(Opening music) (City sounds) MILTON FRIEDMAN: Every day, hundreds of people flock to the Capitol in Washington, D.C., attracted only by power. (men conversing) That power has accumulated here over the past 50 years at the seat of government of the most powerful nation on earth. (men greeting each other) (telephone rings) Hello, this is Warren Richardson. Oh Mary, yes, what's on your mind? FRIEDMAN: Warren Richardson makes his living by knowing who has power and influence to trade. RICHARDSON: I'll be here waiting for you. FRIEDMAN: He's a lobbyist. RICHARDSON: Thanks a lot. Bye. HOUSE REP: The official administration position on this bill, however, is that its consideration would be premature at this time in view of the president's... FRIEDMAN: He trades with people like these: members of the House Committee on Agriculture. They make some of the laws and regulations that, among other things, control the food we eat. They are elected officials who have the power to spend billions of dollars of our tax money. MR. BALDUS: It takes all of page two, and it takes all of page three. FRIEDMAN: Naturally, lots of people would like to get their hands on that money. BALDUS: That's the kind of stuff that ought never go into the statute books. And I think anybody who is practicing justice court knows it. FRIEDMAN: Bill, the way you get common sense administration is by having common sense administrators. And I do feel like there's more common sense administration in agriculture. Access is all-important, and how you gain access. It used to be there were only maybe a few hundred lobbyists in this town. Now we record up to 15,000 lobbyists plus ancillary personnel, secretaries, receptionists and typists and the researchers that go with that. They are calling upon all the law firms imaginable. So there is a tremendous support base out there for the lobbying effort. FRIEDMAN: You don't have to walk these corridors very long before you begin to realize that the concentration of power in the hands of a few people, however well-intentioned, is a real threat to the freedom of the individual. Of course, Warren Richardson doesn't see it that way. Over the years, he's successfully lobbied for special interest groups in energy, environment, wages and prices. Today, he's arguing the case for another special interest: The National Action Committee on Labor Law Reform, hoping to swing influence his way. (Richardson conversing) FRIEDMAN: There's hardly a time when the corridors of congressional office buildings are not peppered with people waiting for their chance to see and influence the elected man at the center of power. UNIDENTIFIED MEMBER OF THE HOUSE:
Within that legislation for funds for communities of 50,000 and under, the goals of the existing law, and certain statutory paperwork requirements are often very unrealistic for smaller communities. FRIEDMAN: 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-interests, which may be as narrow as making a buck- or as broad as trying to reform the world. We the citizens are to blame, because we've handed over so much of our lives, our personal decision-making, to government, and we now find that what government does severely limits our freedom. (typing sounds) The leather and wood paneled official offices of a congressman in Washington, D.C.. It's the mecca of those who try for behind-the-scenes influence. (typist and man on telephone call) FRIEDMAN: Weaving his way between special interest groups can be tough for a politician. To stay in office he needs votes. To get votes, he often has to make deals. POLITICIAN: The chances of our party regaining the White House if Republicans, if the president sends out policies that Republicans can support... FRIEDMAN: It's frequently a frustrating business. MASTERSON: When you have people who are coming in, not for purposes of debate, and dialogue, and discussion on something, but merely they demand their special interest... or their single issue of concern- that's where it becomes extremely difficult, because there might be an equal number on the opposite side of the coin. (city sounds) FRIEDMAN: 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 hands 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 spread... 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. In one building- they're figuring out how to hold down prices, in another building, they've got schemes for raising prices, the prices farmers receive, or import prices, or keeping out cheap foreign goods. We set up an enormous Department of Energy- with 20,000 employees to encourage us to save energy. We set up an enormous Department of Environmental Protection, to figure out ways to get cleaner air involving our using more energy. Now, many of these effects cancel out, but that doesn't mean that these programs don't do a great deal of harm, and that there aren't some very bad things about it. One thing you can be sure of: the costs don't cancel out, they add together. 