In Britain, a country he has only occasionally called on, his name still conjures up, depending on your view-point: the smack of firm government and the conquest of double-digit inflation; or rocketing interest rates, gross unemployment and the scything of swathes of British industry. He is unfailingly associated with the early Thatcher years, and with the M-word.
Professor Friedman, 80 years old this week, is the undisputed father of monetarism, both as an academic theory and a practical (or as his critics insist, impractical) policy. He never particularly liked the name given to his offspring. But he is resentful that, in Britain, his theory (essentially a cure for inflation, through controlling growth in the volume of money in circulation) has come to be associated with any free-market notion, good or bad. 'In Britain, as far as I can see,' Friedman said in an interview last week, 'monetarism has come to be a term of abuse, applied to whatever Mrs Thatcher was thought to be in favour of at any given moment.'
Now semi-retired, he spends much of his time at his retreat in the mountains north of San Francisco. He was unwilling to be visited there. But he granted a one-hour-20-minute interview by telephone - to set the record straight on the Eighties; to forecast continued gloom and the abandonment of market principles in the Nineties ('Clinton will be elected, I think'); and to predict that one day free market ideas would, after all, triumph.
Asked to give a final grade to Baroness Thatcher, Professor Friedman pauses, as if recollecting the work of a once promising, but wayward pupil. 'Mrs Thatcher. Ah. An extraordinarily able woman, of course. I think she was a godsend for the British. I just wish she had exercised a little better control of her government.'
Timidity at the cabinet table is hardly one's first recollection of Lady Thatcher's premiership. But Professor Friedman has always seen things rather differently from others.
Milton Friedman was the son of poor, Jewish immigrants, born in Brooklyn, and educated through state scholarships. By 1948 he was Professor of Economics at Chicago University, attracting attention as the brilliant scourge of Keynesianism, the Roosevelt New Deal, welfarism, and all forms of public spending or public intervention - even the public education that rescued him from Brooklyn. He still annoys conservative friends by preaching in favour of legal abortion and the de-criminalisation of drugs. At his zenith, in the Sixties and Seventies, Friedman was the leader of the Chicago school of free-market economics, which prepared the way for Reaganomics and Thatcherism. (Eighty per cent of the economists in the Reagan administrations studied under Friedman.) Now, unlike John Maynard Keynes, he has lived, in the words of a younger US economist, 'to see his children die,' to see his ideas 'tried and abandoned and then disputed and mangled by the next generation of economists'.
Monetarism is not necessarily Friedman's most important contribution to the history of ideas, but it remains his most celebrated idea and, mangled and disputed though it may be, it refuses to go away. The present sterling controversy arises, in part, because the Bundesbank follows closely the growth of the German money supply. When the supply of marks seemed to be growing too fast, the central bank raised its interest rates, putting pressure on Britain to follow suit.
Despite his fearsome reputation for skewering opponents in debate, Professor Friedman is courteous, chatty, patient and unhurried on the telephone. His original conception of monetarism, he insists, was not applied properly in either Britain or the US. The plan was for governments, like Ulysses strapped to the mast, to set an unbreachable limit on monetary growth: in practice, in both London and Washington, he says, the politicians and bureaucrats could not resist interfering with the rudder. Instead of shrinking the supply of money directly (by restricting the supply of currency and credit to banks), the Thatcher government and the US Federal Reserve tinkered with interest rates - a Friedman no-no - in an attempt to achieve the same result.
The bureaucrats themselves and post-Friedman economists have a somewhat different memory. They say the theory was tried as well as it could have been tried: but Friedman oversimplified the difficulties of measuring and controlling the money supply. For Christopher Dow, Director for Economics in the Bank of England during the early Thatcher years, the very name Friedman produces an audible intake of breath over the phone. 'Friedman had an unrealistic idea about how you could control the volume of money,' he says. 'He thought it was like a tap and you just turned it off. If you didn't stop the growth of money, you hadn't turned the tap far enough. The world doesn't work that way any more.'
The rising star of US economics today, Paul Krugman of the Massachusetts Institute of Technology, says: 'By the end of the 1980s, Friedman had made himself frankly ridiculous to professional economists. He was continually predicting outrageous inflation and severe slumps, based on monetary movements that strayed from his chosen path. And they didn't happen in the way he predicted.'
