A Companion Web Site to C-SPAN's Author Interview Series
November 20, 1994
Introduction to the 50th anniversary edition of F.A. Hayek's Road to
Serfdom
by Milton Friedman
BRIAN LAMB: Dr. Milton Friedman, why did you choose or why did they
ask you to write the introduction to the F. A. Hayek "Road to
Freedom" 50th anniversary ...
MILTON FRIEDMAN: ""Road to Serfdom"."
LAMB: Yes, that's your title on your book. Why did you do it?
FRIEDMAN: The reason they asked me was very clear, because Hayek and
I had been associated for a very long time, in particular in an
organization called the Montbelleron Society that he founded. The
charter meeting was in 1947 in Switzerland. Hans Morgenthau, who was
a professor at the University of Chicago when I was there, a
political scientist, when I came back from the meeting, he asked me
where I had been, and I told him that I had been to a meeting that
had been called by Hayek to try to bring together the believers in a
free, open society and enable them to have some interchange, one
with another. He said, "Oh, a meeting of the veterans of the wars of
the 19th century!" I thought that was a wonderful description of the
Montbelleron Society.
Well, Hayek and I worked together in the Montbelleron Society and we
were fostering essentially the same set of ideas. His "Road to
Serfdom" book, the one you have there, which was published 50 years
ago, was really an amazing event when it came out. It's very hard to
remember now what the attitude was in 1944-45. Throughout the
Western world, the movement was toward centralization, planning,
government control. That movement had started already before World
War II. It started really with the Fabian Society back in the late
19th century -- George Bernard Shaw, the Webbs and so on. But the
war itself and the fact that in war you do have to have an enormous
amount of government control greatly strengthened the idea that
after the war what you needed was to have a rational, planned,
organized, centralized society and that you had to get rid of the
wastes of competition. That was the atmosphere.
Those of us who didn't agree believed in what we would call a
liberal society, a free society -- 19th century liberalism. There
were quite a number of us in the United States and in Britain, but
in the rest of the world they were very isolated, indeed. Hayek's
idea was to bring them together and enable them to get comfort and
encouragement from one another without having to look around to see
who was trying to stab them in the back, which was the situation in
their home countries.
LAMB: The New York Times put on the Op-Ed page your introduction to
this edition. Do you know why they did that? What got their
attention?
FRIEDMAN: I can't answer that. You'd have to ask the people at the
New York Times. On the whole, they have in the past not been very
favorable to these ideas -- quite the contrary -- but they've been
changing. About two or three years ago, they published -- they've
turned down many an Op-Ed piece from me, which I subsequently
published in the Wall Street Journal or somewhere else. But a couple
of years ago, they did publish an Op-Ed piece from me about the
situation after the fall of the Berlin Wall, in which my thesis was
a very simple one. Everybody agrees, as a result of the experience
in the West, that socialism has been a failure. Everybody agrees
that capitalism has been a success, that wherever you have had an
improvement in the conditions of the ordinary people over any
lengthy time, it's been in a capitalist society, and yet everybody
is extending socialism.
After the fall of the Berlin Wall, there were no summits in
Washington about how we cut down government. The lesson from the
fall of the Berlin Wall was that we have too extensive a government
and we ought to cut it down. Everybody agrees, but yet wherever you
go, we have to extend socialism. The summit in Washington was about
how you enable government to get more revenue in order for
government to be more important, which is exactly the opposite. So
socialism guides our behavior in strict contrast to what we believe
to be the facts of the world.
LAMB: Let me ask you a little bit more about Friedrich Hayek. Who
was he?
FRIEDMAN: Fritz Hayek was an economist. He was born in Vienna. He
started his professional career in Vienna. In the late 1920s, some
people in Britain at the London School of Economics were very
greatly impressed with the book he had written and with the work he
had done, and they invited him to come to the London School. At a
relatively young age, he became a professor at the London School of
Economics. He spent the 30s and most of the 40s there. Early in the
1950s, he left London and came to the University of Chicago where he
was a professor for about 10 years, and then he went back to
Germany. He essentially retired to the University of Freiberg in
Germany.
LAMB: How long has he been dead?
FRIEDMAN: He's been dead about two years now, I think. He lived to
be 90, and he has an enormous list of books and articles and so on
he has published. The "Road to Serfdom," the one we're showing here,
was a sort of manifesto and a call to arms to prevent the
accumulation of a totalitarian state. One of the interesting things
about that book is whom it's dedicated to. It's dedicated "to the
socialists of all parties," because the thesis of the book is that
socialism is paving the way toward totalitarianism and that
Socialist Russia, at the time, is not different from Nazi Germany.
Indeed, it was National Socialism -- that's where "nazi" comes from.
