Free or Equal – Full Video


My name is Johan Norberg, a writer and an
analyst, and I was born and raised here in Sweden. I was three years old, when the Nobel
Prize in Economics was awarded to Milton Friedman here in Stockholm. This is Stockholm City
Hall, the traditional place for the Nobel banquet. This is where Milton Friedman celebrated
his prize. Milton Friedman did a lot more than win the Nobel Prize here in Stockholm.
He had a thought-provoking message that won him thousands of advocates and opponents all
over the world. In 2002, I had the pleasure of meeting Professor
Friedman, and the thing that struck me was his intellectual curiosity. His research led
him to believe in the power of free markets and economic freedom, while many people today
place a greater emphasis on government safety nets and greater financial equality. On this thirtieth anniversary of Milton Friedman’s
PBS television series, I’ll revisit his ideas on the struggle between freedom and equality. Major funding for this program was provided
by: Additional funding was provided by: No matter where you come from, whenever there
is a problem, it’s tempting to look to the government for solutions. Since the recession
of 2008, we’ve seen unprecedented government intervention in the financial sector, and
in the automotive industry. We’ve seen new spending programs, more tariffs and new regulations.
And we’ve seen the largest buildup of government debt in American history; a debt that might
haunt us for generations. Some people blame the financial crisis on
Milton Friedman and his theories of free markets, but Friedman would say that economic freedom
is not just to reap the rewards when times are good; it’s also to bear the consequences
of your actions when times are bad. We don’t have free markets as long as speculators can
keep the profits when they win, but send the losses to the taxpayers when they lose. I was born and raised in Sweden. And my country
has made an effort to make people’s lives, “more equal.” To reduce differences of outcome,
we tax heavily and redistribute wealth among our citizens…and many people in the United
States advocate a system like ours. If, on the other hand, the government gives everybody
the same freedom to work and reap the rewards, some will do better than others. The result
will be equality of opportunity, but not equality of outcome. Here in the United States, you’ve
accepted more inequality of outcome. And over the past thirty years, a debate has been raging
between these two competing alternatives. Can we live with economic freedom…even though
it doesn’t guarantee a specific result, even though it’s built on the ongoing destruction
of old ideas and businesses that are no longer competitive? Can we accept freedom, even though
freedom to choose also means that we will not all be equally successful? To answer these questions, Milton Friedman
traveled the world to examine various economic systems. He concluded that for most people,
an emphasis on economic freedom would lead to both individual and political freedom.
Many commentators say that Milton Friedman did more for freedom than anybody else in
recent decades. He convinced many nations to embrace economic freedom. In the U.S.,
he led the effort to abolish the military draft, which he considered nothing less than
slavery. It is long past time that we return to our
basic heritage, got rid of the compulsion in our military service and return to a voluntary
system. When Milton Friedman died in 2006, The Economist
magazine’s obituary had the headline, “How Milton Freed Man.” On the other hand…writers
like the Canadian anti-capitalist, Naomi Klein, claim that he helped authoritarians by advising
them to adopt free market economic policies. Most controversially, in 1975, Friedman traveled
to Chile to lecture about economic liberalization and he also met with the dictator, Augusto
Pinochet, and in 1988 he went to China to talk to the communist leaders about economic
reform. So who’s right? Friedman would advise us to
test his ideas by examining the evidence of recent history. Have his ideas changed our
world? For better or for worse? Whose assessment of his legacy is right? Milton Friedman is one of the most famous
and influential economists of our time. He was born on July 31st, 1912, and received
the Nobel Prize in Economics in 1976. As a professor of economics at the University of
Chicago, he had great influence on the entire field of economics. He was an author, and
an advisor to several presidents. He spent most of his life promoting the benefits of
a free market economic system. Friedman thought that most people are well-equipped
to take care of themselves, no matter where they come from, no matter what gender they
are, no matter which race or creed they belong to. He thought that freedom from government
barriers gave everybody the freedom to try, to start a business, to learn a trade, to
get a good job, to become rich if they’re successful. And it denied the powerful and
the vested interests the right to distort the outcome. In 1980, Friedman presented his ideas to America
through a 10-hour PBS series that was called, “Free To Choose.” He traveled to places he felt could best communicate
his ideas. Milton Friedman began his PBS series, Free
To Choose, in New York City with a bit of personal history because he felt that it was
important to remember how America’s success story began. This statue is iconic; it represents
“freedom.” And for the immigrants who were welcomed by the Statue of Liberty, in the
late 1800s and the early 1900s, America was truly a land of opportunity. They poured ashore in their best clothes,
eager and expectant, carrying what little they owned. They were poor, but they all had
a great deal of hope. Once they arrived, they found, as my parents did, not an easy life,
but a very hard life. Friedman’s parents passed through these doors
here on Ellis Island, and they shared this background with millions of immigrants from
all over the world. About a fifth of all Swedes migrated from
my homeland to America, to find a place where their own talents and hard work made a difference.
Here on Ellis Island, they met the new world for the first time. And then they moved to
the cities and to the frontier in search of the promise of the American dream. Not all
of them found it, but many did. There were many rewards for hard work, enterprise
and ability. Life was hard, but opportunity was real. There were few government programs
to turn to, and nobody expected them. But also, there were few rules and regulations.
There were no licenses, no permits, no red tape to restrict them. They found in fact,
a free market, and most of them thrived on it. This is exactly the same kind of a factory
that my mother worked in when she came to this country for the first time, at the age
of 14, almost ninety years ago. And if there had not been factories like this here then,
at which she could have started to work and earned a little money, she wouldn’t have been
able to come. And if I existed at all, I’d be a Russian or a Hungarian today, instead
of American. But over the next seventy-five years, the
United States began to restrict the workings of the free market. Every line of business
was regulated, and soon the highest tax rate surpassed seventy percent. In 1980, when Friedman
wanted to show a truly free economy, he took the viewer to the other side of the world. If you want to see how the free market really
works, this is the place to come. Hong Kong, a place with hardly any natural resources;
about the only one you could name is a great harbor. Yet the absence of natural resources
hasn’t prevented rapid economic development. When Milton Friedman rode on this ferry in
