The Milton Friedman's argument

Milton Friedman's book Capitalism and Freedom is widely regarded as one of the most important works on political economy ever published. This book hums with significance and life, and it will do so for several years to come. However, Milton Friedman found it difficult to assign a name to his political theory brand. Because of his association with the United States government, which is a social democratic, he struggled to choose between the terms "liberal" and "conservative." He finally refers to himself as a democrat, but he is not a libertarian. This paper will explain what Milton Friedman’s argument against Socialism is by looking at why Friedman believes that a socialist economic system cannot sustain, if economic freedom and political freedom are different, explain the socialist concept of equality compared to the free-market capitalist concept of equality and finally look at the government's role in ensuring equality and which concept of equality.

Friedman most clearly annunciates his classic liberal position in the introduction of his work. In this section, Friedman asks this question, fundamental to his book: "How can we benefit from the promise of government while avoiding the threat to freedom?" (Friedman 2). He espouses two principles of government, which constitute his answer to that question. He claims that "first, the scope of the government must be limited," (Friedman 2) so that it focuses only on national security and protecting personal freedoms- enforcement of private contracts, freedom of speech, religion, thought, etc. His second principle is that "government power must be dispersed" (Friedman 3). He explains that he is wary of centralized government power, and promotes government action at the most local level possible (that is city over the state, state over country). In essence, Friedman requires that the government only establish the rules of society, maintaining that those rules do not infringe upon anyone's freedom, and then enforce those rules. The government's only further conduct is to continually ensure that those rules promote everyone’s freedom to its fullest extent and to account for instances when “strictly voluntary exchange is exceedingly costly or practically impossible, such as in monopolies and “neighborhood effects,” which arise “when actions of individuals have effects on other individuals for which it is not feasible to charge or recompense them” (Friedman 39), such as air pollution.

Friedman's argument for such a limited government stems from what he views as the most important value- formal freedom. For Friedman, formal freedom includes economic freedom and political freedom. Friedman considers economic freedom to both be an end in itself, meaning it has some intrinsically beneficial quality to it, as well as necessary for the preservation of political freedom. Economic freedom, according to Friedman, leads to the purest form of capitalism possible, which he views as the most economically efficient system. He believes that economic efficiency generates the most overall economic resources, making it valuable. However, he also maintains the economic freedom as necessary for political freedom. He defines political freedom as "the absence of coercion of a man by his fellow men," and argues that, by removing the economic organization from the government, the coercive power of the government over economic activities is eliminated. This improves everyone’s political freedom by removing coercion. “Economic strength [becomes] a check to political power rather than a reinforcement” (Friedman 15).

The argument made by Friedman ought to be clearer now. He states that the poor form of government that is labeled above can only improve economic freedom since it improves the most untainted form of capitalism. Consequently, political freedom is realized to its full extent. Formal freedom is fully achieved when political freedom and economic freedom are maximized, and therefore the classic liberalism developed by Friedman becomes the finest form of government. Additionally, Friedman suggested that society would suffer if it goes beyond this limits in quest of its freedom. For instance, Friedman would be vehemently against the law requiring a minimum wage because such a law could, at least in some industries, call for wages higher than they otherwise would be. In this situation, employers are coerced into a contract- paying higher wages- that is not strictly voluntary and into which they otherwise would not have entered. This decreases those employers’ economic and political freedoms.

Friedman then claims that, because discrimination is often economically irrational, a real capitalist market will raise a determination to this issue by itself. As Friedman explains, a businessman has an incentive not to discriminate, because, by doing so, that businessman would put himself at a disadvantage compared to his non- discriminating competitors. This disadvantage would manifest itself as higher costs for the discriminating businessman. This argument also holds true for a consumer or laborer. If one refuses to buy from or work near someone due to one's prejudices, that person limits his or her range of choice, which will often increase that person's costs. Because it is economically irrational to increase one's costs, Friedman argues that those who do it will fall behind their non-discriminating competitors. Eventually, as these competitors flourish and those who discriminate falter, discrimination will begin to disappear altogether. However, Friedman overlooks two important issues. First of all, just because discrimination may lead to a lack of economic efficiency does not necessarily mean that those who discriminate will merely disappear. The businessman who discriminates and falls behind his competitor may not fall back far enough to be forced out of business entirely. More importantly, for Friedman's argument to hold, non- discriminating competitors must exist. If every (or even most) businessperson, consumers, and laborers discriminate in similar ways, these supposed non-discriminating competitors who will drive the discriminators out of business would not exist. Therefore, discrimination would continue unchecked.

