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Free to Choose (1980) (1/10) - The Power of the Market — Transcript

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0:00hello I'm Robert McKenzie you joined me
0:02here in this final library on the campus
0:04of the University of Chicago we're about
0:06to see the first of ten films by Milton
0:08Friedman
0:09an economist of international repute a
0:11winner of the Nobel Prize one of the
0:13most controversial and stimulating
0:15Americans of our time in the weeks that
0:17lie ahead as Friedman's first major
0:19television series unfolds the famous and
0:21influential men and women who will
0:23occupy those seats are going to a lot to
0:25say about Friedman's view of the society
0:27in which we live today and his solutions
0:30for the ills of our time so that's what
0:32the series is about Milton Friedman's
0:33view the way we live now and where we're
0:35headed
0:36now like some people here you may be
0:38appalled by his ideas like others
0:40extremely enthusiastic about them
0:42whichever way it goes I think we'll be
0:44fascinated by what Milton Friedman has
0:46to say
0:48[Music]
1:27[Music]
1:28once all this was a swamp covered with
1:32fuss the Canarsie Indians who lived here
1:36traded the 22 square miles of soggy
1:38Manhattan Island to the Dutch for $24
1:41worth of cloth and trinkets the
1:44newcomers founded a city New Amsterdam
1:46at the edge of an empty continent in the
1:49years that followed it proved a magnet
1:51for millions of people from across the
1:52Atlantic people who were driven by fear
1:55and poverty who were attracted by the
1:57promise of freedom and plenty they found
2:00out over the continent and built a new
2:02nation with their sweat their enterprise
2:04and their vision of a better future for
2:08the first time in their lives many were
2:10truly free to pursue their own
2:12objectives that's freedom released the
2:14human energies which created the United
2:16States for the immigrants who were
2:20welcomed by this statue America was
2:22truly a land of opportunity
2:26[Music]
2:34they poured ashore in their best clothes
2:37eager and expectant carrying what little
2:39they own they were poor but they all had
2:43a great deal of hope
2:44[Music]
2:49once they arrived they found as my
2:51parents did not an easy life but a very
2:53hard life but for many there were
2:56friends and relatives to help them get
2:57started to help them make a home get a
3:00job settle down in the new country there
3:07were many rewards for hard work
3:09enterprising ability life was hard but
3:13opportunity was real
3:16[Music]
3:17there were few government programs to
3:19turn to and nobody expected them but
3:22also there were few rules and
3:24regulations there were no licenses no
3:26permits no red tape to restrict them
3:29they found in fact a free market and
3:32most of them thrived on it many people
3:37still come to the United States driven
3:39by the same pressures and attracted by
3:41the same promise you can find them in
3:43places like this it's Chinatown in New
3:46York one of the Centers of the garment
3:47industry a place where hundreds of
3:49thousands of newcomers have had their
3:51first taste of life in the new country
3:54the people who live and work here are
3:58like the early settlers they want a
4:00better their lot and they're prepared to
4:01work hard to do so
4:05although I haven't often been in
4:07factories like this it's all very
4:09familiar to me
4:10because this is exactly the same kind of
4:13a factory that my mother worked in when
4:15she came to this country for the first
4:17time at the age of 14 almost 90 years
4:21ago and if there had not been factories
4:24like this here then at which she could
4:25have started to work and earned a little
4:28money she wouldn't have been able to
4:30come and if I existed at all I'd be a
4:32Russian or a Hungarian today instead of
4:35America of course she didn't stay here a
4:38long time she stayed here while she
4:39learned the language while she developed
4:42some feeling for the country and
4:44gradually she was able to make a better
4:46life for herself
4:47similarly the people who are here now
4:50they are like my mother most of the
4:52immigrants from a distant country they
4:54came here because they liked it here
4:56better and had more opportunities a
4:58place like this gives them a chance to
5:01get started they're not gonna stay here
5:02very long or forever on the contrary
5:05they and their children will make a
5:07better life for themselves as they take
5:09advantage of the opportunities that a
5:11free market provides to them the irony
5:16is that this place violates many of the
5:19standards that we now regard as every
5:21workers right it's poorly ventilated
5:22it's overcrowded the workers accept less
5:25than the Union rate it breaks every rule
5:28in the book but if it were closed down
5:30who would benefit certainly not the
5:32people here their life may seem pretty
5:34tough compared to our own but that's
5:36only because our parents or grandparents
5:39went through that stage for us
5:40we've been able to start at a higher
5:42point
5:49Frank viñales father was 12 years old
5:52when he arrived all alone in the United
5:54States he'd come from Sicily that was 53
5:57years ago Frank is a successful dentist
6:03with a wife and family they live in
6:05Lexington Massachusetts when one bottle
6:12fills the whole decanter there's no
6:15doubt in Frank's mind what freedom
6:17combined with opportunity meant to his
6:19father and then to him or what his
6:22Italian grandparents would think if they
6:24could see how he lives now they would
6:27not believe what they would see that a
6:29person could immigrate from a small
6:32island and make such success out of
6:35their life because them they were
6:36closely related to the the fields
6:40working in the field as a peasant my
6:43father came over it was he made
6:45something for himself and then he tried
6:48to build a family structure whatever he
6:51did was for his family
6:52it was for a better life for his family
6:56and I can always remember him telling me
6:58that you know number-one thing in life
7:00is
7:00you should get an education to become a
7:03professional person
7:10the vesali family like all of us who
7:13live in the United States today Oh much
7:15to the climate of freedom we inherited
7:17from the founders of our country a
7:19climate that gave full scope to the poor
7:21from other lands who came here and were
7:23able to make better lives for themselves
7:25and their children but in the past 50
7:33years we've been squandering that
7:35inheritance by allowing government to
7:37control more and more of our lives
7:39instead of relying on ourselves we need
7:42to rediscover the old truths that the
7:44immigrants knew in their bones what
7:46economic freedom is and the role it
7:49plays in preserving personal freedom
7:54[Music]
7:56[Applause]
8:01that's why I came here to the South
