Milton Friedman died on 16 November aged 94 years. He was one of the foremost bourgeois economists of the 20th century. His reputation among the right-wing capitalist leaders, especially those who drove the policies of reaction and counter-revolution against the gains of the post-war labour movement in the 1980s was second to none.
Indeed, Friedman was seen by Thatcher, Reagan, Pinochet and many others of this ilk as their main source of advice in rejecting what they saw as the compromising class collaboration policies of the misspent 1960s and 1970s dominated economically by the ideas of John Maynard Keynes. For them, Keynes, a Bloomsbury-set bohemian, who advocated government spending and full employment at the expense of profits and low taxes, was anathema.
It is no coincidence that the current US Secretary of State, Condaleeza Rice, among others, should be profuse in their condolences and in their intellectual debt to Friedman.
What was Friedman's biggest contribution to the cause of capitalism? His main theoretical and empirical arguments started from the assumption that the capitalist system of production and accumulation was without fault in its essence. As long as market forces were allowed to operate untrammelled, then the price mechanism of the market would ensure the proper allocation of resources and thus maximise growth without any crises.
This view was of course, not original. It is the general ideology of modern capitalist economics, taught in all the university economic schools. But it is in direct opposition to the classical economists of the late 18th century and early 19th century like Adam Smith, David Ricardo, James Mill and Malthus, whose scientific inquiry led them to have grave doubts about the ability of capitalism to sustain long-term profitability and sustained expansion. For them, capitalism had serious defects, albeit from agricultural monopolies, excessive competition or over-population.
Keynes too worried about the stability of capitalism. The experience of the depression years of 1921 and 1929-30 led him to conclude that capitalism could not guarantee steady economic growth without slumps and chronic unemployment at periodic intervals. So Keynes advocated making bankers keep their interest rates very low and for governments to borrow and spend money to sustain spending. That meant government had an important role to play in keeping capitalism stable.
Like the Austrian school economist, Friedrich Hayek, Friedman found these ideas as one step on the road to socialism, for him, a system of slavery. Friedman proclaimed the right of the individual to make as much money as he or she could without regulation. Such was his enthusiasm for this principle that in his last years he was a strong advocate of abolishing all laws against smoking, alcohol, and drugs, which he saw as an attack on individual freedom.
Friedman's most famous theoretical contribution was to argue that money was key to successful capitalism. It was the interference of the national bank in the US, the Federal Reserve, in the 1930s that caused the Great Depression. By restricting the amount of money in the economy, the Fed starved industry of the funds to grow. If it had stayed out the equation, all would have been well. He and Anna Schwartz published in 1963, The monetary history of the United States 1867-1950, to justify this argument. The evidence and conclusions of that book have subsequently been refuted by others.
In his propaganda against government interference, he argued strongly for the complete privatisation of nearly all state functions including ending state education, and arguing for a flat rate tax – so a millionaire would pay the same percentage as the poorest paid worker. He also opposed government control of the currency (he predicted that the euro would never be introduced in Europe and later when it was, that it would collapse).
It is a rather sickening irony that a man who claimed he was opposed to big government was only too happy to advise the military dictator and Chilean coup leader General Pinochet in economic policies during the 1970s and at the same time the stalinist Chinese regime – all in order to bring about raw-blooded capitalism.
Friedman is thus honoured in the church of capitalism. However, it is no accident that many of his policies have never been adopted nor will they be. The reality is that a completely free market without regulation would lead to anarchy and chaos for the capitalist system.
His emphasis on controlling the money supply has been completely ignored in recent years as finance capital has exploded. Credit has never been more out of control in the capitalist economies of 2006. Also, Friedman's policies would mean even more inequality of income and wealth than there is already, provoking reaction from working people. All-out Friedmanism would probably have brought capitalism to its knees.
The capitalist apologists and leaders will mourn his passing, but not carry out his policies. The working-class will remember the damage he has done to millions of people's lives.
