Milton Friedman Interview with Dallas Fed President Richard W. Fisher

a year before Milton Friedman passed away I had the chance to sit down with him in San Francisco for an extended conversation Friedman was one of the great economic minds of all time not only won a Nobel Prize but I think in the pantheon of economic thinkers he certainly would be considered by many to be up there with Adam Smith and John Maynard Keynes and Joseph Schumpeter David Ricardo and very importantly he was an American product and perhaps the greatest economic thinker that really took root in American soil and helped us understand the limitations and potential of monetary policy some of the dangers of the fiscal side of the equation and the incredible entrepreneurial genius it's now being expressed through globalization this is an important interview because of the anxiety that we're experiencing with regards to forces of globalization concern about the direction and fate of the United States economy and a general angst about where we're headed and I think Milton Friedman addresses these various issues and only the way that Milton Friedman could with a good sense of humor but with a clarity of expression that is remarkable I hope you'll find this conversation informative and enlightening you realize that you're the patron saint of the Dallas Federal Reserve Bank well that's a condition for me to be in given that most of my life I've been regarded as a chief enemy of the Federal Reserve well I didn't want to make you feel uncomfortable with that statement but delighted to be within your seminal work free to choose has had such a mark on policy development and on society generally I'd like to revisit that if I may in this discussion you wrote that in the 1980s in the 1980s we had this titanic struggle between the capitalists and the Communists we had the Soviet Union in place Berlin Wall was still standing we had a very different kind of Regina than we appear to have presently and I'm curious in your mind dr. Friedman today where is the battleground for ideas the battleground Freud is his word has always been in the minds of people in the United States Britain and the rest of the world but the place where you have had the major changes since then has been not in the United States not in what's known as a West but in the former Soviet Union in China and in East Asia that's where practice has been changing and all that we hope believe now why did that happen it was a good luck was it good ideas it had 232 components over the course of time there had been developing increasing public understanding that socialism was not an appropriate way to run a country you know you socialism used to be the classic definition of socialism when the ownership and operation of the means of production I doubt that anybody today would record that kind of socialism as a viable way to run a country but brought about that change in recognition was a collapse in the Soviet Union and the fall of the Berlin Wall that really was as strong a demonstration as you could have of the firm the fact that hey to talent Arian the state-controlled from the center was not an efficient way to run a country and was certainly not a way that was consistent with human freedom so now today we have some new competitors in the system know you mentioned Ron DeLuca pay not new competitor we have new resources new co-operators in the last 20 years there's been an enormous increase I'm sorry he's been an enormous increase in the number of laborers available for cooperation with capital through private enterprise man-made means and that is but that's what's happening Indiana in Asia in India and much of the former Soviet Union so now we have significant competition in the way of live and cooperation and cooperation we have resources to use and we have new resources to which to resort to comparative advantage that's right you say new competition but it seems to me what really characterizes a world it's less competition and cooperation the really remarkable thing about the world is how people cooperate together how somebody in China makes it a little bit of your television set or somebody in in Malaysia produces some rubber and that rubber is used by somebody in the United States to put on the tip of a pencil or in some other way so call a cooperation what what has happened has been an enormous expansion and the opportunities for cooperation and do you think this is why the United States has been growing and the business cycle appears to have become somewhat elongated no I don't huh I think it's partly why we're growing but not why the business cycle appears to it becoming elongated that I don't I don't really believe that I never really believed in a business cycle as something that's inherent and regularly like a like the yearly cycle I think what you have is a isn't he it's a world or an economy which is continuously being hit by shocks things have come along and deserve it and the whole problem is how you adapted sharks locks chunks now for most there has been a big change in that respect up until about nineteen eighty two or three around that the economy unstable price level was going up and going down going up and down you had a an unstable economy that was what was gave the myth and the business cycle now since nineteen eighty three or four or so we seem to have a very stable world there's it if you plot such a thing as a price level before 1984 it goes like that and then after 84 it goes like almost a straight line there's still some fluctuations but much less and I think the answer is that the Federal Reserve has stopped messing things up thank you for the first 70 years or so of its existence the Federal Reserve in my opinion that's why I said I was when I said earlier the Federal Reserve in my opinion did vastly more harm than good I do not believe we would would have had the Great Depression if the Federal Reserve had never been established but since please since poker and Greenspan with the backing of Reagan ended inflation and adopted the policy that their primary goal was to maintain stable prices and since not only the United States