8:03China Sea it's a place where there's an
8:06almost laboratory experiment in what
8:08happens when government is limited to
8:11its proper function and leaves people
8:13free to pursue their home objectives if
8:20you want to see how the free market
8:21really works this is the place to come
8:26a place with hardly any natural
8:28resources about the only one you can
8:31name is a great Harbor yet the absence
8:33of Natural Resources hasn't prevented
8:35rapid economic development ships from
8:43all nations come here to trade because
8:45there are no duties no tariffs on
8:47imports or exports the power of the free
8:52market has enabled the industrious
8:53people of Hong Kong to transform what
8:56was once barren rock into one of the
8:59most thriving and successful places in
9:01Asia aside from its harbour the only
9:06other important resource of Hong Kong is
9:08people over four-and-a-half million of
9:11them like America a century ago Hong
9:17Kong in the past few decades has been a
9:19haven for people who sought the freedom
9:21to make the most of their own abilities
9:27many of them are refugees from countries
9:29that don't allow the economic and
9:31political freedom that's taken for
9:33granted in Hong Kong
9:34despite rapid population growth despite
9:37the lack of Natural Resources the
9:39standard of living is one of the highest
9:40in all of Asia
9:47people work hard but Hong Kong success
9:50is not based on the exploitation of
9:52workers wages in Hong Kong have gone up
9:55fourfold since the war and that's after
9:58allowing for inflation the workers are
10:04free free to work what hours they choose
10:06free to move to other jobs if they wish
10:08the market gives them that choice it
10:12also determines what they make you can
10:14be sure that somebody somewhere is
10:17willing to pay for these cheap plastic
10:19toys otherwise they simply wouldn't be
10:21made competition from places like South
10:29Korea and Taiwan has made cheap products
10:32less profitable so Hong Kong businessmen
10:38have been adapting they've been
10:46developing more sophisticated products
10:47in new technology that can match
10:49anything in the west or east and their
10:51employees have been developing new
10:53skills Hong Kong never stops there's
11:03always some business to be done some
11:05opportunity to be seized it's long been
11:07a tourist center in a shopper's paradise
11:09and it's now one of the business centers
11:11of the east
11:15it's the ordinary people of Hong Kong
11:18who benefit from all this effort and
11:20enterprise
11:23[Music]
11:28this thriving bustling dynamic city has
11:33been made possible by the free market
11:34indeed the freest market in the world
11:37the free market enables people to go
11:39into any industry they want to trade
11:41with whomever they want to buy in the
11:43cheapest market around the world to sell
11:45in the dearest market around the world
11:47but most important of all if they fail
11:51they bear the cost if they succeed they
11:54get the benefit and it's that atmosphere
11:58of incentive that is induced them to
12:01work to adjust to save to produce a
12:06miracle this miracle hasn't been
12:10achieved by government action by someone
12:13sitting in one of those tall buildings
12:14telling people what to do it's been
12:17achieved by allowing the market to work
12:26walk down any Street in Hong Kong and
12:29you'll see the impersonal forces of the
12:31market in operation mr. Cheung makes
12:36metal containers nobody's offered him to
12:38he does it because he's found that he
12:40can do better for himself that way than
12:42by making anything else but if demand
12:45for metal containers went down or
12:47somebody found a way of making them
12:49cheaper mr. Cheung would soon get that
12:52message a few doors away mr. Yu's firm
12:58has been making traditional Cantonese
12:59wedding gowns for 42 years but the
13:03demand for these elaborate garments is
13:04falling the firm has already gotten that
13:07message and is now looking for another
13:09product the market tells producers not
13:12only what to produce but how best to
13:15produce it through another set of prices
13:16the cost of materials the wages of Labor
13:19and so on for example if these workers
13:25could earn more doing something else mr.
13:28ho would soon find a way to mechanize
13:30his picture frame production inside this
13:36Chinese medicine shop a market
13:38transactions going on the customers
13:41confidence that this painful looking
13:43ordeal
13:43will help them doesn't rest on any
13:45official certification of the bone
13:47doctors qualifications it comes from
13:49experience his owner his friends in his
13:52turn the doctor treats him not because
13:55he's been ordered to but because he gets
13:57paid the transaction is voluntary so
14:00both parties must expect to benefit or
14:03it will not take place
14:11believe it or not this backyard is the
14:13entrance to a factory
14:21the workers here are some of the best
14:23paid in Hong Kong
14:28it's hot sticky and extremely noisy the
14:32workers are highly skilled so they can
14:35command high wages they could induce
14:40their employer to improve working
14:42conditions by offering to work for less
14:44but they would rather accept the
14:46conditions take the high wages and spend
14:48them as they wish that's their choice
14:54the best-known statement of the
14:56principles of a free market the kind of
14:58free market that operates in Hong Kong
15:00was written on the other side of the
15:02world
15:16[Music]
15:19200 years ago in Scotland Adam Smith
15:22taught at the University of Glasgow
15:26[Music]
15:28his brilliant book The Wealth of Nations
15:31was based on the lectures he gave here
15:37the basic principles underlying the free
15:40market as Adam Smith talked them to his
15:42students in this university are really
15:46very simple look at this lead pencil
15:50there's not a single person in the world
15:52who could make this pencil remarkable
15:56statement not at all the wood from which
15:59it's made for all I know comes from a
16:02tree that was cut down in the state of
16:03Washington to cut down that tree it took
16:06a song to make the saw it took steel to
16:09make the steel it took iron ore this
16:13black Center we call it lead but it's
16:16really graphite compressed graphite I'm
16:19not sure where it comes from but I think
16:21it comes from some mines in South
16:23America this red top up here the eraser
16:27bitter rubber probably comes from Malaya
16:31where the rubber tree isn't even native
16:33it was imported from South America by
16:35some businessmen with the help of the
16:38British government this brass ferrule I
16:41haven't the slightest idea where it came
16:43from or the yellow paint or the paint
16:47that made the black lines or the glue
16:49that holds it together literally
16:52thousands of people cooperated to make
16:55this pencil people who don't speak the