This was a kind of manifesto and had a very unexpected effect. It
was turned down by several publishers in the United States before
the University of Chicago published it, and both in Britain and the
United States, it created something of a sensation. It was a
best-seller. The Reader's Digest published a condensation of it and
distributed 600,000 copies. You had a big argument raising about
people who were damning it as reactionary against all the good
things of the world and people who were praising it and showing what
the real status was.
It's a book well worth reading by anybody because there's a very
subtle analysis of why it is that well-meaning people who intend
only to improve the lot of their fellows tend to favor courses of
action which have exactly the opposite effect. I think from my point
of view the most interesting chapter in that book is one labeled
"Why the Worst Get on Top." It's, in a way, another example of the
famous statement of Lord Acton that "power corrupts and absolute
power corrupts absolutely."
LAMB: Lord Acton's quoted several times in the book.
FRIEDMAN: Oh, sure. Lord Acton was a great defender of a free
society. The way the worst rise to the top is that if you're given
power and you have to exercise it, you are driven by that necessity
to do things that many people really would object to doing. Only
those people who are willing to behave in a public capacity
differently than they would behave in their private capacity are
ever going to make it to the top.
LAMB: Who was Lord Acton?
FRIEDMAN: Lord Acton was an English Catholic who was a great
historian. He was a professor at Oxford. He had a named
professorship, which I've forgotten. He wrote "A History of
Liberty," which was very famous and very important. He also was very
much involved -- this has nothing to do with this, really -- in the
dispute within the Catholic church about the infallibility of the
Pope. What do they call it when they call one of these ...
LAMB: Encyclical?
FRIEDMAN: It's a meeting which establishes a policy.
LAMB: Like Vatican II?
FRIEDMAN: Right. One of those in the end of the 19th century was the
one at which they declared the doctrine of the infallibility of the
Pope, and he fought very hard against that because he was a believer
in liberty and freedom and tolerance and did not believe that you
should declare any man to be infallible.
LAMB: Why is it that so many conservatives today will cite you but
also cite Hayek?
FRIEDMAN: Because, as I said in that introduction, over the years
I've gone around and asked people who had shifted from a belief in
central government and socialism and what today goes by the name of
liberalism what led them to shift, what led them to an understanding
that that was a wrong road. Over and over again, the answer has been
The "Road to Serfdom".
LAMB: You wrote an introduction in 1971?
FRIEDMAN: I wrote an introduction to a German edition 25 years ago.
It was the 25th anniversary. My introduction here is primarily the
same one. It's just as applicable now as it was then. The really
troublesome thing is what I mentioned earlier. Everybody is
persuaded that socialism is a failure, and yet in practice we keep
moving down the socialist road. When Hayek's book was published in
1944 -- or let's take not 44, but take 46 or 50 just after the end
of the war -- government was much smaller in the United States than
it is today. If I remember the numbers, government spending at all
levels, for federal, state and local, was about 25 percent of the
national income. Today it's 45 percent. That doesn't allow for the
effect, not of spending, but of regulations -- the Clean Air Act,
the Aid to Disabilities Act and so on -- so that, in fact, we are
more than half socialist today; that is, more than half of the total
output of the country is being distributed in a way that is
determined by the government. That's the regulations.
We pride ourselves on being a free society and having a great deal
of liberty. We do, compared to many countries of the world. But just
consider the limitations on our freedom. You can't choose what
profession to go into. You can't become a lawyer just because you
want to become a lawyer. You have to get approval from the
government. You have to get a license. That's true for beauticians;
it's true for plumbers. It's true in New York City and most big
cities for taxicab drivers. There are enormous limitations on what
we can do, and this goes much beyond the direct economic sphere.
Consider the question of freedom of speech. During the 1950s, 60s
and 70s when there was a big problem of inflation, the government
was making a big push about selling savings bonds. They were a gyp.
The amount you paid for the savings bond you would never get back in
purchasing power. If you held a savings bond for 25 years, at the
end of the time when you turned it in, not only was the purchasing
power because of inflation less than it had been, but to add insult
to injury, you had to pay a tax on the so-called income from it. At
the same time, leading bankers would join in advertisements in the
newspapers telling everybody to buy savings bonds. I went around and
asked bank presidents that I knew why they did that. I asked them
first, "Do you buy savings bonds for yourself?" "Oh, no." "Is it a
good investment?" "No." "Why do you tell the public it is?" "Because
the Treasury wouldn't like it if we didn't." They're not free to
speak.
I know from experience -- I happen to be opposed to tenure in
universities. But the only academics who are free to speak that way
are people who have permanent tenure and on the verge of retirement.