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. They, all of them, grind out rules, regulations, red tape, forms to fill in. I doubt that there's a person in this country, who doesn't violate one or another of those rules or regulations or laws everyday, not because he wants to, or intends to, but simply because it's impossible for anybody to know what they all are. Those are the bad things. But, there's something good about this fragmentation of power, too. And that is, that it enables us to do something about it. If power were really concentrated in monolithic, in a few hands, it would be hopeless to reform the system. But because it's fragmented, because it's split up, we can see how much waste there is, we can see how inefficient it is, how the left hand seldom knows what the right hand is doing. (office sounds) It wasn't always like this. (more office sounds) FRIEDMAN: The armies of bureaucrats administering our lives, making our decisions, spending our money, all supposedly for our good. Our nation was founded with something fundamentally different in mind. Almost 200 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 50 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. We have assigned increasing tasks of great importance to government. We have turned over to government a larger and larger fraction of our income to be spent on our behalf, and the results are plain for all to see. They are disappointing. The great expectations have not been achieved, and our freedoms have suffered in the process. (city sounds, police siren) Where did it all go wrong? Government began to take an increasing part in our personal affairs nearly 50 years ago. It was 1933, at the lowest point of the worst depression in history. The idea took root that capitalism had failed, and that that failure was responsible for the human and economic tragedy. In the early 30s, Franklin Delano Roosevelt and his advisors met here to devise programs to meet the problems of the depression. Their answer was to give central government more power. Out of that beginning came today's welfare state. This Empire State Plaza in Albany, NY is a fine example of the difference between public, political power and private, economic power. It was constructed while Nelson Rockefeller was governor of the state of New York. The Rockefeller family has spent millions of its private money on good causes. It has endowed universities like my own, at the University of Chicago, financed medical research reconstructed Williamsburg. Yet not all the private money of the Rockefeller family gave them anything like the amount of power that Nelson Rockefeller was able to have as governor of the State of New York. He constructed monuments like this all over the state, using every expedient he could think of to finance them. When he left office, taxes per person in New York State were higher than in any other state in the country, excepting only Alaska, and there was a monumental debt besides. So much so, that his successor, who had the reputation, as a democratic congressman, of being a big spender, had to use his inaugural speech to preach the virtues of austerity and to say: "The time of wine and roses is over." Look at this skyline. It's Chicago, and I think it's very beautiful. Much of it is less than 20 years old. Those tall buildings were built by private enterprise, for use by private enterprise, not by government for use by government bureaucrats. These are productive monuments, not a burden on the taxpayer, a burden that has almost bankrupted New York City. The irony is that for the most part it was good intentions that led us to where we are today: a nation governed by bureaucratic empires. I wonder whether, when they built this building, they realized that it was going to come out looking like a fortress. From modest beginnings in 1953, the Department of Health, Education and Welfare has grown into a veritable empire. Only a small part of its total staff is housed in this headquarters building, a mere 2,000 bureaucrats. Its budget is the third largest budget in the whole world, exceeded only by the entire budget of the United States and of the Soviet Union. It employs directly 150,000 full-time people and the empire it rules employs another million. More than 1 out of every 100 people in the United States works in the HEW empire. As we have seen in this series, the Department of Health, Education and Welfare is spending increasing amounts of our money each year on health. One effect is simply to raise the fees and prices for medical and hospital services, without a corresponding improvement in the quality of medical care that we receive. It is controlling more and more of the food and drugs we buy, in the process, discouraging the development and preventing the marketing of new drugs that could be saving tens of thousands of lives a year. In the field of education the sums being spent are skyrocketing. Yet by common consent, the quality of education is declining. More and more money is being spent and increasingly rigid controls imposed to promote racial integration. Yet our society is becoming more fragmented In the field of welfare, billions of dollars are being spent each year, yet at a time when the standard of life of the average American is higher than it has ever been in history, the number of people on welfare rolls is growing. Social Security, the budget is colossal, yet it is in deep financial trouble. The young complain, and with considerable justice, about the high taxes they must pay, and those taxes are needed to finance the benefits that are going to the old. Yet the old complain, and also with justice, that it is difficult for them to maintain the standard of life that they were led to expect. A system that was enacted to make sure that the old never became objects of charity sees an increasing number of our older folk on the welfare rolls. By its own accounting, HEW, in one year lost, through fraud, abuse and waste an amount of money that would have built well over 100,000 houses costing $50,000 a piece. Little wonder that those initials are increasing coming to stand for "How to encourage waste." MARTIN ANDERSON: We found in some cities that upwards of 20-25% of all the people currently receiving welfare are either totally ineligible for welfare or are receiving more than they should be receiving. And it appears in looking into this that the main reason for this is not the welfare laws themselves, but the way they are administered. They are administered in a very lax and loose manner. One of the most famous cases, in fact