16:58same language who practice different
17:00religions who might hate one another if
17:03they ever met when you go down the store
17:06and buy this pencil you are in effect
17:09trading a few minutes of your time
17:12for a few seconds of the time of all
17:16those thousands of people what brought
17:19them together and induced him to
17:21cooperate to make this pencil there was
17:23no commissar sending out officers from
17:25sending out orders from some central
17:27office it was a magic of the price
17:30system the impersonal operation of
17:34prices that brought them together and
17:36got them to cooperate to make this
17:38pencil so that you could have it for a
17:41trifling sum
17:42that is why the operation of the free
17:47market is so essential not only to
17:50promote productive efficiency but even
17:53more to foster harmony and peace among
17:57the peoples of the world these people
18:00are crossing between two very different
18:02societies this is low will the official
18:08border crossing point between China and
18:10Hong Kong nowadays there's a
18:12considerable amount of traffic at this
18:14border people cross a little more freely
18:16than they used to many people from Hong
18:23Kong trade in China and the market has
18:26helped bring the two countries closer
18:28together
18:31[Music]
18:34but the barriers between them are still
18:36very real on this side of the border
18:41people are free not only in the
18:43marketplace but in all their lives they
18:46are free to say what they want to write
18:48what they want to do pretty much as they
18:50please not so over there that is why
18:54people in China who cannot get
18:56permission to leave go to desperate
19:00lengths to escape they risk their lives
19:02in the process
19:03many lose their lives but that doesn't
19:06keep others from following some are
19:08attracted by the higher material
19:10standard of life in Hong Kong but more
19:13by the natural human desire to be free
19:17the people who get official permission
19:19to leave China are fortunate they're
19:22going to be able to enjoy the benefits
19:23of the economic freedom they'll find in
19:25Hong Kong but more important that will
19:29give them a much wider freedom human and
19:35political freedom has never existed and
19:38cannot exist without a large measure of
19:41economic freedom those of us who have
19:45been so fortunate as to have been born
19:46in a free society tend to take freedom
19:49for granted to regard it as a natural
19:51state of mankind it is not it is a rare
19:54and precious thing most people
19:57throughout history most people today
19:59have lived in conditions of tyranny and
20:03misery not of freedom and prosperity the
20:07clearest demonstration of how much
20:09people value freedom is the way they
20:11vote with their feet when they have no
20:13other way to vote
20:21of course many of the people who pour
20:24into Hong Kong will end up in conditions
20:27and most of us in the West would find a
20:29falling Hong Kong is very far from
20:32utopia it has its slums its crime its
20:36desperately poor people
20:49but the people are afraid that's after
20:52all why so many of them have come here
20:54despite having to live in leaky
20:56houseboats in one of Hong Kong's many
20:58small harbors here they have the freedom
21:01and the opportunity to better themselves
21:02to improve their lot and many succeed
21:09[Music]
21:10there is appalling poverty in Hong Kong
21:13it's true but the conditions of the
21:15people have been getting better over
21:17time they're far better off now than
21:20they were when they first came across
21:22the border from China and that poverty
21:24appalling to us because we're accustomed
21:26to much higher standards of life is not
21:30poverty as viewed by most of the people
21:31in the world it's a poverty to which
21:34they would aspire a state of affairs
21:36that they would like to achieve there is
21:44an enormous amount of poverty in the
21:45world everywhere there is no system
21:47that's perfect
21:48there's no system that's going to
21:49eliminate completely poverty in whatever
21:52sense
21:52the question is which system has the
21:56greatest chance which is the best
21:59arrangement for enabling poor people to
22:02improve their lot and on that the
22:05evidence of history speaks with a single
22:07voice I do not know any exception to the
22:10proposition that if you compare like
22:13with like the freer the system the
22:15better off the ordinary poor people have
22:19been
22:20ask yourself what it is that assures
22:23these garment workers in hong kong a
22:25good way not by by Western standards but
22:28I enough to enable them to live far
22:30better than most people in the
22:34it's not government or trade unions
22:37these workers do well because there's
22:39competition for their labor and skills
22:48when a businessman faces trouble a
22:51market threatens to disappear or a new
22:53competitor arises there are two things
22:55he can do he can turn to the government
22:58for a tariff or a quota or some other
23:00restriction on competition or he can
23:02adjust and adapt in Hong Kong the first
23:07option is closed Hong Kong is too
23:10dependent on foreign trade so that the
23:12government has simply had to adopt a
23:14policy of complete non-interference
23:16that's tough on some individuals but
23:19it's extremely healthy for the society
23:21as a whole only the businessman who can
23:25adapt who are flexible in the day and
23:27adjustable survived and they create good
23:30employment opportunities for the rest
23:32the complete absence of tariffs or any
23:35other restrictions on trade is one of
23:38the main reasons why Hong Kong has been
23:41able to provide such a rapidly rising
23:43standard of life for its people even
23:47communist China recognizes Hong Kong's
23:49success it set up shop here and now
23:52accepts the universal symbol of
23:54capitalism
23:58the Bank of China the official Bank of
24:01Communist China is the largest bank in
24:03Hong Kong there's no doubt that
24:05Communist China recognizes a power of
24:08the market
24:10in all this the government of Hong Kong
24:13has played an important part not only by
24:15what it has done but as much by what it
24:18has refrained from doing it has made
24:20sure that laws are enforced and
24:22contracts honored it has provided the
24:24conditions in which a free market can
24:27work most importantly it has not tried
24:30to direct the economic activities of the
24:33colony
24:38no government official is telling these
24:40people what to do they're free to buy
24:43from whom they want to sell to whom they
24:44want to work for whom they want
24:46sometimes it looks like chaos and so it
24:48is but underneath it's highly organized
24:51by the impersonal forces of a free
24:53market and you know the impersonal
25:13forces of a free marketplace at work
25:15back here in the United States prices
