Wednesday, December 5, 2007

Milton Friedman Speaks

Milton Friedman takes a question on slavery and colonialization


Student: First you talk about the injustices which prevail in the so-called communist countries and in the free societies which exist in the capitalist countries and the wealth that has been created there. But you restrict your arguments to the Western European countries, the United States, and Japan. What you fail to point out is that most of the countries in the world are capitalist—that is, the means of production are owned privately or the accumulation of wealth is privately accumulated. Most of these countries have severely repressive governments, and most of them suffer from huge unemployment rates, hunger, and poverty. If we look at India as compared to China which has twice as many people and under its system—the Chinese system—has been able to achieve things for the masses of the people India could not even consider. The same thing goes—

Friedman: Ah, would you come to your question?

Student: All right. Just two more points. Because I—

(comment from audience)

Student: Excuse me, but I’d like a little bit of free speech myself.


Friedman: That’s ok. We don’t want to deny you free speech, we just want to have as many people as possible. And I think we’ve gotten—

Student: Thank-you very much. I agree with you so let me finish. The problem which a lot of us feel is first you did not mention, in terms of the countries you are pinpointing, such barbarous countries such as South Africa and Zimbabwe. And in terms of giving your appraisal of the riches that have been accumulated in the western so-called capitalist democracies, I would like you to give us an honest evaluation of just how these countries got so rich so quick and that direct relationship of that to the fact that there were slaves that worked—free labor, and the wealth that was created and this society being a direct product of that relationship and also of the colonial relationships of the Western European countries and the wealth which they bled out of their colonial domain.


Friedman: I would be glad to answer those questions. First of all, there’s a sense in which every country in the world is capitalist. The Soviet Union is capitalist. Every country in the world has large capital under control, and the real question is of course, the organization in which the capital is controlled. In the Soviet Union it is controlled by the state or of by officials of the state. In the second place, I have been talking for an hour, I would like to talk you for 10 hours, in a full discussion I would certainly agree with you; that capitalism is not a sufficient condition for freedom. It’s a necessary condition for freedom. I never said that wherever you had capitalism you had freedom. I never said that. I never made that statement. I made the opposite statement. Wherever you had freedom, you had capitalism. Capitalism is a necessary condition for freedom, but not a sufficient condition for freedom. In addition, you need relatively broad access to capital and a relatively free market. Again, relatively. You need competition. I usually refer to it as competitive capitalism to distinguish it from certain kinds of systems which have been capitalist and have all the bad qualities that you describe. In the second place—I don’t want to take much time—to go to your final point. In the second place, it simply is not true that the enormous increase in the wellbeing of the free countries in the west arose out of slavery. Slavery was a blot on our scutch and there is no question, and of course it was a disgrace to this country to have had slavery as long as it did, but if you take Britain which did not have slavery—

(Audience: They had colonies!)

Friedman: I’m going to go to the colonies, that’s the next point. I’m trying to take one point at a time. The gentleman made two separate points, one had to do with slavery, and one had to do with colonies. Britain did not have slaves. Japan did not have slaves in the 100 years since the Meiji Restoration. Hong Kong today does not have slaves. And you ask yourself if you want to know how people feel—ordinary people feel—about different systems, you ask how they vote with their feet. And you ask whether it’s Hong Kong that has to put up police to keep people from Hong Kong going into China, or it’s China that has to put up police to keep people China going into Hong Kong? So look at the way people vote with their feet before you judge which society gives em better conditions. But in any event—


Friedman: In any event, let me go to the final point of colonies. In the first place, it’s not true that the wealth or the benefits of the west derive from exploiting the colonies. The facts are against you. The reason why you say that is because it is so hard for people to get out of the notion that life is a zero-sum game. They think that if one man benefits another must loose. But in a free market, both people can benefit. Now if you take the case of Africa, the wheel had not been invented in parts of Africa by the end of the 19th century. The number of people in Africa and their average conditions of life in Africa have grown enormously as a result of their contacts with the west.