If you look at it from that point of view, there are enormous
restrictions on what we can do and say, all imposed by the
government. That doesn't count the loss of freedom from the fact
that they take money away from hard-working, productive people who
are producing this national income and give it to people who are out
of work, who are on welfare, or in prisons for that matter. It
doesn't include the corruption in our personal property rights that
arises through the attempt to prohibit drugs, which has led to
tremendous invasions on our liberty. You can have a drug enforcement
person come to your door and knock on you because some unknown
person has said you're dealing with drugs.
There are many absolutely heartbreaking cases of innocent people
whose rights have been violated in this way, whose property has been
taken away and who have been unable to regain it. I'm a very old
man, and I was graduated from high school in 1928. That's a long
time ago. Now, if you look at the situation in 1928, we were much
poorer in terms of physical goods. We didn't have microwave, we
didn't have washing machines -- you can go down the line. There's no
question that we're enormously wealthier today in that sense and
enormously have a higher standard of living from that point of view.
On the other hand, we were safer, more secure, freer in 1928 than we
are now. As of that time, government was spending something like 10
to 15 percent of the national income; the private sector, 85 to 90.
Today, government controls over half the national income and private
enterprise controls only the rest.
Where have all these good things come from? Can you name any of
those additions to our well-being that have come from government? It
wasn't government that produced the microwave. It wasn't government
that produced the improved automobiles. It wasn't government that
produced computers that led to the information age. On the other
hand, consider our problems. Our major problems are not economic.
Our major problems are social. Our major problems are the underclass
in the center cities, the development of crime so that today we're
much less safe than we were when I graduated high school. We have
much less feeling of security, much less optimism about what the
future's going to be like, and all of the problems have been
produced but government. Consider the schools. The quality of
schooling I got in a public high school in 1928 was almost surely a
great deal higher than you can get in any but a small number of
schools now.
You have the dropouts, you have the decline in scores on SAT and the
like. Why? Because education is the most socialized industry in the
United States. Ninety percent of our kids are in public schools, ten
percent in private, and education is a completely centralized,
socialized system, and it behaves just the way every other
socialized system does. It produces a low-quality output, benefits a
small number of people -- currently mostly those who are associated
with the National Education Association, the American Federation of
Teachers -- and does a great deal of harm to a lot of people.
LAMB: Let me ask you about your own beginning. Where were you born?
FRIEDMAN: I was born in Brooklyn, but I had sense enough to move out
when I was 13 months old.
LAMB: What did your parents do then?
FRIEDMAN: My parents moved to Rahway, New Jersey, and they were
small-scale businessmen who never had an income and by today's
standard would have exceeded the poverty standard. They moved to
Rahway, New Jersey, where they at first had a small textile factory,
and then that wasn't very successful and so they opened a small
retail store and that was the source of their income.
LAMB: What influence did they have on what you decided to do for
college?
FRIEDMAN: Very little, except for the fact that they encouraged me
to want to go to college. As it happened, my father died before I
had graduated from high school. I had three sisters and myself. I
was the youngest, and I was the only one of the four who went to
college.
LAMB: Where did you go?
FRIEDMAN: Rutgers University.
LAMB: A state school.
FRIEDMAN: No, at that time it was not. Rutgers is a very old
institution that was established before the Revolution by the Dutch
Reform Church, and at the time I went to it, it was really entirely
a private school. Only subsequently was it converted into one of the
mega-state universities.
LAMB: What did you study?
FRIEDMAN: Hold on. However, I was able to go to it because of an
action of the state. The state of New Jersey at that time offered
scholarships on a competitive basis. Had a series of exams, and the
people who succeeded in those exams and who could demonstrate
financial need received free tuition at Rutgers. It was because of
that that I was able to go to Rutgers. Now, the tragedy. At the
time, that was a very valuable thing. The tragedy is that the state
of New Jersey in their new incarnation now has a similar program,
but the qualification for getting a scholarship is below average
academic quality. It's a program to raise the lesser qualified. It
typifies what's happened in our society. Instead of emphasizing
strengthening the opportunities open to the able, we have tended
increasingly to shift into a state of victims in which the emphasis
is on raising the people at the bottom. Now, no social progress has
ever come from the bottom up. It's always come from the top small
number pulling up the society as a whole and raising it.
LAMB: When did you first get into economics?
FRIEDMAN: I went to Rutgers and I did a joint major at the time in
economics and mathematics.
LAMB: Why did you pick it? Do you remember?
FRIEDMAN: No. I liked mathematics and I was good at mathematics and
I wanted to be able to earn an income. I may say, I worked my way
through school, of course. I earned my own income. I wanted to be
able to earn an income. As an innocent youth, the only way I knew
that you could use mathematics to earn an income was in actuarial
work for insurance companies, and so that was my initial objective.
