The Friedman Inventions

The Friedman Inventions

In a persuasive tract, Free to Choose (Harcourt Brace Jovanovich, 1979), Milton and Rose Friedman propound an economic system that does not exist, never has existed, and is unlikely ever to exist except in the fantasies of authors who perceive its present reality in Hong Kong, its past in the golden age between Waterloo and World War I, and its future in a world conforming to the Friedman formula. The formula is an economy that runs itself without governmental intervention in a society that separates politics from economics. Such a social order will not only bring greater material gains but also the underpinnings for lasting democracy and peace—they say.

The diagram of this laissez-faire Elysium is drawn so cleverly that a man from Mars would find it almost faultless. The Friedman schema is internally logical. Its sole weakness is its inconsistency with the external, the real, world.

This fatal flaw is most apparent when the Friedmans depart from their smooth syllogisms to refer to the world as it is to Hong Kong today, free trade in the 19th century, and the Meiji Restoration in Japan—as evidence of how well their formula works in practice. Let’s consider each of these.

Hong Kong is the Friedmans’ proof positive that an urban industrial society does not require governmental guidance. “It is often maintained,” they write, “that while a let-alone, limited government policy was feasible in sparsely settled 19th-century America, government must play a far larger, indeed dominant, role in a modern urbanized
and industrial society. One hour in Hong Kong will dispose of that view.” As they see it, “Hong Kong, a Crown colony,” is “the modern exemplar of free markets and limited government.”

Now a few facts. In 1977, in the May 1 issue, the Manchester Guardian ran a set of firsthand reports on conditions in exemplary Hong Kong. The lead story reads:

Many young workers in Hong Kong, especially those employed in the smaller factories that dominate every local industry, work in cramped, unhygienic and dangerous conditions that would not have surprised Shaftesbury or Dickens. In the three years to 1975, 142 workers aged 14 or 15 were injured in the manufacture of plastic products and more than 500 aged 16 to 17. There are no comprehensive figures for injured illegal child workers—those aged 13 or under. However, one hospital alone handled 12 cases last year of children as young as 11 who had suffered industrial injuries…. Although modestly better employers than local companies, foreign firms in Hong Kong are there to take advantage of the colony’s chief assets: hard work, cheap labor, and few restrictive laws…. Children and teenagers are driven into factory life by the four forces that shape the lives of most of Hong Kong’s 4,400,000 people—poverty, limited and expensive educational