1980, Hong Kong was not a part of China, but was leased to Britain as a colony. And it
had just made an incredible journey, one that demonstrated to the world that even the poorest
countries can develop. After the Second World War, and the Communist
Revolution in China, this rock in the middle of nowhere became a refugee camp with millions
of extremely poor people. To Milton Friedman the scientist, this was
a perfect natural experiment to test his theory about free markets. Hong Kong had no prospects,
no natural resources, and little land that could be cultivated. But almost by accident,
it was given economic freedom. The British government couldn’t be bothered with local
Hong Kong affairs. And the governor here happened to favor free markets. So Hong Kong never
introduced all those policies that other governments did: no tariffs, no regulations or government
intervention in the economy. So the economy could evolve in a natural way. As a result,
Hong Kong became an economic powerhouse When Friedman came to Hong Kong in 1980, it
could boast statistics on life expectancy and infant mortality that equaled western
countries. Incredibly, it was on its way to become richer than its colonial ruler, Britain. This thriving, bustling, dynamic city has
been made possible by the free market…indeed the freest market in the world. The free market
enables people to go into any industry they want; to trade with whomever they want; to
buy in the cheapest market around the world; to sell in the dearest market around the world.
But most important of all, if they fail, they bear the cost. If they succeed, they get the
benefit… and it’s that atmosphere of incentive that has induced them to work, to adjust,
to save, to produce a miracle. And what a miracle it’s been. Friedman was
standing next to the tallest building on the skyline, and just look at that skyline now;
there are more skyscrapers here than in all of New York City. Between 1950 and 2000, Hong Kong’s GDP per
capita increased more than ten times. Friedman concluded that this success was due to the
free market. This hasn’t been achieved by government action,
by someone sitting in one of those tall buildings telling people what to do. It’s been achieved
by allowing the market to work. The complete absence of tariffs, or any other restrictions
on trade, is one of the main reasons why Hong Kong has been able to provide such a rapidly
rising standard of life for its people. In 1980, when Milton Friedman wanted to see
a truly free market…he had to come here to Hong Kong. Since then, much of the world
has followed in Hong Kong’s path. In an effort to get out of its stagnation of the 1970s,
the U.S. and Western Europe began to return to the ideals of free competition. Taxes were
lowered, tariffs were reduced and regulations slashed. Hong Kong is now part of China, but at times
it seems more like Hong Kong took over China, rather than the other way around. The communist leaders on the Mainland, they
looked around at their more successful neighbors and then decided to set their own markets
free. And Asia’s other giant, India; they also opened their economy to the rest of the
world. In eastern Europe, communism collapsed, because
the economy never could satisfy the needs of the people, and they were longing for freedom. In 1991, in the small Baltic country of Estonia,
Prime Minister Mart Laar took his inspiration from Milton Friedman’s book, “Free To Choose,”
which was based on the TV series. He decided to imitate the Hong Kong model,
with zero tariffs, a flat tax, and a minimum of regulation. Despite its problems with the
2008 financial crisis, Estonia is widely seen as the most successful of the former communist
economies. Free markets have spread around the world.
At the same time, we’ve seen the fastest human progress ever, and it has been led by the
countries that opened up their economies. In fact, average incomes around the world
have almost doubled. Think about these statistics. Globally, extreme
poverty has been more than halved since Milton Friedman did his series in 1980. Amazingly,
730 million people have been liberated from poverty. Every year, life expectancy around the world
has increased by three months, despite AIDS and despite malaria. And to me, one of the most heartening facts
is that the risk of parents losing their child in infancy has almost been cut in half. These
were the results that Friedman predicted free markets could bring about. As people got more wealthy, they could begin
to deal with the most important challenges in their lives. But Friedman had another reason
why he wanted authoritarian dictatorships to liberalize their economies: political freedom. Human and political freedom has never existed,
and cannot exist, without a large measure of economic freedom. Those of us who have
been so fortunate as to have been born in a free society tend to take freedom for granted,
to regard it as the natural state of mankind. It is not. It is a rare and precious thing.
Most people throughout history, most people today, have lived in conditions of tyranny
and misery, not of freedom and prosperity. He thought that economic freedom would directly
lead to political freedom. When people begin to make their own decisions, and gained confidence
in their ability to take care of themselves, Friedman believed they would begin to demand
personal and political freedoms as well. When we say that a market is “free,” it sounds
a bit like a dog-eat-dog economy. But that is not what Friedman had in mind. He thought that the best explanation of why
the free market works was developed more than two-hundred years ago in Scotland, where Adam
Smith taught at the University of Glasgow. Smith’s book, The Wealth of Nations, explains
why free choice and voluntary association is often more well-functioning and orderly
than commands from the top. Voluntary association is what we do together
of our own free will. When these people buy and sell to each other, and none is subject
to force or fraud, that is voluntary association. It is anything that is going on between consenting
adults. When you visit marketplaces around the world,
they can sure look like chaos, but underneath the surface it is highly organized. Not from
above, but by people’s own interests and actions. Friedman thought that Adam Smith had the answer. Adam Smith’s flash of genius was to see how
prices that emerged in the market: the prices of goods, the wages of labor, the cost of
transport, could coordinate the activities of millions of independent people, strangers
to one another, without anybody telling them what to do. His key idea was that self-interest could
produce an orderly society benefiting everybody. It was as though there were an invisible hand
at work. What did Adam Smith mean by, “self-interest,”
and an “invisible hand?” By self-interest, he wasn’t thinking of greed, just taking what
you can get. He was thinking of the day-to-day decisions that we all make to better our lives;
the clothes we wear, what car we drive… even whether we like our fish really fresh. The market tells producers not only what to
produce, but how best to produce it through another set of prices: the cost of materials,
the wages of labor, and so on. Walk down any street in Hong Kong, and you’ll see the impersonal
forces of the market in operation. If I want to buy a tomato, I could buy one
right here at the market from Ng Choy. But if everybody suddenly wanted to buy tomatoes,
perhaps because we get new information about how good they are for our health, well then,
there would be too few tomatoes. So, Ng Choy’s suppliers would have to charge him more. In
that case, I have to pay more to lay my hands on one. If prices increase, farmers will notice. Without
