My name is Johan Norberg, a writer and an
analyst, and I was born and raised here in Sweden. I was three years old, when the Nobel Prize
in Economics was awarded to Milton Friedman here in Stockholm. This is Stockholm City Hall, the traditional
place for the Nobel banquet. This is where Milton Friedman celebrated his
prize. Milton Friedman did a lot more than win the
Nobel Prize here in Stockholm. He had a thought-provoking message that won
him thousands of advocates and opponents all over the world. In 2002, I had the pleasure of meeting Professor
Friedman, and the thing that struck me was his intellectual curiosity. His research led him to believe in the power
of free markets and economic freedom, while many people today place a greater emphasis
on government safety nets and greater financial equality. On this thirtieth anniversary of Milton Friedman's
PBS television series, I'll revisit his ideas on the struggle between freedom and equality. Major funding for this program was provided
by: Additional funding was provided by: No matter where you come from, whenever there
is a problem, it's tempting to look to the government for solutions. Since the recession of 2008, we've seen unprecedented
government intervention in the financial sector, and in the automotive industry. We've seen new spending programs, more tariffs
and new regulations. And we've seen the largest buildup of government
debt in American history; a debt that might haunt us for generations. Some people blame the financial crisis on
Milton Friedman and his theories of free markets, but Friedman would say that economic freedom
is not just to reap the rewards when times are good; it's also to bear the consequences
of your actions when times are bad. We don't have free markets as long as speculators
can keep the profits when they win, but send the losses to the taxpayers when they lose. I was born and raised in Sweden. And my country has made an effort to make
people's lives, "more equal." To reduce differences of outcome, we tax heavily
and redistribute wealth among our citizens...and many people in the United States advocate
a system like ours. If, on the other hand, the government gives
everybody the same freedom to work and reap the rewards, some will do better than others. The result will be equality of opportunity,
but not equality of outcome. Here in the United States, you've accepted
more inequality of outcome. And over the past thirty years, a debate has
been raging between these two competing alternatives. Can we live with economic freedom...even though
it doesn't guarantee a specific result, even though it's built on the ongoing destruction
of old ideas and businesses that are no longer competitive? Can we accept freedom, even though freedom
to choose also means that we will not all be equally successful? To answer these questions, Milton Friedman
traveled the world to examine various economic systems. He concluded that for most people, an emphasis
on economic freedom would lead to both individual and political freedom. Many commentators say that Milton Friedman
did more for freedom than anybody else in recent decades. He convinced many nations to embrace economic
freedom. In the U.S., he led the effort to abolish
the military draft, which he considered nothing less than slavery. It is long past time that we return to our
basic heritage, got rid of the compulsion in our military service and return to a voluntary
system. When Milton Friedman died in 2006, The Economist
magazine's obituary had the headline, "How Milton Freed Man." On the other hand...writers like the Canadian
anti-capitalist, Naomi Klein, claim that he helped authoritarians by advising them to
adopt free market economic policies. Most controversially, in 1975, Friedman traveled
to Chile to lecture about economic liberalization and he also met with the dictator, Augusto
Pinochet, and in 1988 he went to China to talk to the communist leaders about economic
reform. So who's right? Friedman would advise us to test his ideas
by examining the evidence of recent history. Have his ideas changed our world? For better or for worse? Whose assessment of his legacy is right? Milton Friedman is one of the most famous
and influential economists of our time. He was born on July 31st, 1912, and received
the Nobel Prize in Economics in 1976. As a professor of economics at the University
of Chicago, he had great influence on the entire field of economics. He was an author, and an advisor to several
presidents. He spent most of his life promoting the benefits
of a free market economic system. Friedman thought that most people are well-equipped
to take care of themselves, no matter where they come from, no matter what gender they
are, no matter which race or creed they belong to. He thought that freedom from government barriers
gave everybody the freedom to try, to start a business, to learn a trade, to get a good
job, to become rich if they're successful. And it denied the powerful and the vested
interests the right to distort the outcome. In 1980, Friedman presented his ideas to America
through a 10-hour PBS series that was called, "Free To Choose." He traveled to places he felt could best communicate
his ideas. Milton Friedman began his PBS series, Free
To Choose, in New York City with a bit of personal history because he felt that it was
important to remember how America's success story began. This statue is iconic; it represents "freedom." And for the immigrants who were welcomed by
the Statue of Liberty, in the late 1800s and the early 1900s, America was truly a land
of opportunity. They poured ashore in their best clothes,
eager and expectant, carrying what little they owned. They were poor, but they all had a great deal
of hope. Once they arrived, they found, as my parents