(inaudible comment from the audience)

Friedman: Well, I would say you don’t know your facts sir. In the case of India, which is a very famous case, if you look again at the facts all of the studies have shown that it cost Britain more to maintain India—these are some famous studies by Jacob Viner which went into the details of it in great detail—colonialism has always cost the mother country more than it ever got in any direct or indirect economic benefit. Sofar as India was concerned, the history of India is divided into three periods. The period of British rule in the 19th and early 20th century, when there was very real progress in the standard of life of the people of India. The period of the 20’s and the 30’s when there was a great struggle against Britain and for independence when there was essential stagnation in India and there was no growth. The period since the creation of independence in 1948 when you have had a highly centralized government when unfortunately it was Harold Laski, and not Adam Smith, who was the most respected intellectual figure in India. When the Indian people have lost, not improved. When the average amount of food and so on has been going down, not up. The people of India have been worse off under independent, non-colonial government then they had been before. So colonialism, well first of all, where is it that you have colonialism today? You have the classic colonialism behind the Iron Curtain. You have Russia, which is a master country. I mean not the Union of Socialist Soviet Republics, but Russia which is the master country with the great colony around it within the Soviet Union in Poland, in Czechoslovakia, in Hungary. That’s the great example today of your classic kind of colonialism. The United States, with trivial exception, has never been a colonial country. It had Philippines for awhile—

(audience comment)

Friedman: Cuba was not a colony of the United States. In any event, you need a sense of proportion. In the period between the revolution in 1776 an 1898 the US had no colonies. And yet that was the period of the greatest growth and the greatest economic development of the United States. Your question.

Milton Friedman on the morality of corporations seeking profits (Part 1of2)

Milton Friedman on the morality of corporations seeking profits (Part 2of2)


Student: I think you’ve done an excellent job tonight of defending capitalism. Capitalism has treated you well. In general it’s treated the people in this audience well, and as you say, people respond to things based on their self-interest. So I think they’ve responded well to you. What I’d like to get to now is the question of the relationship between morality and economic policy which you talked about before in terms of the quotes from Thoreau. You said the worst sort of person is the person who’s going to try to be charitable and who is going to try and be—

Friedman: No, that isn’t what Thoreau said.

Student: Well you said that it was unwise for a person to be charitable or to be sincere.

Friedman: No, no.

Student: What did you say then?

Friedman: Let me repeat Thoreau’s words. Thoreau’s words were, “If I knew for certain that a man was coming to my house with the conscious design of doing me good, I should run for my life.” Now that’s not the same thing as being charitable.

Student: Ok, fine I’ll accept that distinction. Take what Thoreau just said and you’ve echoed and apply it to American business. I think, what you’re basically saying is—

Friedman: Apply it to whom?

Student: American business, a corporation.

Friedman: A businessman?

Student: You are the head of a corporation.

Friedman: Oh, you’re applying it to me as the head of a corporation.

Student: Can I ask you the question please?

Friedman: Sure.

Student: Now it seems to me that the implication is that that corporation should not try to do anyone else good, because then the people would run away. What they should do is pursue their own self-interest, and that means profit. And what I’d like to talk about is the implications of that in terms of three concrete examples. I believe that a couple of years ago when there was a major flood in Pennsylvania you came out as opposed to aid for those disaster victims based on the rational that they had bought the land at lower prices because the risk was known and they shouldn’t be given any aid. I’d like people to consider the implications of that.

Friedman: That isn’t what I came out against. I came out against the government providing flood insurance at low cost in advance. I did not come out against private individuals giving charity to people.

Student: But what about disaster aid by the government?

(Audience: what should the government do about the nuclear power plant?)

Friedman: Well it’s the same thing. The nuclear power plant ought to be made to pay full insurance themselves and that ought to be incorporated into their charges. I’m not in favor of government subsidization of nuclear power plant insurance. Look—don’t attribute to me your conventional views about what “a conservative” believes, because I’m not a conservative. I’m a believer in freedom!

Student: Well then I’d like to talk about that using an example. Freedom. In Ohio an old man failed to pay his electric bill. You may be familiar with the case. And the electric company turned off the electricity and he died. The reason they turned it off is because it wouldn’t have been profitable for them to keep it on because he didn’t pay his bill. Do you believe that was right?

