TCS Daily


His Ideas Had Consequences

By Tim Worstall - November 21, 2006 12:00 AM

There's been myriad remembrances of, encomiums to and commentaries about the recently departed Milton Friedman and I don't intend to cover the same ground here. Rather, instead, to give you what it felt like to be young and English as his rather bracing ideas swept through our body politic. Some of the effects were a result of his academic research on such things as the control of inflation via control of the money supply; some more an offshoot of his espousing such classically liberal ideas as trusting (but verifying!) markets and of coure, in common I'm sure with all bumptious teenagers of those years, the delight in poking fun at the ideas of our elders and betters when we'd seen or read Free to Choose.

To describe the effect of the free market ideas that changed Britain so radically in the late 1970s and early 1980s, driven on as they were by Uncle Milt's advocacy, I'd better give you a highly partial and probably extremely biased history lesson. One through the eyes of the freckled and ginger haired boy that was me. Through the 1950s to the 1970s the Keynesian consensus held sway; in fact, in the UK's case it was really corporatism that did. Big business, Big government and Big unions would negotiate and work together for the betterment of the country. This system actually worked to an extent in Germany and does so, again to an extent, in Sweden now. It never really did in the UK, despite it being the consensus across both the main political parties that it should.

Yet by the 70s this cosy set of assumptions and relationships were breaking down (to the extent that they had ever worked in the first place) as predicted by the Professor. The child of a military family I was actually not in the country during the 'three day week' of 73/74 but I remembered listening in horror to my sisters' (rather gleeful I thought) stories of their having to cook by candle light as the electricity supplies were limited. Then in 1976 the UK government essentially went bankrupt, having to go cap in hand to the IMF for a loan. That was, to all intents and purposes, the end of the post-war settlement. Iain Murray (who is of an age with me) in his piece at NRO covers a lot of the same ground but there's one detail that's worth pointing to. So forceful was Milton Friedman's critique of the previous manner of doing things that it was the Labour Chancellor of the Exchequer, Dennis Healey, who first introduced monetarism into the UK, not as is often thought, Margaret Thatcher's Conservative government of three years later. That his arguments were of sufficient force to persuade someone who disagreed with him about almost everything else is a testament to their value.

Then in 1979, just as I was first starting to study economics or even really be aware of it, we had the Winter of Discontent. One of the most trivial events of that time was when a small group of grave diggers went on strike. Trivial for it was unofficial, in a small area, but I do recall quite how it shocked: that a modern industrial nation was storing the bodies of the dead in an unused factory due to the inability to organize their timely burial. No doubt it is unfair but that is still one of the things that sticks in the mind these years later. It's still the killer argument in a pub (or more likely now on a blog) conversation, a great deal more generally than just those I am involved in, yes, perhaps what followed wasn't perfect but don't you remember, they didn't bury the dead?

It was in this sort of atmosphere that the book of Free to Choose landed along with the associated TV program. The Thatcher Government itself was perhaps more influenced by Hayek rather than Friedman, but that's as nothing to the power that an articulate and forceful presenter of the values of classical liberalism had upon me and I suspect many others of my age like Iain. I'm tempted actually to say that it was watching and reading that work which is at the root of both of our arguments with the current Conservative Party in the UK. We remember, just, what it was like before the changes and we remember the breath of fresh air that started to flow through the society after the unthinkable was said: that people know what they're doing better than the Man in Whitehall knows how to do it for them. That markets are to be welcomed, embraced even, that restrictions placed upon them will be high-jacked by those with the power to do so (whether that be the professions, the subject of Friedman's own PhD thesis, unions or corporations), that reform of the supply side was not just desirable but an urgent necessity.

This is of course all highly impressionistic. It isn't true that all of these ideas were either unique to or specific to Friedman. Madsen Pirie of the The Adam Smith Institute (who I write for sometimes) would (will?) be horrified to think that I am forgetting Arthur Seldon, Karl Popper, Ralph Harris and the like who had been making many of the same points within the UK for decades. But the truth is that I became aware of them much later: Friedman was the person who managed to leap the barrier and communicate these ideas to some portion of the public at large.