but other countries in the world did the same thing you had in New Zealand which had the same bad pattern before right about 1985 or so and it established a central bank contract in which the governor of the central bank was would be fired if inflation got above two percent a year that was really putting it on the water Don Brash that's right who was a governor of the central bank really put himself on the line and lo and behold he was able to do it and he then adopted started what became known as inflation targeting other kind of central banks around the world did the same Australia Great Britain and he essentially the European Central Bank and in low and behold all of them could do it so I think that what has happened the explanation for what you're describing as a lengthen down business cycle the explanation for that is the conversion of the central banks of the world to the belief that there are fundamental tears which price development and as a result we've had a convergence of lower rates of inflation and lower interest rates around them at the same time that we have new co-operators which some people would refer to as new competitors coming into the system so we have as you mentioned earlier a huge population mass 1.3 billion Chinese maybe 700 million plus that are of working age we have the Indians and we have then little countries like Estonia and others now eager to compete and eager to be free to choose as people should Americans be worried about this Oh quite the opposite we should applaud it we should try to make more rapidly again it gives us another opportunity to make more use of our own special advantages and we have nothing to be afraid of from cooperating with the great mass of the world's population but everything to gain from it one of the key points you've made throughout your distinguished career is not only taking Adam Smith but also Thomas Jefferson and talking about political freedom as well yeah and a government that is the least intrusive in our society it's the invisible hand go to work how will this resolve itself in China here we have a society that has liberalized since dunk shopping started the program in 79 or so has continued to grow economically it still has a communist centralized government I'm curious as to how you see this resolving itself over time I think it must resolve itself with the conflict between the economic world and the political world I do not believe that the China can continue to move as it has been moving in expanding the range of the market and at the same time continue with it deeply with its wholly fully centralized government I think Tiananmen Square was the first episode of the kind it was the first conflict no no let me emphasize that there has been considerable increase not in not political freedom but civil freedom I have decided I decided basically by experience with Hong Kong that it was important to separate two discrete categories of freedom economic freedom the freedom to buy and sell to make transactions civil freedom the freedom to speak freely this for freedom to write and have a freedom of speech and then political freedom which was a freedom to elect your leaders here Hong Kong under the British had complete civil freedom and complete economic freedom 100 percent had zero political freedom the beach because of the British well the British were they were the dictator right but but the citizens of Hong Kong could not vote for anything and that demonstrates that these are separable and its essence what it says is in principle you can have a benevolent dictator I say in principle because in practice you can't have one but it won't last because he won't stay benevolent at any rate if we come to the Chinese character they have had their had a big improvement in civil freedom in the in the mainland China now I first visited China in 1980 just at the time of in childhood Hong's reforms and there was an a tremendous and I visited it twice since and there's no question about the increase in economic prosperity but there's also no question about the belief in civil freedom and the willingness of people to sleep in the way in which they they're willing to depart from customs to would wear bright clothes instead of the standard mouth job that's right and so on and it's my opinion that that has to continue and that political freedom will result from economic freedom or else economic freedom laws will be terminated well in the meantime of course China has been growing at a pretty fast clip is dumping said it doesn't matter if the cat is black or white as long as it catches my catching mice and droves India is now seems to be getting on the stick right there's a different set of rules in India there is a rule of law in India and I know you believe in the rule of law I'm curious what is the role of government in those societies what would you think is the Carolla government what should be the ideal role of government and these countries as they're making this transition I'm not sure whether you're asking the question what is the role of government they ought to aim at or what is the role of government during the transition well let's start with what they would aim at but how do they get there there no formula for how to get there I am afraid but I have no doubt what they should aim at and exactly the same thing that we should aim at I think the appropriate role of government is not very different anywhere around the world they should aim it first I the first role of government is to defend the nation against foreign threats so every government has to aim it has to have a defense they should aim controller government is to protect private individuals from coercion and and from violence so there's a law enforcement role law enforcement law well a third role of government is to set the law to set the rules to do for example to here in for flavor plane flies over your house is he violating your property rights well if he flies a ten feet over your house had a thousand feet over your house at ten miles over your house a hundred miles over your house clearly there is no obvious breaking point and one of the roles of