knowing us, or without even having heard about the new health information, they can see with
their own eyes that they would make more money if they produced tomatoes, rather than, say-broccoli.
And in that case, more farmers will move into tomato production, and the supply will be
increased. Ng Choy’s costs are reduced, and in order to sell more tomatoes than his competitors,
he once again starts charging less for tomatoes. At that point, no more farmers are tempted
to move into that line of work. When I buy a tomato, and when someone else
is buying some fish, we control the supply on the market. We vote with our pocketbooks,
and all around the world, people spring into action, to satisfy our demands. Every purchase
sends a message. This is how the market economy works in every sector…from tomatoes to apples,
to Apple computers. And this is Adam Smith’s, “invisible hand.” To make your life better,
you have to better the lives of others. Invisible hands are all around us. Friedman
borrowed an example from economist Leonard Read to show that something that we take for
granted, and use every day, is the result of a complex interaction between thousands
of people. Look at this lead pencil; there’s not a single
person in the world who could make this pencil. Remarkable statement? Not at all. The wood,
from which it’s made, for all I know, comes from a tree that was cut down in the State
of Washington. To cut down that tree, it took a saw. To make the saw, it took steel. To
make the steel it took iron ore. This black center, we call it lead…but it’s
really graphite, compressed graphite. I’m not
sure where it comes from, but I think it comes from some mines in South America. This red top up here, the eraser, a bit of
rubber…probably comes from Malaya, where the rubber tree isn’t even native. It
was imported from South America by some businessmen, with the help from the British
government. This brass ferrule, I haven’t the slightest idea where it came
from. Or the yellow paint, or the paint that made the black lines, or the glue that
holds it together. Literally thousands of people cooperated to make this pencil. But obviously, the pencil is no longer one
of our most important tools of communication. This is. And the production of a smart phone
is not less complex, to say the least. This display is made in Japan… and the camera
in Vietnam. The microphones come from Austria and the chip set from France. The memory is
produced in Korea, and the battery in China. And the software and design centers are all
over the world, in countries like India, Finland, Britain and the U.S. Thousands of people,
on several continents, cooperated to make these phones so that we could have them. People
from different countries, different cultures; people who had never even met. That is why the operation of the free market
is so essential. Not only to promote productive efficiency…but even more, to foster harmony
and peace among the peoples of the world. We have a choice of smart phones, tomatoes,
even trucks because of competition. Sometimes the price is too high, sometimes the product
doesn’t work, and sometimes the service is lousy. But in that case, someone else can
enter the market and take all the customers. So every company has to offer us something
better to stay in business. Some succeed, but some fail, and it’s that risk of failure
that really scares us. When a businessman faces trouble, a market
threatens to disappear, or a new competitor arises, there are two things he can do. He
can turn to the government for a tariff or a quota, or some other restriction on competition,
or he can adjust and adapt. In Hong Kong the first option is closed. Hong
Kong is too dependent on foreign trade, so that the government has simply had to adopt
a policy of complete non-interference. That’s tough on some individuals, but it’s extremely
healthy for the society as a whole. Only the businessmen who can adapt, who are flexible
and adjustable survive, and they create good employment opportunities for the rest. So, this the kind of boxes that you were producing
here, when Milton Friedman came by to visit? Mr. Cheung makes metal containers. Nobody’s
ordered him to. He does it because he’s found that he can do better for himself that way,
than by making anything else. But if demand for metal containers went down, Mr. Cheung
would soon get that message. And Mr. Cheung is still here, and nowadays
he produces more things for the tourist trade. But, when only the flexible and adaptable
survive…thank you, Mr. Cheung, it means that other businesses fail. Economists call
this constant renewal of the economy, “creative destruction.” If we want to increase our wealth
and opportunities; we have to stop doing old things in old ways, and start doing innovative
things in better ways. In other words, we have to be, “creative.” But when consumers move on to new goods, it
can be difficult and painful, because old factories and old shops close, and people
lose their jobs. That is the, “destructive” part. And yet, most economists think that
creative destruction is necessary for economic development. Mrs. Lee starts out every day with her lunch,
her teapot and her cell phone. Cell phones are important for boat drivers around here,
because they used to pass messages by shouting to one another. Not terribly efficient, and
very bad for your voice. Hong Kong has the most cell phones in the world; one-point-seven
cell phones per person. But all around the globe we’ve seen a cell phone revolution.
In 1980, there were eleven-million cell phones on the planet. Today almost four-billion people
have access to cell phones. This is an example of creative destruction. It used to be all
landlines, made of copper. But now they’ve become less and less important, especially
in the developing world. This farmer in Bangladesh was always dependent
on one buyer of her eggs, and had to accept his prices. But now she can now check the
price of eggs in other village markets with her cell phone, before she sells, and so she
can negotiate a better price. In Tanzania, it used to be that the customer
often had to sit and wait for hours at the butcher’s for the meat to arrive. And sometimes
in Peru, the meat had to wait, because the customers didn’t know that it was already
there. Today, you coordinate the business with a cell phone, and the food ends up in
people’s stomachs, and not in the garbage. We have rarely seen a technology that has
meant so much for human development. But that was not the intention. The telecom companies
wanted more market share, those who adapted and distributed the technology locally wanted
to make money, and butchers and egg farmers just wanted to improve their own lives. Adam Smith would say that it was as if they
were led by an invisible hand when they rolled out this technology faster than any other
technology in world history, and many would say that this revolution did more to give
the average person power, and to reduce poverty more than any government program. No government official is telling these people
what to do. They’re free to buy from whom they want, to sell to whom
they want, to work for whom they want. Sometimes it looks like chaos, and so it is.
But underneath, it’s highly organized, by the
impersonal forces of a free marketplace. But all progress comes at a cost. Market forces
are both creative and destructive. As people buy cell phones, they ditch their home phones.
And then, there is no need for all those workers who used to connect homes to wires, and repair
telephone lines. And that is tens of thousands of people who worked hard, and supported their
families, and through no fault of their own lost their jobs, and whose skills might not
