CAPITALISM AND FREEDOM Milton Friedman

In the 1920's and the 1930's, intellectuals in the United States were overwhelmingly persuaded that capitalism was a defective system inhibiting economic well-being and thereby freedom, and that the hope for the future lay in a greater measure of deliberate control by political authorities over economic affairs. The conversion of the intellectuals was not achieved by the example of any actual collectivist society, though it undoubtedly was much hastened by the establishment of a communist society in Russia and the glowing hopes placed in it. The conversion of the intellectuals was achieved by a comparison between the existing state of affairs, with all its injustices and defects, and a hypothetical state of affairs as it might be. The actual was compared with the ideal.

At the time, not much else was possible. True, mankind had experienced many epochs of centralized control, of detailed intervention by the state into economic affairs. But there had been a revolution in politics, in science, and in technology. Surely, it was argued, we can do far better with a democratic political structure, modern tools, and modern science than was possible in earlier ages.

The attitudes of that time are still with us. There is still a tendency to regard any existing government intervention as desirable, to attribute all evils to the market, and to evaluate new proposals for government control in their ideal form, as they might work if run by able, disinterested men, free from the pressure of special interest groups. The proponents of limited government and free enterprise are still on the defensive.

Yet, conditions have changed. We now have several decades of experience with governmental intervention. It is no longer necessary to compare the market as it actually operates and government intervention as it ideally might operate. We can compare the actual with the actual.

Who can now see any great hope for the advancement of men's freedom and dignity in the massive tyranny and despotism that hold sway in Russia? Wrote Marx and Engels in the Communist Manifesto: "The proletarians have nothing to lose but their chains. They have a world to win." Who today can regard the chains of the proletarians in the Soviet Union as weaker than the chains of the proletarians in the United States, or Britain or France or Germany or any Western state?

Let us look closer to home. Which if any of the great "reforms" of past decades has achieved its objectives? Have the good intentions of the proponents of these reforms been realized?

Regulation of the railroads to protect the consumer quickly became an instrument whereby the railroads could protect themselves from the competition of newly emerging rivals - at the expense, of course, of the consumer.

An income tax initially enacted at low rates and later seized upon as a means to redistribute income in favor of the lower classes has become a façade, covering loopholes and special provisions that render rates that are highly graduated on paper largely ineffective. A flat rate of 23½ percent on presently taxable income would yield as much revenue as the present rates graduated from 20 to 91 percent. An income tax intended to reduce inequality and promote the diffusion of wealth has in practice fostered reinvestment of corporate earnings, thereby favoring the growth of large corporations, inhibiting the operation of the capital market, and discouraging the establishment of new enterprises.

A housing program intended to improve the housing conditions of the poor, to reduce juvenile delinquency, and to contribute to the removal of urban slums, has worsened the housing conditions of the poor, contributed to juvenile delinquency, and spread urban blight.

Social security measures were enacted to make receipt of assistance a matter of right, to eliminate the need for direct relief and assistance. Millions now receive social security benefits. Yet the relief rolls grow and the sums spent on direct assistance mount.