As I was reminiscing with friends over a range of events and times discussing the history of the 20th Century, the question of “who were the three greatest villains of the century?” was asked.
Without thinking I responded “Milton Freidmann, Maggie Thatcher and Ronnie Reagan.”
I must admit that a couple of people were not surprised, but the others were, and one was actually appalled. “What about Hitler? Stalin? Lenin?” she asked.
My response to that was that they were classified as “evil”, a debateable point but not for now. They were demonstrably responsible for a huge numbers of deaths, for repression and hardship on a grand scale. Their “evils” were obvious and were/are remedial. What grew out of their deeds allowed us to develop better social rules, better economic outcomes, better understandings of social interactions. Can we say the same things about Freidmann, Thatcher and Reagan?
Freidmann developed the basic conservative responses to the Keynes/White systems that had been in place since the end of WW2. Those systems were placed under the umbrella of the Bretton Woods agreements and standardized international trading rules. With that Agreement, came a lot of regulations and over time, those regulations became onerous, even contradictory. During the 1960’s, the growth from the end of the war was still good. We were experiencing the longest, and richest, most balanced, single expansionary period in world economic history. There were booms and busts, something Keynes well understood. Each peak, though, was higher than the previous, each trough was not as deep as the last, and the trend was always upward.
The Freidmann approach essentially said, “toss the lot out” and reintroduced the very system that the Bretton Woods agreements were designed to mitigate against. This was the point Freidmann and the Chicago School missed. Freidmann clearly stated that regulation was killing business, so deregulate and allow business to grow as it should. In other words, “supply-side economics”. Laissez-faire has never really worked, so why did Freidmann think it was going to work this time? Sure, it has a startling period of growth, but inevitably, there is always a huge crash. We can see why, we were able to see why in the 1960s, yet all the available evidence has been ignored by Freidman.
Under the Keynsian system booms are smaller, but so are the crashes. Also, the recovery periods from the busts were short. The economic data shows this quite clearly and if you care to search for it, it is easily found. So why did Freidmann miss that? I suspect the answer is simple. It is too easy for the conservatives, the intellectually barren, to look for solutions that do not involve a great deal of effort to think about. The ideal answer is “supply side economics.”
This is why Thatcher and Reagan picked up on it – it is easy. This is why the Right has been so successful in transforming the economy of the world from a Keynesean “balanced” model to pure Hobbesean nightmare. It is easy to identify the flaws in the Keynesean model, easy to point out where over-regulation was not helping. It is simpler to apply a populist “win-win” the mantra than any real thought about what is good economics. That it is not proving to be successful is irrelevant – I got mine so I am OK, and who cares about anyone else. This is “Leviathan” at work.
If you think I am wrong, you only have to look at the last five years, you do not have to go back any further than that. Corporate greed, corruption and open contempt for people, with a willing compliance from Governments are hallmarks of this period. Pick a country, any country – the story is the same. People no longer count in the equation of “successful economics”. And there is the rub, is supply side economics successful? As we are in a prolonged period of economic uncertainty, and we are waiting for the next bit of bad news, I suggest “supply side” economics is short term success against long term failure.
Is that how we want to live? We need “free trade”, it works, but should it be totally free when people are made slaves to it? It is why we need a strong public education program, not just here but in all nations, for people to recognise the fallacy of modern economics. This is why the conservatives are so intent on wrecking public education, making it, once again, the sole province of the economic elites.
This is why Freidmann, Thatcher and Reagan are the great villains, not because they were evil, but because their foolish “good intentions” have led us to a place that is far less desireable than they believed it would be. The real evil though, lies with the economists and politicians who refuse to see where it has gone wrong and deny any effort to remedy it.