it just happened last week, they arrested a woman in southern California; they referred to her as the Welfare Queen. And over the past six or seven years she had received $300,000 in welfare payments, which of course is on an after tax basis, so if you put her on a before tax basis, it might be equivalent to over a million dollars in before tax income. And, she and her husband were living in a nice $170,000 home, nice cars, and she used a very simple technique. She just used aliases, used false names, and signed up to get countless different welfare agencies and departments, and drove around and collected her checks. FRIEDMAN: Something had to be done about this scandalous state of affairs. What better bureaucratic decision than to set up a special department, crammed with computers and civil servants, all dedicated to tracking down waste, using taxpayers’ money, of course, in the process: $27.5 million in the first year. As Adam Smith wrote over 200 years ago, "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 is 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. The reason is simple: As we have seen in case after case, the general interest is diffused among millions and millions of people. The special interest it’s concentrated. When reformers get a measure through, they go on to their next crusade, leaving no one behind to protect the public interest. But they do leave behind some money and some power, and the special interests that can benefit from that money and from that power are quick to gain it, at the expense of most of the rest of us. By now, after 50 years of experience, it is clear that it doesn't really matter who lives in that house. Government will continue to grow so long as the rest of us believe that the way to solve our problems is to turn them over to government. Yet there are many people who want to solve their own problems, who want to use their own skills and energy and resources. We found such a person here in southern California. John McCollum, a fireman, was planning his retirement. He decided to fulfill his life's ambition: he built his own house with his own hands. He bought a site with a magnificent view, cleared the ground, and realized that he was the first man who ever cultivated this land. It made him feel good. He pulled a trailer on to the edge of his plot and moved in with his wife to live there while they worked on the house. He made his own adobe bricks, he planted avocado trees, learned about carpentry and plumbing. It was going well when one day a local official arrived with a warning. It was all right to build a house, he said, but it was against regulations to live in the trailer any longer. The McCollums thought that the rules were bureaucratic and foolish, and they resented them. They decided to leave the trailer exactly where it was and defy the authorities. Pat Brennan became something of a celebrity in 1978 because she was delivering mail in competition with the United States Post Office. With her husband she set up business in a basement in Rochester, NY. Soon it was thriving. They charged less than the post office, and they guaranteed delivery the same day of parcels and letters in downtown Rochester. There is no doubt now that they were breaking the law as it stood. The post office took them to court. The case against them was simply that they should not be handling letters. The Brennans decided to fight, and local businessmen provided the financial backing. PAT BRENNAN: I think there's going to be a quiet revolt, and perhaps we're the beginning of it, that you see people bucking the bureaucrats, where years ago you wouldn't dream of doing that because you could be squelched. Now, with tax revolts and with what we're doing, people are deciding that their fates are their own and not up to somebody in Washington who has no interest in them whatsoever. So, it's not a question of anarchy, but it's a question of people rethinking the power of the bureaucrats and rejecting it. FRIEDMAN: The Brennan customers were clear about one thing. After all, the Brennan's service was cheaper than the regular mail. THOMAS O'DONAGHUE (STOREKEEPER): We're not sure that they have done anything illegal. And I'd like to know more about this and I hope that this gets further into the courts than it has already, and someone will listen to their appeal, because when we use the Brennan's we know for a fact that same day delivery is going to be happening day after day after day, whereas with the other guy, you're not sure and you're not sure what kind of shape it's going to get there in. So I am behind the Brennan's 100%, and anything I can do to help them, I will. PAT BRENNAN: Well, the questions of freedom comes up in any kind of a business, whether you have the right to pursue it and the right to decide what you are going to do. There is also the question of the freedom of the consumers to utilize the service that they find is inexpensive and far superior. And according to the federal government and the body of laws called the Private Express Statutes, I don't have the freedom to start a business and the consumer does not have the freedom to use it, which seems very strange in a country like this, that the entire context of the country is based on freedom and free enterprise. FRIEDMAN: The post office won the case. It went all the way to the State Supreme Court and the Brennans were closed down, put out of the business of delivering mail. What we've been looking at is a natural human reaction to the attempt by other people to control your life when you think it's none of their business. The first reaction is resentment. The second is to attempt to get around it. And finally there comes a decline in respect for law in general. There's nothing especially American about