did, not an easy life, but a very hard life. Friedman's parents passed through these doors
here on Ellis Island, and they shared this background with millions of immigrants from
all over the world. About a fifth of all Swedes migrated from
my homeland to America, to find a place where their own talents and hard work made a difference. Here on Ellis Island, they met the new world
for the first time. And then they moved to the cities and to the
frontier in search of the promise of the American dream. Not all of them found it, but many did. There were many rewards for hard work, enterprise
and ability. Life was hard, but opportunity was real. There were few government programs to turn
to, and nobody expected them. But also, there were few rules and regulations. There were no licenses, no permits, no red
tape to restrict them. They found in fact, a free market, and most
of them thrived on it. This is exactly the same kind of a factory
that my mother worked in when she came to this country for the first time, at the age
of 14, almost ninety years ago. And if there had not been factories like this
here then, at which she could have started to work and earned a little money, she wouldn't
have been able to come. And if I existed at all, I'd be a Russian
or a Hungarian today, instead of American. But over the next seventy-five years, the
United States began to restrict the workings of the free market. Every line of business was regulated, and
soon the highest tax rate surpassed seventy percent. In 1980, when Friedman wanted to show a truly
free economy, he took the viewer to the other side of the world. If you want to see how the free market really
works, this is the place to come. Hong Kong, a place with hardly any natural
resources; about the only one you could name is a great harbor. Yet the absence of natural resources hasn't
prevented rapid economic development. When Milton Friedman rode on this ferry in
1980, Hong Kong was not a part of China, but was leased to Britain as a colony. And it had just made an incredible journey,
one that demonstrated to the world that even the poorest countries can develop. After the Second World War, and the Communist
Revolution in China, this rock in the middle of nowhere became a refugee camp with millions
of extremely poor people. To Milton Friedman the scientist, this was
a perfect natural experiment to test his theory about free markets. Hong Kong had no prospects, no natural resources,
and little land that could be cultivated. But almost by accident, it was given economic
freedom. The British government couldn't be bothered
with local Hong Kong affairs. And the governor here happened to favor free
markets. So Hong Kong never introduced all those policies
that other governments did: no tariffs, no regulations or government intervention in
the economy. So the economy could evolve in a natural way. As a result, Hong Kong became an economic
powerhouse When Friedman came to Hong Kong in 1980, it
could boast statistics on life expectancy and infant mortality that equaled western
countries. Incredibly, it was on its way to become richer
than its colonial ruler, Britain. This thriving, bustling, dynamic city has
been made possible by the free market...indeed the freest market in the world. The free market enables people to go into
any industry they want; to trade with whomever they want; to buy in the cheapest market around
the world; to sell in the dearest market around the world. But most important of all, if they fail, they
bear the cost. If they succeed, they get the benefit... and
it's that atmosphere of incentive that has induced them to work, to adjust, to save,
to produce a miracle. And what a miracle it's been. Friedman was standing next to the tallest
building on the skyline, and just look at that skyline now; there are more skyscrapers
here than in all of New York City. Between 1950 and 2000, Hong Kong's GDP per
capita increased more than ten times. Friedman concluded that this success was due
to the free market. This hasn't been achieved by government action,
by someone sitting in one of those tall buildings telling people what to do. It's been achieved by allowing the market
to work. The complete absence of tariffs, or any other
restrictions on trade, is one of the main reasons why Hong Kong has been able to provide
such a rapidly rising standard of life for its people. In 1980, when Milton Friedman wanted to see
a truly free market...he had to come here to Hong Kong. Since then, much of the world has followed
in Hong Kong's path. In an effort to get out of its stagnation
of the 1970s, the U.S. and Western Europe began to return to the ideals of free competition. Taxes were lowered, tariffs were reduced and
regulations slashed. Hong Kong is now part of China, but at times
it seems more like Hong Kong took over China, rather than the other way around. The communist leaders on the Mainland, they
looked around at their more successful neighbors and then decided to set their own markets
free. And Asia's other giant, India; they also opened
their economy to the rest of the world. In eastern Europe, communism collapsed, because
the economy never could satisfy the needs of the people, and they were longing for freedom. In 1991, in the small Baltic country of Estonia,
Prime Minister Mart Laar took his inspiration from Milton Friedman's book, "Free To Choose,"
which was based on the TV series. He decided to imitate the Hong Kong model,
with zero tariffs, a flat tax, and a minimum of regulation. Despite its problems with the 2008 financial
crisis, Estonia is widely seen as the most successful of the former communist economies. Free markets have spread around the world. At the same time, we've seen the fastest human
progress ever, and it has been led by the countries that opened up their economies. In fact, average incomes around the world
