stupidest thing a person can say in three words is the system works. When a
person says the system works, what they're really saying is I'm not hurting.
When a gang of police are videotaped beating a man to the ground repeatedly,
you are sure to hear that the system works. When a company’s board of
directors is indicted for dumping their own stock, it also goes to show that
the system works. It doesn’t matter whether any of the trials eventually
produce a conviction. Once beaten a man can not be unbeaten, nor will any
looted pension funds ever be recovered, but this is apparently of no
concern. Whenever the ongoing failure of the system becomes noticeable, some
commentator will be on hand to guide the public to the happy conclusion that
the system has worked yet again. People say the system works precisely when
It is rare for someone to examine our social system and actually say why they believe it works. One attempt to do so which remains influential today was Milton Friedman's Capitalism and Freedom, based on a series of lectures which were originally delivered in 1956 at an academic conference at Wabash College. It is a book which is becoming more and more timely today as the clock starts to run backwards in America and we again hear proposals for a flat tax and school vouchers.
In what seems an act of willful perversity, Friedman presents his ultra-conservative ideas under the name of liberalism, with the slender justification that the term had a different meaning in the nineteenth century. He periodically resorts to painting himself as a liberal at heart who nonetheless opposes every form of liberal legislation, putting them off in the hopes of a day when the entire population can be won over to the cause voluntarily through persuasion. In this he is so pure that an ordinary Congressional majority is not enough for him.
His sense of history is horrifically warped and out of touch. His comment on the Hollywood blacklist is to say that the system worked because the blacklist only lasted twelve years and some of the people affected were able to find other kinds of employment. He goes so far as to say hypothetically that things would have been worse if it had occurred in Britain because the BBC is subsidized by the government. This is taking a very long route around reality, in which it did not happen in Britain; in fact, many blacklisted Americans fled there for refuge.
In Friedman's view, capitalism even deserves the credit for bringing the Puritans to the New World. How so? Because, as he assures us, they accumulated the necessary funds for their voyage in the market. You see, we must bow down and be grateful to capitalism for every little thing since it was all paid for with money. When Friedman tells us the South was enlightened in not imposing property restrictions on the Negro after emancipation, he again seems to be missing the forest for the trees. Furthermore the remaining problems of racism will be solved by the market, he promises, since it would simply be bad business to deny low-wage jobs to minorities. (When an economist tells you the market will take care of something, be very afraid. It means nothing will be done.)
Friedman blames the Great Depression on a few poorly-timed decisions by the Federal Reserve Board, thus neatly removing the greatest blemish on capitalism's record. If he had been around, this glitch could have been avoided. We should remember though that the strongest objection to capitalism is not periodic instability but suffering. For most people the flaw in the system is not the recurring cycle of crashes but rather unemployment and the inability to provide meaningful work. The problem is not that the system breaks down, but that even when it works it does not work for everybody. The instability of the system is thus of most concern to those who benefit from it. For those suffering under it the problem is if it never breaks down.
Like every defender of capitalism, Friedman must briefly preach against monopoly; however he does so in the context of downplaying its actual existence. True, the auto industry may be dominated by a few companies but domestic service he reminds us is not. He finds he can forgive the phone company in a gentle aside but must go on at length hammering on the “monopoly” he considers the most dangerous, labor unions.
Friedman makes an elaborate show of arriving at each of his opinions judiciously but somehow he always lands on the same square, dismantling the government. In one chapter he argues that the AMA functions like a medieval guild but it seems that what he wishes to replace it with is something akin to the modern HMO. He is against the post office (he says the Pony Express was more efficient) and the national park system; if people really want to see trees let them pay. He chides the ACLU for not defending an employer’s “freedom” not to hire minorities and his proposed solution to the day's controversy over segregated schools amounts to discontinuing public education.
He is continually diminishing the domain of what economists term "neighborhood effects," what a layman would call the public good. One incontestable example of a public good is immunization, which benefits not only the individual immunized but their neighbor as well since it may prevent epidemics and even eradicate some diseases altogether. Throw in the highways and there is little else Friedman will concede. The state’s main role in his eyes is to enforce contracts. Friedman wishes to reduce the great spreading and sheltering oak of the public good to little more than an after-dinner toothpick. In sum, if the marshall comes to evict you, that is good government. If they set a limit to the amount of rent you can be charged, that is bad government.
Public housing he denounces as paternalistic. Why not just give the poor some money, he asks disingenuously, and let them buy what they need on the market? For one thing, the market will overprice everything, as it does with pharmaceutical drugs. Most conservatives labor under the misconception that taxes are payment for services on the model of a business contract. By this logic, a parent who chooses to send their child to private school should not have to pay for a share of public education. Similarly, Friedman's main objection to social security is that it is involuntary. If you were given a choice, you could purchase a retirement annuity from a private source instead of the government. But social security is not a service you purchase. It is a fund into which everyone who works must pay and out of which everyone who works may benefit. If taxes were voluntary no one would pay them; they are a necessary evil of civilization.
