Capitalism and Freedom - Book Report/Review Example

 Milton Friedman’s Capitalism and Freedom, which is based on the discussion of economic capitalism’s function in the liberal society, was originally published by the University of Chicago Press in 1962. In the book’s main concept, economic freedom and competitive capitalism are described as necessary conditions towards achieving political freedom. In reiteration to what Adam Smith, a Scottish economist had asserted about two centuries ago, Friedman agrees that communities will prosper and be more civilized when they are not placed under the government’s excessive control. This, he points out decidedly, is because a robust private economy will provide its own means to put checks on the government’s power naturally. From the introduction, Friedman portrays himself as person who advocates for dispersed and limited government authority, through which he goes on to define the relationship between political freedom and economic freedom. This paper will present a book review of Capitalism and Freedom. Milton Friedman was born in Brooklyn, New York, in 1912 to Jewish immigrants from Ukraine. A high school graduate before reaching the age of 16, he won a Rutgers University scholarship to study economics and mathematics, and yet another one at the University of Chicago for a master’s degree. After failing to secure an academic profession at the time of the Great Depression, he chose to work as an economist in the administration of President Roosevelt (Bernanke 19). Initially, he was an adept believer of Keynesian economics but changed his stand and believed that the fixing of prices and wages by the government was a barrier to the recovery of the conditions caused by the Great Depression. Throughout the Second World War, he was working at Columbia University’s Division of War Research and in 1946, earned his PhD which also secured his teaching job at the University of Chicago. In a period of three decades, he established the Chicago School of Libertarian Economics, which was one of his key contributions towards the study of economics. He was also at one point a senior research fellow at the University of Chicago’s Paul Snowden Russell Distinguished Service Professor Emeritus of Economics and the Stanford University’s Hoover Institution. His experience in the field of economics was an influential factor during the presidential campaigns of Barry Goldwater and President Nixon, through which floating the dollar and fluctuating exchange rates were accepted. Friedman’s key motivation towards writing Capitalism and Freedom seems to stem from the need of showing that progress should be achieved through people, rather than the government, and that capitalism does not lead to inequality. He actually points out that the Great Depression was caused the meddling and mismanagement of the government (Bernanke 22). The book contributed significantly and variedly in political economics, with some of the suggestions like Estonia’s flat income tax undergoing tests and implementations. It is also worth noting that the Bretton Woods system has almost been completely replaced by Friedman’s idea of the floating exchange rate. He popularized ideas that were previously not known in most outside economies, such as the school voucher systems in Sweden and Chile and also advocated for free trade, a concept that has been an almost permanent part of political deliberations (Carnoy 310). Out of the 13 chapters that the book is arranged into, only three have a key focus on philosophy, while the rest discuss issues. The main theme is apparently on competitive capitalism’s role as an economic freedom system while the minor theme is founded on the government’s role in a society committed to freedom and fundamentally relies on the market for organized economic activity. In the first chapter, he discusses how political freedom and economic freedom relate to each other. He points out that economic freedom is necessarily an essential component of political freedom, apart from its own sake. His argument is that when the means of production are controlled by the government, it will not be possible to have the free exchange of goods and real dissent. This, he points out, is because dissenting groups will not be able to overcome the ability of the government to hold back the medium through which they convey their views and ideas. However, he does not offer evidential support for this claim but, he adds, economics and politics are not as separate as has widely been the misconception (Friedman 8). He defines political freedom as the lack of coercion of man by fellow men. Hence, the power to coerce is the primary threat to freedom, whether it is vested in the majority, an oligarchy, a dictator or a monarch (Friedman 15). His idea is that for freedom to be preserved, the concentration of power must be eliminated to the highest possible degree. Rather, power must be distributed to ensure the existence of a system that ensures checks and balances. To this effect, he claims that it is not possible for a socialist society to be democratic as well since it cannot guarantee individual freedom. It is possible for the society to achieve only a limited number of economic and political combinations. In the second chapter, Friedman discusses the government’s role in a free society. It actually restates the foundation of the liberal position as opposed to limited government. Therefore, the market has a role in permitting agreement without conformity (Friedman 23). As the main idea of the chapter, Friedman opines that the role of the government must be limited formulating, implementing and enforcing rules and regulations. These rules and regulations must offer fair and equal opportunities to all and protect property rights and individual freedom. It is also the government’s duty to prevent, and if possible eliminate, monopolies as they are the coercive means through which freedom is compromised and destroyed. It is also the responsibility of the government to carry out functions that prevent neighborhood effects. He explains neighborhood effects as the instances in which an individual’s actions impress significant costs on others whereby exchanges or compensations are not possible. He points out that basic difference in fundamental values are rarely solved through the ballot box and eventually end up being decided via conflict, which actually does not translate into a solution. This is exemplified by the civil and religious wars that are often bloody (Friedman 24). The third chapter is about the control of money. Here, the evolution of money in the US that culminated in the Federal Reserve Act is discussed. Instituted in 1913, the Federal Reserve has been more detrimental than beneficial according to Friedman. Instead of acting as the stabilizer that it was intended to be, the Federal Reserve failed in many circumstances. He also believes that the idea has become