have almost doubled. Think about these statistics. Globally, extreme poverty has been more than
halved since Milton Friedman did his series in 1980. Amazingly, 730 million people have been liberated
from poverty. Every year, life expectancy around the world
has increased by three months, despite AIDS and despite malaria. And to me, one of the most heartening facts
is that the risk of parents losing their child in infancy has almost been cut in half. These were the results that Friedman predicted
free markets could bring about. As people got more wealthy, they could begin
to deal with the most important challenges in their lives. But Friedman had another reason why he wanted
authoritarian dictatorships to liberalize their economies: political freedom. Human and political freedom has never existed,
and cannot exist, without a large measure of economic freedom. Those of us who have been so fortunate as
to have been born in a free society tend to take freedom for granted, to regard it as
the natural state of mankind. It is not. It is a rare and precious thing. Most people throughout history, most people
today, have lived in conditions of tyranny and misery, not of freedom and prosperity. He thought that economic freedom would directly
lead to political freedom. When people begin to make their own decisions,
and gained confidence in their ability to take care of themselves, Friedman believed
they would begin to demand personal and political freedoms as well. When we say that a market is "free," it sounds
a bit like a dog-eat-dog economy. But that is not what Friedman had in mind. He thought that the best explanation of why
the free market works was developed more than two-hundred years ago in Scotland, where Adam
Smith taught at the University of Glasgow. Smith's book, The Wealth of Nations, explains
why free choice and voluntary association is often more well-functioning and orderly
than commands from the top. Voluntary association is what we do together
of our own free will. When these people buy and sell to each other,
and none is subject to force or fraud, that is voluntary association. It is anything that is going on between consenting
adults. When you visit marketplaces around the world,
they can sure look like chaos, but underneath the surface it is highly organized. Not from above, but by people's own interests
and actions. Friedman thought that Adam Smith had the answer. Adam Smith's flash of genius was to see how
prices that emerged in the market: the prices of goods, the wages of labor, the cost of
transport, could coordinate the activities of millions of independent people, strangers
to one another, without anybody telling them what to do. His key idea was that self-interest could
produce an orderly society benefiting everybody. It was as though there were an invisible hand
at work. What did Adam Smith mean by, "self-interest,"
and an "invisible hand?" By self-interest, he wasn't thinking of greed,
just taking what you can get. He was thinking of the day-to-day decisions
that we all make to better our lives; the clothes we wear, what car we drive... even
whether we like our fish really fresh. The market tells producers not only what to
produce, but how best to produce it through another set of prices: the cost of materials,
the wages of labor, and so on. Walk down any street in Hong Kong, and you'll
see the impersonal forces of the market in operation. If I want to buy a tomato, I could buy one
right here at the market from Ng Choy. But if everybody suddenly wanted to buy tomatoes,
perhaps because we get new information about how good they are for our health, well then,
there would be too few tomatoes. So, Ng Choy's suppliers would have to charge
him more. In that case, I have to pay more to lay my
hands on one. If prices increase, farmers will notice. Without knowing us, or without even having
heard about the new health information, they can see with their own eyes that they would
make more money if they produced tomatoes, rather than, say-broccoli. And in that case, more farmers will move into
tomato production, and the supply will be increased. Ng Choy's costs are reduced, and in order
to sell more tomatoes than his competitors, he once again starts charging less for tomatoes. At that point, no more farmers are tempted
to move into that line of work. When I buy a tomato, and when someone else
is buying some fish, we control the supply on the market. We vote with our pocketbooks, and all around
the world, people spring into action, to satisfy our demands. Every purchase sends a message. This is how the market economy works in every
sector...from tomatoes to apples, to Apple computers. And this is Adam Smith's, "invisible hand." To make your life better, you have to better
the lives of others. Invisible hands are all around us. Friedman borrowed an example from economist
Leonard Read to show that something that we take for granted, and use every day, is the
result of a complex interaction between thousands of people. Look at this lead pencil; there's not a single
person in the world who could make this pencil. Remarkable statement? Not at all. The wood, from which it's made, for all I
know, comes from a tree that was cut down in the State of Washington. To cut down that tree, it took a saw. To make the saw, it took steel. To make the steel it took iron ore. This black center, we call it lead...but it's
really graphite, compressed graphite. I'm not
sure where it comes from, but I think it comes from some mines in South America. This red top up here, the eraser, a bit of
rubber...probably comes from Malaya, where the rubber tree isn't even native. It was imported from South America by
some businessmen, with the help from the British government. This brass ferrule,
