Milton Friedman v Naomi Klein-Lucidity v Twaddle:

http://www.youtube.com/watch?v=g2kTy7glZ9s

In my opinion-commies such as the Klein Lady and free market economists like Friedman are opposite extremes sewn out of the same cloth.

One says do everything to prevent the world from burning---------the other says do nothing even if the world is in the pits .

JM Keynes is the master economist- - - - -the moderating voice that animates all economic policy around the world wherever you go.

The success of a model is best judged by its outcome.We know for certain that Klein's model has been an abject failure but free market economies have been a roaring success.There is a proven link between the extent of economic freedoms adopted by a nation and its economic growth.

To put free market economies on the same level as communist economies is ridiculous.

How many developed countries still adopt Keynesian policies? Very few people still believe that Roosevelt's New Deal policies are the elixir for economic stagnation.

The lessons of Friedman-lower taxes,lowering barriers to trade,lesser economic regulation-have been behind major economic success stories like Ireland and Singapore.

Of course,not all of MF's ideas are agreeable-removing all trade barriers can render developing nations industrial sector's vulnerable to collapse owing to imports from stronger economies.The early history of the Asian Tigers-Taiwan,Japan,S.Korea,e.t.c illustrated that some measure of import barriers may be necessary to protect embryonic industries.However,lowering trade barriers,as opposed to a total barrier-free import policy,does help countries concentrate on where they have comparative advantage instead of coddling wasteful inviable industries .

I-man:

The success of a model is best judged by its outcome.We know for certain that Klein's model has been an abject failure but free market economies have been a roaring success.There is a proven link between the extent of economic freedoms adopted by a nation and its economic growth.

To put free market economies on the same level as communist economies is ridiculous.

How many developed countries still adopt Keynesian policies? Very few people still believe that Roosevelt's New Deal policies are the elixir for economic stagnation.

The lessons of Friedman-lower taxes,lowering barriers to trade,lesser economic regulation-have been behind major economic success stories like Ireland and Singapore.

Of course,not all of MF's ideas are agreeable-removing all trade barriers can render developing nations industrial sector's vulnerable to collapse owing to imports from stronger economies.The early history of the Asian Tigers-Taiwan,Japan,S.Korea,e.t.c illustrated that some measure of import barriers may be necessary to protect embryonic industries.However,lowering trade barriers,as opposed to a total barrier-free import policy,does help countries concentrate on where they have comparative advantage instead of coddling wasteful inviable industries .

But Iman - - - - - - -once you start making exceptions you stop being a free marketer. There can be no buts cause according to laissez faire economists(Friedman, Hayek, van Mises) all planning is bad.

Take your example of protecting embryonic industries in developing nations. The Hayekian refrain is governments cannot possibly know how to determine for example which industries will need protection or how much protection such industries would required if they decide on which products to protect. It would be equivalent to what Friedman called trying to do good and end up doing bad because according to this school of thought knowledge is dispersed in society and it would require a superior brain of which the world has never seen to analyse such data.

The irony is that such policies endanger the democratic principles which the likes of Friedman are so concerned to protect. Socialism and Fascism were I would as has been argued a result of the laissez faire faire hands off positions of OLD EUROPE. They simply lay supine while their populace suffered the dire consequences of the down cycles of capitalism. Alternatives were quickly sought and provided most disastrously by the Nazis.

It is this obstinacy to hold their positions in the face of the dire consequences of their theoretical premises that pits these two schools together in my opinion and sets Keynes apart.

Keynesian economics does not equate to New Deal policies. Mba

The essence of Keynesian economics was to argue against simply doing nothing while the capitalist system was under undue stress. That, as you have intoned here, such policies which were meant to e short sharp injections of stimulus should gain a degree of permanence with the so called Post war consensus is unfair and untrue to Keynesian economics.

His economics was way more flexible and is the foundation upon which modern day economic policies are run.

The policy of adjusting interest rates to avoid recessions or fight inflation is anathaemic to classical economists but is classic Keynesianism.

So is the selective protection of industries- - - -a policy position which Keynes suggested to the British government in the 1930's when such a policy direction was soooooooo unfashionable.

So I put it to you that Keynes won the debate with Hayek and his followers as well as against the commies.

His is a humanist interventionist position as against the soulless mechanistic theoretical dictats of Marxist/Communism and Laissez Faire/Friedmanite/Hayekian economics

To make exceptions doesn't in itself undermine the free market case.You and I know that there are no actual free market economies in the idealised sense.No economy operates without some measure of government intervention whether in the form of taxation or regulation.