How I got into economics, I don't know, but somehow or other I did
get into economics. Now, by the time I graduated in 1932, the
situation was very different. We were in the midst of the worst
depression we've ever had. The major problems of the country were
economic, and it's natural that I would have been interested. As it
happened, I was very lucky. When I graduated in 32, I was able to
get the offer of two tuition scholarships, one from Brown University
in applied mathematics and one from University of Chicago in
economics, and it's easy to know why I took the economics at that
time.
LAMB: How many books have you written?
FRIEDMAN: Oh, I don't know, 15.
LAMB: The best seller?
FRIEDMAN: The best seller is undoubtedly "Free To Choose," which was
written by myself and my wife. It was based on the TV program of the
same title. It was a 10-part TV program that was shown in 1980 on
PBS. In reverse of the usual procedure, the TV program wasn't based
on the book; the book was based on the TV program, because I
insisted that I was not going to talk to a written script for the TV
program but I was just going to talk. Then from the transcript of
the TV program, we developed the book. It's undoubtedly the best
seller, although the other you have there, "Capitalism and Freedom"
-- again, this is a very interesting contrast. That back was
published in 1963. At the time it was published, it was so out of
favor, so much outside the intellectual atmosphere of the time that
it was not reviewed in any major paper or magazine, other than the
Economist in London. It was not reviewed by the New York Times, by
the then Herald Tribune, Time, Newsweek. None of them reviewed it,
and yet over the subsequent 30 years, it has sold something like a
half a million copies.
LAMB: The tie you have on ...
FRIEDMAN: That's Adam Smith's tie.
LAMB: Adam Smith comes up in all your books.
FRIEDMAN: Oh, of course. Adam Smith was the founder of modern
economics.
LAMB: When did he live?
FRIEDMAN: In the 18th century. Adam Smith's great book, "The Wealth
of Nations," was published in 1776, the same year as the Declaration
of Independence.
LAMB: When did you first read it?
FRIEDMAN: In college as an undergraduate.
LAMB: Is he the guy who's most important in your education?
FRIEDMAN: Well, that's very hard to say. He certainly had a major
influence on all of us, but after all, I think the influence when
you get an education comes from people who are living people, not
from books. Books influence you. There's no doubt about it. They
make a great difference. But the person who is probably most
important in my education -- there are several. One is Arthur Burns,
who was subsequently chairman of the Federal Reserve System and so
on. He was at Rutgers, and he taught me as an undergraduate and he
was really my mentor for a large part of my professional career. I
owe a great deal to Arthur. But then I went to the University of
Chicago and there was a group of teachers at the University of
Chicago -- Jacob Viner, Frank Knight, Henry Simons -- who played a
major influence in shaping my views and attitudes.
LAMB: When did you think you had enough independent thought to start
writing books like "Free to Choose" and "Capitalism and Freedom"?
FRIEDMAN: That was very late. Up until that point, prior to that, my
writings were scientific. See, these books give a misleading
impression of my publications. Most of my publications are
technical, scientific, economic publications, which really do not
have any great interest to the public at large. That's a
best-seller, "Free to Choose," but there's no question that the most
influential book I've written is not "Free to Choose," but a book
that sold probably one-twentieth as many, 5 percent as many copies,
namely "A Monetary History of the United States," which I wrote
jointly with Anna Schwartz. So I really had a fairly large body of
technical economic literature before I started writing on public
policy.
LAMB: Where did you meet your wife?
FRIEDMAN: In the first course in economics at the University of
Chicago in 1932. We took the same course. It was Jacob Viner's
Economic Theory, and, as it happened, Jacob Viner seated his
students alphabetically in order to be able to remember their names,
and so Rose Director, which was her name, sat next to Milton
Friedman. In addition, as Rose always says, she was the only girl in
the class at the time.
LAMB: When did you decide to write books together, and how did you
separate the responsibility?
FRIEDMAN: Well, that's very hard to answer. We were married in 1938,
six years after we first met, and then we had children. Rose did a
wonderful job in really taking care of the house, raising children
and being an inspiration to me. But she had a professional career
before that. She had written some things and worked in research
organizations before that. But it wasn't until the kids were grown
up and off to college that she was able, really, to spend the time
working with me. "Capitalism and Freedom" was based on a series of
lectures that I had given at a kind of summer school, and she took
those lectures and reworked them into the book, so really she should
have been a joint author on that as well.
LAMB: Janet and David?
FRIEDMAN: They're my children.
LAMB: You dedicate "Capitalism and Freedom" to them. Where are they?