important roles of government is to set the rules for cases like that to specify what is what our property rights fourth for another function the government or the same function is to protect those property rights to protect transactions between individuals that are made in good faith and that's about the end of it so the methods of transitions differ but while these transitions are taking place and these new co-operators are in the system there are some other governments that we are used to as Western societies that are coming under enormous pressure to change pressure to change we just have witnessed an election in Germany for example and I'm curious as to your views is to how some of these less flexible societies that's what they are now adapt to the competitive pressure that's coming from this liberalisation of Chinese economic activity you know in a way New Zealand that we were talking about earlier yes except it gives you a very good example here you had a Conservative Party in New Zealand that that tied it all up imposed price controls imposed exchange control imposed wage controls had highly regulated it really one of the most regulated welfare states and a new government come in and it came in a Labour government as it happened at which completely reversed all of those it set the exchange rate free it established the new bank arrangements and eliminated wage and price control and even eliminated a large part a government owner management and ownership with the schools and it did that entirely in democratic process not with any force that's the I think the the example that you'd like to see repeated here in Germany it's it's in a very difficult situation because by this time probably close to half of the public if not more than depends in large part on payments from the government and they obviously don't want those changed nobody wants to give something up nobody wants to give something up and yet somehow or other everybody has to give something you if they're going to have a better country here's Germany it's people are hard workers they've demonstrated in the past that they are highly productive people they are a model from that point of view and they started after World War two in what looked like a very good direction but then they got driven of the right path by the problems that arose with unification of East and West Germany I believe their current difficulties derive from three factors first when they went into the euro I believe they went in at an exchange rate that overvalued the mark second going back earlier when they unified they made a major mistake of equating the East German and the West German mark on a one-to-one basis went which grossly overvalued East German wages East German cause and third they have adopted a great a an unreal amount of regulation and restrictions and the only way they can say it's trading out things is to eliminate some of those problems I don't see much chance of they're doing so soon so the prospect does not look very good but it turns out that those are the circumstances which sooner or later give rise to a real movement for change but I don't have a magic formula about how to break up that kind of a situation and that the situation of different countries are different that Germany it's altogether different from the situation let's say of India India is a country which has it from the political point of view it is a democracy and it has a legal system and a rule of law but it has been a country of castes and have high restrictive restrictions of government controls it's been a socialist country its Indians who move out of India and go anywhere in the world - very well whether they're in Silicon Valley or whether they're in Africa but within India in the past they've been hamstrung because of a socialist government and now that's changing breaking up and India's is moving very rapidly but we must remember that both India and China are still very poor countries and as such they are have lots of room to grow and lots of room to grow and in the process both of them are going to increase the extent of both civil freedom and political freedom so this process of becoming free to choose works it's magic not just on the economy but also here the politics I think that's right I think we I think choice has enormous power you just compare how somebody spends his own money and how he spend somebody else's money well I betcha he'll do a better job spending his own money you don't have to bet let's talk about spending money for a minute one of the some people posit that as we move towards greater cooperation / competition in the world at large that in order to stay ahead of the game and we are the biggest economy in the world we produced 12 trillion dollars or so of output and we have been growing whereas the Europeans if not for example we have to become more and more flexible and reduce the barriers to competition which is healthy in the United States and around the world some would posit that not only does this force or keep the central bank's doing what you described so beautifully before that is providing conditions to keep interest rates low and stable policy but it also has impacts on the fiscal side that is we all are trying to attract as much capital as possible to build our societies and keep our businesses humming argue that it forces a discipline of lower and lower more simplified taxation so that on that side of the equation there's less interference in society would you accept that doctrine I would accept that it's highly desirable to have a lower taxation and to have flatter rate but whether it's being forced by the change I don't know what I do know is that the real problem that the problem there seems to me it's on the spending side that as we as government has increased spending we make ourselves a less attractive society in which to set up businesses in which to run businesses it's what if you look at one of the things that has happened in Germany it's a number of German companies that have been moving their production and their activities outside the country even to Poland which some Germans even to Poland right