Freedom and the Market
I recently visited the Autonomous Technological Institute of Mexico (ITAM) to discuss the leadership and cultural change, a crucial issue for Mexico. I discussed the growth in government spending and the key role of civil society. I commented that one of the main problems we face is the horrible idea that the government will resolve all of our problems. As noted in "The Great Degeneration" by Niall Ferguson, there is no idea more dangerous than the belief that the government will resolve all of our problems. Liberal thinking is a powerful antidote to such thoughts.
In Mexico, fortunately we have a centuries-old liberal tradition. We Mexicans love our freedom and are prepared to defend it against any power. Every day the Mexican press reminds us of the value of freedom and democratic practices. There are also programs and initiatives such as the Caminos de la Libertad essay contest that are devoted exclusively to promoting a liberal agenda.
Nevertheless, there is one point that is often ignored or even belittled by the most renowned Mexican liberals, namely economic freedom. According to Milton Friedman and other authors, this freedom, along with freedom of expression, is a cornerstone of an open society. In 1962, Milton Friedman wrote an essay, entitled “Capitalism and Freedom” that was initially rejected even in the United States but has gradually gained acceptance and importance. Even though I find a contradiction between the liberal values promoted by Friedman and his commitment to militarism, the essay is nonetheless essential reading for any liberal worthy of the name.
In the 1960s, at the height of a misunderstood Keynesianism, Milton Friedman was accosted for his ideas, even in the United States. However, in the 1970s and 1980s, given the seriousness of the fiscal crises caused by excesses in public spending and the growing government intervention in the economy, Friedman's ideas were gradually incorporated into official policies. Many of these ideas are now recognized throughout the world, such as the crucial importance of removing the government’s control over activities that are not essential to its operation.
Thanks to the pressure from this economic mindset, in the 1980s and 1990s privatizations were undertaken and other measures implemented throughout the world that enabled public finances to be put on a healthy footing and increased government efficiency and competition in the markets. The privatization of TV Azteca in 1993 was one such measure.
However, in Mexico, Friedman's ideas are still disparagingly characterized as "neoliberal" as if being liberal in any of its variants were something terrible. What's worse is that these judgments are made by commentators who would otherwise have impeccable liberal credentials. Perhaps they feel economic freedom to be less important than all the other liberties, but this is a fatal error.
In any event, I think it is worth revisiting the writings of Friedman’s, who in the preface to the 2002 edition of his book, recognized that his concepts were universally rejected from the word go and very slowly accepted worldwide.
The central idea of his essay is that the unbridled growth of government and its constraints on the market threaten the freedom and the general welfare of the population, and that this has been amply demonstrated.
Nevertheless, if Friedman had lived to witness the European crisis a few years after his death, he would understand that the degree to which his ideas were accepted was insufficient.
For Friedman there is an intrinsic connection between freedom and the market, between capitalism and democracy. This is why a liberal party is inconceivable in a communist country, but in capitalist country, socialist intellectuals can flourish. The reason is that under a radical communist system, all economic activities, by definition, are government controlled, and no one can lead an economic life outside such control, and as a result, a communist regime has the capacity to get rid of any liberal intellectual who might pose a "danger to the state."
But in a society of free men and women, the government is just a tool to achieve the common good and not an end in and of itself, nor is it the lord and master that should rule over our destinies without being questioned for its actions. For Friedman, the free market is a necessary condition for political freedom to percolate, although at times it is not a sufficient condition for this to occur.
Even though Friedman acknowledges that there should be a national goal or project, it should not undermine the welfare of its citizens. On the contrary, it must protect and promote their welfare and of course, freedom. A government that undergoes unbridled growth views individual liberties as a constant threat and seeks by all means to restrict them. Therefore, the greatest threat to freedom is the concentration of power in the hands of the government and the more power is concentrated, the greater government restrictions and obligations imposed on the people will be.
A functioning market is the opposite of the concentration of power. It represents the interaction of free men and women seeking to exchange the fruits of their labor with other free men and women to increase the welfare of their families. In this sense, any threat to the market is a challenge to a basic freedom, economic freedom. On other occasions I have mentioned the importance of business and commerce to human progress. Friedman emphasizes something that goes much deeper, the importance of business and commerce to strengthen the society of free men and women.
Consequently, Milton Friedman warns that any government restriction on commerce is an attack on human freedom, with the sole exception being the control of monopolies, which must be strong, since monopolies also restrict our economic freedom. The same can be said, of course, for other failures of the market that have been completely identified, including the destruction of the environment.
A natural conclusion from this essay is that government activities should be limited. The only function of government should be to guarantee the safety and protect the freedom of citizens and uphold the rule of law, order, enforce compliance with contracts, and ensure competition in markets. I imagine that a government incapable of providing security and maintaining the rule of law would be inconceivable for this author.
Beyond these functions, there are other secondary obligations of government such as meeting commitments that could hardly be achieved independently by individuals and guaranteeing the supply of public goods and services. However, even in these cases, Friedman believes that the private sector and civil society must always take precedence over the government in any human activity, due to the permanent risk posed by the concentration of power that the government maintains by definition.
In addition, Friedman reminds us that the great advances of civilization, whether in science, literature, art, industry or agriculture, occur not thanks to the government, but in spite of it because the government can never replicate the variety and richness of individual action.
For Friedman, an author despised by those I call "governa-saurs,” the power to do good is also the power to do evil, and therefore government must face clear and insurmountable limits.
Economic freedom is one of the most powerful counterweights we can impose on a potential tyrant. Perhaps that is why many Mexican politicians so vehemently attack the free market and label anyone who seeks to limit government power as “neoliberal”. It’s worth revisiting what Friedman has to say, especially today. Let’s think about it.