be in demand as the technology takes a new leap. Some succeed in inventing the next smart phone,
and become incredibly rich. Others are stuck with an obsolete technology. Some win, some
lose, and the result is something that most people have a problem with: inequality. Equality is a powerful concept…one that
we can all cherish to some degree. In fact, it’s fair to say that in one sense, America
was built on the idea of equality. Equality is so important that here in Washington, D.C.,
there is a monument dedicated to Thomas Jefferson. Thomas Jefferson was one of the Founding Fathers,
and he wrote the American Declaration of Independence, with these words, “We hold these truths to
be self-evident: that all men are created equal. That they are endowed by their creator
with certain inalienable rights, among these are life, liberty and the pursuit of happiness.” What did Thomas Jefferson mean by the words,
“all men are created equal?” What he meant by the word, “equal” can be seen in the phrase,
“endowed by their creator.” To Thomas Jefferson, all men are equal in the eyes of God. They
all must be treated as individuals, who have each separately a right to life, liberty,
and the pursuit of happiness. Of course, practice did not conform to the ideals. In Jefferson’s
life, or in ours as a nation, he agonized repeatedly during his lifetime about the conflict
between the institution of slavery, and the fine words of the Declaration. Yet, during
his whole life, he was a slave owner. But during the 19th century, the powerful
words and ideals of the Declaration of Independence helped more people to see the horrors of slavery,
and it helped to end forced labor. Practice began to catch up with the ideals. The idea of equality came more and more to
mean that everyone should have the same opportunity to make what he could of his capacities; that
all careers should be open to people on the basis of their talents, independently of the
race, or religion, or belief, or social class that characterized them. This concept of equality
of opportunity offers no conflict at all with the concept of freedom. On the contrary, they
reinforce one another. And it is no doubt the concept that even today, is most widely
held. But during the 20th century, as people were
confronted with some of the differences of outcome that were the result of free markets,
a very different ideal began to emerge. And Friedman thought that this ideal was in conflict
with freedom. …that is the ideal that everyone should
be equal in income and level of living in what he has. The idea that the economic race
should be so arranged that everybody ends at the finish line at the same time, rather
than that everyone starts at the beginning line at the same time. This concept raises
a very serious problem for freedom. It is clearly in conflict with it, since it requires
that the freedom of some be restricted, in order to provide the greater benefits to others. How did the idea that government should change
economic outcomes become popular in the West? In a way it started here, in 1929, when the
stock market crashed. The Wall Street crash was followed by the
worst depression in American history. That depression has been blamed on the failure
of capitalism. It was no such thing, but the myth lives on. Friedman thought that the Great Depression
was the result of massive government failure, of stupid monetary policies, and tariffs that
created a trade war, but the common interpretation at the time was that capitalism had failed,
and that you couldn’t just leave things for themselves in the face of massive unemployment
and widespread poverty. So politicians worldwide were looking for a new approach. Roosevelt’s first priority after his election
was to deal with massive unemployment. A public works program was started. The government
financed projects to build highways, bridges and dams. Roosevelt wanted to see America
move into a new era. The Social Security Act was passed, and other measures followed: unemployment
benefits, welfare payments, distribution of surplus food. With these measures, of course,
came rules, regulations, and red tape, as familiar today as they were novel then. The
government bureaucracy began to grow…and it’s been growing ever since. The United States became a bit more like European
countries, like my home country, Sweden, by introducing some wealth redistribution, and
more government control over the economy. My country has made an effort to make people’s
lives more equal. We have relatively free markets in business. It’s fairly easy to start
a company and compete without being stopped by licenses, regulations, and tariffs. But
when people are allowed to compete freely, some win, and make a lot of money, some lose,
and they lag behind. That’s when the Swedish government steps in;
to reduce differences of outcome we tax heavily, and redistribute wealth among our citizens.
To many, this is the best of both worlds…since we don’t really have equal chances in life.
Some people have parents who give them an interest in learning, ambition and opportunities,
some don’t, some are lucky in the genetic lottery, and some aren’t, some have good health,
and some don’t. To reduce the gaps that such differences might
lead to, our government steps in. Sweden chose to make equality a priority in the 1970s,
when we were already one of the richest countries in the world. Taxes were raised and benefit
systems were made more generous. Public spending almost doubled between 1960 and 1980: from
thirty-one percent to sixty percent of GDP. Some would say that this has made our country
better. But it has also reduced the rewards for working hard and taking risks. This is a museum recreation of the original
workshop of Lars Magnus Ericsson. He was a very important person in Swedish history,
because more than one-hundred-and-thirty years ago, he produced cheap and reliable versions
of the telephones that he had seen in the United States. And because of this, Stockholm
became a global center for telecommunications in the late 19th century. And it laid the
groundwork for one of Sweden’s most successful companies: Ericsson. And today, it still employs
more than eighty-thousand people in one-hundred-and-fifty countries. This should make me proud as a
Swede, but in fact, it makes me a bit worried, because almost all big Swedish businesses
share Ericsson’s heritage. And they probably all had boardrooms that looked a bit like
this. The average big Swedish company is 94 years old. We have apparently not had the
policies that encourage people to start the new businesses that might become tomorrow’s
Ericsson. Today, Swedish entrepreneurs are the oldest
in the world. This is the other side of the coin. The young people and the immigrants,
who should be our future, are not starting the new Ericsson’s. In fact, we have many
examples of young Swedes and entrepreneurial immigrants who moved from Sweden to Britain,
or the United States, because the rewards are much greater there, where taxes are lower.
In many suburbs like this, outside of Stockholm, the unemployment rate is higher than fifty
percent. Even in the midst of the economic boom, almost a quarter of the working-age
population in Sweden did not go to work in the morning, but got their checks from the
government. It does seem to support the view that economic incentives matter. With a sickness benefit of up to eighty percent
of your income, perhaps it wasn’t surprising that Swedes were off sick more than any other
people, even though we objectively were healthier than almost any other population. In 2004,
sickness benefits absorbed sixteen percent of the government’s budget. These statistics
have improved since…but interestingly, only after a determined effort by the government
