Thoughts on Economic Freedom
By Michael McGehee at Nov 13, 2008
"Historical evidence speaks with a single voice on the relation between political freedom and a free market. I know of no example in time or place of a society that has been marked by a large measure of political freedom that has not also used something comparable to a free market to organize the bulk of economic activity." - Milton Friedman, Capitalism and Freedom
I was thinking about this quote and the highly distorted definition Friedman used repeatedly for his claim that Capitalism delivered "economic freedom."
Even though economists and writers like Ha-Joon Chang have exposed the "myth" of free market capitalism - i.e. every developed country developed through extensive and various forms of protectionism - there is still more to Friedman's deceit or ignorance (I can't be too sure which is the culprit) than meets the eye.
I am cautious and skeptical of the bravado in which Friedman refers to not only "historical evidence" but of the "single voice" as well, and I think linking the political freedoms of the developed world to the history of their form of economic development has numerous flaws too.
Again, Chang is a great source on debunking that myth as well as Naomi Klein in her most recent book, The Shock Doctrine; the Rise of Disaster Capitalism. For the latter, the author notes that not one country has adopted neoliberal reforms freely or democratically. They were all put in place by force or behind closed doors.
When I read Friedman's statement that, "I know of no example in time or place of a society that has been marked by a large measure of political freedom that has not also used something comparable to a free market to organize the bulk of economic activity" I was quickly reminded by something the writer William Blum wrote in the introduction to his book Killing Hope; US Military and CIA Interventions Since World War II:
The boys of Capital, they also chortle in their martinis about the death of socialism. The word has been banned from polite conversation. And they hope that no one will notice that every socialist experiment of any significance in the twentieth century -- without exception -- has either been crushed, overthrown, or invaded, or corrupted, perverted, subverted, or destabilized, or otherwise had life made impossible for it, by the United States. Not one socialist government or movement -- from the Russian Revolution to the Sandinistas in Nicaragua, from Communist China to the FMLN in Salvador -- not one was permitted to rise or fall solely on its own merits; not one was left secure enough to drop its guard against the all-powerful enemy abroad and freely and fully relax control at home.
It's as if the Wright brothers' first experiments with flying machines all failed because the automobile interests sabotaged each test flight. And then the good and god-fearing folk of the world looked upon this, took notice of the consequences, nodded their collective heads wisely, and intoned solemnly: Man shall never fly.
The other interesting thing about Friedman's comment was the effect his brand of economic views had on the Pinochet dictatorship, which brutally overthrew the Allende government that was taking economic moves that would have undermined Friedman's assertion. And, we cannot forget the order of President Nixon to the CIA: "make the economy scream!"
But let's get back to the definition of "economic freedom." Friedman is asserting that the ability of "a free market to organize the bulk of economic activity" is the definition.
I have some strong doubts, or at least reservations on choosing that as a definition. It seems deeply contradictory and perverse. I use both of those phrases to describe his definition because the manners in which they are put in place and the severity of their adverse effects hardly resemble anything remotely close to freedom.
We do not tolerate others stealing, robbing are raping others and it would be preposterous to claim that doing so is a product of freedom.
So where does freedom end and criminal begin? Consider this comment Karl Marx made on "liberty":
Liberty, therefore, is the right to do everything that harms no one else. The limits within which anyone can act without harming someone else are defined by law, just as the boundary between two fields is determined by a boundary post.
This was made in response to the Declaration of the Rights of Man, and seems to be a very appropriate and acceptable definition of liberty. I would think an equally applicable definition could and should be applied to the concept of economic freedom (or freedom in general):
[Economic freedom], therefore, is the right to do everything that harms no one else. The limits within which anyone can act without harming someone else are defined by law, just as the boundary between two fields is determined by a boundary post.
Does Friedman's economic freedom rise to this challenge? The answer is a powerful "NO!" Why not?
In his book, The ABC's of Political Economy, Robin Hahnel comments on "the nightmare of the invisible foot":
Mainstream economic theory teaches that the problem with externalities is that the buyer or seller has no incentive to take the external cost or benefit for others into account when deciding how much of something to supply or demand. And Mainstream theory teaches that the "problem" with public goods is that nobody can be excluded from benefiting from a public good once anyone buys it, and therefore everyone has an incentive to "ride for free" on the purchases of others rather than revealing their true willingness to pay for public goods by purchasing them in the market place. In other words, mainstream economics concedes that the laws of the market place will lead to inefficient allocations of scarce productive resources when public goods and externalities come into play because important benefits or costs go unaccounted for in the market decision making process.
The consequences of interactions in a capitalist system do not consider the effects they have on others. A seller sells a car for as much as possible while the buyer will buy it for as less as possible. The effects of pollution, congested highways, road rage and depletion of natural resources do not enter the equation.
While a more accurate definition of economic freedom is the ability do anything so long as it does not harm others Capitalism ignores whether it harms or aids unless it is strictly regulated to do so.
Which begs the question: Why waste time, energy and resources on an economic system that has to be caged - notice the contrast with freedom - like a wild tiger just to keep from being mauled, which also happens to be its nature?
It's not that Capitalism is intently malignant. It is not anymore than a wild tiger is, and like a tiger, Capitalism is predictably dangerous because it has not evolved to be conscientious of its effects on civil society. It is simply a predator.