, it nationalised various public services, but the idea that they could be institutionally decentralised with worker self-management implemented never even entered their heads.

    Big businesses supports whatever is in its interests. It used to be social democracy, now it’s neoliberalism. Next it’ll probably be some form of Green capitalism to placate the growing concern for the environment and they figure they can probably profit from the increase in ethical consumerism and green-washing their businesses.

  8. robert blackmon

    Your willingness to engage libertarian shapeshifters is commendable. Please, never internalise their delusions simply to understand them.

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