I haven't the slightest idea where it came from. Or the yellow paint, or the paint
that made the black lines, or the glue that holds it together. Literally thousands of people cooperated to
make this pencil. But obviously, the pencil is no longer one
of our most important tools of communication. This is. And the production of a smart phone is not
less complex, to say the least. This display is made in Japan... and the camera
in Vietnam. The microphones come from Austria and the
chip set from France. The memory is produced in Korea, and the battery
in China. And the software and design centers are all
over the world, in countries like India, Finland, Britain and the U.S. Thousands of people,
on several continents, cooperated to make these phones so that we could have them. People from different countries, different
cultures; people who had never even met. That is why the operation of the free market
is so essential. Not only to promote productive efficiency...but
even more, to foster harmony and peace among the peoples of the world. We have a choice of smart phones, tomatoes,
even trucks because of competition. Sometimes the price is too high, sometimes
the product doesn't work, and sometimes the service is lousy. But in that case, someone else can enter the
market and take all the customers. So every company has to offer us something
better to stay in business. Some succeed, but some fail, and it's that
risk of failure that really scares us. When a businessman faces trouble, a market
threatens to disappear, or a new competitor arises, there are two things he can do. He can turn to the government for a tariff
or a quota, or some other restriction on competition, or he can adjust and adapt. In Hong Kong the first option is closed. Hong Kong is too dependent on foreign trade,
so that the government has simply had to adopt a policy of complete non-interference. That's tough on some individuals, but it's
extremely healthy for the society as a whole. Only the businessmen who can adapt, who are
flexible and adjustable survive, and they create good employment opportunities for the
rest. So, this the kind of boxes that you were producing
here, when Milton Friedman came by to visit? Mr. Cheung makes metal containers. Nobody's ordered him to. He does it because he's found that he can
do better for himself that way, than by making anything else. But if demand for metal containers went down,
Mr. Cheung would soon get that message. And Mr. Cheung is still here, and nowadays
he produces more things for the tourist trade. But, when only the flexible and adaptable
survive...thank you, Mr. Cheung, it means that other businesses fail. Economists call this constant renewal of the
economy, "creative destruction." If we want to increase our wealth and opportunities;
we have to stop doing old things in old ways, and start doing innovative things in better
ways. In other words, we have to be, "creative." But when consumers move on to new goods, it
can be difficult and painful, because old factories and old shops close, and people
lose their jobs. That is the, "destructive" part. And yet, most economists think that creative
destruction is necessary for economic development. Mrs. Lee starts out every day with her lunch,
her teapot and her cell phone. Cell phones are important for boat drivers
around here, because they used to pass messages by shouting to one another. Not terribly efficient, and very bad for your
voice. Hong Kong has the most cell phones in the
world; one-point-seven cell phones per person. But all around the globe we've seen a cell
phone revolution. In 1980, there were eleven-million cell phones
on the planet. Today almost four-billion people have access
to cell phones. This is an example of creative destruction. It used to be all landlines, made of copper. But now they've become less and less important,
especially in the developing world. This farmer in Bangladesh was always dependent
on one buyer of her eggs, and had to accept his prices. But now she can now check the price of eggs
in other village markets with her cell phone, before she sells, and so she can negotiate
a better price. In Tanzania, it used to be that the customer
often had to sit and wait for hours at the butcher's for the meat to arrive. And sometimes in Peru, the meat had to wait,
because the customers didn't know that it was already there. Today, you coordinate the business with a
cell phone, and the food ends up in people's stomachs, and not in the garbage. We have rarely seen a technology that has
meant so much for human development. But that was not the intention. The telecom companies wanted more market share,
those who adapted and distributed the technology locally wanted to make money, and butchers
and egg farmers just wanted to improve their own lives. Adam Smith would say that it was as if they
were led by an invisible hand when they rolled out this technology faster than any other
technology in world history, and many would say that this revolution did more to give
the average person power, and to reduce poverty more than any government program. No government official is telling these people
what to do. They're free
to buy from whom they want, to sell to whom they want, to work for whom they want. Sometimes it looks like chaos, and so it is. But underneath, it's highly organized, by
the impersonal forces of a free marketplace. But all progress comes at a cost. Market forces are both creative and destructive. As people buy cell phones, they ditch their
home phones. And then, there is no need for all those workers
who used to connect homes to wires, and repair telephone lines. And that is tens of thousands of people who
worked hard, and supported their families, and through no fault of their own lost their