well Poland has been doing much better exactly because Poland has been moving away it's been a opening up the economy rather than closing it down whereas what Britain what Germany has been doing is to close down the economy so I would say that it the the the the global world world of free trade the best thing we in the United States to do there's no question in my mind would be unilateral free trade we have nothing to by trading freely with every other place in the world well we have of course had a series of rounds of trade negotiation it's gotten better and better but it's imperfect does it now exists we know that you but coming back I just like to come back to complete if we can dr. Friedman this discussion of spending question when government spends money and you defined earlier the limited areas where at least they have to spend money defense enforcing the law and so on will there will this new cooperation new competition force a difference in the composition of spending can we continue to spend on entitlements for example as opposed to improving our educational plant or only searchers involved in that at all we shouldn't have been involved in that at all right independently of the international trade but well it is true that after all the countries are going to compare one with the other and most countries in the world spend as lawyer asthma we spend roughly close to 40% of our national income through government that's a very high number but it's lower than what's true for all of the European countries it's lower than what's true for many countries in the world and so as long as we're not higher than other countries we can get along with it comparatively comparatively but we would be much better off if we get to cut down that spending you say entitlements but it's not clear most entitlements in my opinion are not justified they do not serve a useful function they take social security for a moment what Social Security Ponzi game you people come in and put money into a pot people go out and take the money out of the pot and the whole thing is dependent on new entrance coming in and feeding that part right there the money is not invested the money this comes in the government spends routinely it does not accumulate any assets there's a it's interesting everybody talks about how gingka the population he's raising difficulties for Social Security I haven't heard anybody ask well why don't they raise difficulties for life insurance companies interesting it doesn't because the ageing of the population means that life insurance companies have larger reserves because older people have bought in their youth insurance and and it's in the insurance company so those are real trust funds and properly managed asset right whereas the the Social Security is a is as I say a Ponzi game it's taking money from some and give giving it to others and that's not a stable situation well we have then an existing liability there for our governor we have an existing liability and we ought to we ought to live up to it we ought to pay it off my favorite solution utterly in impression not politically feasible would be to give every individual and that who was in Social Security system now either as a recipient as a payer a bonds equal to the present value of what they so far have actually are and then close the whole system down well then you'd have to explain present value to the public which is never an easy thing oh I think the public understands present value right he may not know the formula right well they understand value we know can i if we could just come back to this issue because you were saying that spending is is a critical issue and obviously indiscriminate spending can scare away those we're trying to attract capital from do you worry about the fiscal deficits that we now have in this country that have been accumulating over time the problem is not that the problem is a spending I consider the two following the following which would you rather have government spending on anything of ten billion dollars completely paid for by taxes or government spending five billion dollars completely paid for by borrowing them what's your answer is that question well I'd rather have five billion spending paid by borrowing right what matters is not whether that pays the buffets it is borrowed or taxed but whether the spending takes place what really uses up resources is the spending the in fact borrowing and taxing are really two different forms of Taxation the borrowing is an indirect form of Taxation obviously it would be better than either of those to have five billion dollars covered by taxes but you have to keep your eye on the real problem and the real problem is and one of the reasons I have always been in favor of tax cuts is because it seemed to be the only way that you can keep down government spending do you think that has worked I think that has worked well not completely not a hundred percent but I think it has worked I think that if we had not had those tax cuts government spending today would be higher than it is the bush administration by my views has been entirely too spendthrift governing has been going up and I think about a seventeen percent per year rate in the Bush administration and there's no justification for that it's the military accounts were very very small part of it but it's incredibly absurd that we still subsidize farmers just past a three billion dollar the subsidization bill for four more farmers that want to be a banach there's no excuse for it whatsoever and do you hold out any hope or prospect for trade negotiation via vehicle on this farm issue there's currently an attempt as you know to liberalize it's called the built-in agenda built-in because no one's been able to deal with it within the WTO is that the avenue to through why don't we go I know only recently somebody asked me to write a letter or statement in support of the recent trade bill was with the the CAFTA Capra Central American Free for our viewers yes and so I said I I decided I would look up this a captive bill and no one who read that bill could be in favor of it only you would read the bill