Milton's Myth #2: Free Enterprise Promotes Political Freedom


✑ ROBIN HAHNEL | 745 words
‟99% of the population cannot pay for a single ad in the New York Times.

A point-by-point response to Milton Friedman’s claims about the purported virtues of free market capitalism that have grown to become popular myths. This week, myth number 2: the idea that free enterprise promotes political freedom. "Friedman is blind to the dictatorship of the propertied".


Originally published in chapter ten of Hahnel's book The ABC's of Political Economy: A Modern Approach (Pluto Press, 2014).
About the author (click)
Robin Eric Hahnel (1946) is Professor Emeritus of Economics at American University in Washington DC. He has published on marxian economics, liberating theory, economic crises , ecological issues and “participatory economics”. He has frequently contributed to Znet and is the co-director of Economics for Equity and the Environment.
General introduction (click)
This article is part of a series refuting several myths of the neoliberal economist Milton Friedman (1912-2006), extracted from the book ABC's of Political Economy: A Modern Approach (Pluto Press, 2014) by economist Robin Hahnel. The general introduction was included in the first post of this series but can also be found here below↴


When Milton Friedman published Capitalism and Freedom (University of Chicago Press) in 1964 free market capitalism1 was not yet ascendant. In the post WWII era Keynesian, social democratic capitalism was more dominant, and government regulation and guidance of the economy was generally considered necessary, prudent, and desirable. So Friedman was writing as a dissident when he argued that only free market capitalism can provide economic freedom, promote political liberty, allocate resources efficiently, motivate people successfully, and reward people fairly, and government intervention was usually unnecessary and counterproductive.

By 2002 when the first edition of The ABCs of Political Economy was published neoliberal capitalism stood triumphant over the demise of not only centrally planned Communism, but social democratic, Keynesian capitalism as well. Friedman’s disciples were more confident than ever that free market capitalism was the best economy possible. Deregulation, privatization, and dismantling the social safety net had become the order of the day. Keynesians had been successfully isolated and silenced, and only a scattered tribe of “heterodox economists” any longer challenged Milton Friedman’s claims about the virtues of free market capitalism.

What a difference twelve years can make! While neoliberal capitalism still clings to power almost everywhere in 2014, and especially within the economics profession, there are now many who doubt that free market capitalism is truly the best economic system for the vast majority. Six years after the worst financial crash in four generations the global financial system remains without adequate regulation, and is just as dangerous as it was before the collapse of Lehman Bros. Five years after the largest drop in GDP since the Great Depression unemployment remains high in all the advanced economies with no end in sight. And despite overwhelming evidence that we are on course to unleash disastrous climate change, carbon emissions continue to rise everywhere. While the tongues of all but a few critics were tied in 2002, there are now many voices bemoaning the loss of hard won reforms neoliberals assured us were counterproductive, no longer necessary, or unaffordable. Every day more people are realizing that we are on course for an ecological disaster of Biblical proportions. As our “old economies” continue to fail us, there is rising interest in a potpourri of initiatives that are self-consciously not business-as-usual economics, called the “new” or “future” economy. And finally, there is a notable stirring of renewed interest in alternatives to capitalism altogether. However, it is still instructive to begin a careful evaluation of free market capitalism with a point-by-point response to Milton Friedman’s claims about its purported virtues that have grown to become popular myths about capitalism. After which we can see where criticisms raised by protest movements in Europe and the US during the past five years fit into the long, historic debate over the pros and cons of laissez faire capitalism.



Also in this series:


Friedman goes on to argue that besides being good in itself, economic freedom promotes political freedom. His first argument is that in a free enterprise economy people have a choice of non-government employers. This means people are not reliant on the government for their economic livelihood and therefore will be free to speak their minds, and in particular, free to oppose government policies. Friedman’s second argument is that if wealth were distributed equally none would have sufficient discretionary wealth to fund political causes. Since wealth is distributed unequally in capitalist economies, Friedman concludes there are always multiple funding sources available for any and all political causes.

Economic democracy is political democracy’s best friend, and authoritarian economies are political democracy’s worst enemy. But that does not mean private enterprise promotes political freedom and democracy. One problem with Friedman’s first argument is that private employers can intimidate employees who are afraid to lose their jobs if they support political causes their employers disagree with – just as a government employer can. In other words, Friedman is blind to the dictatorship of the propertied, and sees government as the only conceivable perpetrator of coercion. A second fallacy with his first argument is that a monolithic state employer is not the only alternative to a wealthy capitalist employer. State monopoly on employment opportunities in Soviet style economies was a serious obstacle to freedom of political expression in those societies. But in the next chapter we will see that nobody has reason to fear for her job because of her political views in a participatory economy, or in an employee managed, market socialist economy since the state exerts no influence over who gets hired or fired in either of these economies. Comparing capitalism only to Communism, and implicitly assuming there are no other alternatives is the oldest play in the capitalist team play book.
‟Those with vastly greater wealth will control access to the means of political expression.
The obvious problem with Friedman’s second argument – that unequal wealth provides alternative sources of funding for political causes – is that by his own admission, those with vastly greater wealth will control access to the means of political expression. This effectively disenfranchises the poor who have no recourse but to appeal to the wealthy to finance their political causes. Jerry Brown was right when he argued in the 1992 Democratic presidential primaries that politicians in both major parties in the US are essentially bought and paid for by wealthy financial interests who pre-select which candidates can mount viable primary campaigns. Ralph Nader was right when he argued during the 2000 general election that both the Republican and Democratic parties had been effectively bought by corporations, and should be seen for what they are, two wings of a single party of business, the Republicrats. And Occupy is right when it points out that the Citizens United v. Federal Election Commission Supreme Court decision in 2010 opened the floodgates to corporate money in elections, and made a mockery of political democracy in the United States.


Every politician has to ask how her stand on an issue will affect both her voter appeal and her funding appeal, mindful that donations from wealthy contributors are ever more important because televisions ads are increasingly important to “electability.” While we needn’t feel sorry for them, more and more US Senators are choosing retirement in face of the daunting task of raising literally tens of thousands of dollars per day starting the day after they’re elected in order to be viable candidates for re-election six years later. The fact that Ross Perot and Steve Forbes Jr. could gain serious public consideration for their mostly harebrained political ideas by financing presidential bids out of their own deep pockets, whereas 99% of the population cannot pay for a single ad in the New York Times, much less finance a credible presidential campaign, is hardly evidence that capitalism makes it possible for all political opinions to get a hearing, much less evidence of equal political opportunities under capitalism. Moreover, why does Milton Friedman think the economically powerful and wealthy will finance political causes aimed at reducing their wealth and power? At best, Friedman’s view of the wealthy as “patrons of the political arts” would predictably provide more adequate funding for some schools of “political art” than others. Simply put, Friedman’s attempt to make a political virtue out of the large disparities of economic power capitalism creates is ludicrous. Unequal economic power breeds unequal political power – not political democracy – as any school child knows.


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