jobs, and whose skills might not be in demand as the technology takes a new leap. Some succeed in inventing the next smart phone,
and become incredibly rich. Others are stuck with an obsolete technology. Some win, some lose, and the result is something
that most people have a problem with: inequality. Equality is a powerful concept...one that
we can all cherish to some degree. In fact, it's fair to say that in one sense,
America was built on the idea of equality. Equality is so important that here in Washington,
D.C., there is a monument dedicated to Thomas Jefferson. Thomas Jefferson was one of the Founding Fathers,
and he wrote the American Declaration of Independence, with these words, "We hold these truths to
be self-evident: that all men are created equal. That they are endowed by their creator with
certain inalienable rights, among these are life, liberty and the pursuit of happiness." What did Thomas Jefferson mean by the words,
"all men are created equal?" What he meant by the word, "equal" can be
seen in the phrase, "endowed by their creator." To Thomas Jefferson, all men are equal in
the eyes of God. They all must be treated as individuals, who
have each separately a right to life, liberty, and the pursuit of happiness. Of course, practice did not conform to the
ideals. In Jefferson's life, or in ours as a nation,
he agonized repeatedly during his lifetime about the conflict between the institution
of slavery, and the fine words of the Declaration. Yet, during his whole life, he was a slave
owner. But during the 19th century, the powerful
words and ideals of the Declaration of Independence helped more people to see the horrors of slavery,
and it helped to end forced labor. Practice began to catch up with the ideals. The idea of equality came more and more to
mean that everyone should have the same opportunity to make what he could of his capacities; that
all careers should be open to people on the basis of their talents, independently of the
race, or religion, or belief, or social class that characterized them. This concept of equality of opportunity offers
no conflict at all with the concept of freedom. On the contrary, they reinforce one another. And it is no doubt the concept that even today,
is most widely held. But during the 20th century, as people were
confronted with some of the differences of outcome that were the result of free markets,
a very different ideal began to emerge. And Friedman thought that this ideal was in
conflict with freedom. ...that is the ideal that everyone should
be equal in income and level of living in what he has. The idea that the economic race should be
so arranged that everybody ends at the finish line at the same time, rather than that everyone
starts at the beginning line at the same time. This concept raises a very serious problem
for freedom. It is clearly in conflict with it, since it
requires that the freedom of some be restricted, in order to provide the greater benefits to
others. How did the idea that government should change
economic outcomes become popular in the West? In a way it started here, in 1929, when the
stock market crashed. The Wall Street crash was followed by the
worst depression in American history. That depression has been blamed on the failure
of capitalism. It was no such thing, but the myth lives on. Friedman thought that the Great Depression
was the result of massive government failure, of stupid monetary policies, and tariffs that
created a trade war, but the common interpretation at the time was that capitalism had failed,
and that you couldn't just leave things for themselves in the face of massive unemployment
and widespread poverty. So politicians worldwide were looking for
a new approach. Roosevelt's first priority after his election
was to deal with massive unemployment. A public works program was started. The government financed projects to build
highways, bridges and dams. Roosevelt wanted to see America move into a new era. The Social Security Act was passed, and other
measures followed: unemployment benefits, welfare payments, distribution of surplus
food. With these measures, of course, came rules,
regulations, and red tape, as familiar today as they were novel then. The government bureaucracy began to grow...and
it's been growing ever since. The United States became a bit more like European
countries, like my home country, Sweden, by introducing some wealth redistribution, and
more government control over the economy. My country has made an effort to make people's
lives more equal. We have relatively free markets in business. It's fairly easy to start a company and compete
without being stopped by licenses, regulations, and tariffs. But when people are allowed to compete freely,
some win, and make a lot of money, some lose, and they lag behind. That's when the Swedish government steps in;
to reduce differences of outcome we tax heavily, and redistribute wealth among our citizens. To many, this is the best of both worlds...since
we don't really have equal chances in life. Some people have parents who give them an
interest in learning, ambition and opportunities, some don't, some are lucky in the genetic
lottery, and some aren't, some have good health, and some don't. To reduce the gaps that such differences might
lead to, our government steps in. Sweden chose to make equality a priority in
the 1970s, when we were already one of the richest countries in the world. Taxes were raised and benefit systems were
made more generous. Public spending almost doubled between 1960
and 1980: from thirty-one percent to sixty percent of GDP. Some would say that this has made our country
better. But it has also reduced the rewards for working
hard and taking risks. This is a museum recreation of the original
workshop of Lars Magnus Ericsson. He was a very important person in Swedish