it's a law it's a long piece of paper it's a very long people write a thousand pages you get free trade on a thousand pages it's a thousand pages of rules and regulations it's the opposite of free trade I think at the only way in which we're ever going to achieve free trade is by unilateral action this is what the chileans did of course did so well their own import tariffs and non-tariff barriers unilaterally did they not and that worked very well it's a it altered their their economic State they became from a stagnant society they became a very dynamic society and yet we would benefit the same way well right now in terms of agriculture if we could just stick with that for a second our societies do subsidize our farmers the degree to which they do so varies country by country one of the key issues now is of course Tian's so heavily subsidized their farm communities and this is part of the negotiation want to waste their money why should why should it bother us and in particular if they waste their money in a way which benefits us if they make their agricultural products cheaper to us why should we refuse the gift we think it's okay for us to give foreign aid isn't it okay for us to receive foreign aid you must we you should regard foreign subsidization as a form of foreign aid dr. Freeman as eloquent as Winston Churchill who used to say the same thing he would say let someone else cheat their taxpayers will take advantage of it take the inputs add value and sell it at a higher profit right the system doesn't quite allow us to do that but I think that's an incredible statement that you just made and by the way you have distinguished company and Churchill and others oh I should say when you try to you try to do this by negotiation you end up with those thousand page documents because what do you negotiate what is there to negotiate we're hurting ourselves you know somehow if you look at it in the broad sense you have people saying we are hurting ourselves they are hurting themselves therefore we have to negotiate about how we reduce that hurt to hurt ourselves least but not not eliminate to hurt it's your point well we're gonna do no we're not gonna be lemonade to hurt we're gonna make it worse we've had many shocks to our system in recent history we had the September of 2001 we've had natural disasters we've had energy price developments at least that increase the volatility if not the direction of crisis and we had a huge stock market reversal based on the popping of what some called the dot-com bubble and yet throughout this we continue to increase our productivity why is that we've been remarkably flexible I think the performance of the American economy over the past 10 years 10 years particularly over the period since September since bright the economy has behaved remarkably well it's been Florida it's been adjustable and I think a very important part of credit for that does go in this case to the Federal Reserve and to the to the stable monetary policy you don't have to say that by the way I know I don't have to say that I say I have not been a constructive critic I've not been afraid to criticize where I thought it would deserve criticism but in its adopted the view and its fundamental objective was to maintain stable prices right the Fed has been able to do so and over the period from about the 1992 now you've had close to stable prices and been about two or three percent inflation on and off up and down a little but very little and that has provided a stable background which has facilitated the adjust adjustment to these other changes that have come along so that what you have easily has there been greater price stability but there has been greater stability of the economy the it's fascinating the accepted doctrine and no question he accepted doctrine among monetary economist was that there was a trade-off between price stability and economic stability that in order to get greater stability of the economy you had to have more instability in prices because you had to use ups and prices or downs in prices to keep the economy straight but it's the and that has turned out be false right it's just the opposite the stability of prices facilitate the stability and economic output and I think that's a major explanation moment so that it's been a very satisfactory period and productivity has been running high for since about the late 80s and why who knows but surely it has something to do with the great developments in telecommunication in the area we've had a whole new universe opened up we the character of business has changed in the sense that with the improvements in communication and in in movement traffic seems to be much cheaper now what you have is that companies instead of producing a factory in the United States where they produce something to produce on the basis of using stuff from all over the world of comparative advantage there what somebody has called become what somebody has called platform countries companies that a company will pick one part out in China another part out in India another part out somewhere else and then maybe have a plant in Guatemala which will assemble all of these into a product which they can then sell on the market and which they can sell abroad as well so that manufacturing is in the old sense has become a much smaller part of the total business the development of in time inventories has played a big role in this because it's reduced the amount of capital that has to be tied up while you're producing it and all of those things have been very beneficial so they have led us it's a curious situation you read the newspapers and you think the world is going to hell you think the economy is doing badly and yet the truth is that we have never in our history had as productive and economy as it now that average per capita real income he's higher now than it had ever been and continues to grow that's right well let's take these pieces and put it together you you kindly made the point that the central bank has behaved itself so that business decision makers the women men and women and men who run businesses aren't distracted by having to worry