FRIEDMAN: Janet's at Davis, California. She's a lawyer, but her
husband is a computer specialist who teaches at the Davis Branch of
the University of California. My son David is now -- well, he's had
a checkered career in the sense that he got a degree in physics, a
Ph.D. in physics, but he's become an economist. He never took a
course in economics except over the dinner table.
LAMB: Where is he?
FRIEDMAN: He's at the University of Chicago in the law school where
he does research in law and economics.
LAMB: When did you win the Nobel Prize and for what?
FRIEDMAN: I won the Nobel Prize in 1976, and I won it for none of
those things, but for "Monetary History of the United States "and an
earlier book of mine called "A Theory of the Consumption Function,"
which, I may say, are funny things. "A Theory of the Consumption
Function" is, in my mind, the best thing I ever did as a piece of
science. "Monetary History" is undoubtedly the most influential, and
"Free to Choose is the best selling," so they are not similarly
characterized.
LAMB: I'm going to take it even a step lower, if you will. I want
you to tell a little bit of the pencil story.
FRIEDMAN: Oh, sure. I'd be delighted to.
LAMB: Your picture on this book has you with a pencil in your hand.
FRIEDMAN: That didn't originate with me. I got it from Leonard Read,
who was the head of the Foundation for Economic Education. It's used
to tell how the market works, and it's used to tell how people can
work together without knowing one another, without being of the same
religion or anything. The story starts like this: Leonard Read and I
held up a lead pencil -- so-called, one of these yellow pencils --
and we said, "Nobody knows how to make a pencil. There's not a
single person in the world who knows how to make a pencil." In order
to make a pencil, you have to get wood for the outside. In order to
get wood, you have to have logging; you have to have somebody who
can manufacture saws. No single person knows how to do all that.
What's called lead inside isn't lead. It's graphite. It comes from
some mines in Latin America. In order to be able to make a pencil,
you'd have to be able to get the lead. The rubber at the tip isn't
really. Nowadays it isn't even natural rubber, but at the time I was
talking, it was natural rubber. It comes from Malaysia, although the
rubber tree is not native to Malaysia but was imported into Malaysia
by some English botanists.
So in order to know how to make a pencil, you would have to be able
to do all of these things. There are probably thousands of people
who have cooperated together to make that pencil. Somehow or other,
the people in South America who dug out the graphite cooperated with
the people in Malaysia who tapped the rubber trees, cooperated with
maybe the people in Oregon who cut down the trees. These thousands
of people don't know one another. They speak different languages.
They come from different religions. They might hate one another if
they saw them. What is it that enabled them to cooperate together?
The answer is the existence of a market. The answer is the people in
Latin America were led to dig out the graphite because somebody was
willing to pay them. They didn't have to know who was paying them;
they didn't have to know what it was going to be used for. All they
had to know was somebody was going to pay them.
Indeed, going back to Hayek, one of the most important articles he
ever wrote -- it doesn't show up in the book -- was about the way in
which prices are an information mechanism, the role of prices in
transmitting information. Let's suppose there's a great increase in
the demand for graphite. How do people find out about that? Because
the people who want more graphite offer a higher price for it. The
price of graphite tends to go up. The people in Latin America don't
have to know anything about why the demand went up. Who is it who's
willing to pay the higher price? The price itself transmits the
information that graphite is scarcer than it was and more in demand.
If you go back to the pencil thing, what brought all these people
together was an enormous complex structure of prices -- the price of
graphite, the price of lumber, the price of rubber, the wages paid
to the laborer who did this and so on. It's a marvelous example of
how you can get a complex structure of cooperation and coordination
which no individual planned. There was nobody who sat in a central
office and sent an order out to Malaysia, "Produce one more thimble
of rubber," or sent a signal. It was the market that coordinated all
of this without anybody having to know all of the people involved.
LAMB: How many times have you told that pencil story?
FRIEDMAN: Well, I really haven't told it that many times. I told it
in the TV program and then I told it in the book, but I think this
is the third time.
LAMB: You're living in San Francisco, where we are. What brought you
here?
FRIEDMAN: When I reached the age of 65 -- I was at that time living
in Chicago and teaching in Chicago -- I decided I had graded all the
exam papers I was going to grade. My wife grew up in Portland,
Oregon, and she was in love with San Francisco. She tried to move us
out here many times during our life together, but she never
succeeded until I decided I was going to retire from active
teaching. Fortunately, the Hoover Institution at Stanford University
offered me the opportunity to be a fellow at Hoover so I could
continue my research and writing without doing any teaching.
LAMB: Peter Robinson, who is a "Booknotes" that people will see at
another time, said that he got an MBA from Stanford and never once
did anybody bring up Adam Smith or Milton Friedman.
FRIEDMAN: I can believe that.