history, because more than one-hundred-and-thirty years ago, he produced cheap and reliable
versions of the telephones that he had seen in the United States. And because of this, Stockholm became a global
center for telecommunications in the late 19th century. And it laid the groundwork for one of Sweden's
most successful companies: Ericsson. And today, it still employs more than eighty-thousand
people in one-hundred-and-fifty countries. This should make me proud as a Swede, but
in fact, it makes me a bit worried, because almost all big Swedish businesses share Ericsson's
heritage. And they probably all had boardrooms that
looked a bit like this. The average big Swedish company is 94 years
old. We have apparently not had the policies that
encourage people to start the new businesses that might become tomorrow's Ericsson. Today, Swedish entrepreneurs are the oldest
in the world. This is the other side of the coin. The young people and the immigrants, who should
be our future, are not starting the new Ericsson's. In fact, we have many examples of young Swedes
and entrepreneurial immigrants who moved from Sweden to Britain, or the United States, because
the rewards are much greater there, where taxes are lower. In many suburbs like this, outside of Stockholm,
the unemployment rate is higher than fifty percent. Even in the midst of the economic boom, almost
a quarter of the working-age population in Sweden did not go to work in the morning,
but got their checks from the government. It does seem to support the view that economic
incentives matter. With a sickness benefit of up to eighty percent
of your income, perhaps it wasn't surprising that Swedes were off sick more than any other
people, even though we objectively were healthier than almost any other population. In 2004, sickness benefits absorbed sixteen
percent of the government's budget. These statistics have improved since...but
interestingly, only after a determined effort by the government to reduce the equality of
income, by lowering taxes, and making benefit systems less generous. So it seems that these changes increased incentives
to work. Friedman emphasized something counter-intuitive. There is a positive benefit to inequality
of outcome for everybody. Some people become millionaires, and some
become billionaires, but that is because they were the ones who made their customers happy. That's the economic system that has transformed
our society in the past century and more. That's what gave the Henry Fords, the Thomas
Alva Edisons, the incentives to produce the miracles that have benefited us all. They went in with their eyes open, they knew
what they were doing; and win or lose, we, society, benefited from their willingness
to take a chance. If we did not allow a Lars Magnus Ericsson,
a Thomas Edison, or a Bill Gates to become incredibly rich, we would be more equal. But Friedman would ask: would we be better
off? If entrepreneurs did not think that a possible
reward for all the sacrifices they make, all their hard work, all the risks they take,
is a lot of wealth, then they might do something else instead. And in that case, we would not have the goods,
and the services, and technologies that make our lives better. We like the products of the free market: the
wealth, the choices, the goods and the services, that previous generations could not have dreamt
of. But we're not as willing to accept the workings
of the free market: the seemingly chaotic ups and downs, the fact that it produces both
winners and losers, so we give the government power to deal with these problems. Listen to these words from 1980...don't they
still ring true today? Every time I come to Washington, I'm impressed
all over again with how much power is concentrated in this city. But we must understand the character of that
power. It is not monolithic power in a few hands,
the way it is in countries like the Soviet Union or Red China. It is fragmented into lots of little bits
and pieces, with every special group around the country trying to get its hand on whatever
bits and pieces it can. The result is that there's hardly an issue
in which you won't find government on both sides. For example, in one of these massive buildings
scattered all through this town, filled to the bursting with government employees, some
of them are sitting around trying to figure out how to spend our money to discourage us
from smoking cigarettes. In another of the massive buildings, maybe
far away from the first, some other employees, equally dedicated, equally hardworking...are
sitting around figuring out how to spend our money, to subsidize farmers to grow more tobacco. Well, it's obvious that things haven't changed
much. U.S. politicians still spend tax dollars on
anti-smoking campaigns. And tobacco farming is still subsidized by
the government. Each of these programs spends money, taken
from our pockets...that we could be using to buy goods and services to meet our separate
needs. All of these programs use very able, very
skilled people who could be doing productive things. Once you've created a special interest group,
it's difficult to un-create it. Every so often a bill is introduced to Congress
to eliminate tobacco subsidies, and routinely they're voted down. Who knows? Maybe one day one will pass. In the economic market, people who intend
to serve only their own private interests are led by an invisible hand to serve public
interests, that it was no part of their intention to promote. In the political market, there's an invisible
hand operating as well. But unfortunately, it operates in the opposite
direction. People, who intend only to serve the public
interest, are led by an invisible hand to serve private interests, that it was no part
of their intention to promote. It's not that people in government aren't