25:22are the key the prices that people are
25:24willing to pay for products determines
25:26what's produced the prices that have to
25:29be paid for raw materials for the wages
25:31of Labor and so on determine the
25:33cheapest way to produce these things and
25:36in addition the self-same prices the
25:39wages of Labor the understan capital and
25:42so on determine how much each person has
25:45to spend on the market it's tempting to
25:48try to separate this final function of
25:51prices from the other two to think that
25:54somehow or other you can use prices to
25:56transmit the information about what
25:58should be produced and how it should be
25:59produced without using those prices to
26:02determine how much each person gets
26:04indeed government activity over the past
26:07few decades has been devoted to little
26:09else but that's a very serious mistake
26:12if what people get is not going to be
26:14determined on what they produce on how
26:16they produce it and how successfully
26:18they work what incentive is there for
26:21them to act in accordance with the
26:22information that's transmitted there's
26:25only one alternative force some people
26:28telling other people what to do
26:34wake up Ashley and buddy
26:42oh my god real good tomato
26:55real nice hey come on try one of those
26:58tomato if you don't get home any more
27:00every lunch over here for nothing over
27:03here boy if you don't charge you have a
27:05free right now I'm the fundamental
27:10principle of the free society it's
27:12voluntary cooperation the economic
27:15market buying and selling is one example
27:17but it's only one example voluntary
27:20cooperation is far broader than that
27:22to take an example that at first sight
27:25seems about as far away as you can get
27:27the language we speak the words we use
27:30the complex structure of our grammar no
27:33government bureau designs that it arose
27:36out of the voluntary interactions of
27:38people seeking to communicate with one
27:40another or consider some of the great
27:42scientific achievements of our tongue
27:45the discoveries of them Einstein or
27:47Newton the inventions of a Thomas Alva
27:51Edison or an Alexander Graham Bell or
27:55even consider the great charitable
27:56activities of a Florence Nightingale or
27:58an Andrew Carnegie these weren't done
28:01under orders from a government office
28:03they were done by individuals deeply
28:06interested in what they were doing
28:07pursuing their own interests and
28:09cooperating with one another this kind
28:12of voluntary cooperation is built so
28:14deeply into the structure of our society
28:16that we tend to take it for granted
28:18yet the whole of our Western
28:20civilization is the unintended
28:22consequence of that kind of a voluntary
28:25cooperation of people cooperating with
28:28one another to pursue their own
28:30interests yet in the process building of
28:32Great Society
28:33[Music]
28:47and here at the Harper library in the
28:51University of Chicago our distinguished
28:52guests have their own ideas too so let's
28:55join them now it seemed to me he was
28:57saying that the golden age for America
28:59when it was truly a land of opportunity
29:01was the late 19th early 20th century no
29:03regulations no permits no red tape I
29:06would argue that the government played a
29:08decisive role in an enormous grant to
29:10the railroads and creating an American
29:12capitalist economy and secondly to go
29:14back to that Golden Age you find that
29:16the government constantly intervened in
29:18a rather characteristic way used troops
29:20against strikers American labor history
29:22has been the most violent bloody class
29:25struggle anywhere in the world and the
29:27government up until 1932 the law the
29:30courts the society always sided with
29:34business always sided against working
29:35people therefore I would argue that both
29:37economically and in terms of repressing
29:40the attempts of people to assert their
29:41freedom a government prior to the rise
29:44of the welfare state in this country was
29:46more or less owned by business notice
29:48even Michael Harrington is seeing the
29:51hole in the barn door and he's not
29:52looking at the barn door itself the
29:54plain fact is during the whole of that
29:56period while government did intervene
29:58from time to time and mostly to do harm
30:00I agree with him that government
30:02intervention was in the may not a good
30:04thing
30:04tariffs for example on the other hand
30:07throughout that whole period government
30:09spending federal government spending
30:12central government spending never was
30:13more than three percent of the national
30:15income it was trivial the land grants to
30:17the railroads were a minor factor I'm
30:20not I don't approve of him I'm not
30:22saying they were a good thing but they
30:23were a very minor factor one has to have
30:26a sense of proportion and that goes to
30:27the whole discussion I am NOT an
30:30anarchist I am not in favor of
30:31eliminating government I believe we need
30:33a government but we need a government
30:35that sets a framework and rules within
30:39which individuals pursuing their own
30:41objectives can work together and
30:43cooperate together and they work
30:44together and cooperate together not only
30:46in economic areas well what you hold you
30:48for a moment go to that Golden Age
30:49theory that we were best when we were
30:51regulated least in the late 19th and
30:53early 20th century because remember the
30:55sweat shot analogy comes out of there
30:56when there was no attempt to restrict
30:58hours of work or to regulate working
31:00conditions now is that a view you accept
31:03of that period well I think is necessary
31:05to contrast what's happened in the
31:07interim I don't say we can talk about
31:09that without comparing him well the
31:11interim period now you talked earlier
31:12about the fact that during the last 50
31:17years we had squandered some of our
31:20inheritance of freedom and I believe
31:23during the last 50 years we really have
31:25improved our freedom I spent over half
31:28that time working for one of the world's
31:30largest industrial companies that the
31:31plant company deeply involved with the
31:33launching of new ventures and got to
31:35know the free enterprise system well
31:37have a very healthy respect for it but
31:40during that interval and particularly
31:41during the last few years and I had been
31:43more involved with government and with
31:44environmental matters I have become
31:47convinced that our freedom was improved
31:50when the people are allowed to add to
31:53their freedom in the marketplace the
31:55freedom for voting with their dollars in
31:57the marketplace the freedom to vote with
31:59their ballots in the polling place to
32:01put some restraints on the excesses of
32:04the marketplace particularly when you're
32:06concerned with such things as the
32:09long-term impact on our health from the