LAMB: Why would that be?
FRIEDMAN: Because you still have, although it's not the same as it
was in 1963 -- there's more tolerance for the kind of ideas I am in
favor of. The general academic community is very much socialist in
the sense in which Hayek speaks of the socialists. The general
academic community, nowadays it's labeled political correctness. The
ideas of Adam Smith, the ideas of Friedrich Hayek, of Milton
Friedman are not very congenial to those who believe that the way in
which you get things done is by having government come in and do
them.
LAMB: You said earlier that you're an old man. Do you feel like an
old man?
FRIEDMAN: Physically at the moment I do, but not intellectually.
LAMB: Why physically?
FRIEDMAN: I recently had an operation on my back, which had some
side effects from which I've been very slow in recovering.
LAMB: How old are you now?
FRIEDMAN: I'm 82 years old.
LAMB: Other than this operation, do you think differently because
you're an older person?
FRIEDMAN: No.
LAMB: Do you have things you want to accomplish?
FRIEDMAN: Absolutely. My wife and I are in the process of trying to
write our memoirs.
LAMB: What in that process are you finding? Is it hard?
FRIEDMAN: Yes, because when you start digging back into your past,
you find that you've forgotten so much and there's so much to dig
out.
LAMB: What's the purpose of the memoir?
FRIEDMAN: Well, that's hard to answer. The purpose of the memoirs is
we have been very fortunate people. In fact, our tentative title for
it is "Two Lucky People." We've been very fortunate in our life.
We've had a great deal of activity. We've spent a long time. We've
been able to be at the center. For example, we spent years with the
New Deal in Washington. I was involved in wartime research during
the war. We've lived through and been associated with a lot that has
gone on, and we believe that people have forgotten that story.
We're not mostly interested in telling about ourselves, but we want
to tell about the world in which we grew up and the world which
enabled us, both of whom came from families which by any standard of
today would have been regarded as below the poverty level, but
neither her family nor mine ever thought of themselves as poor. They
weren't poor. They didn't have a very high level of income, but they
weren't poor. Unfortunately, the world is moving in a way in which
that is no longer likely to be the case. We think maybe we have a
story to tell that will be of interest to the public people at
large.
LAMB: How are you going about it?
FRIEDMAN: By writing it.
LAMB: Separately, together? Do you dictate?
FRIEDMAN: No. In a word processor mostly. Sometimes by hand, but
mostly in a word processor. But the way we've always done it. We
each write parts of it, and then we share it and so on. I don't
believe the problem of collaboration is a very difficult one.
LAMB: How far away are you from completing it?
FRIEDMAN: We're about halfway through.
LAMB: What size will it be when it's finished?
FRIEDMAN: I don't know. At the moment, it's about this big, but how
big it'll be, I don't know. We're up into the 1950s.
LAMB: As you look around today and watch the world move, where are
the influences in the society today? Do books influence? Newspapers?
Television?
FRIEDMAN: I would say the television has a tremendous influence, but
I think books also have an influence. It's not easy to answer that
question. That's a very sophisticated and subtle question, and I
don't have an easy answer to it. I think experience plays an
enormous role. The collapse of the Berlin Wall, for example, was
undoubtedly the most influential action for the last hundred years
because it put finis to an attitude. The general attitude had been
that the future was the future of government, that the way in which
you got good things done was by having government do it. I believe
the collapse of the Berlin Wall and the exposure of what was
happening in Russia, the contrast between East Germany and West
Germany has been made a lesson; more recently, the experience of
East Asia, of Hong Kong, of Singapore.
Today people may not behave in accordance with their knowledge, but
everybody knows that the way to develop and to improve the lot of
people is through private markets, free enterprise and small
government. We're not practicing what we should be preaching. I've
been saying that the former communist states are trying as hard as
they can to go to where we were 50 years ago, whereas we're trying
as hard as we can to go to where they were 10 years ago.
LAMB: Why?
FRIEDMAN: Because of the inertia and the drive for power. It's very
hard to turn things around. The big problem with government, as
Hayek points out, is that once you start doing something, you
establish vested interests, and it's extremely difficult to stop and
turn that around. Look at our school system. How is it our school
system is worse today than it was 50 years ago? Look at the welfare
state. We've spent trillions of dollars without any success. But
unsuccessful experiments in government -- I've said if an experiment
in private enterprise is unsuccessful, people lose money and they
have to close it down. If an experiment in government is
unsuccessful, it's always expanded.
LAMB: What is it that government does that you like?
FRIEDMAN: I would like government to enforce law and order. I would
like government to provide the rules, effectively, that guide our
life, that determine what's proper and to do very little other than
that.
LAMB: What kind of a grade do you give to the American system of
government today? How is it working?
FRIEDMAN: As it was in 1928 or as it is in 1994? It's a great
system. The fundamental system is great, but it hasn't been working
in the last 30 years.
LAMB: Why not?
FRIEDMAN: Because we've been departing from its fundamental
principles. The founders of country believed in individual freedom,
believed in leaving people be, letting them be alone to do whatever
they wanted to do. But our government has been increasingly
departing from those constitutional principles. You know, there's a
provision in the constitution that Congress shall not interfere with
interstate commerce. That provision had some meaning at one time,
but it has no meaning now at all. Our courts have ruled that
anything you can think of is interstate commerce, and so the
government exercises extensive control over things that it has no
business interfering with.
LAMB: What do you think of the Federal Reserve Board today?
FRIEDMAN: I've long been in favor of abolishing it. There's no
institution in the United States that has such a high public
standing and such a poor record of performance.
LAMB: What did Arthur Burns think of that?
FRIEDMAN: He didn't like that very much, but, needless to say, I
didn't hesitate to say it to him. Look, the federal reserve system
was established in 1914, started operation in 1914. It presided over
a doubling of prices during World War I. It produced a major
collapse in 1921. It had a good period from about 1922 to about 28.
Then it undertook actions which led to a recession in 1929 and 30,
and it converted that recession by its actions into the Great
Depression. The major villain in the Great Depression was, in my
opinion, unquestionably the federal reserve system. Since that time,
it presided over a doubling of prices during World War II. It
financed the inflation of the 1970s. On the whole, it has a very
poor record. It's done far more harm than good.
LAMB: What do you say to the people who say and write that it's just
a matter of time until it all comes tumbling down, meaning the
tremendous debt we have in this country will catch up with us?
FRIEDMAN: The debt is not the problem. The debt is not the problem.
You've got to compare a debt with the assets which correspond to it.
It need not come tumbling down. Whether it comes tumbling down will
depend on what we do. If we continue to expand the role of
government, if we let government grow beyond limit, it will come
tumbling down. But that isn't going to happen. The attitudes of the
American people have changed, and they've become aware of the fact
that government is too big, too intrusive, too extensive, and I have
a great deal of confidence in the American people that they're going
to see to it that doesn't happen.
LAMB: But if you were sitting around with experts in a room and they
said, "Let's look at the future," where are the problems? We listen
every day on the radio and read in the newspapers that it's just a
matter of time.
FRIEDMAN: I think that's wrong. Fundamentally, what's been happening
is that in the period I talked about from 1928 to now, we have been
starving the successful part of our society, namely, the free
private enterprise system, and we have been feeding the failure.
Government controls over 50 percent of the output of the country,
but thank God government is not efficient. Most of that is wasted.
LAMB: Another one of our "Booknotes" guests in this series is John
Kenneth Galbraith. If you put the two of you in a room together,
which one's the happiest with what's happened over the last 50
years?
FRIEDMAN: Ken would be much happier than I would be.
LAMB: Why would he be?
FRIEDMAN: Because he's a socialist.
LAMB: Why do you think he's happier and why do you think his side's
been more successful?
FRIEDMAN: Because the story they tell is a very simple story, easy
to sell. If there's something bad, it must be an evil person who's
done it. If you want something done, you've got to do it. You've got
to have government step in and do it. The story Hayek and I want to
tell is a much more sophisticated and complicated story, that
somehow or other there exists this subtle system in which, without
any individual trying to control it, there is a system under which
people in seeking to promote their own interests will also promote
the well-being of the country -- Adam Smith's invisible hand.
Now, that's a very sophisticated story. It's hard to understand how
you can get a complex interrelated system without anybody
controlling it. Moreover, the benefits from government tend to be
concentrated; the costs tend to be disbursed. To each farmer, the
subsidy he gets from the government means a great deal. To each of a
much larger number of consumers, it costs very little. Consequently,
those who feed at the trough of government tend to be politically
much more powerful than those who provide it with the wherewithal.
LAMB: During your lifetime, who are the leaders you think have been
the most loyal to their beliefs and have done the best job?
FRIEDMAN: I would certainly put Ronald Reagan high on that list.
LAMB: What do you say to David Frum's thesis? Have you read "Dead
Right"?
FRIEDMAN: Yes. He's quite right. I agree with it.
LAMB: That conservatives basically buy off now ...
FRIEDMAN: I'm not a conservative. I never have been a conservative.
Hayek was not a conservative. The book that follows this one in
Hayek's list was "The Constitution of Liberty," a great book, and he
has an appendix to it entitled "Why I Am Not a Conservative." We are
radicals. We want to get to the root of things. We are liberals in
the true meaning of that term -- of and concerned with freedom. We
are not liberals in the current distorted sense of the term --
people who are liberal with other people's money.
LAMB: You write about Thomas Jefferson. What was he?
FRIEDMAN: I would certainly put him very high on the list. He was a
great man. There's no question about that, and he was certainly a
believer in freedom. He was not a conservative.
LAMB: Would he have been a liberal?
FRIEDMAN: Yes, in my sense, not in the corrupted sense of today.
LAMB: But what's confusing as you watch today's people who embrace
him, you have the Jefferson-Jackson dinners every year for the
Democratic Party, and Lincoln is embraced by both sides. What was
he?
FRIEDMAN: He's much more difficult to characterize because his role
in our history had to do with the Civil War, and that's not
something to be characterized in terms of socialist or liberal or
conservative.
LAMB: Is Thomas Jefferson a Democrat as we know the Democratic Party
today?
FRIEDMAN: No, he would not.
LAMB: What would he be today?
FRIEDMAN: He would be a libertarian.
LAMB: A member of the Libertarian Party?
FRIEDMAN: Not necessarily. See, I'm a libertarian in philosophy,
but, as I say, I'm a libertarian with a small "l" and a Republican
with a capital "r."
LAMB: You supported and were close to Barry Goldwater.
FRIEDMAN: Yes, I was.
LAMB: What was he?
FRIEDMAN: A libertarian in philosophy, not in party.
LAMB: What is Bill Clinton?
FRIEDMAN: Oh, he's a socialist.
LAMB: Defined as being what?
FRIEDMAN: As somebody who believes that the way to achieve good
things is to have government do it. You can't think of a more
socialist program than the health care program that he tried to get
us to adopt.
LAMB: You said earlier in the discussion when we were talking about
Rutgers that the worst way to go is to take care of the bottom up.
Explain that.
FRIEDMAN: Not to take care of them in the sense of giving them a
minimum income, but to believe that the progress of society is going
to come from the bottom.
LAMB: So how do you take care of someone who is in the lower third?
FRIEDMAN: In my book "Capitalism and Freedom" I propose something
called a negative income tax, of getting rid of all of the welfare
programs we now have, but replace them by essentially a minimum
income.
LAMB: But you also say that's not going to happen very quickly.
FRIEDMAN: Well, we're moving toward that. The earned income credit
is in that line.
LAMB: What will that do?
FRIEDMAN: What we're not going to move toward, the place we're wrong
is with all of the special welfare programs we have -- food stamps,
aid to families with dependent children. There are probably a
hundred such programs, and what I've argued is that we ought to
replace that whole ragbag of programs with a single negative income
tax.
LAMB: In your lifetime, have you ever had a theory that proved to be
wrong? Do you ever go back and say, "I was wrong"?
FRIEDMAN: Oh, yes, sure.
LAMB: What was it?
FRIEDMAN: During World War II when I was at the Treasury, I was
essentially a Keynesian, as I believed that the way to control
inflation was by controlling government spending. I paid very little
attention to money. Only after World War II when I started to work
in the field of money did I come to a different conclusion. Now, I
believe Keynes was a great man. He was a great economist, but I
think his theory is wrong.
LAMB: And his theory, basically stated, is?
FRIEDMAN: Basically stated, the fundamental element of it, is that
what matters is spending and what matters in particular is
government spending and that government must play a major role in
guiding the society. He was a liberal in the 19th century sense, but
he was also an elitist, and he believed that there was a group of
able public-spirited intellectuals who should be given charge of
society.
LAMB: When people look at Milton Friedman 25 years from now --
you'll probably still be here ...
FRIEDMAN: I won't be here.
LAMB: What do you want them to remember? Do you want them to
remember you as a writer, as a teacher, as a philosopher, as an
economist?
FRIEDMAN: Again, I want them to remember me as an economist.
LAMB: And what principle do you want them to remember the most?
FRIEDMAN: That's hard to say because there are quite a number. I
mentioned "The Theory of the Consumption Function," which is a very
technical book but which yet, I believe, has had a good deal of
influence within the discipline of economics. But I really don't
know how to answer that question. I think that people 25 years from
now will have to answer it, not me.
LAMB: Milton Friedman has been our guest, and he wrote the
introduction of this 50th anniversary edition of F. A. Hayek's book,
"The Road to Serfdom," and he has a few books of his own. We thank
you very much for joining us.
FRIEDMAN: Very nice to be here.
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Copyright © National Cable Satellite Corporation 1994.
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Introduction to the 50th anniversary edition of F.A. Hayek's Road
to Serfdom
Publisher: University of Chicago Press (Trd)
ISBN: 0226320596
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