Tuesday, June 23, 2009

Milton Friedman and Chicago School Economics

"I don't think I was ever regarded as evil"
~Milton Friedman

I don't know if there's any school as mysterious and myth laden than the University of Chicago's Economics Department in the 1950's. It was not simply a school, it was a new way of thinking and it did not exist to merely to teach students, it was the evil brainchild of a select group of Conservative intellectuals who were dead set on changing the dominant way of thinking at that time.

The energetic and charismatic man who was ambitious enough to run such a place could only have been Milton Friedman himself. Friedman believed in an extreme form of laissez-faire. He spent his days dreaming of a state of perfect balance, a natural state of health, a clean slate, a system free of all human interferences. Friedman believed that we needed a return to pure capitalism, capitalism free from interruptions, regulations, trade barriers, and entrenched interests. But sadly before this perfect Utopian capitalism could reign, society had to be deprogrammed and the only way to do that was to wipe the slate clean and start anew.
At the Chicago School of Economics, they did not just teach theories, they taught sacred principles, this was not a school, it was a religion. The economic forces such as supply and demand, unemployment, and inflation were viewed as fixed and never changing. All these forces were in equilibrium with each other, a perfect harmonious balance. According to Friedman, if anything went wrong, if unemployment rates or inflation skyrocketed, this was because us humans tampered with the perfect system inevitably leading to an imbalance. If the system goes awry the answer is always the same, a more severe and all encompassing application of the fundamental principles of Friedman's Chicago School theories. Just as the human body self regulates keeping itself in homeostasis, the market, when left to it's own devices, will naturally produce the right number of products at exactly the right price, created by employees who are paid just the right wage to buy those products. A utopia of zero unemployment, no inflation and unfettered creativity.

The only thing standing in Milton Friedman's way was now proving to the world that his dream of radical free market economics could actually change things for the good of all people. Friedman was a scientific man who believed strongly that economics was no different than chemistry or physics. Everything in economics needed to be put through the scientific method to be rigorously tested and proved. But Friedman's theory of perfect laissez-faire economy had never been tested. There wasn't a single economy on earth that had ever been free of all human "contamination". Unable to prove his theory, Friedman had his colleagues create elaborate equations and computer models, cooking numbers and rigging charts, whatever it took to prove that his dream for the future would and could become reality.

One of the biggest draws to Chicago School Economics was that, at a time when Marxism was promising freedom and protection for workers, Friedman's ideas offered a conservative way to keep the status quo for entrepreneurs. Both schools of thought claimed that theirs was the way to an Eden of perfection and balance. In contrast to Marxism's demands of replacing the current economic systems with socialism, Friedman showed that we needed to purify our version of capitalism. Friedman "proved" that government interference with the free market was actually doing obscene amounts of harm by throwing off the market's natural balance. Only by purging our system of sanctions such as a minimum wages, public education and price caps - which had always been viewed as protecting people - could our economy reach it's perfect state.
In the 1950s memories of the Great Depression were still fresh in people's minds: the terrible unemployment, shelters, decimation of savings and homelessness. As John Maynard Keynes predicted, laissez-faire was gone due to the peoples demand for a hand's on form of government. Between the 1930s and the 1950s America's politicians gave in to the people's demands for security with public works and social welfare programs as well as Roosevelt's launch of the New Deal. These efforts against poverty were reinforced when the world saw impoverished Germany turn to fascism to solve it's economic problems, as Keynes had warned they would. Only by guaranteeing basic protections could disillusioned citizens be protected from converting to other extreme ideologies such as communism and fascism.

At the same time developing countries came up with their own economic theory called developmentalism. By nationalizing all their natural resources, such as oil and minerals, and keeping them within their own country, rather than exporting it all to the Western first world, they would be able to climb out of their despondency. Developmentalism succeeded in all of it's endeavors and most successful of all was the southern cone of Latin America, which includes Chile, Argentina, Uruguay, and parts of Brazil. With the money their governments made by keeping their natural resources local they were able to fund public works projects, such as roads and highways, offer subsidies to local businesses and farmers, and build new factories that produced cars and appliances to protect their country from foreign imports which imposed high tariffs.In the following years the Southern Cone became a beacon for all third world countries. Their factory workers had labor unions and middle class salaries, their children were able to attend cutting edge public universities and the gap between the upper and lower class narrowed dramatically. Uruguay was able to provide free health care to every citizen and sported a 95% literacy rate, and Argentina had the largest middle class on the entire continent, proving to the world that developing nations could rise up to the same level as the first world.

With the booming success in South America and of Keynesian in North America few people gave any heed to the Chicago School's rhetoric. As America's economy blossomed corporations were forced to redistribute their rocketing profits to their workers and the government via taxes. A select minority of powerful individuals recognized that through Friedman's fundamentalism the wealth that was being spread about could be redirected into their own hands.

The Keynesian revolution was burning large holes in the pockets of big business, the necessary solution was a counter revolution - not just to capitalism as it had been, but to a more pure form that would help protect their profits from the working class. Since they could not come out against the overwhelming success America was experiencing they found their perfect champion in Milton Friedman. As a mathematical genius and prestigious scholar he was able to fiercely debate the issues and charm people to his way of thinking, as well as produce Chicago School boys who would carry his message worldwide.The biggest pain in Friedman's ass was the New Deal, he saw it as America's ticket to hell in a hand basket. To pull his country back from the brink of destruction he published his first book "Capitalism and Freedom" which would subsequently become the rulebook for the agenda of the neo-conservative movement. He outlined three basic rules: 1) governments must abolish all regulations interfering with the accumulation of profits. 2) governments must sell off any asset that could be used by companies to make money. 3) all social programs should have their funding cut back - in essence deregulation, privatization and cutbacks. Additionally he taught that taxes should be minimal, that any taxes should flat regardless of income, that products should be sold worldwide and that local economies should receive no protection. He believed that minimum wages and price caps must be abolished and that every conceivable industry - from health care to mail service to national parks - needed to be sold off to private interests.

Furthermore, the socialized assets such as schools and public works which had been created using public funds, must necessarily be privatized. In other words he believed that all shared wealth and assets should be turned over to private interests. Disguised in a costume of mathematics and science Friedman's dream of unregulated capitalism played right into the hands of multinationals, who search desperately for new markets. The first stage of capitalism, colonialism, claimed land we had no right to and stripped it of it's natural resources, creating pure profit. Similarly Friedman's second stage of capitalism would create untold wealth by draining the government and the welfare state. The state became a new frontier to be conquered, it's resources sold to private companies for pennies on the dollar.

Join me over the weeks to come as we follow Milton Friedman and his Chicago Boys in their attempts to prove their theories by experimenting on various countries. Watch as the Chicago School ideals rape Poland and Russia, destroy Asia and bring the southern cone to it's knees. Democratically elected leaders will be assassinated by the CIA in order to have ferocious dictators put in their place, millions of people will find themselves without food, homes or jobs, demonstrators will be arrested for protesting their victimization and individuals will be taken from their homes in the night to be tortured and killed. No, this isn't a Tom Clancy novel or a horror movie, it's the legacy of a man named Milton Friedman.


Jack W. said...

Have you read Shock Doctrine by Naomi Klein? If not, you should.

Dawson said...

Wow... this article absolutely blew me away! I cannot wait to join you in the weeks to come as we follow the Anti-Christ, Milton Friedman, in his attempts to create a literal hell-on-earth.