32:12pollution of our environment their
32:13introduction to carcinogenic materials
32:15or their radiation of our people with
32:17nuclear products restraints on the
32:21excesses of government hasn't that
32:23become an ever more serious problem how
32:25is it that a government of the people
32:27supposedly does things which a very
32:30large fraction of the people would
32:32really prefer not to have done such as
32:33over tax them over govern them over
32:36regulate them I think you're looking
32:38again at one side and not the other and
32:41of course I agree we have to look at
32:43what's happened in the interim we're
32:44better off than we were 50 years ago
32:46never would deny that but we stand on
32:49the shoulders of the people who went
32:51before we have to look at how much they
32:53achieved from where they started and
32:56that was a period in which you had the
32:57tremendous influx of immigrants from
33:00abroad millions and millions and
33:02millions of them when you opened up a
33:04new continent when you had achievements
33:06Milton are you saying though there's any
33:08sense in which
33:09go back to those circumstances where
33:11there are no regulations of factory work
33:13no hours limitations are over to work do
33:15you want to return to that or do you
33:16just say that was a stepping stone to
33:18where we are now it depends on what you
33:20mean by circumstances I don't want to
33:22have to go back to using a
33:23horse-and-buggy instead of an automobile
33:24but I would prefer to go back to the
33:27kinds of governmental regulations or
33:30absence of regulations the greater
33:32degree of freedom which was given to
33:33individuals to pursue one activity or
33:35another which prevailed then then which
33:39prevails now I think that really our
33:42industrial leaders have been dragged
33:44into the future screaming they resisted
33:46the child labor laws they resisted
33:48Social Security labor unions and now the
33:50environmentally once the government
33:53forced them to pay attention to those by
33:55the voting of the people in the ballot
33:57box and in the polling place then the
34:00industrial leaders business leaders paid
34:03attention to those rules and have done a
34:04good job in most cases of abiding by the
34:06Bob Galvin is an industrialist now come
34:09on is that a fair statement
34:10maybe the industrialists have a clearer
34:14view of history and its prospects the
34:17most precious asset we possess is
34:19freedom the easiest way to lose one's
34:22freedom is to go into receivership and I
34:25mean economic receivership because a
34:27receiver is a dictator and to the degree
34:30that we employ the costs and the burdens
34:34of government that lead us in the
34:36direction of further debt ultimate
34:39receivership and then the political
34:41consequence of the imposition of the
34:44political dictator over the economic and
34:48the job and the living rights of the
34:50individual but maybe the industrialist
34:52can see farther down the pike as to the
34:54consequence of all this Michael
34:55Harrington I just think that that two
34:59things one to view freedom positively I
35:01think people over 65 years of age in the
35:04United States today are freer now
35:06because of Medicare I do not think that
35:09the freedom to die from the lack of
35:10medicine was a very good thing
35:12secondly related to industrialist I
35:15think that one of the one of the
35:18startling things about American history
35:20is that when Franklin Roosevelt was
35:21saving the system for
35:22itself the main beneficiaries were
35:25screaming bloody murder at him for being
35:27a traitor to his class when he was in
35:29fact the salvation of that class and I
35:31think if you therefore if you look at
35:33our history I do think you find a
35:34tremendous myopia on the part of
35:37industrialists and you find that the
35:39positive increments to our freedom
35:41interestingly enough have not come from
35:43the college graduates but often from
35:45people with and not from the best people
35:48its come from working people it's come
35:49from poor people it's come from blacks
35:50and Hispanics and the like Milton would
35:54you reply but then tell us why you took
35:55us to Hong Kong to prove something
35:57unaccustomed as I am to agreeing with
35:59Michael Harrington I will agree in part
36:01with what he's just said I do not
36:04believe it's proper to put the situation
36:06in terms of industrialist versus
36:08government on the contrary one of the
36:12reasons why I am in favor of less
36:13government is because when you have more
36:16government industrialists take it over
36:17and the two together form a coalition
36:20against the ordinary worker in the
36:22ordinary consumer I think business is a
36:25wonderful institution provided it has to
36:27face competition in the marketplace and
36:29it can get away with something except by
36:31producing a better product at a lower
36:33cost and that's why I don't want
36:34government to step in and and help the
36:37business community now I want to go to
36:39your question about Medicare there are
36:42many people who have benefited from
36:43Medicare but you're not looking at the
36:45cost side what has happened to the
36:47people who are paying for it it isn't we
36:49don't have a free good it isn't coming
36:51from nowhere and are they benefiting
36:53from it
36:54in a cost-effective way those are the
36:56questions it's it's demagoguery if
36:58you'll pardon me Mike Michael Harrington
37:00to say the people who have Medicare are
37:03freer of course in one dimension but
37:07they themselves have been paying all
37:08their lives and have they gotten a good
37:11bargain at the moment they have the
37:13young man the young working people who
37:15are going into Social Security now
37:17they're going to get a very raw deal
37:19indeed interestingly on that point
37:22people over 65 are paying more their
37:24spendable income for medical care now
37:27than they were before Medicare was
37:29enacted it's been not a very successful
37:30program now things well it doesn't do
37:33things as well as that
37:34and done things well in britain in
37:36canada in the united states no then you
37:38took us to Hong Kong on exactly that
37:40point that here you said was a true
37:43model of the market operating now is
37:47that really the fair description of Hong
37:49Kong at the moment yes
37:51it's not a again there aren't any such
37:53things there's a hundred percent one way
37:55and a hundred percent the other
37:56everything is mixed of course Hong Kong
37:59has a government it happens to be a
38:01government in this case there's no
38:03democracy in Hong Kong it's run from
38:05Britain it's a crown colony of Britain
38:08and the British governor-general and so
38:10on the financial secretary run it but
38:13the situation in Hong Kong is that there
38:16is very little government regulation of