Friedman: I don’t know the details of that case at all. But I can well believe—

(interruption from the audience)

Friedman: But I’ll be glad to— No no, excuse me. In many of these cases you hear stories which when you find the details are very different from those that have been presented. But let’s suppose it were true. Which is what I was going to go onto say. You know why do you want to stop me? Why do you assume I’m always going to give the wrong answer?


Friedman: Let’s assume the facts were true. The result is a tragedy. Who is responsible? Is it really the responsibility—should I blame the people—let’s suppose for a moment. Let’s suppose the electric company were to follow the practice of never turning off anybody’s electricity. Let’s just for a moment take that other extreme. Then this wouldn’t have happened. Who would pay the cost?

Student: Are those the only alternatives?

Friedman: Well—for a moment—we can come to other alternatives, but I just want to show you the logic of it. Because I want to show you—

Student: You’re reducing it to absurdity.

Friedman: No no, it’s not an absurdity, because what I want to show you that what you have to ask about, is the costs imposed on different individuals. The electric company is neither. The electric company is a non-human institution. The electric company—what you must talk about are either the stockholders of the electric company, the employees of the electric company, or the customers of the electric company. Those are the people involved. As you go to the other extreme and adopt the policy that the electric company will never turn anything off, then you’ve effectively instituted a system under which the only people who pay for electricity will be those who pay for it voluntarily. Now the number of people who will do that—

Student: Mr. Friedman, are these the only 2 alternatives?

Friedman: No, but I’m just showing you—you’ve gone to one extreme, I’m going to the other extreme and show you that where the responsibility really lies for they kind of thing you’re describing. The responsibility really lies not on the electric company for turning it off, but on those of this mans neighbors, and friends, and associates who are not charitable enough to enable him as an individual to meet the electric bill. You’re blaming the wrong person for what happened.

Student: Ok, well I think people understand that example. I have just one more, this has to do with the Ford Pinto. I’m not sure if you’re aware of recent revelations that have come about the production of that car, Ford produced it knowing full well that in any rear end collision the gas tank would blow up because they had failed to install a $13 plastic block in front of the gas tank and Ford estimated in an internal memo that that would cost about 200 lives a year and estimated further that the cost of each life would be $200,000. They multiplied and found that the cost of installing those blocks in the cars would be more than the cost of saving those 200 lives. And over the past 7 years the car’s been produced and over 1,000 lives have been lost. It seems to me that Ford did what would be the right thing according to your policy and yet that seems to me to be very wrong.

Friedman: Well, let me ask you, let’s suppose it would cost a billion dollars per person. Should Ford have put them in none the less?

Student: It’s not a question of that. It’s a question—

Friedman: You’re only arguing about price. You’re not arguing about principle. Nobody can accept the principle that an infinite value should be put on an individual life. Because, in order to get the money involved—in order to get the resources involved, it’s not money—they have to come from somewhere. And you want the policy that maximizes the situation overall. You cannot accept the situation that a million people should starve in order to provide one person with a car that is completely safe.

Student: That’s absolutely right.

Friedman: Right, and therefore you’re not arguing anything about principle. You’re just arguing whether Ford using $200,000 was the right number or not.

Student: No I’m not arguing that.

Friedman: Suppose it was $200 million? What should Ford have done?

Student: $200 million for what?

Friedman: Suppose it would cost $200 million per life saved? Should Ford still have spent that $200 million?

Student: You mean per—that’s not really the question.

Friedman: Yes it is the question. That’s the principle of the question. That’s the only principle involved. I don’t know whether Ford did the right thing. It’s a question of whether these numbers are valid numbers, for the relative cost of different things. You’re not arguing about a principle if you once agree with me that if it had been $200 million—the cost per life saved had been $200 million—you would not argue. Look, let me go back for a moment—

Student: Can I say something in response to that? If Ford had not been able to market those cars in the same kind of economic bracket because of the price of installing this one plastic block that would be a different question. Maybe Ford could have considered re-designing the whole car so as to make it cheaper. But what we’re talking about is balancing advantages and balancing disadvantages. I’m a supporter of abortion. Therefore I don’t believe that every single human life is sacred. I believe that principles have to be balanced. And yet I don’t see Ford spending $13 less on each car at the cost of 200 lives a year as being a principled position to take and yet I think your logic requires it.