Friedman remains unshakeable in his faith that monetarism and the other free market experiments of the Eighties, in the US and Britain, did not fail: they succeeded in part but then fell back, through corruption of principle, or lack of nerve.
The UK is in trouble today because - 'What was the name of that Chancellor?' - Nigel Lawson loosely tied the pound to the mark, as a prelude to Britain joining the exchange rate mechanism of the EMS. Professor Friedman, like his disciple Professor Alan Walters (Lady Thatcher's former economics adviser), has been predicting the demise of the EMS ever since it was born 13 years ago. This time, he says, the end is really nigh. 'I have been astounded at the willingness of Britain, and France and Italy, to pay, for political reasons, the economic price of being within the EMS exchange rate mechanism. It cannot go on much longer.'
America has a weak economy today, he insists, because President George Bush rolled back Reaganism in the Nineties, with tax rises, spending increases and fistfuls of regulations. Friedman refuses to admit that the triple load of debt - public, private and corporate, inherited from Reaganomics - is even a mildly contributory factor. 'They all say that. But it's not right. Oh no. Absolutely not right. If the economy had continued to grow vigorously, who would be talking about the debt now?'
Professor Friedman is a difficult man to argue with because he has a way of asserting that even when he is wrong, he is also right. (He admits a couple of trifling mistakes of analysis in his career, but can recall no major blunders.) If the defence of free markets breaks down on rational grounds, Friedman is perfectly willing to retreat into ideological, or quasi-mystical argument. 'I stand for the values of freedom, not just the practical benefits. I've said that even if free market economics was not the most efficient system, I'd still be in favour of it, because of the human values it represents of choice, challenge and risk. I see economics as a means to an end not an end in itself. It so happens that free markets are the most efficient. And that is a good job, because if they weren't, they wouldn't last for a moment.'
This is a characteristically candid, but somewhat hazardous argument. Professor Friedman comes close to confessing that his gut commitment to freedom, and ideological distaste for government action, is capable of overriding his professional economist's logic and common sense (as other economists believe it did in his defence of purist monetarism). Friedman sees a constant struggle between 'freedom' and the temptation of mankind to settle for stifling, and ultimately freedom- corroding, security and mediocrity. The freedom argument won the Cold War but is now losing ground again at home, he says. The greatest obstacles to freedom of markets, and of the spirit, are: a) intellectuals, who only approve of choice for themselves; b) big businessmen, who love cartels and subsidies far more than they love competition and c) to his great chagrin, the American middle classes, who are 'basically for freedom' but have been 'bought' by 'welfarism'.
State pensions, health plans for the poor and the elderly, public roads, even compulsory schooling - Friedman would abolish them all. He speaks wistfully of the time, before the First World War, when only 3 per cent of America's national income went on public spending. 'Heck, here in the US we're now half socialist. American government - federal, state and local - takes 44 per cent of the national income. If you include private spending mandated by government rules, it's well over 50 per cent.'
Here is a curious irony. Both Friedman, the ageing bull elephant of the right, and John Kenneth Galbraith, the ageing bull elephant of the left - decline to take seriously the supposedly 'revolutionary' mood of the American middle classes this year. In his recent book, The Culture of Contentment, Professor Galbraith sees the national mood as essentially selfish: having pocketed the benefits of the Roosevelt New Deal, most Americans no longer wish to spend money on the public investments needed to help the under-class or keep America strong (ditto in Britain). Friedman sees the national mood as essentially spooked and squeamish. With inflation cured, and the Democrats converted to a less overtly statist approach, the American people no longer want to pursue the revolution against big government (and their own welfare entitlements).
Friedman and Galbraith, frequent television adversaries in the early Eighties, share a boat in old age. The policies they supported cured, at various times, the worst abuses of what went before, and prepared the ground for their own demise. Put more positively, the intellectual and political mood of the times now favours avoiding excesses of both left and right in favour of some creative model in the centre - respectful of both markets and governments. (Paul Krugman, a sometime adviser to Bill Clinton, has been at the forefront of this movement.)
Professor Friedman, hugely energetic despite his years - he is working on an autobigraphy - is far from giving up the fight against such heresy. 'I am pessimistic about the Nineties, whether Clinton wins or Bush wins. But I am not pessimistic about America. The British are a very patient people. The Americans are not. I believe the struggle for economic and political freedom will resume - and will resume here first once again. But quite possibly not in my lifetime.'
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