Listener 23 May 1981.
Keywords: History of Ideas, Methodology & Philosophy;
This book may well become a bible for advocates or the political right in New Zealand. Expressions from it (or from the television series on which it is based) are already gaining currency here. Yet such a fate would. be unfair to the Friedmans, and to New Zealand.
For Milton Friedman, professor of economics at Chicago University and , 1976 Nobel prize-winner, and Rose, his wife (the only information the book accords her), are “little Americans” – that is, their book is about America and is intended primarily for Americans, and it does not relate easily to New Zealand conditions:
Chapter three, for instance, plays a central role in the book. The Friedmans argue that there has been growing government involvement in the United States economy, which they attribute in part to the response by Americans to the Great Depression of the 1930s. They argue that Americans have misinterpreted the cause of the Depression, seeing it as a failure of the private economic system which was rescued by the Government, whereas the Friedmans consider that government measures in fact precipitate the Depression. If private enterprise had been left to itself, they say, the economic hardship would have been less and shorter-lived. Scholars may argue about this interpretation, but whatever conclusions are reached they are irrelevant to New Zealand. Whether the international slump was precipitated by America private enterprise or by the American Government is academic in this context since the result to us was the same.
Another instance is that, while the account of the inefficiencies of the American social security bureaucracy is fascinating, it would be ignorant to attribute similar deficiencies to the New Zealand social security system. Indeed, despite our deficiencies here, this country may well offer numerous examples to counter the book’s claim that responsible government cannot improve community welfare.
As befits little Americans, the authors are selective about the evidence they present from other countries; for instance, many New Zealand viewers of the television series, were .puzzled by Friedman’s advocacy of Hong Kong as an example of how to run an economy, for they had seen Corso’s A Fair Deal,’which used Hong Kong to illustrate how people were suffering under private enterprise. There is no inconsistency between these two views – each simply neglects to mention what the other promotes, and whether you see greater virtue in happy businessmen or in prosperous workers is, of course, a value judgment.
Similarly, the Friedmans state: “A society that puts freedom first will, as a happy by-product, end up with both ‘greater freedom and greater equality.” Are we entitled to assume from such an unqualilfied judgment that countries which give highest priority to freedom have the greatest equality (the expression should, of course, be the “least inequality”)’? If so, we can report that Northern Europe and Australasia have less unequal income distributions than the US; from which one concludes that New Zealand, among others, gives a higher priority to freedom than does the US – which I think even the Friedmans would find surprising.
Nonetheless. despite the little Americans and the frequent cavalier misuse of facts, there is a theme in this book that all New Zealanders need to consider. Over the last 100 years social development has created vast bureaucracies in government {and, I would add, private enterprise) which are becoming increasingly unresponsive to social control, and which pursue policies in their own interest, even though they claim to be acting in the public interest. There frequently develops a collaboration between the bureaucracy and part of private enterprise in which the government supports private enterprise, allegedly in the interests of the public, and for which in return the private sector maintains the bureaucracy.
In the past we have tended to be less than critical of such symbiosis. The Friedmans’ criticism of this development is important and deserves consideration, but the solution they offer – a return to the economic mechanism of the 19th century, with its rampant uncontrolled corporate enterprise – falls somewhere between the nostalgic and the foolish. That mechanism was abandoned for good reasons and, while its successor in the form of a high degree of government intervention may have its limitations, the history of social development is one of inevitable progression.*
For all this, the book makes a worthwhile contribution. It is a pleasure to read economists who make no pretence of disguising their values and who argue vigorously, if, alas, without wit. The danger lies not in the book itself but in the uncritical acceptance of it as having direct relevance for New Zealand. The challenge for the political right in this country is to present us with their own well-argued case, so that we have the freedom to choose or reject it.
* Added in 2003: I am not as sure about the ‘inevitability’ today as I was in 1981 – certainly in the short to medium term. BE.