this. It happens all over the world whenever some people try to control other people. For example, take a look at what's happening to the British. For most of the past century Britain was known throughout the world for the respect which its citizens gave to the law, but no longer. GRAHAM TURNER: Nothing is perfect, but we have become in the course of the last ten or fifteen years, a nation of fiddlers. How do they do it? They do it in a colossal variety of ways. Let’s take it right at the lowest level. Take a small grocer in a country area, say, Devon. Very small turnover. How does he make money? He finds out that by buying through regular wholesalers, he's always got to use invoices, but if he goes to the cash and carry, and buys his goods from there, the profit margin on those goods can be untaxed, because the tax inspector simply don't know he's had those goods. That's the way he does it. Then if you take it to the top end, if you take a company director, well there's all kinds of ways they can do it. They buy their food through the company, they have their holidays on the company, they put their wives as company directors even though they never visit the factory. They build their houses on the company by a very simple device of building a factory at the same time as a house. It goes absolutely right through the range from the ordinary person, the ordinary working class person, doing quite menial jobs, right to the top end, businessmen, senior politicians, members of the Cabinet, members of the Shadow Cabinet, they all do it. I think almost everybody now feels the tax system is basically unfair. And, everybody who can tries to find a way around that tax system. Now, once that happens, once there’s a consensus that the tax system is unfair, the country, in effect, becomes a kind of conspiracy. And everybody helps each other to fiddle. You've no difficulty fiddling in this country because other people actually want to help you. Now 15 years ago that would have been quite different. People would have said, “Hey, you know, this is not quite as it should be.” So that's the first reason, a very high level of taxation. But I think personally there's another fact that comes into it. And that is that over the years we've had a huge growth in bureaucracy, government expenditure, cotton wool, if you like, to protect people from the slings and arrow of ordinary life, you know, health service, all kinds of benefits of one sort or another. And I think there’s comes into the consciousness of people almost a sort of new factor feeling that things don't quite have the value that they did, that money is not a thing of value, if you’re short you get it from some government body or other. FRIEDMAN: Criminal tax evasion in Britain, laws and regulations defied in the United States: It's nothing to celebrate. The hopeful thing is that throughout the free world, the public is coming to recognize the dangers of big government and is taking steps to control it. But it will be no easy task to cut government down to size. Today, in country after country, the strongest special interest has become the entrenched bureaucracy, whether at the national or at the local level. In addition, each of us gets special benefits from one or another governmental program. The temptation is to try to cut down government at someone else's expense while retaining our own special privileges. That way is stalemate. The right approach is to tackle head-on the explosive growth in government spending. Let’s give the government a budget the way each of us has a budget. A movement in this direction is already underway in the United States, with the many proposals for Constitutional Amendments limiting government spending. Several states have already adopted such an amendment. There is strong pressure for a similar amendment at the federal level. Those amendments would force government to operate within a strict budget. Each special interest would have to compete with other special interests for a larger share of a fixed pie, instead of all of them being able to join forces at the expense of the taxpayer. This is an important step, but it is only a first step. No piece of paper by itself can solve our problems for us. What we need is widespread public recognition that the central government should be limited to its basic functions: defending the nation against foreign enemies; preserving order at home; mediating our disputes. We must come to recognize that voluntary cooperation, through the market and in other ways, is a far better way to solve our problems than turning them over to the government. This is where much of the future strength of the United States lies, in places like Ottumwa, Iowa, where ordinary hardworking American people live. People of all economic levels live in Ottumwa, but there are no extremes of either wealth or poverty. All are part of a community, each part of which depends on the others for a stable and happy life worth living. This is the kind of community that formed the character of democratic America. We began this series by stressing two ideas: the idea of human freedom as embodied in Thomas Jefferson's Declaration of Independence; the idea of economic freedom as embodied in Adam Smith's Wealth of Nations. Those two ideas, working together, came to their greatest fruition here in the heartland of America. But the basic character of the society that they created has been changing as a result of the rise of another set of ideas. We have forgotten the basic truths that the founders of this country knew so well: that the greatest threat to human freedom is the concentration of power, whether in the hands of government or anyone else. Throughout the Western world, more and more of us are coming to recognize the dangers of an over-governed society. But it will take more than a recognition of danger. 