You have to recognise that free market proponents concede that the Govt can intervene in certain special circumstances-where the market is not operating at its optimum.If the Nigerian Govt for instance,protects textile producers through the use of tarriffs, due to competition from Chinese textile producers who have Govt subsidies-that would be a mere recognition of market failure resulting from the Chinese Govt's actions.

Ideally,in the best case scenario,there would be no dumping from China and thus no need for tariffs.

New Deal policies were inspired by Keynesian economics,they represent the practical application of Keynes' theories.The idea that economic malaise can be alleviated by boosting the demand side of the economy.New Deal was about a Govt spending binge designed to boost demand,the idea being,the more money pumped into the economy by the Govt through its infrastructural projects and welfare policies,the more available to stimulate investment and consumption.

We all know that nobody spends your money in the manner of a drunken sailor like the Govt.In the bid to raise money for the priming of demand,the Govt competes for scarce capital with a private sector which could spend the money more efficiently.Taxes are raised to finance this spending.It was Keynes' ideas that inspired the IMF's warped solution to economic difficulties-raising taxes.

Friedman was never against using monetary policy to fight inflation or recession!That is the exact opposite of his views.He was always said that inflation was a monetary phenomenon-a function of money supply-in sharp contrast to the fiscal weapon wielded by Keynesians to fight both ailments.

My view is that the ideas of Friedman-smaller Govt,lower taxes,lesser regulation,lower trade tarrifs-have gained greater acceptance than Keynes.The economic reforms implemented by Thatcher and Reagan in the 80s-particularly the privatisation policies-have been the foundation of the subsequent expansion of the economic cycle,with recessions getting shorter and rarer and expansions lasting longer.

I-man:



My view is that the ideas of Friedman-smaller Govt,lower taxes,lesser regulation,lower trade tarrifs-have gained greater acceptance than Keynes.The economic reforms implemented by Thatcher and Reagan in the 80s-particularly the privatisation policies-have been the foundation of the subsequent expansion of the economic cycle,with recessions getting shorter and rarer and expansions lasting longer.

Even America, the cynosure for capitalism is not run along these lines of ''small Govt., lower taxes, lesser regulation, lower trade tarriffs''

I still maintain that once you concede the slightest involvement for the government in the running of affairs, then all manner of historical truisms reveal the
government gets bigger rather than smaller. Debts as percentages of GDP grow bigger, political imperatives of defence and healthcare etc. cannot be avoided, as your man Reagan would attest. Thatcher's government despite cutbacks and privatisations still found all manner of ways to spend money.

Economics at its own peril ignores political reality. When it does it leads to quixotic theories of the free market and Marxist Communes

doyin13:

Even America, the cynosure for capitalism is not run along these lines of ''small Govt., lower taxes, lesser regulation, lower trade tarriffs''

Sadly because political necessities get in the way of good economics.However,Govts are much "smaller" than previous.Gone are the days when the US and UK Govts were responsible,in pursuit of Keynesian ideals,of providing a comprehensive range of services from-telecoms,water,electricity,air travel to steel,ship and mining of natural resources.

Does anyone still believe that the British Govt,through state owned BT,should be providing mobile phone services? Ask people who had to wait for months for a landline from BT in the 70s and 80s.

Like any "do gooder" Keynesisan,the idea behind Govt involvement in the above was that the Govt could provide more affordable services and thus,ensure wider access.

Govt regulation restricted competition in the industries State enterprises were involved in, thus start-up companies faced a mountain of regulatory barriers designed to protect the advantages of the State run monopolies and ostensibly the "common good". Gone are the days when your choices for a land line phone was either BT or BT.

With respect to taxes,do you realise that the top rate of income tax used to be 90% in the UK? Corporate taxes were also in a similar range.The result was higher tax avoidance.Is it a coincidence that the more the top rate of taxes are lowered,the more the wealthy bear a higher proportion of Govt tax receipts?

In 1979 when the top rate of income tax was 83%,the top 1% paid share of income tax receipts was 11%.The lower this was cut,the higher their share went up.Today with a top rate tax of 40%,their share is now 21%http://www.hmrc.gov.uk/stats/income_tax/table2-4.pdf Same phenomenon can be observed in the US.