Some years later I went to university (I took a few years off to wait tables and go traveling) and I was extremely surprised to find that the pet theory of my really rather left-wing professor on one course, Richard Layard, was based on a piece of analysis from Milton Friedman! I found that really rather shocking, that while (please remember, I was still a callow youth) it was possible to oppose much of what one economist stood for -- the primacy of markets and the fallacy of the benefits of the average piece of Government intervention -- it was at the same time absolutely fine to base one's own theory upon a technical piece of analysis by the same economist! That piece was the work that Friedman did on NAIRU which lead to Layard positing that the long term unemployed are effectively out of the labor market altogether, so by encouraging (insisting upon?) their re-engagement we can shift NAIRU rather than simply move along the curve. I have to admit that looking back I'm most impressed with that influence that Friedman had: someone attempting to perfect a contention of his led to the welfare reform that we had in the 90s. Rather a measure of the intellectual influence he had don't you think?

Just two more things from a very personal stand point. I am a convinced anti-drug war warrior (or perhaps anti drug-war warrior), not for any personal reasons (my narcotics of choice are entirely legal and sold in supermarkets up and down the land) but for the terrible effect that the War on Drugs has upon the rest of society. An analysis that has found fewer better expressions than this open letter to Bill Bennett (although I will admit that some of PJ O'Rourke's interjections on the subject have been funnier).

The final one is more a matter of influence, of the way that the general nature of the debate was changed by Friedman rather than any piece of either political activism or academic study. It was a commonplace of British political and economic thought that there had to be restrictions upon the currency. The rate at which it could be exchanged, what people could do with their own money in moving it in or out of the country. It was simply not part of the intellectual atmosphere that this should be challenged: but of course the movement of personal property should be managed by the wise and for the benefit of the economy as a whole, as determined by those wise people. Who would believe that millions of people making their own decisions would actually lead to the correct result?

As the Adam Smith Institute points out here, that led to such grossly illiberal rules as a tourist leaving the country on holiday only being allowed to take £50 of their own money. (Think $120 or so in the money of the day.) Then, one fine day in 1979, the entire structure was abolished, simply done away with. Was this a specific action promoted by Friedman? I know not, I'm afraid, but I'm certain that it wouldn't have happened without the way that he had changed the nature of the entire debate over the way in which the economy was managed. By bureaucrats and politicians or managed by us, the people ourselves, making our choices as we wish. It might be worth noting that the UK now runs a very substantial capital account surplus: not something we were known for in the years before this sea change.

I have benefited hugely personally from this one thing, the abolition of exchange controls, over the years. I've been able to move in and out of the country as I wish, work in dollars, pounds, euros, as business has required, been able to buy things in America or Japan, sell in Taiwan or Germany, just as the demands of the flow of trade require, without having to present myself and justify my actions to a committee of bureaucrats. Even more personally, I recently borrowed against a property in the UK to buy one here in Portugal. That simply would not have been allowed under the old regime. I would have had to show a need, a requirement, to be able to do so. The simple fact that I wish to do so with my own property would not have been enough.

So, for something as entirely trivial as that, my ability to purchase a house in Portugal, I'd like to thank Milton Friedman. For he changed the terms of the debate, changed how we talked about the rights of the governors and the governed. Instead of the default condition being 'prove to us the governors why we should allow you to do this' it has become 'you prove to us the governed why we should not be allowed to do as we wish'. An advance in freedom and liberty, I hope you will agree, and one that I have a sneaking suspicion that Milton Friedman would be much prouder of than any piece of academic research or even of some (or all) of the many richly deserved honors that were showered upon him.

I'm certain that my life is profoundly different from what it would have been if Milton Friedman had not existed, vastly freer, my liberties greatly expanded. Thank you Professor, for having gone from vox clamantis in deserto to one who could rightly cry, vae victis.


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