to reduce the equality of income, by lowering taxes, and making benefit systems less generous.
So it seems that these changes increased incentives to work. Friedman emphasized something counter-intuitive.
There is a positive benefit to inequality of outcome for everybody. Some people become
millionaires, and some become billionaires, but that is because they were the ones who
made their customers happy. That’s the economic system that has transformed
our society in the past century and more. That’s what gave the Henry Fords, the Thomas
Alva Edisons, the incentives to produce the miracles that have benefited us all. They
went in with their eyes open, they knew what they were doing; and win or lose, we, society,
benefited from their willingness to take a chance. If we did not allow a Lars Magnus Ericsson,
a Thomas Edison, or a Bill Gates to become incredibly rich, we would be more equal. But
Friedman would ask: would we be better off? If entrepreneurs did not think that a possible
reward for all the sacrifices they make, all their hard work, all the risks they take,
is a lot of wealth, then they might do something else instead. And in that case, we would not
have the goods, and the services, and technologies that make our lives better. We like the products of the free market: the
wealth, the choices, the goods and the services, that previous generations could not have dreamt
of. But we’re not as willing to accept the workings of the free market: the seemingly
chaotic ups and downs, the fact that it produces both winners and losers, so we give the government
power to deal with these problems. Listen to these words from 1980…don’t they still
ring true today? Every time I come to Washington, I’m impressed
all over again with how much power is concentrated in this city. But we must understand the character
of that power. It is not monolithic power in a few hands, the way it is in countries
like the Soviet Union or Red China. It is fragmented into lots of little bits and pieces,
with every special group around the country trying to get its hand on whatever bits and
pieces it can. The result is that there’s hardly an issue in which you won’t find government
on both sides. For example, in one of these massive buildings
scattered all through this town, filled to the bursting with government employees, some
of them are sitting around trying to figure out how to spend our money to discourage us
from smoking cigarettes. In another of the massive buildings, maybe far away from the
first, some other employees, equally dedicated, equally hardworking…are sitting around figuring
out how to spend our money, to subsidize farmers to grow more tobacco. Well, it’s obvious that things haven’t changed
much. U.S. politicians still spend tax dollars on anti-smoking campaigns. And tobacco farming
is still subsidized by the government. Each of these programs spends money, taken
from our pockets…that we could be using to buy goods and services to meet our separate
needs. All of these programs use very able, very skilled people who could be doing productive
things. Once you’ve created a special interest group,
it’s difficult to un-create it. Every so often a bill is introduced to Congress to eliminate
tobacco subsidies, and routinely they’re voted down. Who knows? Maybe one day one will pass. In the economic market, people who intend
to serve only their own private interests are led by an invisible hand to serve public
interests, that it was no part of their intention to promote. In the political market, there’s
an invisible hand operating as well. But unfortunately, it operates in the opposite direction. People,
who intend only to serve the public interest, are led by an invisible hand to serve private
interests, that it was no part of their intention to promote. It’s not that people in government aren’t
well-intentioned. These are not evil people, purposely trying to wrest away our freedoms.
It’s just the nature of the job. The deals made here affect all of us, and
sometimes in ways we don’t like. But don’t blame the people making the deals. They’re
just pursuing their own self-interest, which may be as narrow as making a buck, or as broad
as trying to reform the world. Friedman worried that people would stop doing
what they…and others they deal with…thought was best. And instead, they would be doing
what the government encouraged or required through regulation, taxes, and tax loopholes…and
that creates new problems. Taxation to help the poor might result in less growth, and
so less poverty reduction, and bans on abortion may mean that abortion takes place anyway,
but becomes less safe. Tighter border controls might force immigrants to stay in the U.S.
once they manage to get in, rather than risk going back when the economy retracts, and
there are fewer employment opportunities. Sometimes, government action results in a
demand for more government action. Just look at how governments have transformed the financial
industry. Over the years, governments always step in to save banks that are on the brink
of collapse. And central banks…they always try to avoid recessions,
by lowering interest rates to encourage borrowing. And politicians, they massively
subsidize home ownership. That was popular on Wall Street, but it led
to a lot of risk-taking, and in many loans being given to people who could not afford
the payments in the long run. So it led to gigantic losses for the banks, and a financial
crisis in 2008. Of course, no one wants banks to fail, but
bailouts like these also set a bad example for homeowners, speculators, and banks; making
it likely that they will take on too much risk the next time as well. Every government intervention results in unintended
consequences. These consequences have to be dealt with as well, and that leads to new
unintended consequences. The result is a constant growth of government. In 1980, Friedman designed
a very graphic way to highlight this problem. The federal regulations that govern our lives
are available in many places. One set is here, in the Library of Congress in Washington,
D.C. In 1936, the federal government established the Federal Register to record all of the
regulations, hearings, and other matters connected with the agencies in Washington. This is Volume
1, Number 1. In 1936, it took three volumes like this to
record all these matters. In 1937, it took four, and then it grew, and grew, and grew.
At first rather slowly and gradually, but even so, year-by-year it took a bigger and
bigger pile to hold all the regulations and hearings for that year. Then around 1970,
came a veritable explosion…so that one pile is no longer enough to hold the regulations
for that year. It takes two, and then three piles, until, on one day in 1977, September
28th, the Federal Register had no fewer than 1,754 pages… and these aren’t exactly what
you would call small pages, either. It wasn’t always like this. America was founded
with something different in mind. Milton Friedman came here to Philadelphia, and Independence
Hall, to reflect on the Founding Fathers. Almost two hundred years ago, a remarkable
group of men gathered in this room, to write a constitution for the new nation that they
had helped to create a few years earlier. They were a wise and learned group of people.
They had learned the lesson of history. The great danger to freedom is the concentration
of power, especially in the hands of a government. They were determined to protect the citizens
of the new United States of America from that danger. And they crafted their constitution
with that in mind. That constitution has served us well. It has
enabled us to preserve our freedom for close on to two-hundred years. But in the past fifty