Whether Friedman is insincere no one can prove, but much of his rhetoric relies on the same dirty tricks conservatives are using today. In discussing corporate taxes, he brings up the dreaded injustice of being taxed twice. If a corporation pays taxes on its profits and then its shareholders pay taxes on their dividends, they have been taxed twice. Friedman's solution is to abolish corporate taxes. On reflection this is obviously absurd. If you cash your paycheck and buy a six-pack of beer, you are also being taxed twice, once on your wages and again on your purchase. If you use your income to buy a house and then pay property taxes on it, you are being taxed twice. If the state is not going to derive all of its revenue from one form of taxation, then citizens will inevitably be taxed multiple times in multiple ways. In theory the net amount of tax should be the same and the issue of double taxation is a false one.
Friedman's dirtiest trick is the common one of dismissing a proposal he disagrees with as ineffective and then acting as if he has refuted the principle behind it as well. Progressive taxation does not achieve its goals, he claims, so we should have a flat tax. This is an intellectual sleight of hand because it dodges the crucial question of whether these goals are themselves worthy and thus should be achieved by other means. This is the same device of trivialization that neo-liberals like Krugman used to defend NAFTA years ago, arguing it might as well pass because its actual effects would be small.
It is a similar sort of trickery to say that because of all the loopholes in the tax code, a lower flat tax could generate as much revenue as the current progressive tax. If there are loopholes that should be closed then close them, but this has nothing to do with whether taxation should be progressive or at a flat rate; eliminating deductions would increase revenues with either system. (Friedman makes the interesting point that trying to redistribute wealth through taxation may backfire, because it only redistributes income. The old rich will stay rich from their property while it will become harder for anyone else to join their ranks by acquiring new wealth. Of course, he is not proposing any measures to rectify this “problem.”)
Besides denigrating idealistic measures as ineffective, Friedman puts his full weight behind the ancient claim of fatalists that change is futile because nothing can be granted without something else be taken away. He argues that the actual effect of unions is to raise wages in one occupation while lowering them correspondingly in others, as if wages were a closed system paid in one kind of money somehow different from other money that circulates. By this logic, raising the minimum wage will only increase unemployment. The money has to come from somewhere, so if the boss pays one worker more he will just have to pay another less or hire fewer people.
Some people believe that this is the essence of economics, to say that you can't get something for nothing. But at best the law of necessity can only be true of a system operating at full capacity, which as anyone looking for work knows ours does not. Economics is not merely the distribution of existing resources but the production and use of them, and different uses will in turn produce different amounts for distribution. If healthcare and training are provided to workers they will be more productive and there will be greater total resources available for everyone. We must remember to make a distinction between productive and non-productive expenditures, between sharing and waste: a closet full of unworn clothes, a garage holding a car that costs more but does less, a second house that stands empty most of the year.
Most conservative thinking is only shameless cruelty veiled by pompousness. It is not a Swiftian jest but mechanical callousness when Friedman considers taking children away from parents who can't pay for their education. The Chicago School shrouds their savagery in the classics while entirely missing the point of humanism. Great books may in the end be written by uniquely talented individuals, but from Homer to Tolstoy their greatness always consists in reminding us of our common humanity.
It is of the utmost importance to understand that today's Republicans are not actually reasonable people but in fact revolutionaries of a different stripe. The radicals of the left have been purged, demoralized, bought off, entertained, while the radicals of the right are in office actively pursuing their mad dreams of Christian war. It is no accident that the conservatism of Fox News today presents itself as pseudo-populist and opposed to "big" government. The government is the only possible protector of the public interest against corporations and the rich.
Amartya Sen's 1999 book Development as Freedom is a new defense of capitalism for an era in which one is surprised anyone would bother. It is some indication of the bubble in which our educated classes live that a man can be awarded a Nobel prize for discovering that the poor starve to death not for lack of food but for lack of money. In some famines, Sen relates, not only is there no shortage but the prices of food have not even gone up. Instead a crop failure has wiped out the wages of agricultural laborers. Sen assures us that such famines do not and can not occur in democracies, where there is an “incentive” to prevent them. It requires some fancy footwork on his part to get around the fact that Britain was a democracy in the 1830's when the Irish were allowed to starve, but get around it he eventually does.
Sen’s main thesis, which grows out of his work on famine, is that freedom is both the means and the end of economic development, that it is something which is good in itself and which has the added advantage of being conducive to economic prosperity. The belief is becoming widespread today that as freedom increases in a country so will its wealth, either because happy workers are more productive or because modern businesses such as software and entertainment demand more individual creativity. To claim that freedom is also the goal of development is a bold stroke that sadly must go completely unsupported here, since there is no plausible evidence to back it up.
To Sen, capitalism is a system that uses the tool of freedom to achieve the goal of freedom. Logically however it is not possible for one thing to be both means and end. If freedom is a means then it is necessarily a means to something other than itself, in this case productivity, growth and increased profit. If it is an end then it must be accomplished by some means other than itself or else it would be accomplished immediately the moment the means were employed. Sen wants the win-win of eating your cake and having it too, money-making and feeling virtuous, but the old saying that no man can serve two masters would be well-applied in this instance.