about price volatility they focus on their businesses they have better options in terms of sourcing they can go to any platform anywhere in the world and increase their efficiency drive down their cost raise their profits in new markets how do we answer those that say well that's wonderful conceptually and indeed you point to some very powerful numbers but my job is threatened and we're losing jobs to Bangalore in India or to Estonia or to the Philippines or Indonesia or Mexico or Guatemala G reference I'm not a weak what do we why are we able to convince people so easily everybody always takes something good that happened to him as he's a proper do and I always regard something bad that happened to him it's some evil person doing something to them so there's no way you can get around that and somehow we simply have to let people observe with our own eyes what the balance of effects is and the balance of effects clearly is that people today can consume goods and services they could not possibly have consumed 10 20 30 40 years ago it's a larger that a larger fraction of the population owned their homes and they've ever owned their own home we go down after another and on every side what we've got is incredible progress now will you say people are worried about losing their jobs we aren't losing our jobs what we're doing is relieving the American workers so they can be used in what they do best suppose you never like nobody ever lost a job how would you get progress when the United States was established there were 19 people were on FOIA on aggregate in agriculture to every put one person in other activities it took 19 people to raise enough food for the other for themselves and the other one now they are abou I think about 1 or 2 percent of the population on a in agriculture and they raise enough food not only for everybody in the United States but also to have large exports around the world now suppose we had never met never disturbed anybody in agriculture where we would weigh a manpower to build air automobiles to build airplanes to build telephone and telegram you and I wouldn't be on television because the ravine hotel so the the right way to look at it as I said and he said what we're doing is not losing jobs we're making opportunities for our people for people in the United States to use their skills in the most effective way by enabling them to combine more effectively with other people now let me ask you a question about that obviously education plays our what is the role of Education and should government play a role in financing education if that's the key to our continuing to adapt and move up the ladder education plays a very big role and it's one of the areas of which are most deficient and we're deficient for a very simple reason we have a socialist educational system our elementary and secondary system a 87% of 8650 and 90% of the kids government schools and the reason for that is obvious government says to children we'll give you a schooling for free if you want to go into the business of providing schooling but it has setting up a school you've got to sell something that somebody down the street is giving away free and that's not an easy thing now that would be okay if those schools were providing really good education but those schools are not literacy today in the United States is probably lower than a years ago and functional literacy even lower a third of our children never graduate from high school it's an amazing statistic it's a terrible student writing and the other two-thirds aren't very well educated in many cases and that's because as I say you have a government system and government we know government produces anything very badly very badly now there is an argue education is enormous ly important is the case for the government concern was with education but there is no case for government producing education there is a case for government financing education I say there's a case that doesn't mean I think it's it's a decisive case in my ideal world government would not finance education parents would finance the schooling of their own children at their own expense the same way they finance their food and their clothing and their howling in government's role if any would be only to a step in in case of indigent children whose parents could not afford it to send them to school but the way the situation is now government does two things it does really three things one it compels has compulsory education compels children to go to school number two it finances the school and number three it does so by producing schooling now if you're gonna if the government is gonna finance something you can either finance the producer of that thing or it can finance a consumer of that thing it has food stamps it could finance a food stamps by having the grocery stores and requiring food stamp people to get their foods in the end the government grocery store which is telling us to do that would not be a very good kosher store instead it now gives them stamps and lets them spend it and they compete for the better food product in the same way onion the right way for government to finance education would be to finance the students not the schools to give each parent a voucher which could be used for full tuition in government schools and for a definite sum of money I would say about half of what the government now spends per school child in in the private market so they would be free to choose they would be free to and you would have a you would have a new industry development and you would have the ingenuity and productivity of the private market at work and the educational sphere I don't know what would happen in that there's no reason why why shouldn't be sensible for children to get all of their schooling in one brick building maybe a better way to do it is partly over the internet maybe one piece here one piece there I don't know but give the market a chance and the market would produce something different than what we now I have it's better than what we now have well let me ask you about higher education one of the concerns you hear when you travel around