Friedman’s Defense of Capitalism

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milton friedmanPhil DonahueA while ago I posted an article on this website “Is Obama a Keynesian?” that talked about the wealth redistribution inherent in Keynesian economic principles. That means the question posed by the title of that article was answered in 2008 when Obama told Joe Wurzelbacher that when you spread the wealth around, it’s better for everybody. (Think about that – how could it be better for EVERYBODY? What about the person’s wealth that was confiscated?)

But not all economists believe these principles, principally because (believe it or not) not all economists are stupid. Milton Friedman (1912 – 2006) was a great economist with an ability to explain things simply. Wealth redistribution is, of course, a tenet of socialism and Marxism. Back to Friedman and his incredible ability to speak plainly….Some of you may remember Phil Donahue, a television talk show host in the late 1960s through the mid 1990s. Donahue was a socialist, as evidenced by his frequent quips about the ‘maldistribution of wealth caused by capitalism. Watch this 2 ½ minute video clip of Friedman defending capitalism on Donahue’s show.

Friedman hits the nail on the head – people who believe in something better than capitalism are idealists. A lot of us started out as idealists! But those of us who worked for what we gained, failed a few times and started again, turned into pragmatists. As practical people, we realize that there is not a single soul (till Jesus returns anyway) that we can trust to take in the fruits of our labor and make sure that it is distributed fairly.

Boy, I hate the word ‘fair’, which is so overused today. What is ‘fair’ anyway? Is the most ‘fair’ system one that only takes from each citizen what he can afford and then provides for each citizen according to what he needs? Some readers may recognize that last sentence is merely paraphrased from Karl Marx. If this is the definition of what’s fair, then consider the incentives this provides. A citizen is now incented to either hide wealth or develop a ‘disability’ that limits his productive capacity (hmmmm….). In fact, doesn’t that ‘disability’ increase his ‘need’ so that he would be allocated more from the State? Or maybe an abundance of children would increase his need and hence his allocation? Those are just examples. The point is that this system provides an incentive to be unproductive and needy.

I’m sure most of you know that the first PIlgrim settlement in America tried this construct for their society and nearly died out (no incentive to work hard in the fields) until Governor Bradford gave each family a plot of lot for them to work for their own gain. This is what Friedman recognized – people will follow their own best interests. When you have a society in which this is allowed (as long as an individual’s actions neither pick another’s pocket nor breaks his leg, to paraphrase Jefferson), the result is prosperity. There has never been a system that has pulled more people out of poverty than capitalism. Ever. I guess you only believe that wealth redistribution will only work this time if you’re an idealist (or if you believe you will be one of the ruling elites).

Follow Gail on Twitter: @AcctgProfTX


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