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Influencers: Milton Friedman

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Influencers: Milton Friedman
Champion of the free market and father of "monetarism", how did Milton Friedman's attack on Keynesianism affect British politics?

Stephen Moore, writing in the Wall Street Journal in May 2013, observed of Milton Friedman that “Quoting the most-revered champion of free-market economics since Adam Smith has become a little like quoting the Bible: There are sometimes multiple and conflicting interpretations”. Like the Bible, like Marx, and like Keynes, who he would always claim was wrong, Friedman’s reputation often thrived on ambiguity.

But the core of Friedman’s economic philosophy, and the reason that he is a key figure for the New Conservatives, is his championing of the free market. This theme runs through any and every one of his major works, from 'Capitalism and Freedom' to 'Free to Choose', the latter book coming out of a PBS TV series.

For Friedman, the free market should always be the default proposition. If he found there was not a free market in any part of the economy, he urged that there should be. This extended to the US postal service, and to the provision of education, where he advocated a system of vouchers, giving parents that crucial power – choice.

What Friedman also did, and what the New Conservatives may not be so keen on acknowledging, was to oppose the Draft in the USA - it was, after all, a compulsion, which no true libertarian can accept - and latterly to oppose wars, including the Gulf War, and, yes, the Iraq War.

Those who found themselves out of work, he asserted, should benefit from a “negative Income Tax”, which would return money to them to provide a basic income. This, too, is not often discussed in New Conservative circles.

Friedman’s best-known legacy, though, is his work in monetary theory, and its practical use by Governments in the UK and elsewhere as a way of tacking inflation. Strict control of the money supply was needed. This would restore the necessary conditions for growth in the economy.

Margaret Thatcher’s Government was initially keen on the monetarist experiment, which, it was conceded, might cause some increase in unemployment. When the increase in unemployment took the jobless total from a million to over three million, that keenness was not so marked. Inflation also took off in the early days of her first term, peaking at an annual rate of over 20%.

It was later concluded that Friedman had, in making his calculations on the UK’s money supply, got his sums wrong. It is possible that many of those thrown out of work, and whose businesses failed at the start of the 1980s, may not have found this revelation of much comfort.

Friedman was also insistent that there must be no “Taxation Without Representation”. After all, this was perhaps the most significant factor behind the secession of what, back in the eighteenth Century, were Britain’s American colonies. Again, the New Conservatives do not refer to this idea when the Government they favour decides not to allow citizens of other EU member states, who pay their taxes here, to vote in the upcoming referendum on membership.

And while much praise has come his way during his lifetime, and since his death, Friedman’s fellow Nobel laureate Paul Krugman observed “he slipped all too easily into claiming both that markets always work and that only markets work. It's extremely hard to find cases in which Friedman acknowledged the possibility that markets could go wrong, or that government intervention could serve a useful purpose”.

Also, he failed to account properly for power that is wielded in any and every developed economy by those interests that do so without recourse to the democratic process, particularly the multinational corporates that nowadays are part of all our lives.

Those individuals that are subject to taxation may indeed receive representation, but that representation does not always bestow choice to those represented. This last is actually understood well by the New Conservatives, many of whom do not trouble themselves with the rigmarole of getting elected, and serving the people.

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