years, we have been forgetting the lesson that these wise men knew so well. From regarding
government as a threat to our freedom, we have come more and more to regard government
as a benefactor from which all good things flow. Friedman was afraid that a bigger government
would threaten the incredible results of economic freedom, because the economy is not a zero-sum
game. In other words, we’re not fighting over ever-smaller pieces of the pie. The pie is
constantly growing larger, as people and businesses become more productive…and the world is
getting wealthier all the time. In the last one hundred years with relatively
free markets, we have created more wealth than in the one-hundred-thousand years before.
And as a result, we have reduced extreme poverty around the world; more than people ever dreamed
was possible. Americans and Swedes alike, we’re all obsessed with our monthly paycheck.
But how much that paycheck is really worth? To find out that, is not as simple as it seems.
What’s the inflation rate? Do goods and services cost more or less today than they did last
year? We have to look at what we can buy, how far that paycheck takes us. And that has
increased dramatically, because entrepreneurs become rich by constantly reducing the price
of everything we want. Let’s look at a couple of everyday items. Twenty-five years ago, you had to work for
four-hundred-and-fifty-six hours to be able to buy a cell phone. Today, after all the
productivity increases that businesses and innovators have introduced, you only have
to work for four hours. And of course it’s a better deal today, this is not just a phone,
it also doubles as a texting device, a calendar, a camera, almost everything. In these same
twenty-five years, the cost of a personal computer has been reduced from four-hundred-and-thirty-five
hours, to twenty-five hours, and you really couldn’t compare it to those original PCs
that wouldn’t be able to run any of the software or the operating systems that we use today. In 1980, when Milton Friedman did his series,
Free To Choose, he wrote the script on a typewriter. And he sent the drafts via
the post office. And the film crew was constantly searching for a pay phone. Today,
our work process is a bit different: we have computers, we have email, we have
a cell phone, which makes it much, much easier. And, unlike then, video cameras are
now accessible to almost everyone. What about a basic necessity like food? Well,
we don’t see the recent dramatic productivity increases that we see when we look at electronics;
the great leap forward in agricultural technology happened a hundred years ago. But with a long-term
perspective, you certainly see a lot of change. In 1920, you had to work for thirty-seven
minutes to afford half a gallon of milk; today you wouldn’t have to work more than seven
minutes. And in 1920, it cost you two-and-a-half hours to buy three pounds of chicken. Today,
you’d get away with less than fourteen minutes. Professor Friedman noticed something similar
thirty years ago. Over a quarter of a century ago, I bought,
second-hand, a desk calculator, for which I paid three-hundred dollars. One of these
little calculators today, which I can buy for ten dollars or so, will do everything
that did, and more besides. What produced this tremendous improvement in technology? Friedman’s conclusion was that accepting differences
of outcome does not just make the winners better off, but the losers as well. People
with a lot of money can afford to be early adopters, they can pay ridiculous amounts
for the first versions of cell phones and personal computers, and that’s a good thing
for us. Because they create bigger markets, so the companies get revenue, so that they
can streamline production and create lower-cost versions, so that all of us can buy one. And
historically this seems to be the case. Free markets regularly turn luxuries into consumer
goods. This may seem hard to believe, but the average rate of ownership for refrigerators,
air conditioners, and dishwashers is higher among poor American households today, than
they were for all American households in the early 1970s. When people are free, they are able to use
their own resources most effectively and you will have a great deal of productivity, a
great deal of opportunity. The major beneficiaries are always the small man. The man who has
power who is at the top of society, he’s going to do well whatever kind of a society you
have. It’s the society which gives the small man the opportunity to go his way, which is
going to benefit him the most. One thing is certain. Rarely in the history
of mankind has freedom made such rapid progress as it has since Friedman produced, Free To
Choose in 1980. Whole populations yearning for freedom tore down the walls. Communism
collapsed, the Soviet Union was abolished, and its satellite states were set free. Military
dictatorships and the apartheid system were swept away. Most of the world embraced free
market capitalism. Democracy spread and living standards surged. So, what really happened in Chile and China
after Milton Friedman’s controversial visits in the 1970s and 80s? Well, Chile liberalized
the economy radically, put an end to inflation, and adopted free trade. And after a difficult
period of adjustment, the country experienced rapid growth and improved living standards.
The pressure for a democratic transition grew. In 1987, political parties were legalized,
and in 1988, there was a referendum on whether the dictator, Pinochet, would remain in power
for eight years. Pinochet lost and had to resign, and the country continued making economic
progress under a center-left leadership. Chile is now a stable democracy. Here it seems that
Friedman was proven right. Economic freedom created wealth, and wealth undermined the
dictatorship. In China that is not the case, at least not
yet. The Communist Party still runs the show, and opposition is vigorously suppressed. Still,
economic reform has made an enormous difference in China. It has turned the country into the
world’s biggest exporter, with the world’s fastest growth rates. It has led to the greatest
poverty reduction in any country anywhere, ever. And hundreds of millions of Chinese
are experiencing personal freedoms that were unheard of thirty years ago. We’ll have to
see what happens next. As economies have liberalized, the results
are stunning. Extreme poverty around the world has been halved since Milton Friedman did
his show. In fact, more than seventy-thousand people have left poverty every day since the
early 1980s. That’s almost three-thousand every hour, one-hundred and twenty-four people
every minute around the clock. But at the same time, we see a widespread hostility against
the free market system that made this possible. Freedom is not the natural state of mankind.
It is a rare and wonderful achievement. It will take an understanding of what freedom
is, of where the dangers to freedom come from. It will take the courage to act on that understanding,
if we are not only to preserve the freedoms that we have, but to realize the full potential
of a truly free society. Equality sounds good, and some value equality
of outcome more than anything else. The risk is that the outcome is that we’re all equally
poor. Market-based systems have made all of us richer, but some much richer than others.
In the end, we have to decide whether this wealth is the problem, or whether poverty
is the problem. As Milton Friedman put it in 1980, “The society that puts equality before
freedom will end up with neither. The society that puts freedom before equality will end
up with a great measure of both.” Major funding for this program was provided
by: Additional funding was provided by:




Comments
  1. Fantastic work. Understanding that equality for the left is always equality of outcome is really a key concept.

    In Argentina, and also in Brazil, we are struggling to learn this lesson and instead we insist with populist daddy-state-takes-care-of-all kind of ideas. It ends up badly of course and we experience this documentary lesson in the negative form:

    “Populism loves the poor so much, it multiplies them.” ~ Mariano Grondona

  2. Great documentary. Thank free to choose network! Unfortunately i fear you mainly preach to the converts, but still…

  3. An excellent doc, YT at its best, an unboring walk and talk with Johann Norberg through the world of economics (aired in 2010), a fascinating 3 way perspective – 1980 with Milton Frieberg/President Reagan, 2010 with Mr. Norberg/President Obama and now with ??/President Trump. (The following is my reaction to the vid. Click READ MORE at yer own peril.)

    Not a bit boring. Well, it helps that Johann is kinda cute. Really, I'm totally straight, but that little flip of hair in the front? AND he's intelligent? Talk about inequality. Sigh.

    Ok, yall gotta check out the Great and Powerful Uncle Milty with his smarmy, weird smile rationalizing everything from tomatoes to totalitarianism with a slap of the ol' invisible backhand. Using his best kindergartner teacher's voice – you know, speak slowly, put a space between words – he sounds like he's trying to convince us why it's better to poop in the potty rather than selling us he and his boss' plans to spend more taxpayer money than all administrations before them – combined.

    What annoys me most about Mr. Friedman, as Mr. Norberg points out too, is that he is correct. To date, free markets have provided a lifestyle beyond what our parents dreamed of. But seven years later we are looking at the first gen of Americans who will NOT do better than their parents. In large part because of the immense debt rung up by Milt's ilk.

    Ignore the men behind the curtain.

  4. Beautiful! Truthful! and enlightening. Loved your encounter in Hong Kong with Mr. Chang (?), it seems that he is not one of the most adaptable, but has certainly improved his life and, above all, has kept his Freedom. Greetings from a brand new failed socialist paradise called Ecuador.

  5. To all democratic socialists out there, here is why free market will always prevail over government intervention: it doesn't pretend to know the solution of anything and the worst thing you could do in a free market is try. I can't say the same for the opposition.

  6. Johan heads off to you…. this is one beautiful and insightful video… I've been watching your videos lately and they're really interesting and provides with ample amount of thoughtful information.. keep up the good work

  7. The Free Market would be great if it wasn't corrupt; Once the initial success stories reach the top, they monopolize the markets, raise the prices, outsource the jobs and use the government subsidies to expand, not risking losses while pocketing the gains. Not to mention the damage unchecked corporations do to the environment.

  8. Whatever you do, every society will always end up with concentrations of power. The people who end up with the power may have originally got there though admirable qualities like intelligence and hard work, or less desirable qualities like destroying competitors. Their children may be different but they usually hang onto the privileges for a few generations.