Friedman: Suppose it had been one fewer life per year. So that the $13 per car, so that that one life, instead of being 200 times—$40 million—suppose that it had been one life a year so that it would have cost $40 million, would it then have been ok for Ford to not to have put in that block?

Student: You can’t predict that one life will be lost because of a physical defect in the car. This was a clear—

Friedman: I know, I know, but you’re evading the question of principle.

Student: No I’m not; I’m saying they knew before they put the car out—

Friedman: Look, look, excuse me. You know when you buy a car; you know that your chance of being killed in a Pinto is greater than being killed in a Mac truck.

Student: No I didn’t. I didn’t know that the gas tank would rupture.

Friedman: Every one of us separately in this room could at a cost, reduce his risk of dying tomorrow. You don’t have to walk across the street. The question is, is he willing to pay for it? The question he should be raising is—if he wants to raise the question of principle—the principle he should raise is whether Ford wasn’t required to attach to this car the statement: “we have made this car $13 cheaper and therefore it is one, whatever the percentage is, it is one percent more risky for you to buy. Now then he would be arguing a real question of principle—

Student: Why should they do that? Doesn’t that interfere with the free enterprise system that you’re touting?

Friedman: No! Not at all.

Student: Why not?

Friedman: The consumer should be free to decide what risk he wants to bear. If you want to pay $13 for that, you should be free to do it. If you don’t want to pay $13 for that—

Student: Then the government does have the right to require information of corporations.

Friedman: No, no. The government has the right to provide courts of law in which corporations that deliberately conceal material that is relevant can be sued for fraud and made to pay very heavy expenses. And that is a desirable part of the market. Of course. What I’m trying to say to you, is that these things are really a little bit more subtle and sophisticated than you are at first led to believe. You can’t get easy answers along this line. Because your way of putting it doesn’t really get at the fundamental principle. The real fundamental principle is that people individually should be free to decide how much they’re willing to pay for reducing the chances of their death. People mostly aren’t willing to pay very much. I personally regard this as very, very illogical. I see people on all sides of me smoking. Now there’s no doubt, nobody denies that increases their chance of death. I’m not saying they shouldn’t be free to smoke, don’t misunderstand me, I just think they’re fools to do it. And I know they’re fools, because I quit on the basis of the evidence 18 years ago. But that’s the real issue. And if you want to berate Ford, you ought to berate it on those terms. Not on the grounds that you don’t think they used the right number. Now look, I don’t think we can keep on going much longer. I’m afraid we’re gonna run out of tape and I’m afraid I’m gonna run out of voice. So I think I’ll call it there. Thank-you.

About Milton Friedman Speaks

The preceding clips are from a 15-part lecture series delivered by Milton Friedman from 1977 to 1978 entitled "Milton Friedman Speaks". The lectures were originally intended to serve as the core content of what later became the Free to Choose television programs and subsequently the best selling book of the same title.

From Free to Choose's producer Bob Chitester:

"When I first approached him about hosting a TV series, Milton was concerned about his ability to "talk to the camera," so he proposed giving a series of lectures, which would be used as the core of the TV programs. In an effort to convince him to undertake the venture, I agreed to try this approach, while explaining my reservations. After doing about six of the scheduled lectures, he realized my assessment was correct, but since he had already agreed to the other appearances, all 15 were completed.

The lectures will introduce you to Milton Friedman's brilliant analytical skills while demonstrating his ability to make economics understandable.

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Liberty Travel said...

You can still see the unemployment levels are high even after a few years of the recession first hitting. I like the fact that they try to call it a double dip recession vs calling it a depression but if it goes down for travel a couple years, then goes up briefly should it "count" as wiping the slate clean...You can see the effects in the honeymoons industry as people did not have the disposable income to book cruises or other activities that cost a pretty heft entertainment fund. Same is true with global brands joining other brands such as flight center to recapture lost market share...whatever happens people need jobs or they will begin to riot...once the unemployment checks stop.

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Was the question asker a young Eric Michael Dyson?