Tuesday, May 3, 2011

Economic Freedom as defined by Milton Friedman

The word "freedom" and "liberty" in politics (like the word "love" in other venues) is tossed around so much that after a while they begin to lose their touch. Economic freedom, particularly, is very misunderstood and, consequentially, overlooked in today's political climate. Some democrats I've debated have confused it with economic opportunity, or "fairness", or lateral economic mobility, and many politicians have done much harm to economic liberty for the cause of enhancing these things. So I'm here to set up a true definition.

I would loosely define economic freedom as the right to own property, and to make any voluntary exchange of that property for money, goods or services, with any other person or persons, at terms which are mutually agreeable to all parties. But my examination of economic liberty in today's society would pale in comparison to that of the late, great Milton Friedman. I am currently reading a book of his, called Free to Choose, and I took the following excerpt from this book. It is a stellar read and I highly recommend it to everyone. But what makes it even more amazing is the time frame in which it was written (1980), and how accurate his theories have proved over the past 30 years. As you read his description of all the ways in which economic liberty is repressed in America, realize that these repressions have increased tremendously in the 30 years since this was written, and were a drastically incomplete listing even at the time he wrote. He's only scratching the surface, but in doing so he teaches us much about whether or not we are truly free to choose.

"An essential part of economic freedom is the freedom to choose how to use our income: how much to spend on ourselves and on what items; how much to save and in what form; how much to give away and to whom. Currently, more than 40% of our income is disposed of on our behalf by the government at the federal, state, and local levels combined. One of us once suggested a new national holiday, "Personal Independence Day, that day in the year when we stop working to pay the expenses of government...and start working to pay for the items we severally and individually choose in light of our own needs and desires" [Note: today, this holiday is better known as Taxing Independence Day]. In 1929, that holiday would have come on Abraham Lincoln's birthday, February 12th; today it would come about May 30th; if present trends were to continue, it would coincide with the other independence day, July 4th, around 1988 [Note: thanks to Reagan, those trends did not continue! In 2009, Taxing Independence Day generally fell around April 19th, though it varies by state.]

Of course, we have something to say about how much of our money is spent on our behalf by the government. We participate in the political process that has resulted in the government spending an amount equal to more than 40 percent of our income. Majority rule is a necessary and desirable expedient. It is, however, very different from the type of freedom you have when you shop at a supermarket. When you enter the voting booth once a year, you almost always vote for a package rather than for specific items. If you are in the majority, you will at best get both the items you favored and the ones you opposed but regarded as on balance less important. Generally, you end up with something different from what you thought you voted for. If you are in the minority, you must conform to the majority vote and wait for your turn to come. When you vote daily in the supermarket, you get precisely what you voted for, and so does everyone else. The ballot box produces conformity without unanimity; the marketplace, unanimity without conformity. That is why it is desirable to use the ballot box, so far as possible, only for those decisions where conformity is essential.

As consumers, we are not even free to choose how to spend the part of our income that is left after taxes. We are not free to buy cyclamates or laetrile, and soon, perhaps, saccharin [Note: not to mention many drugs which have become larger issues over the past 30 years, such as marijuana.] Our physician is not free to prescribe many drugs for us that he may regard as the most effective for our ailments, even though the drugs may be widely available abroad. We are not free to buy an automobile without seatbelts, though, for the time being, we are still free to choose whether or not to buckle up [Note: not anymore!].

Another essential part of economic freedom is freedom to use the resources we possess in accordance with our own values--freedom to enter any occupation, engage in any business enterprise, buy and sell from anyone else, so long as we do so on a strictly voluntary basis and do not resort to force in order to coerce others.

Today, you are not free to offer your services as a lawyer, a physician, a dentist, a plumber, a barber, a mortician, or engage in a host of other occupations, without first getting a permit or license from a government official. You are not free to work overtime at terms mutually agreeable to you and your employer, unless the terms conform to the rules and regulations laid down by a government official.

You are not free to set up a bank, go into the taxicab business, or the business of selling electricity or telephone service, or running a railroad, busline, or airline, without first receiving permission from a government official.

You are not free to raise funds on the capital markets unless you fill out the numerous pages of forms the SEC requires and unless you satisfy the SEC that the prospectus you propose to issue presents such a bleak picture of your prospects that no investor in his right mind would invest in your project if he took the prospectus literally. And getting SEC approval may cost upwards of $100,000--which certainly discourages the small firms our government professes to help.

Freedom to own property is another essential part of economic freedom. And we do have widespread property ownership. Well over half of us own the homes we live in. When it comes to machines, factories, and similar means of production, the situation is very different. We refer to ourselves as a free private enterprise society, as a capitalist society. Yet in terms of the ownership of corporate enterprise, we are about 46 percent socialist. Owning 1 percent of a corporation means that you are entitled to receive 1 percent of its profits and must share 1 percent of its losses up to the full value of your stock. The 1979 federal corporate income tax is 46 percent on all income over $100,000 (reduced from 48 percent in prior years). The federal government is entitled to 46 cents out of every dollar of profit, and it shares 46 cents out of every dollar of losses (provided there are some earlier profits to offset those losses). The federal government owns 46 percent of every corporation--though not in a form that entitles it to vote directly on corporate affairs.

It would take a book much longer than this one even to list in full all the restrictions on our economic freedom, let alone describe them in detail. These examples are intended simply to suggest how pervasive such restrictions have become."

Pretty bright guy, huh?

No comments:

Post a Comment