53 pages • 1 hour read
Milton FriedmanCapitalism And Freedom
Nonfiction | Book | Adult | Published in 1962A modern alternative to SparkNotes and CliffsNotes, SuperSummary offers high-quality Study Guides with detailed chapter summaries and analysis of major themes, characters, and more.
Themes
How Competitive Capitalism Promotes Freedom
Friedman clearly states that competitive capitalism’s role in promoting freedom is the major theme in Capitalism and Freedom (4). Competitive capitalism is characterized by a large system of private enterprise that operates through a free market. Most economic activities occur in this system. Friedman believes competitive capitalism aids two types of freedom: economic and political. He sees it as a way of achieving economic freedom and a prerequisite for political freedom. Friedman argues that each type of freedom serves as a counterbalance for the other in a competitive capitalist system. He also insists that no other system has achieved both types of freedom like competitive capitalism has, and that alternatives such as socialism and totalitarian capitalism limit at least one of the two types.
A key element of freedom is the absence of coercion, so Friedman spends plenty of time explaining how coercion harms economic and political activities. Competitive capitalism fights coercion by relying on the free market; the free market fights coercion by operating on the basis of voluntary, mutually-informed agreements. When these agreements are voluntary, transactions happen through cooperation, rather than coercion. Additionally, the presence of competition among buyers, sellers, employers, and employees protects individuals in all of these groups from being coerced: buyers by sellers, sellers by buyers, employees by employers, and so on. In Friedman’s view, competition also tends to foster the best conditions for these groups; for instance, more choices among products for buyers and more choices among employers for employees. When choices exist, the buyer can switch sellers if he’s unhappy with a product or the terms of trade, and the employee can switch employers if she dislikes the terms of the employment contract she’s been offered. Furthermore, no single individual gets to determine the prices of goods or the terms for other people’s access to jobs.
When a person is free, they can also live the way they want without being subjected to someone else’s rules. If this is not happening, the source of restrictions is often the government. Friedman argues that the government is a pervasive source of coercion. That’s why he and other liberals view government—especially government authority in the hands of a few people—as a threat to freedom. Friedman also notes the coercive power of monopolies, which make a capitalist system less competitive than it ought to be and limit the power of individuals to shape the terms of the transaction. A monopolist might also discriminate against some consumers because he knows he has more power than they do. Certain consumers might be left without a service they desperately need—water or heat, for example—if they possess a characteristic the monopolist dislikes. When the market is functioning properly, with adequate competition, it provides incentives for participants to disregard personal characteristics that are irrelevant to trade. In this sense, people are free to be themselves, without fear of someone else’s prejudice obliterating their trade opportunities. Friedman states:
[T]he groups in our society that have the most at stake in the preservation and strengthening of competitive capitalism are those minority groups which can most easily become the object of the distrust and enmity of the majority (21).
Reasons to Decentralize Government and Limit Its Power
Friedman identifies “the role that government should play in a society dedicated to freedom” as an essential minor theme in Capitalism and Freedom (4). This theme intertwines with Friedman’s thesis about competitive capitalism’s role in promoting freedom, as well as his ideas about the size and scope of government. He states that the “preservation of freedom is the protective reason for limiting and decentralizing governmental power” (3). Friedman says that limiting the scope of the government helps ensure that the market is performing the activities it excels at performing, from promoting voluntary exchange to protecting freedom of speech. He opposes the welfare state in part because it contains too many examples of government intervening in matters it ought to avoid. As Friedman sees it, the government ought to avoid issues for which the public doesn’t have common views or an agreed-upon solution. Other than this, its primary functions fall into areas such as enforcing laws and contracts, creating a monetary system, and defining property rights.
The liberal belief that concentration of power is the greatest threat to freedom informs Friedman’s case for decentralization of government. America’s central government tends to concentrate its power and activities in one place: Washington, D.C. While proponents of centralization point to benefits such as efficiency and ease of communication, they overlook the fact that “the power to do good is also the power to do harm; those who control the power today may not tomorrow; and, more important, what one man regards as good, another may regard as harm” (3). So, even if centralizing the government allows it to be more effective at one point in time, concentrating power in this way could lead to trouble down the road.
Decentralizing the government’s power gives people options: if they don’t like the way one community is run, they can move to another. It is much harder, he argues, to move to another country if one doesn’t like the federal government. Friedman is also convinced that centralized governments simply aren’t the most effective agents of change. Instead, he attributes civilization’s great advances to individual genius, tolerance of diverse viewpoints, and minority opinions. The market encourages a varied set of participants—and their diverse perspectives—to participate, innovate, and interact with one another. He doubts that a centralized government is capable of doing this.
The Liberal as Underdog
By using the trope of the underdog for his own philosophical perspective, Friedman encourages the reader to rally for his success. This is a typical role for the reader in classic underdog tales, from Jack and the Beanstalk to the Bible’s David and Goliath. And by framing liberalism as a minority position, Friedman bolsters his argument that it’s crucial to protect minority opinions and create environments where they can be freely shared and discussed. This type of environment is an example of political freedom.
The liberal-as-underdog theme also sustains Friedman in his attempts to dismantle popular assumptions about the proper role of government (beliefs about government intervention for poverty relief, for example) and long-held beliefs about the meaning of certain historical events he interprets differently (the causes of the Great Depression, for instance). By casting himself as the underdog, he makes it clear that he has a bone to pick, a reason to take the powerful to task. He’s not just talking because he has the floor, or because he has an advanced degree in economics. This serves as motivation for the reader to listen carefully to his points.