  9. Hong Kong certainly did not gain economic freedom 'by accident as Mr Norberg claims. Any description of Hong Kong's economic success that does not mention John Cowperthwaite demonstrates a profound misunderstanding of how that success was achieved. Plus Free to chose may have been broadcast by PBS in the US however I dont think they made it they bought it as did many other countries.

  10. You are a national treasure to Sweden Johan much like Milton Friedman and Thomas Sowell has been to the United States.
    I very much appreciate your work.

  11. The idea of freedom is alien to the people that birthed it first – the Indians. In traditional Indian philosophy, the highest aim of man is Moksha/Mukti – Sanskrit for self-realization/self-actualisation/freedom. It is a mark of how intellectually enslaved today’s Indians are, and the generation after 1947 are, that the government is still seen as the quasi-divine benefactor rather than an impediment to individual freedom. This also despite the obvious strides made since the advent of ‘true’ freedom in 1991. Indians did not build the largest economy in the world of much of history through the beneficence of some mighty ruler – it is the operation of free markets and the ingenuity of her millions that made her society so prosperous previously. This is blasphemy in today’s India. Sigh.

  12. Milton Friedman was a capitalist that has received Nobel prize in economic. Is there any social economist or marxist economist has received the Nobel Prize?

  13. This video should be recommended to everyone who has access to YouTube. Brilliant work Johan! I greatly appreciate your work! From a Socialist Country- India 🇮🇳.

  14. Excessively simplified, did not really cover the various aspects of things. The downsides of unfettered captatalism is no where to be seen. Take http://valleyofsteel.blogspot.com/2012/05/pinkertons-guards-or-blackguards.html If you look at american history you will see some really horrible stuff and bad conditions because there was nothing to stop people from taking control. See capitalism can produce kings of sort, and once on top they prevent others from gaining control. You got a better operating system than Windows? They will make sure computers sold won't work with it or they won't allow Windows on it., Or many other anti-competitive practices that can be employed. Or take how badly it's been for Britain since they privatized trains. You think someone with a few dollars, a dream, and a willingness to work hard can ever hope to compete with many of the megamonoliths out there. Like if someone had a genius new CPU design, no way could they muster in with Intel and AMD. Instead they'd probably end up selling their design and these two companies would remain on top.

    Or take China, they are known the world over for the crappiest quality shit since almost no enforced business regulations means poor quality, no respect for copy right or patents or company reputation as they steal identities and reputations for a quick buck. China is a good proof of why pure lassua faire capitalism a horrible idea.

    And of course countries with almost no economy grow fast, that's proof of nothing, but that growth stalls once you get the giants at top knocking everyone else down. These big corporations become another form of government deciding our lives, without any checks to their power or responsibility to anyone other than share holders.

    Freedom is a tricky funny concept. How free is a person born to a hard working mother who can not find a good paying job, who's born a cripple in a house struggling to get by, who goes to a decrepit school because schools are paid for by the taxes of the people of that area and it's a slum. You think this person is going to get a chance to make a new idea that could make them rich? How about the freedom of the born rich landlord to raise rent to a impossible to pay level because they can, because supply of housing is bad and options are little for those of little means. And that rich landlords freedom to evict that family with the hard working mother and disabled child because they can't pay this rent. Their freedom as homeless people to be told that almost no place will welcome these "bums" to constantly be pushed out of spaces by police because people don't want to see them. But at least they have freedom? Wrong. They can not escape their situation, they have no freedom in a supposedly "free society".

    One persons freedom begins where another persons freedom ends. For example in a country with dictators and nobles, there is plenty of freedom, it's just all in the hands of the dictator and nobles. in other words for true freedom you need equality now it may be true that perfect freedom and equality are impossible. But the greater the inequality, the less the freedom.

    So indeed trickle down economics isn't all BS, but it's not the perfect solution either, it's also not synonymous with freedom!

    There are many things one can do, including having the RIGHT regulations. To put in the hands of government what makes most sense for to be in the hands of government and put in the private sector what works best in the private sector. To support and help people without it becoming too much of a crutch. To have BALANCE and smart decisions.

    As it is now the US government is partially already in the hands of corporations with their lobbying. So not only do the corporations become a form of government, they get way too much pull in the actual government.

  15. China is far from free but clearly outgrowing most free nations. I so hope the Chinese, the biggest group of people on Earth, gets also political development.
    When I was born Europe was divided with half the continent under strict communist regime. The Polish protests was at the same time as China shifted it's economics.
    China has had sucessfull capitalism soon 30 years, what political freedom did the population get yet? Chinas economical progress is astounding, it is a nothing short off a miracle.
    I hope the Chinese get their political freedom in my lifetime. For sure they could!

  16. We have 22 trillion in the hole… with 16 trillion of that borrowed since 2007! If we sustain this pace we will be completely screwed in less than a generation.

  17. Market economy is simply the best because it assures best capital allocation (because privateers manage their own money or are held accountable by shareholders and lenders) . The government doesn’t because responsibilities are dispersed and “shareholders” (aka tax-payers) don’t have direct mechanisms to check capital allocation.

  18. As Milton Friedman put it in 1980, "The society that puts equality before freedom will end

    52:19

    up with neither.

    52:21

    The society that puts freedom before equality will end up with a great measure of both."

  19. You need to translate this video to spanish. There's not enough videos like this in spanish and many people around the world needs to see it.

  20. "The society that puts equality before freedom will end up with neither but a society that puts freedom before equality will end up with an abundance of both" – Milton Friedman.

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