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. LAWRENCE E. SPIVAK: Milton, all through your discussions, you hammer away at two things: the theories of Adam Smith on the free market and of Thomas Jefferson on central power. One thing that troubled me a little bit about your discussions is that it seemed to me that you are a little bit the way psychoanalysts used to talk about Freud; that you believe they had given us the word, and that even though 200 years have gone by, it was still the word, that circumstances had not changed the meaning in any way. Are you that fixed about their ideas? MILTON FRIEDMAN: There's a great difference between principles and the application of principles. The application of a principle has to take account of circumstances. But the principles that explain how it is that an automobile operates are no different from the principles that explain how a horse and buggy operated, or how a bow and arrow operated. The principles that Adam Smith enunciated, the philosophy that Thomas Jefferson enunciated, are every bit as valid today as they were then. But the circumstances are different, and therefore the applications in many cases very different. In addition, there has been a great deal of work and study and scholarly activity that has gone on since then. We know a great deal more about the way in which an economy works than Adam Smith knew. He was wrong in many individual details of his theory, but his overall vision, his conception of how it was that without any central body planning it, millions of people could coordinate their activities in a way that was mutually beneficial to all of them; that central concept is every bit as valid today as it was then, and indeed, we have more reason to be confident in it now than he had because we've had 200 years more experience to observe how it works. SPIVAK: All right, well then let's go back to Jefferson. You say, cut the functions of central government to the basic functions advocated by Jefferson, which was what? Defense against foreign enemies, preserve order at home, and mediate our disputes. Now, can we do that in the complicated, the complex world we live in today, without getting into very serious trouble? FRIEDMAN: Suppose we look at the activities of government in the complex world of today and ask, to what extent has the growth of government arisen because of those complexities? And the answer is, very little indeed. What is the area of government that has grown most rapidly? The taking of money from some people and the giving of it to others; the transfer area. HEW, a budget 1-1/2 times as large as a whole defense budget. That's the area where government has grown. Now in that area, the way in which technology has entered has not been by making certain functions of government necessary, but by making it possible for government to do things they couldn't have done before. Without the modern computers, without modern methods of communication and transportation, it would be utterly impossible to administer the kind of big government we have now. So I would say that the relation between technology and government has been that technology has made possible big government in many areas, but has not required it. SPIVAK: I know-- I believe, I say I know, I think I know, but I'll say I believe, that you felt, you blame the government for the Great Depression of 1929 through 1933, and, of course, you had to blame FDR for all he did, but most people feel that he saved this free economy of ours. FRIEDMAN: Given the catastrophe of the Great Depression, there is no doubt in my mind that emergency government measures were necessary. The government had made a mess. Not FDR's government; it was the government that preceded him, although it was mainly the Federal Reserve System, which really wasn't subject to election. But once FDR came in he did two very different kinds of things. SPIVAK: Well, had the government made a mess by what it did or by what it didn't do? FRIEDMAN: By what it did. By its monetary policies, which forced and produced a sharp decline in the total quantity of money. It was a mismanagement of the monetary apparatus. If there had been no Federal Reserve System, in my opinion, there would not have been a Great Depression at that time. But given that the depression had occurred, and it was a catastrophe of an almost unimaginable kind, I do not fault at all; indeed, on the contrary, I commend Roosevelt for some of emergency measures he took. They obviously weren't of the best, but they were emergency measures, and you had an emergency you had to deal with. And the emergency measure, such as relief programs, even the WPA, which was a make work program, these served a very important function. He also served a very important function by giving people confidence in themselves. His great speech about, “The only thing we have to fear is fear itself,” was certainly a very important element in restoring confidence to the public at large. But he went much beyond that. He also started to change, under public pressure, the kind of government system we had. If you go beyond the emergency measures to the, what he regarded as the reform measures, things like NRA and AAA, which were declared unconstitutional, but then from there on to the Social Security system, to the ... SPIVAK: Take the Social Security System for a minute. The people wanted that, they wanted that protection. They were frightened; they wanted welfare.
FRIEDMAN: Not at all. SPIVAK: Well you said pressure, pressure from whom? FRIEDMAN: Pressure from people who were expressing what they thought the public ought to have. There was no widespread public demand for Social Security programs. The demands...