38:19Industry there's complete free trade
38:20there are no tariffs there are no export
38:23subsidies there are no restrictions on
38:25the purchase and sale of monies so that
38:31it is comes about as close as to a
38:33complete free market as you can find in
38:35the world today and there is no doubt
38:36that the main beneficiaries have been
38:40these low income people the poor people
38:43who poured into Hong Kong by the
38:45hundreds of thousands and millions out
38:47of Red China and who keep on trying to
38:49get in there this goes to Michael
38:50Harrington's question if a industrial
38:53system of a free enterprise system is a
38:55system in which the poor are ground
38:57beneath the heels of these rapacious
39:01industrialists he's worried about how
39:03would he explain the success in Hong
39:05Kong the extent to which people continue
39:08to vote with their feet to go there
39:09you're not asking us to make of the
39:11United States one gigantic Hong Kong or
39:14a sweatshop or whatever you want to call
39:16it your you'd acknowledge that that
39:19there is historical development of an
39:22economy and what may be right for one
39:25stage in the development of an economy
39:27may not be right for another stage isn't
39:30the issue where do we go from here what
39:32what pragmatic decisions do we make
39:35about the direction of the American
39:37economy
39:37should it be toward more and more
39:39government or should it be trying to
39:41preserve an adequate balance between
39:43freedom of choice and government
39:45intervention again the problem is too
39:48English two things this comes back to an
39:51earlier comment the circumstances in
39:54terms of the physical arrangements and
39:56the circumstances in terms of the rules
39:59that guide the society now in the case
40:02of Hong Kong of course I'm not asking
40:04that we crowd our people to a density of
40:07population such as Hong Kong as Hong
40:09Kong is a marvelous example just because
40:11it's circumstances are so terrible it's
40:13physical circumstances and the people in
40:15Hong Kong would love to get elsewhere
40:17into less crowded circumstances if other
40:20people would let them in this is a
40:21problem of immigration which is a very
40:23important restriction on human freedom
40:25in the period before 1913 we had
40:27complete a hundred percent freedom of
40:29immigration into the United States we
40:31don't know but go back to your question
40:32you think Hong Kong would exist if it
40:34weren't in close juxtaposition to
40:36Communist China Hong Kong would exist it
40:40is very dubious that it would have the
40:42policies it has now if it weren't in
40:44close just juxtaposition to Communist
40:46China we'll know but to answer your
40:48question directly yes I am in favor of
40:51the United States having not the
40:55circumstances not the physical
40:56circumstances but the policies that Hong
40:59Kong has had of zero tariffs complete
41:03free trade of no restrictions on exports
41:06no restrictions on monetary transactions
41:09of a far greater degree of government a
41:12far lesser degree of governmental
41:14regulation I agree with what Russell
41:16Peterson said before that there are
41:18third party effects there are things
41:19like pollution the question is whether
41:21we're handling him in the right way and
41:23I think we're not Galvan in here you've
41:25got the beginning of Milton's agenda
41:27there no tariffs for example no
41:29restrictions no quotas now will business
41:32big business where that kind of policy I
41:34think big business and all business
41:37could wear that kind of policy if we
41:40could find the appropriate balancing
41:42factor that in the rest of world trade
41:44where we trade outside our border and as
41:47others come in we are required to trade
41:50against socialized institutions that's a
41:55very different kind of an institution
41:56than the private institution the private
41:59institution can clearly
42:02more efficiently if it is not imposed
42:06upon by an artificial price from the
42:08socialized institution across the seas
42:11so I think there has to be not
42:14protectionism but there has to be an
42:16international rule of the road that
42:19prevents the socialized institution from
42:23subsidizing and taking advantage of the
42:25private inside you include the nine
42:27countries of the common market though as
42:29socialist countries are you prepared to
42:31open competition from all the nine
42:33countries of the color market the nine
42:35countries of the european common market
42:36engage in the most dramatic of the
42:40socialized institutions i don't agree
42:43with him at all we are hurting ourselves
42:44by restricting trade from abroad other
42:47countries are hurting themselves and us
42:49by the measures you described board only
42:52hurting ourselves even the more if we
42:54imitate them
42:55I don't think dr. Friedman that your
42:58mother would get a job sewing today in
43:01America if we had no tariffs at all what
43:04would happen is there wouldn't be any
43:06sewing jobs in America we'd be making
43:08nothing but computers other kinds of
43:11jobs and she would get a job as at a
43:13very low level in making computers yeah
43:15although although you face the problem
43:16that you've had both a leading
43:18businessman and a leading conservative
43:21congressman not accepting your
43:23prescription of course the two greatest
43:27enemies of the I would say the greatest
43:30enemies of free enterprise in a freedom
43:32in the world have been on the one hand
43:34the industrialists and on the other hand
43:36most of my academic colleagues who land
43:38up in government for opposite rate for
43:40opposite reasons people like Michael
43:43Harrington and my academic colleagues
43:45want freedom for themselves there they
43:47want free speech they want freedom to
43:49write they want freedom to publish to do
43:51research but they don't want freedom for
43:52any of those awful businessman now the
43:54businessmen are very different every
43:56businessman wants freedom for somebody
43:58else but he wants special privilege for
44:01himself he wants a tariff from Congress
44:03and the congressman well the way in
44:06which congressmen get elected is by
44:08performing favors to constituents and if
44:11indeed you were to wipe out completely
44:13all tariffs if you were to reduce car
44:15and controls in this country to what
44:17they are now I do not think that would
44:19be in the self-interest well then even
44:21for whom I have the very greatest rank
44:24or Bob Galvin for whom I have the
44:26respect I think it would be in the
44:27self-interest of Michael Harry let's ask
44:30what the American people want and will
44:32wear because you're saying in effect to
44:34get elected the congressman is giving
44:36the people what they want now aren't you
44:38saying in the end then the people don't
44:40want this or don't understand the