On average,trade tarriffs are much lower than at any time since the 20th century.Organisations such as the WTO and the various free-trade agreements binding the EU and NAFTA,embody a recognition of the advantages of free trade.

Reagan did boost spending on defence but free trade advocates are not against this. As Friedman noted,it is partly the US's pre-eminent national security strengths that encouraged foreigners use of the dollar as the world's reserve currency and also foreign investment in US assets.

The policy revolutions that led to privatisation,deregulation,lower taxes and many of today's free trade agreements reflect a greater acceptance of Friedman's philosophy.

I am sure if Keynes had survived the war. . .he would have disavowed the Postwar quasi-socialistic consensus.

His demand-management propositions were for the special circumstances which Old Europe faced during the Inter War years
as he argued, the principles of laissez faire economics were suitable for the special circumstances of the Industrial Revolution.

Policy sloths, comfortable with post war prosperity and brimming with optimism took their eyes off the ball and the 70's were a reality check.

It is that aspect of vigilance on the part of economic policy makers that is the hallmark of Keynesian economic philosophy. While the Austrian school(Friedmans progenitors) were circumspect and quite cynical about human ability to manage economies(limits of knowledge and all that). Keynes's theory reached spectacular heights of human hubris. (The stewardship of economies were safest he thought in the hands of Oxbridge graduates!!!!!!!)

But it was also the more realistic position. While von Mises and his protege Hayek were theorising debasing limits of human humility,he was using national income statistics and other forms of data for his policy suggestions which showed optimism in human ability.

Now I have been conflating the Austrians with Friedman, trite kitsch perhaps, but accurate in the realm of politics.

As Friedman himself admitted on his essay on Keynes-----------Keynesian contribution on technical economics was positive. . .it was his 'hubristic' political views that caused him concern. . .According to him:

''Keynes believed that economists (and others) could best contribute to the improvement of society by investigating how to manipulate the levers actually or potentially under control of the political authorities so as to achieve desirable ends, and then persuading benevolent civil servants and elected officials to follow their advice. The role of voters is to elect persons with the right moral values to office and then let them run the country.''

But guess what I-man: THAT IS PRECISELY HOW THE WORLD WORKS. Statecraft or whatever cannot be devoved from economics. They are inextricably linked. But what differentiates overtly political theories of Public Choice theory(intellectual cousins of Friedman)is their limited use considering the way the world actually works. The more you try to brush the government off, the wider the reach of its tentacles.

it is the impending visions of financial doom(in the US---Ballooning healthcare costs, ballooning deficits) that slows down governments rather than the purchase of free market theories. Keynesian philosophy/political economy readily accommodates this reality.

I have largely steered clear of discussing the intricacies of Friedmanite technical economics because at base I would argue they have a lot in common. Monetarist Economics is by and large an attenuated offshoot from Keynesian foundations. Anyways, I aint got time right now to elucidate. . .

@Iman

Governments are getting smaller? What world are you living in?

Tariffs are lower because governments in developed economies can not collect income and sales taxes more efficiently. Developing countries still depend heavily on tariffs regardless of WTO rules and regulations.

The policy revolutions that led to privatisation,deregulation,lower taxes and many of today's free trade agreements reflect a greater acceptance of Friedman's philosophy.

Isn't that what IMF policies are all about? Why do you regard IMF policies as being based on Keynesian theories? IMF policies in the developing world are based on neo-classical economics. Free market, small government, markets clearing all based on supply/demand and rationality.

The revolution reflect the dominance of neoclassical economics in the post-60's economics landscape. Neoclassical economics was also buoyed by the increased demand for clarity using mathematical equations in economic models and theory. Most economist were trained in western universities and carried this training to wherever they had the chance to apply them.

Friedman is more accruately seen as a monetarist, all the other attributes are held by neoclassical economists and I doubt anyone will say Friedman was a pioneer in that field.

@ Doyin13

Keynesian theory was abandoned at the end of the '60s, sorry.

You're right in pointing out that both Klein and Friedman are standing at extreme positions and neither is correct - even though they both have valid points.

America's emeregence as an economic superpower can hardly be characterized as being as a result of a free market economy in operation. For chrissake how exactly is economic discrimination based on race or gender that was in accordance with free market principles?. . .

@I-man and Donzman

http://money.cnn.com/2008/01/07/news/economy/paulson_speech_nyc/index.htm?postversion=2008010712

If this intervention is not Keynesian, then I don't for the life of me know what is.