well-intentioned. These are not evil people, purposely trying
to wrest away our freedoms. It's just the nature of the job. The deals made here affect all of us, and
sometimes in ways we don't like. But don't blame the people making the deals. They're just pursuing their own self-interest,
which may be as narrow as making a buck, or as broad as trying to reform the world. Friedman worried that people would stop doing
what they...and others they deal with...thought was best. And instead, they would be doing what the
government encouraged or required through regulation, taxes, and tax loopholes...and
that creates new problems. Taxation to help the poor might result in
less growth, and so less poverty reduction, and bans on abortion may mean that abortion
takes place anyway, but becomes less safe. Tighter border controls might force immigrants
to stay in the U.S. once they manage to get in, rather than risk going back when the economy
retracts, and there are fewer employment opportunities. Sometimes, government action results in a
demand for more government action. Just look
at how governments have transformed the financial industry. Over the years, governments always step in
to save banks that are on the brink of collapse. And central
banks...they always try to avoid recessions, by lowering interest rates to encourage
borrowing. And politicians, they massively subsidize
home ownership. That was popular on Wall Street, but it led
to a lot of risk-taking, and in many loans being given to people who could not afford
the payments in the long run. So it led to
gigantic losses for the banks, and a financial crisis in 2008. Of course, no one wants banks to fail, but
bailouts like these also set a bad example for homeowners, speculators, and banks; making
it likely that they will take on too much risk the next time as well. Every government intervention results in unintended
consequences. These consequences have to be dealt with as
well, and that leads to new unintended consequences. The result is a constant growth of government. In 1980, Friedman designed a very graphic
way to highlight this problem. The federal regulations that govern our lives
are available in many places. One set is here, in the Library of Congress
in Washington, D.C. In 1936, the federal government established
the Federal Register to record all of the regulations, hearings, and other matters connected
with the agencies in Washington. This is Volume 1, Number 1. In 1936, it took three volumes like this to
record all these matters. In 1937, it took four, and then it grew, and
grew, and grew. At first rather slowly and gradually, but
even so, year-by-year it took a bigger and bigger pile to hold all the regulations and
hearings for that year. Then around 1970, came a veritable explosion...so
that one pile is no longer enough to hold the regulations for that year. It takes two, and then three piles, until,
on one day in 1977, September 28th, the Federal Register had no fewer than 1,754 pages...
and these aren't exactly what you would call small pages, either. It wasn't always like this. America was founded with something different
in mind. Milton Friedman came here to Philadelphia,
and Independence Hall, to reflect on the Founding Fathers. Almost two hundred years ago, a remarkable
group of men gathered in this room, to write a constitution for the new nation that they
had helped to create a few years earlier. They were a wise and learned group of people. They had learned the lesson of history. The great danger to freedom is the concentration
of power, especially in the hands of a government. They were determined to protect the citizens
of the new United States of America from that danger. And they crafted their constitution with that
in mind. That constitution has served us well. It has enabled us to preserve our freedom
for close on to two-hundred years. But in the past fifty years, we have been
forgetting the lesson that these wise men knew so well. From regarding government as a threat to our
freedom, we have come more and more to regard government as a benefactor from which all
good things flow. Friedman was afraid that a bigger government
would threaten the incredible results of economic freedom, because the economy is not a zero-sum
game. In other words, we're not fighting over ever-smaller
pieces of the pie. The pie is constantly growing larger, as people
and businesses become more productive...and the world is getting wealthier all the time. In the last one hundred years with relatively
free markets, we have created more wealth than in the one-hundred-thousand years before. And as a result, we have reduced extreme poverty
around the world; more than people ever dreamed was possible. Americans and Swedes alike, we're all obsessed
with our monthly paycheck. But how much that paycheck is really worth? To find out that, is not as simple as it seems. What's the inflation rate? Do goods and services cost more or less today
than they did last year? We have to look at what we can buy, how far
that paycheck takes us. And that has increased dramatically, because
entrepreneurs become rich by constantly reducing the price of everything we want. Let's look at a couple of everyday items. Twenty-five years ago, you had to work for
four-hundred-and-fifty-six hours to be able to buy a cell phone. Today, after all the productivity increases
that businesses and innovators have introduced, you only have to work for four hours. And of course it's a better deal today, this
is not just a phone, it also doubles as a texting device, a calendar, a camera, almost
everything. In these same twenty-five years, the cost
of a personal computer has been reduced from four-hundred-and-thirty-five hours, to twenty-five
hours, and you really couldn't compare it to those original PCs that wouldn't be able