SPIVAK: No demand for welfare with 13 SPIVAK: million people unemployed…
FRIEDMAN: There was a demand for welfare and assistance. I was separating out the emergency measures from the permanent measures. Social Security, in the first 10 years of its existence, helped almost no one. It only took in money. Very few people qualified for benefits. It wasn't an emergency measure. It was a long-term measure. And it had to be sold to the American people, primarily, by the group of reformers, intellectuals, New Dealers, the people associated with FDR. The, Social Security is one of the most misleading programs. It has been sold as an insurance program. It's not an insurance program. It's a program which combines a bad tax, a flat tax on wages up to a maximum, with a very inequitable and uneven system of giving benefits, under which some people get much, some people get little. So that Social Security... SPIVAK: Would you now abolish Social Security? FRIEDMAN: I would not go back on any of the commitments that the government has made. But I would certainly reform Social Security in a way that would end in its ultimate elimination. SPIVAK: You're not afraid, then, of the free market under any circumstances, where cooperation, which you find necessary, which you believe always comes, fails to come; where competition becomes so fierce and becomes very frequently corrupt, and, or where it becomes stupid. Take for example what's happening in today's market, the conglomerates, which have been seizing up all sorts of, we happen to live in a hotel that's run by a conglomerate. Why should ITT, for example, run a hotel, and how are you going to stop that? FRIEDMAN: Well in the first place, once again,
SPIVAK: Without government, without... FRIEDMAN: Once again, it's government measures that have promoted the conglomerates. The only, the major reason we have conglomerates is because they are a very effective way to get around a whole batch of tax legislation. Let me ask a different question. Who is more affected by government regulations, by government controls? SPIVAK: I thought I was supposed to ask the questions. But I was warned that you might turn these on me. FRIEDMAN: Well tell me, who is, who’s more affected, the big fellow who can deal with it or that have a separated department to handle the red tape, or the poor fellow? SPIVAK: The big fellow can always take care of himself under any system. FRIEDMAN: Right, and therefore you want a system which gives the big fellow the least advantage. And the system under which he can get government to help him out, gives him the most advantage, not the least. You say am I afraid of greed, of lack of cooperation. Of course. But we always have to compare the real with the real. What are the real alternatives? And if we look at the record of history, if we go back to the 19th century, which everybody always points to as the era of the robber baron, who strode around the land and ground the poor under his heel, what do we find? The greatest outpouring of voluntary charitable activity in the history of the world. This University, this University of Chicago is an example. It was founded by contributions by John D. Rockefeller and other people. The colleges and universities throughout the Mid-West. If you go back and ask when was the Red Cross founded, when was the Salvation Army founded, when were the Boy Scouts founded, you'll discover all of that came during the 19th century, in the era of unregulated rapacious capitalism. SPIVAK: Milton, I'd like to go back for a minute to the question of conglomerates. Granted that what you say, that the government policies, concentration of central government, if you will, or whatever you want to call it, are responsible for the growth of conglomerates. What would we, what should we do about them now? Should government try to undo them? Or should anybody try to undo them?
FRIEDMAN: No. SPIVAK: Or should you just let them fail? FRIEDMAN: You should let them fail, of course. I am strongly opposed to government bailing any of them out. You should let them fail. The best things you can do, in my opinion, are, first, to have complete free trade so you can have conglomerates in other countries compete with conglomerates in this country. We may have only two or three automobile companies, but there's Toyota, there's Volkswagen, competition from abroad is effective. But in the second place... SPIVAK: When do you say complete free trade, you mean all over the world? FRIEDMAN: No sirree. I mean the United States, all by itself, unilaterally, should eliminate all trade barriers. We would be better off if all the countries did the same. SPIVAK: What do you think would happen if we just did it though? FRIEDMAN: I think we'd be very much better off, and a lot others would then follow our example. That's what happened in the 19th century when Great Britain in 1846 completed removed, unilaterally, all trade barriers so that... SPIVAK: You don't think this country would be flooded with goods of all kinds from all over the world, maybe cheaper, and that we wouldn't have great unemployment in this country?
FRIEDMAN: What would the people who FRIEDMAN: sold us goods do with their money? They'd get dollars, what would they do with the dollars? Eat them? If they want to send us goods and take dollars in return, we're delighted to have them. No. That's not a problem as long as you have a free exchange rate, because we cannot export without importing, we cannot import without exporting. You would not have a reduction in employment, what you'd have would be a different pattern of employment. You'd have more employment in export industries, and less employment in those industries that compete with imports. But go back to conglomerates, Larry, for a moment. I just want to ask a very different kind of a question. Conglomerates are not very attractive. I would much rather have a lot of small enterprises. But there's all the difference in the world between a private conglomerate and a government conglomerate. In general, the government conglomerate can get money from you without your agreeing to give it to him. You and I pay for Amtrak and for the postal deficit whether we use the services of Amtrak or the postal deficit or not. I don't pay your conglomerate unless I rent one of their apartments. I get something for my money. So bad as private conglomerates are, they're less bad than one of the alternatives. SPIVAK: Milton, suppose I agree with almost everything you say and say, it would be wonderful if we... starting from scratch…
FRIEDMAN: If you agree with almost FRIEDMAN: everything I say, you are a unique human being.
