Milton Friedman was not only an economist; he developed a philosophy of freedom that had enormous influence in all freedom-loving countries. He has done this through his books, lectures at the University of Chicago, articles published in business magazines and newspapers, and television broadcasts.

Friedman was a supporter of the idea that there is a close connection between political freedom and economic freedom: “History clearly proves that there is a connection between political freedom and the free market. I know of no example of a society in time or space that has known great political freedom without using something comparable to a free market to organize the bulk of its economic activity.”

Modern economic policy in democratic countries is largely inspired by Friedman’s ideas. The way of taxation, the more or less free floating of exchange rates, the monetary policy of the main central banks of the world, the controversy about unconditional income, etc. – all this is connected with the arguments for or against Friedman.

His ideas about capitalism, limited government and inflation were picked up around the world, from Santiago to Shanghai. It witnessed the decline of government economic intervention, the abandonment of the Bretton Woods international monetary system, the liberalization of trade and the fight against inflation in industrialized countries in the 1970s and 1980s, and the collapse of communism in Central and Eastern Europe and elsewhere. world in the late 1980s and early 1990s. Friedman’s monetarism became the guiding doctrine for central banks around the world and contributed to decades of low inflation until 2020. For the rest of the world, it was—and remains—a shining example of the scientific study of a market economy.

Born in 1912 to Jewish immigrants, Friedman grew up in Rahway, New Jersey. He attended elementary and high school in that city, then studied economics at Rutgers University, where his professors impressed him and encouraged him to continue his studies at the University of Chicago.

Friedman sought to answer the fundamental questions of his era: Can capitalism provide universal prosperity, or is it doomed to endless cycles of boom and bust, or even collapse, as the Communists claimed? How can nations support those in need without stifling the energy of creative and enterprising people who drive economic growth? Does liberal democracy have a future, or are the ideals of classical liberalism — representative government, individual liberty, and unrestricted trade — a thing of the past?

Most economists of his generation answered these questions by drawing inspiration from Keynesian economic theory, which recommended greater government involvement in economic life, primarily through taxes and government spending. However, from the very beginning of his career, Friedman doubted that these solutions were economically sustainable and compatible with individual freedom.

After completing graduate studies at the University of Chicago and Columbia University, Friedman got an unexpected job: the US government. His first job was with a New Deal agency, and during World War II he worked in the US Treasury Department. However, no amount of professional experience changed his version of government with limited powers. However, this professional practice allowed him to know well how to develop economic policy.

The decades after the Second World War were for Friedman a period of great intellectual creativity, during which he developed a new structure of economic policy based on a clear rule for the management of the monetary system (constant growth of the money supply – “Friedman’s golden rule. “) and the free play of prices and transactions in all other markets. Realizing that when the large government apparatus could no longer be reduced, Friedman sought to limit its goals and actions. In some cases, he advocated the complete repeal of regulations such as rent controls, agricultural price subsidies, import tariffs and quotas, and controls on oil and gas production. In other areas of government intervention, Friedman proposed that the government act by distributing financial resources directly to beneficiaries, so that retirees, the unemployed, or low-income families can bypass bureaucracy and buy what they want on the market.

As an alternative, he proposed that public enterprises, such as the United States Postal Service, be put in a position to face private competition, a reform partially implemented in the 1970s and 1980s. In general, Friedman advocated the idea of ​the state structures and capitalizes market forces, and does not directly intervene in their functioning. He always assumed that the price system – the free interaction of buyers and sellers – gives a better social effect than the decisions of politicians and regulators. In other words, he had a very different view of the state and its role in the economy than that which emerged after the depression of the 1930s and the New Deal.

Friedman’s work on currency, inflation, and exchange rates made him an influential economist in the 1970s and 1980s. But the main features of the market economy began to change, and the solutions adopted in 1945 – the Bretton Woods international monetary system, government spending and the general welfare state – turned out to be ineffective. The result was massive inflation. This phenomenon has manifested itself throughout the non-communist world: from the United States and Western Europe to the Middle East and South America, rising prices have destabilized international alliances, undermined the positions of political leaders, deepened social divisions, and caused waves of discontent and anxiety among businessmen, workers, and consumers alike. . It was a period of economic confusion similar to today’s, which holds many lessons for today’s politicians.

Looking back, we can say that in that era the old economic order came to an end and a new form of world capitalism was born. Inflation was the explosive that blew up social and political forms already weakened by the upheavals of the 1960s, from the two-parent family to collective bargaining agreements and the relocation of manufacturing to developing countries. The irony was that the very thing Friedman sought to prevent—permanent and pervasive price increases—created a world somewhat like his ideal, in which capital moved freely across borders, governments limited social spending, and a resurgent culture of individualism allowed human freedom to be free. above all else.

Friedman’s reputation declined in the early years of the 21st century due to, among other things, the unconventional monetary policies pursued by the world’s major central banks to combat the 2008 economic crisis. For many observers, including economists inspired by Friedman, an extremely low interest rate is the ideal way to cause inflation. But as inflation developed slowly, Friedman’s ideas seemed irrelevant, and the warnings of his followers were ignored. In addition, another area in which Friedman’s intellectual influence manifested itself, political conservatism, underwent a profound transformation. The “Establishment” in the US, which supported Friedman in his efforts to cut taxes, eliminate regulations and liberalize trade, has been challenged by President D. Trump. A new set of ideas focused on limiting immigration, protecting US global interests, and protecting traditional values ​​was contrasted with the “old consensus” embodied by Friedman. Amid the resurgence of socialism on the left of the American political spectrum and the rise of nationalism on the right, Friedman’s ideas seemed out of date. He died in 2006. -Read the entire article and comment on it at contributors.ro