to run any of the software or the operating systems that we use today. In 1980, when Milton Friedman did his series,
Free To Choose, he wrote the script on a typewriter. And he sent the drafts via the post office. And the film crew was
constantly searching for a pay phone. Today, our work process is a bit different:
we have computers, we have email, we have a cell phone, which makes it much, much
easier. And, unlike then, video cameras are now accessible
to almost everyone. What about a basic necessity like food? Well, we don't see the recent dramatic productivity
increases that we see when we look at electronics; the great leap forward in agricultural technology
happened a hundred years ago. But with a long-term perspective, you certainly
see a lot of change. In 1920, you had to work for thirty-seven
minutes to afford half a gallon of milk; today you wouldn't have to work more than seven
minutes. And in 1920, it cost you two-and-a-half hours
to buy three pounds of chicken. Today, you'd get away with less than fourteen
minutes. Professor Friedman noticed something similar
thirty years ago. Over a quarter of a century ago, I bought,
second-hand, a desk calculator, for which I paid three-hundred dollars. One of these little calculators today, which
I can buy for ten dollars or so, will do everything that did, and more besides. What produced this tremendous improvement
in technology? Friedman's conclusion was that accepting differences
of outcome does not just make the winners better off, but the losers as well. People with a lot of money can afford to be
early adopters, they can pay ridiculous amounts for the first versions of cell phones and
personal computers, and that's a good thing for us. Because they create bigger markets, so the
companies get revenue, so that they can streamline production and create lower-cost versions,
so that all of us can buy one. And historically this seems to be the case. Free markets regularly turn luxuries into
consumer goods. This may seem hard to believe, but the average
rate of ownership for refrigerators, air conditioners, and dishwashers is higher among poor American
households today, than they were for all American households in the early 1970s. When people are free, they are able to use
their own resources most effectively and you will have a great deal of productivity, a
great deal of opportunity. The major beneficiaries are always the small
man. The man who has power who is at the top of
society, he's going to do well whatever kind of a society you have. It's the society which gives the small man
the opportunity to go his way, which is going to benefit him the most. One thing is certain. Rarely in the history of mankind has freedom
made such rapid progress as it has since Friedman produced, Free To Choose in 1980. Whole populations yearning for freedom tore
down the walls. Communism collapsed, the Soviet Union was
abolished, and its satellite states were set free. Military dictatorships and the apartheid system
were swept away. Most of the world embraced free market capitalism. Democracy spread and living standards surged. So, what really happened in Chile and China
after Milton Friedman's controversial visits in the 1970s and 80s? Well, Chile liberalized the economy radically,
put an end to inflation, and adopted free trade. And after a difficult period of adjustment,
the country experienced rapid growth and improved living standards. The pressure for a democratic transition grew. In 1987, political parties were legalized,
and in 1988, there was a referendum on whether the dictator, Pinochet, would remain in power
for eight years. Pinochet lost and had to resign, and the country
continued making economic progress under a center-left leadership. Chile is now a stable democracy. Here it seems that Friedman was proven right. Economic freedom created wealth, and wealth
undermined the dictatorship. In China that is not the case, at least not
yet. The Communist Party still runs the show, and
opposition is vigorously suppressed. Still, economic reform has made an enormous
difference in China. It has turned the country into the world's
biggest exporter, with the world's fastest growth rates. It has led to the greatest poverty reduction
in any country anywhere, ever. And hundreds of millions of Chinese are experiencing
personal freedoms that were unheard of thirty years ago. We'll have to see what happens next. As economies have liberalized, the results
are stunning. Extreme poverty around the world has been
halved since Milton Friedman did his show. In fact, more than seventy-thousand people
have left poverty every day since the early 1980s. That's almost three-thousand every hour, one-hundred
and twenty-four people every minute around the clock. But at the same time, we see a widespread
hostility against the free market system that made this possible. Freedom is not the natural state of mankind. It is a rare and wonderful achievement. It will take an understanding of what freedom
is, of where the dangers to freedom come from. It will take the courage to act on that understanding,
if we are not only to preserve the freedoms that we have, but to realize the full potential
of a truly free society. Equality sounds good, and some value equality
of outcome more than anything else. The risk is that the outcome is that we're
all equally poor. Market-based systems have made all of us richer,
but some much richer than others. In the end, we have to decide whether this
wealth is the problem, or whether poverty is the problem. As Milton Friedman put it in 1980, "The society
that puts equality before freedom will end up with neither. The society that puts freedom before equality
will end up with a great measure of both." Major funding for this program was provided
by: Additional funding was provided by:
