Milton Friedman: Capitalism And Freedom

In this essay I would like to consider the Milton Friedman’s thesis concerning the fact that economic freedom is a prerequisite for political freedom. After analyzing his book (Capitalism and Freedom) I must say that I fully agree with this statement. However, arises the question what economic freedom is. It can be said that there is no unique definition of this concept, but many experts agrees with the opinion that economic freedom is characterized by the greater number of options for business entities provided by the government. As a fact, economic freedom determines political situation in the country. Also, economic freedom provides stability and new prospective of activities in this sphere.

Without any doubts, economic freedom takes a special place among other values of the society, such as economic, political or civil freedoms. In my opinion, economic freedom despite all, serves as a support of other freedoms. It is difficult to imagine how a person can be meaningfully engaged in political freedom or civil rights in the situation, when he does not have a chance of personal choice, an opportunity to protect his private property according to the law. In his book “Capitalism and freedom” Milton Friedman proclaimed following: “So that the record of history is absolutely crystal clear. That there is no alternative way, so far discovered, of improving the lot of the ordinary people that can hold a candle to the productive activities that are unleashed by a free enterprise system”, as described in Capitalism and Freedom.

It should be noted that the collapse of central planning system in the USSR and in other socialistic countries in the last 20 years seems to confirm the thesis of Friedman. Worldwide growth of economic freedom was accompanied by the rise of political and civil freedoms, and both processes were of great importance, as the countries changed their political systems to the side of liberalism and opened their markets.

It can be said that achieving economic freedom is desirable in itself, because it expands the range of choice available to the individual – both as consumer and as producer. However, the importance of economic freedom in society is often overlooked, including those who are convinced of the importance of human rights, political pluralism, speech and religion. It is important to note that the decentralization of economic decision-making strengthens in civil society, creating a system in which various organizations can exist independently from state control. In a country where is economic freedom, the private sector, as a rule, contributes to the development of the civil society institutions. That is why, a truly independent organizations, opposition political parties, businesses, mass media have more chances to exist in the situation when the bureaucrats do not control all economic power, and also it is not concentrated in the hands of politicians, as described in Capitalism and Freedom: A Critique of Milton Friedman’s Views.

According to “Capitalism and Freedom” Unmasked, economic liberalization is characterized by facing the complete loss of control over the citizens in a political sense Today, many authoritarian governments all around the world are faced with this situation. Moreover, it can be said that the main reason of this process lies in the fact that we live in the era of globalization. Consequently, Chinese Communist Party nowadays is facing with well known dilemma. On the one hand, to maintain social stability, China must continue to liberalize the economy of the country, which is ensured with high growth rates for over two decades. On the other hand, market reforms offered to millions of Chinese people plenty opportunities to have more independence from the state and led to the formation of a middle class, which increasingly demands political freedoms and its representation on the political level. As a fact, the Communist party wants to retain political power, but economic liberalization undermines this goal, because if authorities end liberalization policy, this step will reduce economical growth and entail destabilization in the country. This situation can be clearly seen in China and many other countries, where economic freedom encourages political pluralism, contributing to the growth that generates the middle class citizens, which has less dependence on the state and its policy. Without any doubts, empirical evidence supports this connection, as described in Milton Friedman’s Unfinished Business.

It should be noted that the thesis that economic freedom is a prerequisite for political freedom is clearly proved by research “Economic Freedom of the World” that were conducted by the Canadian “Fraser Institute”. As a fact, it is the most comprehensive empirical study of the relation between economic policies and institutions, on the one hand, and level of wealth of the population, on the other hand. According to Economic Freedom of the World. 2010 Annual Report, “the research addresses the 38 components of economic freedom from government to the rule of law and the monetary and trade policies in 127 countries over a period of 30 years”. It should be noted that the survey found a strong link between economic freedom and prosperity. In countries with free economies the average income per capita is $ 25,062 in comparison with $ 2,409 in the countries with the lack of freedom. As a fact, countries with free economies and liberation economic policy are also growing faster than countries with less free economies. In most free countries, the growth rate of per capita income over the past 10 years amounted to 2.5 percent, while the less free – to 0.6 percent.

Also, Fraser Institute study found that economic freedom of the country is strongly associated with poverty reduction, and other signs of progress. It can be stated that the level of income is $ 6451in the poorest countries, which form 10 percent of the population in most economically free countries. At the same time, in less free countries this indicator is at the level of $ 1185. Moreover, people living in the more developed countries in terms of economic freedom, as a result, live about 25 years longer than people in the poorer countries. As well, UN human development index is positively correlated with greater economic freedom. To a large extent this also applies to the index of political and civil liberties by the technique of Freedom House – countries with greater economic freedom tend to have more of other freedoms, as described in Economic Freedom of the World. 2010 Annual Report.

I am convinced that sustainable growth contributes to creation of conditions for free entrepreneurship and the guaranteeing protection of private property. Obviously, economic freedom strives to provide sustainable growth, but anyway, it does not result in democracy. Notable examples include Hong Kong and Singapore, where the economy is one of the freest in the world. However, wealth itself is not always a result of economic freedoms, which proves some countries that are rich in resources and with relatively high incomes, but with strict government control over the economy. Undoubtedly, civil and political freedoms in these countries are extremely limited. Although, the key role of economic freedom in a democracy, is obvious. As a fact, it can be a powerful force to promote democracy and to preserve political freedom, but it requires a high degree of economic freedom, as stated in Milton Friedman’s Hidden Anarchism in Capitalism and Freedom.

To sum it up I would like to say that I fully agree with Milton Friedman’s thesis that economic freedom is a prerequisite for political freedom. Without any doubts tight government control does not allow people to develop economically. According to Milton Friedman: “The world runs on individuals pursuing their self interests. The great achievements of civilization have not come from government bureaus. Einstein didn’t construct his theory under order from a bureaucrat. Henry Ford didn’t revolutionize the automobile industry that way”. In other words, if a country wants to conduct independent policy on the international arena – it should be based on its economical power. Moreover, President Kennedy once said: “the policy of the country is determined by its economy”. I share this opinion, if the country wants to ensure the better future for its citizens in political sense and develop such important mechanisms as civil society, before that authorities should proclaim economic freedom, which is inherent mechanism of true freedom of its citizens. Those of us who believe in democratic capitalism, whether we live in affluent democracies, the poor, democratic or autocratic states, should not lose sight of the key role of economic freedom in achieving a free society.