44:41advantage of it I'm saying that my whole
44:43function and purpose is to try to
44:44persuade the people to make a different
44:47thing politically profitable I'm trying
44:50to persuade the people to make it clear
44:52for that congressmen who pursue these
44:54policies are gonna lose their jobs and
44:56if we do that congressmen are pursuing
44:58their self-interest they're in a market
45:00there's a political market they've got a
45:02product to sell and they've got to
45:04appeal to their customers and I am just
45:07engaging in the kind of advertising
45:09mr. gallon other another very
45:11experienced politician governor Peterson
45:12let me ask you how you would cope with
45:15this problem dr. Fremont the people
45:18decided that they wanted couleur there
45:20was tremendous need and so we built a
45:23huge industry the air conditioning
45:24industry hundreds of thousands of jobs
45:27tremendous earnings opportunities and
45:28nearly all of us now have
45:29air-conditioned homes and cars and
45:31offices but then that people decided
45:33they want a clean air and they couldn't
45:35buy it in the marketplace so they voted
45:38at the polling place they got their
45:40elected representatives to go to the
45:42Congress and say we are going to have
45:44clean air now overnight there was a new
45:46market in the free enterprise system
45:48responded to that now there's a big
45:50environmental industry making earnings
45:52providing jobs but also serving this
45:55public need to have the freedom to
45:58breathe clean air you grossly
46:00underestimate the extent which into
46:02which the private market is able to do
46:04it it's not an accident that the air
46:07before you had any of this legislation
46:09the air and water was cleaner in the
46:11United States today than they were in
46:13the United States a hundred years ago
46:15you know the automobile added one kind
46:18of pollution but it eliminated a far
46:19worse kind of pollution if you consider
46:22what the streets of New York would look
46:23like today if you were still
46:25transporting people by horse-drawn
46:28vehicle
46:28you would have pollution on a scale that
46:30would stagger you in the same way it's
46:32not an accident that the air is cleaner
46:35and the water pure in those countries
46:37today that are the most advanced than
46:40they are in the backward country it's
46:41not been in Afghanistan that you find
46:43clean air and water it's in the advanced
46:45countries so the market is a very much
46:48more subtle mechanism then people give
46:51it credit for being I would like to get
46:52this back to the to the real world
46:54because in the real world there is no
46:56possibility that American business which
46:58is a welfare dependent business system
47:01is going to adopt these ideas what these
47:03ideas function as in the real world is a
47:06rationalization for the myth of free
47:08enterprise which disguises the fact of
47:10state capitalism as an argument against
47:13social intervention in a society that
47:16does intervene on behalf of the steel
47:18industry very quickly finally in terms
47:21of the American political process I
47:23don't believe that the political process
47:24is so simple as having about people
47:26elected a government the fact is that
47:29when a jimmy carter is elected president
47:31on a relatively liberal platform he then
47:34has to win business confidence because
47:38of the control of the investment process
47:40by corporate power and i think that fact
47:43corporate power rationalized by free
47:46enterprise myths is the central problem
47:49of freedom in our time and that's what
47:50has to be a tire again i've got got a
47:54comment on this because I think we
47:55mustn't let words get in the way of what
47:57really is the case I take it you think
48:00we don't have socialism I would say to
48:02you that 46% of every corporation in
48:06this country is owned by the US
48:07government
48:08that's the corporate income tax that
48:11means out of every dollar of profits
48:12that a cut corporation makes 46 cents
48:15goes to the US government the actual tax
48:17is far higher than that because you tax
48:19that EE when it comes to the individual
48:21the the extent to which corporations
48:24control their investment decisions has
48:26been increasingly reduced the government
48:29is dictating what they spend their
48:30investment funds on and in the name of
48:32pollution they've controlled and the
48:34name of other things it's a myth to
48:36suppose that there is some kind of a big
48:38corporate power over here there was a
48:40time when corporations were more
48:42influential than they are now but at the
48:44moment I think they're a beleaguered
48:46minority rather than the dominant
48:48majority I'd like to take the others
48:51into this for a moment what is the
48:52process for those of you who want to
48:54rollback the state or to push back
48:56governmental influence on the operation
49:00of the economy before we let Milton in
49:01on that what would you do as a active
49:04politician as another politician and a
49:07businessman I personally think we ought
49:09to restrain the growth of government in
49:10the future by putting some sort of limit
49:13on government expenditures I would like
49:16to see a constitutional amendment doing
49:18that otherwise we're going to continue
49:20to have the government growing faster
49:22than the economy and thus pushing more
49:23and more of the gross national product
49:25through the tinhorn of government I I
49:27think that would be that's a mistake
49:28it's a difficult thing to do I hope we
49:31can find some way to do it without
49:33making ourselves less free in some way
49:36yes I think we can make substantial
49:39headway by furthering our pluralistic
49:41society by encouraging educating more
49:46people to think comprehensively I think
49:48one of the big problems in our world is
49:51that leaders in government in an
49:53industry are short-sighted they don't
49:55look at the long-term impacts or the
49:56decisions and in a democracy such as
49:59ours the power is with the people just
50:02let the textbooks say and if they get
50:04this more comprehensive understanding
50:05and knowledge they're gonna see to it
50:07that the special interests as elected
50:10officials will be in tune with getting
50:12reelected and they will look at the long
50:14term view as just like the citizenry is
50:16so I'm all in favor of an all-out push
50:19to get this freedom to vote in the
50:21polling place add it to the freedom of
50:24the marketplace because that's a potent
50:26combination but voting in the polling
50:28place is a very different kind of
50:29freedom than voting in the marketplace
50:31when you vote in the polling place it is
50:33important but it's a very different
50:35thing when you vote you vote for a
50:36package and if you are in the minority
50:39you lose you don't get what you want
50:42when you vote in the marketplace
