This means that those providing the bulk of the revenue to the State are not the same as those receiving it. Those receiving (without paying) would naturally prefer more government hand-outs; if they are in the majority, the danger is that government can continue to grow, and command a "rent" which reduces overall productivity.
Is the argument of the Friedmans viable and workable? The program "Free to Choose" was aired in 1980. Since that time, nearly one-half of the world's population has moved from socialistic and communist government control to greater personal and economic freedom. These people include those in China, India, Southeast Asia, much of Latin America and Eastern Europe. The result of this freeing of government controls has been an unprecedented growth rate in the world. In the past decade, for example, global GDP grew at 3.1%, with growth rates in China and India at 9% and 6.3% per year over the past 11 years (Economist, 2007). If the Friedmans were alive today, they would attribute this tremendous growth rate to the reduction of government interference and the growth of personal and economic freedom.
Is the Friedmans' argument desirable? In "Free to Choose," the interviewers make the point that society is more complex today than it was in Adam Smith's time, and therefore people need to be "protected" by their governments by the rapacious forces of naked capitalism. Friedman argues that the free market system works better than previous centuries where trade was restricted and governments had a greater role in peoples' lives. This author agrees that economic and personal freedom, while chaotic, assure better economic situations for all. Note that in China the peasants on the farms received economic freedom starting in 1965. Deng Xiao Ping's agricultural market reforms of 1980 resulted in a 40% increase in peasant incomes in the 1980's. Although there is a considerable hue and cry about income inequality in China, all levels of society are considerably...
The unspoken assumption on Harrington's part is that the costs of this "rent" are worth the protections from unbridled capitalism.
Friedman argued, and this author agrees, that the government's role is best-illustrated by its
structure in
Hong Kong: create a level playing field, establish ground rules for
competition and assurances that capital and labor will not be unfairly penalized, then get out of the way. Teddy Roosevelt could be both a capitalist and a trust-buster at the same time; many of the laws put in
place before and after the establishment of the FTC assured that capitalism worked better, without collusion and monopoly practices.
In
conclusion, the Friedmans' argument was strong in 1980, and is even stronger today. The increased strength comes from the demonstration of global growth in freedom leading to global growth in economic prosperity. In every case, with the exception of temporary spurts in totalitarian regimes, economic prosperity has followed from governments removing their heavy hand of
taxation, regulation and dictation of how to live, what job to take, and what to think.
Bibliography
Bade, R. a. (2007). Foundations of Microeconomics. London (HQ): Addison Wesley.
Economist. (2007). 2008 World Almanac. London: Economist.
Friedman, R. (1980). FREE to CHOOSE: The Power of the Market. (McKenzie, Interviewer) New York.
Li, H. (2005). Family Life Cycle and Peasant Income in Socialist China: Evidence from Qin Village. Journal of
Family History, 121-138.
With the ability to grow their own products on 1/3 of an acre per family; within 3 years, 30% of all agricultural production took place on these private plots.
Free to Choose, Rose and…