more popular lately especially in economic downturns, characterized by the government bailouts in times of banking crises. With the examples of the 1929 Stock March Crash and then the Great Depression, Fried argues that the government’s and Federal Reserve’s intervention through the New Deal aggravated and prolonged the financial problems the country was facing. His proposal is that the Federal Reserve should institute a consistent rule that will increase the supply of money by up to 5% per year. International financial and trade agreements are discussed in the fourth chapter. The abolition of the Bretton Woods system is advocated for and the floating exchange rate system proposed. Further, Friedman proposes that all barriers to trade and currency control should be brought to an end, including export quotas that are viewed as being voluntary and are not. He believes that that is the only way towards balancing problems in trade. He gives seven proposals of policies that he believes must be enacted to deal with international trade and currency exchanges, all of which were actually adopted eventually. Chapter five focuses on fiscal policy and mainly rebukes the Keynesian view that unemployment should be eliminated through government spending. This approach, Friedman thinks, perceives the government as a means to balance the private sector’s spending. The evidence he offers towards this opinion is that increasing government expenditure will lead to an approximately equal growth in GDP, which contrasts the multiplier theory of the Keynesian system. His position is that the economy does not really need skilled monetary drivers (Friedman 78). Rather, he opines that what is needed is a way of ensuring the economic passengers are prevented from sending the economy into crises. Chapter six is on the government’s role in education. Friedman advocates for a policy in which students can have vouchers to use for education at their preferred private schools. His opinion is that every person within a democracy must be provided with basic education. Looking at the idea of vouchers critically, it is in resonance with Friedman’s favor of a free market. In this chapter, the author also discusses the bureaucratic characteristic of the teaching industry, which he believes has set teachers’ salaries rigidly and uniformly. He points out that good teachers receive less than they are worth while the poor ones are paid much more than they deserve (Friedman 95). Chapter seven discusses capitalism and discrimination. His argument here is that it is costly and difficult to discriminate in a capitalist society since market transactions are mostly of an impersonal nature. He also opines that laws dealing with fair employment practices should not be enforced because they will potentially compromise employers’ liberty to employ workers basing on the qualifications they intend to use as employers (Friedman 112). Basing on this argument, he proposes that laws related to the right to work need to be abolished. Social responsibilities of labor and business as well as monopoly are discussed in chapter eight, where three alternatives are stated for a monopoly. They include private monopoly, public monopoly and public regulation, and they are all considered universally undesirable. Although monopolies are known to arise from various sources, the indirect and direct intervention by the government is stated by Friedman as the most common and need to be stopped. In the ninth chapter, Friedman discusses occupational licensure by taking a radical position against state licensure of any form. Usually, the most notable license advocates in an industry are the players in that given industry aiming to lock out competition (Friedman 138). For instance, he claims, licensing physicians is not liberally justified since it only leads to medical cartels and inferior care. In chapter 10, on distribution of income, Friedman looks into the progressive income tax that was established to restructure income so as to make the situation fairer. His investigation reveals that the wealthier in society take advantage of a number of weaknesses and nullify the effects of the restructuring efforts. Chapter 11 discusses measures of social welfare that are created with good intentions but often fail to help the poor as expected. The main focus is on Social Security that is portrayed mainly as a humongous and inequitable system. Chapter 12 discusses alleviation of poverty and offer a solution to the issues exposed in chapter 11. The proposal is that negative income tax should be placed at a certain threshold for those earning a particular income (Davies 128). In his concluding chapter, Friedman focuses on the way the government’s repeated interventions have always turned out the opposite of what was intended. He emphasizes that all good things can only be achieved from the free market rather than the government. In spite of its perceived positive intentions, the government needs to keep out of areas it is not needed. In conclusion, it can be summarized that the book emphasizes ways in which free markets offer protection to political freedom and that progress can be achieved through people rather than the government. Essentially, the book makes an ideal case of modern literalism. The reader is easily convinced that political freedom has historically been achieved after capitalist institutions and free markets emerge. The recent government shutdown can be related to the author’s theme when he insists that the power of the government needs to be minimized in economic issues, which is a manifestation of his negative position against the Federal Reserve. As a personal opinion on the author’s concept, he appears to have been thoughtful throughout his work that can be assessed over the entire political spectrum without giving rise to undue repercussions. Not all of his views and perceptions are agreeable to all stakeholders in the economic and political arena, but at least he offers convincing arguments that support them. There is sufficient evidence that modern economics is all about self-interested appeals and an exercise in ideology on behalf of those wealthy in obscene ways. He successfully constructs a neoliberal thought in which freedom is viewed as the greatest value. This concept is further supported by the fact that everything appears to be rational make sense since there is no connection to any historical context. Works Cited Bernanke, Ben. Essays on the Great Depression. Princeton University Press, 2004. Print. Carnoy, Martin. “National Voucher Plans in Chile and Sweden: Did Privatization Reforms Make for Better Education?” Comparative Education Review, 42.3 (2000): 309-337. Print. Davis, William. “Economic Professors’ Favorite Economic Thinkers, Journals and Blogs.” Economics Journal Watch, 8.2 (2011): 126-146. Print. Friedman, Milton. Capitalism and Freedom. Chicago: University of Chicago Press, 1962. Print. Read More