SPIVAK: I don't say I do agree, but I said suppose I agree for the sake of argument. We can't start from scratch. How do we undo what we have done? How would you undo it, not me? FRIEDMAN: That's the hardest problem and I agree that is the real question. How do we get from where we are to where we want to go? And we can't get there overnight; we cannot get there by simply eliminating the things that should not have been done. As in the case of Social Security, we have it, and we've got to live up to our obligations. So we do have to develop a series of policies which will enable us gradually to move from where we are to where we want to be. The first and most important step, in my opinion, is to stop moving in the wrong direction. SPIVAK: Milton, you said a few minutes ago that throughout the free world, the public is coming to recognize the danger of big government and is taking steps to control it. But how, with the example of what freedom does before them, how do you explain the new countries that have been coming up, all going in the direction of dictatorship? FRIEDMAN: The climate, the intellectual climate of opinion has an enormous influence on what happens, and the popular intellectual attitude within the free countries, for the poor countries, has been that they have to have centralized government. And that has served the interests of small elite groups within those countries. In one backward country after another what has happened is they've gotten their freedom, supposedly, from colonial rule, you've had a small elite take over, and they have run that country for their own benefit and at the expense of the poor. It's a tragedy of the modern era. Change the climate of opinion in the major countries. As the climate of opinion is changing, as the philosophy, the attitude, what's being taught at the universities is different, and you will see that these other countries, these backward countries, will follow it. And there are, there is some evidence that way. If you look at the countries where the backward countries which are doing best for themselves, they are places like Hong Kong, like Singapore, like Taiwan, like Korea, they're not free countries in our sense of the term.
SPIVAK: No, they’re certainly not. FRIEDMAN: But they have much larger elements of freedom, much greater scope for individual initiative, than do many other countries of the world, which have gone much farther in the communist, centralized, controlled direction. SPIVAK: How--Singapore, for example, and Taiwan, have had, you say, very free economies. Now how do their economies remain free, but their politics and their human freedom is still curtailed, and as I understand, in many cases, rather severely curtailed. They don't have any of the freedoms we have, the press, religion… FRIEDMAN: Economic freedom is a necessary condition for all human freedom, but it is not a sufficient condition. You can have an economy that is largely free with large elements of restrictions. For example, let me take the American experience before the Civil War. We had a mixture of a largely free economy, with a segment of the population, the slaves, held in the condition of involuntary servitude. But even where you don't have complete political freedom, in the case of a Singapore or a Taiwan, human beings are much freer than they are in those societies where there is no economic freedom either. If you compare the conditions of people in a place like Singapore with the conditions of people in a place like Red China, or, for that matter, in Indonesia, you will see that the economic freedom is a very important component of total freedom. It's not something different; it's not something separate. Economic freedom is part of total freedom, and for most people it's the most important part. Freedom doesn't mean very much to a starving man. And if a free society could not help the starving man, it would be very difficult for it to remain free very long. That's why the ability of a free society to improve the lot of the ordinary person is a very, very necessary condition for its remaining free. But it's not the fundamental reason why I want a free society. I want a free society for the human and ethical and moral values that you stressed as pertaining to freedom. Freedom really rests, the value of freedom. SPIVAK: But suppose the moral values mean a lot to me. But, again, as I say, they mean nothing to the man who is hungry. FRIEDMAN: Absolutely nothing.
SPIVAK: It means absolutely nothing to him. What are you going to... well do you think it does mean something to him? FRIEDMAN: No. First, I think it means something to many of them, of course. Many men have died for their moral values, have put those moral values much above life itself. But I, you and I are citizens of a free society, will not stand the sight of... SPIVAK: ... Well let me put it a different way. Suppose you turn and you made a speech to all the people on welfare, and you said to them, look, there are, freedom is much more important than the welfare money that you are getting. There are ethical concepts, there are spiritual things about the, men have died for this things. Suppose you told them all that, and then said, and we're going to withdraw welfare now. What do you think would happen now? FRIEDMAN: I would tell them something else. I would tell them… SPIVAK: I want to know also what you'd do. FRIEDMAN: I’ll tell them both what I would do and what I would tell them. I would tell them: welfare has been corrupting you. Look at what it is doing to you. Look at what it's doing to your children. You would be far better off in every respect...
SPIVAK: But suppose they said to you, I don't see that at all. Without that welfare we'd be in an awful mess. FRIEDMAN: Your wrong, you wouldn't be in an awful mess, but I understand your feeling, and I do not propose to withdraw assistance from you like that all at once. I think it would be intolerable to throw the millions of people who are now depending on welfare on to the streets. We've got to go gradually from here to there. That's why I’ve proposed a negative income tax as a transitional device that would enable us to give help to people who really need help, while not at the same time having the kind of mess we have now, where most of the benefits go to people who are not. But look at the way in which the welfare system has been corrupting the very fabric of our society. We have put people in a trap, which is of no part of their own making. I don't blame them. But they've been put in a trap where we are inducing them to become dependents, to become children, not to become independent human beings. The virtue and the desire of freedom is for what people can do with their freedom. Freedom is not an individual value; it's a social value. A Robinson Crusoe on an island, freedom is a meaningless concept to him. SPIVAK: Milton, how bad is the state of freedom in this country today? FRIEDMAN: It's a mixed bag. In some areas we have more freedom than we've ever had before. In some other areas our freedom has been drastically reduced. Our freedom to spend our own money as we want has been cut sharply. Our freedom to go into whatever occupation we want has been reduced sharply. Our freedom to enter various businesses has been reduced sharply. And these restrictions in our economic freedoms have carried over to restrictions on the freedom with which we speak and we talk, the activities we carry on, our attitudes toward governmental officials and all the rest. In those areas, our freedoms have been very seriously restricted.