50:43everybody gets what he votes for if if
50:46you vote for a I vote for a green tie I
50:50get a green tie you vote for a blue tie
50:52you get a blue tie if we do that in the
50:54polling booth if 60% of us vote for a
50:57green tie you have to wear a green but
50:59the 40% don't just shut up they can try
51:01to influence but it's a very different
51:04less efficient mechanism for matching
51:07performance matching results to
51:09individual taste impression and a car I
51:12buy I still get dirty air there are good
51:15people running this society and most of
51:17the people that we're talking about work
51:18someplace and they know that their
51:20company is doing something pretty good
51:23or try to do something pretty good I
51:25think the people are going to start
51:28telling the leaders where they've gone
51:30wrong and start to redress it by the
51:33direction of the ballot visit people in
51:35general are more conservative and in
51:37particular or more liberal that is to
51:39say if you ask the people in general
51:40what do you think the government get it
51:41off my back less taxes if you ask in
51:43particular what about health national
51:45health what about full employment
51:46government is the employer of last
51:47resort
51:48what about pollution do something about
51:50it Everett Ladd had an article in
51:51Fortune about a year ago which is hardly
51:54a radical left-wing journal showing this
51:56contradiction and I think that there is
51:59in the United States today a rapid
52:01movement to the left right and center
52:02which I obviously hope will be resolved
52:06not by an across the boards cuts aimed
52:09primarily at poor and working people but
52:11at by an increasing democratization of
52:14economic power and an increasing
52:16democratization of the government I
52:17think that in this complicated society
52:19of huge institutions and bureaucracies
52:22if we talk about freedom one things I
52:25would like to see would be a law
52:26providing funds for any significant
52:29minority to buy the research to counter
52:31the majority if you don't have the
52:33expertise that knowledge technology
52:35today you're out of the debate and I
52:38think that we have to democratize
52:40information and government as well as
52:42the economy and society I am sorry to
52:44say Michael Harrington's solution is not
52:46a solution to what he wants minority
52:48rule I don't I want individual rule I
52:50want human being separately and
52:52individually to have control of their
52:53lives I don't believe that a minority
52:55that differs with me should have the
52:56right to take money out of my pocket to
52:58do research for them they should go out
53:01and try to persuade people to contribute
53:03to them I should be free to get people
53:05to contribute to me too
53:06present my ideas but the idea of having
53:09some kind of an official government
53:11agency that is going to finance
53:13dissidents in the first place anybody
53:16who has any sense of realism about the
53:19way government operates at all will know
53:20that that will end up in the hands of
53:22the majority and not the minority but
53:23can government in this extremely
53:26interdependent complex world economy
53:29which is developing can you have a
53:32mystical belief in the invisible hand of
53:34Adam Smith I happen to think that Adam
53:35Smith is one of the greatest
53:36intellectual figures in the history of
53:38the world and that capitalism was one of
53:40the greatest advances the humankind has
53:42ever made but precisely because I put
53:44this in historical context capitalism is
53:47a friend of mine by the name of Karl
53:48Marx predicted some time ago has
53:50developed tremendous tendencies towards
53:52monopoly concentration multinational
53:54corporations money supplies that that
53:58are not controlled by the Federal
54:00Reserve Bank or even the president the
54:01United States anymore and to think that
54:03you can respond to this radically new
54:05environment by an 18th century solution
54:08I think really comes down to an
54:11intellectual exercise whose practical
54:13political effect is to rationalize
54:15conservative power in America this is a
54:17myth a complete myth that the
54:21development of an inner developed
54:23country in a more complicated world
54:25necessitates greater government
54:27intervention government intervention has
54:29not grown in those areas which arise out
54:32of complexity and interdependence of the
54:34world it's grown we're in taking money
54:36from some people all I have to say is
54:39that government dr. Friedman has to live
54:42in the 20th century much less than 19th
54:44of the 18th but again and we have we
54:47have to take societies as it exists
54:49today and build on that to me the
54:51decisive thing at issue here is an
54:54essentially mythic non historical
54:57presentation of an abstract solution
55:00taken out of time which does not look to
55:04the tremendous evolution of capitalist
55:06society the tremendous interdependence
55:08of the world the fact that we now have
55:09not only National Economic Planning but
55:12at the Tokyo summit and we have
55:13institutionalized international economic
55:16planning of the major industrial
55:18capitalist powers and under those
55:20circumstances granted the enormous
55:22achievements of Adam Smith granted the
55:24enormous achievement to capitalist
55:26society under this radically changed
55:28historical situation to propose those
55:31classic old solutions I think is to
55:33propose something non serious which
55:35however does function seriously to
55:37rationalize conservative corporate
55:39economic and political power the great
55:42achievements of the 19th century came
55:44from by departing from the kind of
55:46system you now want to reimpose you want
55:48to take us back to the 18th and 17th
55:50century when we had a when we had a
55:53corporate society when we had government
55:55controlling things the whole issue is
55:58not is what somebody is posing in the
56:0120th and the 19th in the 18th the whole
56:03issue is what is the right thing to do
56:05what is the best way in which we can
56:07widen our opportunities preserve our
56:10freedom maintain our prosperity and it
56:14seems to me the kind of solutions you
56:15would propose involve more of the same
56:18more of the of the measures that have
56:21failed over and over again to achieve
56:24the objectives well we leave the debate
56:26for there this week and hope you'll join
56:28us again the next edition of free to
56:30choose
56:30[Music]
56:46when governments try to control the
56:49economy what goes wrong Milton Friedman
56:52looks at modern governments in action in
56:54Britain in India and here in the United
56:57States don't miss his stark and
56:59realistic assessment of the real world
57:01we live in free to choose next week
57:18[Music]
57:50[Music]

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