The pragmatic view of development is that it aims to raise the living standards of the poor by increasing their incomes. Sen encourages researchers to go beyond this approach to look at more variables in the hopes of accounting for some interesting anomalies, one being the fact that blacks in America have a shorter lifespan than much poorer minorities in other countries. Another is that civilian life expectancy actually went up during both World Wars; though there was less food it was shared more equitably by rationing.
While it is good to look at additional variables in search of a more complicated picture, one should not create a false complexity or pseudo-originality by renaming all one’s terms. In Sen's new rhetoric, poverty is called "capability deprivation." I suspect that calling disease and hunger forms of “unfreedom" as he does is the start of an intellectual shell game that does not end with the poor being much better off. Speaking of a “freedom not to starve,” Sen begins to sound like the Clash's satirical public service announcement reminding us we have the right not to be killed. Reading Sen as he tries to grasp hard realities in this cautiously analytic language of abstractions is like watching someone try to punch their way out of a wet paper bag.
Sen attempts to justify all of what we call human rights by describing them as varieties of freedom, but while this might be intended to give them a stronger foundation in fact it works to diminish their intrinsic importance. At the same time he blurs the concept of freedom until it seems to mean everything and nothing. It no longer means political freedoms like the right to vote and the right to express oneself.
Essentially Sen does not propose any real change to global capitalism but rather a new and disorienting set of terms and an alternate scale of weights and measures. For him, to simply give people help with no strings attached is an insult to their “agency” which reduces them to passive recipients. He whitewashes global capital by scrawling a thin and implausible pseudo-idealism across every aspect of it; his book is like a World Bank Mad Lib where every noun and verb has been replaced with freedom.
There is a long liberal tradition of changing terms rather than changing policies. This is something like changing your diaper rather than learning to stop soiling yourself. Liberal rhetoric is partly a way of avoiding reality and partly of offering empty phrases as a substitute for change. In its more academic form it also serves the purpose of excluding ordinary people from the discussion, paralyzing them with confusion or intimidating them into silence. I guess we're supposed to be grateful that an establishment figure even admits there is poverty in the world, but reading Sen's book I felt like an innocent man being told to take a plea bargain because it was the best deal he was going to get.
In our time the post-Soviet triumph of capital has moved from crowing to revisionism. Most of this book reads as if it came from an imaginary planet where socialism never happened. On page 28, Sen praises capitalism not in comparison with socialism but rather against slavery! When Sen compares China and India's performance in the market he notes the former has been more successful because of the "social commitment of the pre-reform regime to health care as well as education." Put plainly, Chinese communism took better care of its general population, which gave them a headstart in the post-communist world. On page 6, Sen argues that the market system can neither be defended nor attacked, but rather that the right to buy and sell is itself a basic liberty. Here he goes so far as to claim that capitalism is synonymous with freedom, even for those who have nothing to sell, nothing to buy with.
What has changed in the forty years since Friedman? The short-sighted claim that there is no alternative to the market has gone from the marginal view of besieged conservatives to a central pillar of the “neo-liberal” orthodoxy.
One of the great myths of capitalism is that private enterprise is inherently more efficient than government. It is absurd to state that a private corporation like Edison Schools could provide a better education with a smaller budget and still have enough extra left over to draw their profit. Where does the extra come from? Two minus two does not equal five. It is claimed that competition produces efficiency, but by definition it involves considerable duplication of effort and redundancy. It is claimed that people of ability are drawn by high salaries which can only come from private sources, but it is not true that self-interest is a stronger motive than idealism. Was your Bible written for pay?
The greatest obstacle to socialism today is the false perception that socialism is an idea while capitalism is not, that the latter is the result of letting nature take its course while the former would mean unleashing a troop of eggheads to wreak havoc on our traditional way of life. Really the defense of capitalism consists in the lie that it is inevitable, which is why it is explicitly defended so rarely. Socialism is not unrealistic, it is not even idealistic: it is simply practical. If something needs to be done, let’s get together and do it ourselves rather than drawing up specs and waiting for bids. Nevertheless I do not believe that socialism will ever make a comeback in the U.S. The cause will soldier on under the confused rubric of anti-globalization, without the intellectual heritage of its predecessor but also without its accumulated stigmas.
In the end freedom may be the most abused word in our language, beating out truth by several lengths. When mainstream economists argue that the freest system is capitalism, they are missing the point of freedom altogether, which is choice. To me freedom would mean freedom from a fucked-up system that uses the specter of sickness to terrorize its own population and trades pills for the votes of the elderly, a system that knows how to punish schools but is unwilling to bear the burden of funding them properly, a system that uses terrorism as a bogeyman against internal disagreement while failing to take necessary measures against the actual threat.
In a world in which there is only capitalism, having someone tell you that you are free does not make it so. If we are given a choice between market operations and the public sector, we are free. If we are given the market and told that it is good for us, we are not.
Other articles by Said Shirazi