SPIVAK: What about you yourself? You as an individual, and we really have to do with, deal with millions of hundreds, two-hundred million, two-hundred-twenty million individuals. What about you? What freedom do you think you've lost? FRIEDMAN: Well, I have been a very fortunate individual. I always have...
SPIVAK: That sounds like a cop out. FRIEDMAN: No, it's not a cop out because I'm going to add to it. I've always said about the only people who have effective freedom of speech these days in the United States are tenured professors at private universities who are on the verge of retirement or have retired. And that's been my situation in these recent years. Consider the freedom of, for example, a professor of medicine at any one of our great institutions. He's almost certainly having his research financed by the federal government. Don't you suppose he'd think two or three times before he gave a lecture on the evils of socialized medicine? Or consider one of my colleagues at the University who happens to be getting grants of money from the National Science Foundation. Do you think he really feels free to speak out on the issue of whether government ought to be financing such research? Of course, you ought not to have freedom without costs. But the costs ought to be reasonable. They ought not to be disproportionate. There's no businessmen in this country today who can speak out freely. Why is it, why is it that the businessmen today are so mealy-mouthed in what they say? There are very few of them who are willing to come out and say openly what they believe. Why? SPIVAK: About what? FRIEDMAN: About anything. Take, for example, the recent attempts by President Carter to impose voluntary wage and price controls. There's hardly a businessman in this country who doesn't think it's terrible. There are only about two or three businessmen who have had the courage to stand up and say something about that. But again, as I say, go to my academic colleagues. Many of them feel, as I do, that government is devoting altogether too much money; that there's been altogether too much subsidization of state universities and colleges all along the line. Yet very few of them are willing to speak out. SPIVAK: What about the generation that doesn't know what freedom is as you knew it, and therefore, doesn't mind so much what has happened? Just takes for granted what he's living under now. FRIEDMAN: I think that's a very real problem. I think we're living on our inheritance. We have inherited a philosophy and a set of attitudes and they tend to be eroded. People get accustomed to what they know. There's an enormous tyranny of the status quo, and most people, most of the time, accept the circumstances that are around them. There's a natural human drive for freedom, which always expresses itself. But, it’s stronger or weaker. And I think a great danger in continuing along the path that we've been going on is that we will lose still more of our inheritance, still more of our basic values, of our basic beliefs in freedom, and that we will have still less protest as more and more freedoms are taken away. The real value of freedom is that it provides diversity, and diversity is in turn the real protection of freedom. People who like to live in small cities can live in small cities. People who like the impersonality of a metropolis can live in a metropolis. We have loyalties to our churches, we have loyalties to our universities, to our schools, to our clubs, to our cities, to our states. It's this diversity, the fact that there isn't a monolithic conformity imposed on us that is the source of protection for our freedom, and also the fruit of freedom. It's because freedom protects diversity, allows--you will remember the phrase when Mao said he was going to allow a 100 flowers to bloom. But of course he didn't. As soon as people spoke out and 100 flowers bloomed, he cut them off. But it's the blooming of many flowers, the fact that you have all of these different expressions of people's individuality, that produces the great achievements of civilization, and that provides the great hope and protection of our freedom. SPIVAK: Are you saying that there are pockets of freedom still existing in the countries?
FRIEDMAN: As I said before, FRIEDMAN: the picture's a mixed bag. In certain respects we have more freedom than we've ever had, but in other respects we have very much less freedom. Of course there are great pockets of freedom; this is predominantly still a free country. We must not confuse the trend with the situation. We have been moving away from freedom. Our freedom is in jeopardy, but it by no means has been completely destroyed. And I believe that there is a strong enough component of freedom in our society that we will be able to preserve it, that we're going to turn this trend back, that we are going to cut government down to size, we're going to lay the ground work for a resurgence for a, a flowering, of that diversity which has been the real product of our free society.
