Canada and the World
Current Events with a Canadian Perspective
Last update
19 November 2010
Capitalism According
to Milton Friedman
The American economist Milton Friedman, who championed unrestricted free enterprise,
has taken a lot of blame for advocating
the conditions that caused the Great Recession
Milton Friedman (left) was the leader of the Chicago School of Economics at the University
of Chicago. Following his death in November 2006 at the age of 94, The Economist
wrote that he was “the most influential economist of the second half of the 20th
century…possibly of all of it.”
Fan of Free Market Capitalism
Friedman studied such mysterious topics as consumption theory and stabilization policy, and won the Nobel Prize for Economics in 1976 for his work in these areas. However, Mr. Friedman is known more for his theories about the place where politics and economics meet.
Mr. Friedman was a passionate believer in unrestricted capitalism. He was scornful of the ability of government to provide services for people, once saying “If you put the federal government in charge of the Sahara desert, in five years there’d be a shortage of sand.”
The core of Milton Friedman’s theories is that the free market, motivated by profit
and self-
Friedman’s Ideas were Unpopular at First
He started writing about his faith in capitalism early on. In 1946, he co-
In it he argued that government-
The point of the essay was to ask the public if it wanted a “ceiling” on rents or a roof over their heads. According to Friedman it was not possible to have both.
At the time, just after the Great Depression and the Second World War, there was wide acceptance that government had a major role to play in the economy.
Milton Friedman’s pro-
Thatcher and Reagan
Converts to Friedman’s Theories
However, 30 years later there were plenty of influential people who thought Friedman was on to something and it wasn’t drivel.
Britain’s Prime Minister Margaret Thatcher and U.S. President Ronald Reagan were
firm believers in Friedman’s ideas. They accepted as gospel truth Friedman’s dictum
that the best government was the smallest government. Thus began an era of privatization
and de-
Under various socialist regimes the British government had come to own the coal, steel, oil, and electricity industries, several auto companies, the railway system, the telephone service, a major airline, and much more. These were all sold off to private enterprise by Thatcher. Reagan was not as radical, but he did privatize a rail freight business, Conrail, and Fannie Mae.
Thatcher and Reagan Cut Regulation
Both leaders also heeded Friedman’s advice to cut government red tape. In 1982, Ronald
Reagan signed into law the Garn-
Economist Paul Krugman, writing in The New York Times (May 2009) says this bank deregulation
“ended New Deal restrictions on mortgage lending -
Families began to pile on debt on a scale that would have been impossible if regulations had remained in place.
Eventually, overstretched borrowers ran into trouble and began defaulting on their
loans. “These defaults,” wrote Krugman, “in turn wreaked havoc with a financial system
that -
And, it’s all tied to the economic theories of Milton Friedman and the people who followed his advice.
Sources
“Milton Friedman: A Giant among Economists.” The Economist, November 23, 2006.
“Who Was Milton Friedman?” Paul Krugman, New York Times, March 29, 2007.
© Canada and the World, September 2010
All rights reserved
Casey Serin
By the fall of 2010, property values had fallen so much in the United States that one in four homeowners owed more on their houses than they were worth.
“Friedman’s ideas were profoundly influential. Among other things, he argued that
free trade, lower taxes on income and capital, and a reduction in the burden of regulation
would increase economic growth and improve social well-
Brent J. Skinner, Fraser Institute, August 2010.