Friedman then examines fair employment practices, or what he calls “Fair Employment Practices Commission" (FEPC) and right-to-work laws. The FEPC was the precursor to the Civil Rights Act of 1965 and required that companies with government contracts not discriminate by race or religion. Right to work laws make it illegal to require the joining of a union upon being hired. Friedman believes both of these laws are vastly beyond the scope of the government, and even offers three arguments against them. While his arguments were focused on the FEPC, he claims that right to work laws follow the same principle and, therefore, his arguments against the FEPC apply to the right to work laws also.

For his first argument against FEPC, he claims that such a commission “involves interference with the freedom of individuals to enter into voluntary contracts with one another” (Friedman 111), thus implying that these laws are coercive and limit economic and political freedom. Friedman, however, fails to look at all of the consequences of such a commission. While it is true that discriminating employers would be coerced into entering certain contracts they would otherwise not enter, the gains in political and economic freedom would outweigh the loss in freedom caused by that coercion. Especially in a society where discriminatory hiring practices are commonplace, the party that is being discriminated against has their freedom severely limited, often to a point further than what FEPC would limit discriminators. The people being discriminated against are essentially facing coercion from society itself. In this case, to maximize economic efficiency and freedom, which are Friedman's own goals, government coercion would be better than allowing this societal coercion to continue. For instance, in a society where African Americans will not, under any circumstances, be hired (meaning, a society where employers will not hire African Americans no matter what kind of wage reduction they are willing to take), those African Americans’ economic and political freedom is limited more than employers’ freedoms would be if FEPC were enacted. Those African Americans are not even given the opportunity to make a living for themselves, let alone have freedom of occupation, which should be a freedom protected by the government, even under Friedman’s limited conception.

Friedman’s next argument can almost be viewed as a refutation to the rebuttal above, in that, in this next argument, Friedman identifies a further denial of freedom caused by the FEPC, one that could be strong enough to tip the scale back in favor of the discriminator. He claims that sometimes employers use discriminatory hiring practices not because they are themselves prejudiced, but because their customers are prejudiced, so they employ such practices to retain their customers. Friedman uses the example of a grocery store. In a society with pervasive racism, a grocery store owner does not hire any African Americans not because he is prejudiced against them but because he is concerned that, by hiring them, he will lose customers. Friedman argues that FEPC would force this owner to hire African Americans, and that this could lead to less business in that store, and even its eventual closure because its patrons would no longer buy there. This would obviously severely limit the freedom of that owner. However, this argument implicitly assumes that only certain businesses within an industry would be subject to FEPC. A good law intended to end discriminatory hiring practices would subject all businesses, or at least all businesses within certain industries, to that law and we must assume that the law passed would be useful. Otherwise, the law would fail to have its intended effect not because it is bad in principle (which is what Friedman is trying to argue), but only that it is bad in practice. Assuming that the law effectively forces an end to discriminatory hiring practices across the board, either Friedman would be right, and every single business within that industry would close (that is, every grocery store would close), or customers would simply have to adjust to buying from those against whom they discriminate. Because of the importance of most industries, especially grocery stores, the overwhelmingly likely outcome would be that customers would simply accept buying from those against whom they are prejudiced. The result would be more freedom for those who are discriminated against and a minimal loss in freedom for the employer and consumer because the employer does not lose any business, and the consumer can continue shopping where they initially shopped, or try to find a new place to shop.













Work cited

Friedman, Milton. "Capital and freedom." (1962): 89.