the country is now the Chinese are producing engineers and scientists setting aside the contentious issue of stem cell research but just generally speaking a lot of money mind you a very small number relative to their entire society but or entering into these fields and often I hear concerns that we're going to be outdone on the engineering and higher science side what is the role of higher education here and should be involved in financing higher education again what are our risks again I think higher education is with lower education it should be financed by the individuals who are benefiting from it not not by the government you now have so-called private schools and public schools government schools and private schools they most all of them derive from the from the land grant exam the 1860s we Texans know that part in my opinion you need more competition in the higher education areas as you do in the lower education and here again if government is going to finance schooling it should finance the consumers not the producers here you have a state of Texas as a University of Texas California has a University of California it spends a great deal of money on sending children to those schools as I've that's the most redistributed activity of other government in total what I what happens is that you send children to Berkeley at the expense of why are they of the residents of watts or you send a kid from Beverly Hill to school at the expense of the residents of watts and what you but but if you're gonna spend the money what California should do it's gonna spend extra billion dollars on higher education it should say we're gonna give out scholar equal to so much per person for whatever number is students we will however met much for our money we'll go and you they can use those scholarships in any university they want to including Berkeley but Berkeley will have to live with them on the tuition that it earned from the people that attracts and the same thing in Texas instead of financing the University of Texas in my opinion the right way to do it would be to provide scholarships on if exam if you want to as many students as you can afford and require the state universities to charge tuition to enter into free competition and to live on their earnings and yet we see us but let me add one more thing yes Ramon we benefit from China having more more skilled people it's just that we don't benefit as much as we could would if we also had more of our own skill team but why are we hurt in any way suppose China breeds a great many more engineers that enables them to Bruce the good and services cheaper right they'll sell them to us cheaper aren't we better off very good question even if they subsidize their education because it's a centralized government produces engineers say cheaper than we might hear your point is that we can take advantage of that we may not be victimized is that correct an interesting perspective so we shouldn't worry and that others might be and basically they're hurting themselves by doing that if they're subsidizing something that is it should not be subsidized I remember as a child being told over and over again the Soviet children were better at mathematics than I was I remember what happened to the Soviet Union and now I hear similar organs being applied to China or to other countries I assume that you expect the outcome in China as long as they keep moving towards more freedom to obviously be different than that of what happened to the Soviet Union Oh entirely I think that China is now headed if it continues in its present course sometime in the next 10 or 15 years you're going to have a drastic change in the political structure you cannot maintain in my opinion today's political structure and today's you can oh I think you're already more than 50% private and the economy let me ask you a summary question if I may because you've lived a long life you've made major contributions to the way we think and the way we act what do you worry about in terms of the future of America well I am basically in innately an optimist and so I operate future for America I think we have the right flow of the right kind of a basic government if we can keep it and what I worry about most for America is that we will not control the propensity to spend for government spending to increase as we should do if we're if freedom is going to be lost in America it will be lost by increase by an excessive government involvement you have the father you know it's it's hard to say but it's true we are much wealthier today than we were in nineteen fifty but we are less free today than we were in nineteen fifty if you think of all of the regulations that have been imposed in the period since then of all of the organizations Medicare Medicaid eight for disabled people you can go down the line there are hundreds of them so that while there's less regulation on business but there's more regulation on people the the probability the prohibition of drugs it was bad then but it got worse when Nixon started a war on drugs in 1972 and but it's but in any event from the long-run point of view the one only thing I am really for were worried about is that government will grow too large well we will hope that that is not the case and we will there some reason for optimism if you look at the record look a single measure non-defense spending as a percentage of national 19-foot he started in 1950 right after World War two and it goes like this in 1980 then with Reagan's election a change in public opinion it goes like horizontal and today the percent non-defense spending as a percentage of income is the same as it was it in 1980 so we've hauled we've slowed down health alliance galloping social but we have not really defeated it yet well we'll hope that that ensues and in the meantime we'll continue to provide what central bankers do to your satisfaction thank you very much

Channel: Dallas Fed

Views: 11,626

Rating: 4.9075146 out of 5

Keywords: Milton Friedman, Richard W Fisher, economy, interview, Federal Reserve, Dallas Fed

Id: ZJfrWSYXu3A

Length: 55min 18sec (3318 seconds)

Published: Wed Aug 01 2012