My Introduction to Milton Friedman
Milton Friedman, the 1976
Nobel memorial prize winner for economics and the highly decorated high priest
of American capitalism had died on November 16th, at the age of 94. I
have saved the contents of this essay for a future dual biography book on
Kannadasan, but felt that it is
also timely now to share it with the readers following the death of Milton
It may be strange for some to believe that I became interested in Milton
Friedman’s writings only through MGR.
Partially the blame should go to the school and university curriculum used for
the 1960s and 1970s in the post-colonial Ceylon as well. Once I chose to study
[natural] sciences at the age of 12 in 1965, there was no opportunity for me to
sit in any class teaching economics, until I graduated in Zoology from the
University of Colombo in 1976. Thus I missed out on Milton Friedman in my salad
Luckily for me, my movie idol MGR had other plans. He had been thrown out of the
Karunanidhi-led DMK party in
October 1972. This led MGR to found his own party immediately and which he named
as Anna DMK, to honor C.N.Annadurai
(Anna), his political mentor and founder of the DMK party. On September 17, 1973
(even before his newly found party reached its first anniversary), MGR in his
inimical fashion announced that the ideology of the ADMK was ‘Annaism’. This was
a new word in the Indian political lexicon. To the question, what is the essence
of Annaism, MGR had a ready answer; “a proper amalgam of capitalism, socialism
Only the charismatic MGR could deliver such an obscurantist response and still
stay in the political theater without being chased away as a crackpot. Remember
that in the India of 1970-1977 led by Indira Gandhi, socialists and communists
of the ‘home garden’ variety and the ‘foreign-returned’ variety chased their
dreams on these political red hue rainbows of socialism and communism. For
them, capitalism was an anathema. Even Chakravarthi Rajagopalachari (Rajaji), a
renowned freedom fighter and later the first Governor General of independent
India, had to fold his pro-Capitalist Swatantra Party for lack of popular
support. From the podia of their English press, the pen wielders of socialism
and communism naturally ridiculed MGR (a primary school dropout turned a stage
actor and then a successful movie idol) for his ignorance on economics and
As a die-hard MGR fan, initially I thought MGR’s Annaism balloon was an
entertaining distraction. And MGR was entitled to it. Then, while enjoying my
stay in the USA for 80 months (from 1981 to 1986, and again from 1989 to 1991),
I became interested in gathering any literary evidence (if there is any!) for
MGR’s ‘Annaism’ concept. I was pleased that in an Op-Ed piece he contributed to
the New York Times of December 31, 1989, Milton Friedman himself
presented his thesis that “U.S. is now 45 percent socialist.”
This amused me to a degree, that even Milton Friedman had provided evidence that
MGR had got it right in 1973, that capitalism and socialism could co-exist.
Meanwhile, MGR had passed away in December 24, 1987 – two years before we heard
from the American high priest of capitalist economy.
provide below the entire text of Milton Friedman’s mini-essay, which appeared in
the New York Times of December 31, 1989. I consider this as a masterpiece
of lucid writing for commoners by an egg head wizard of economics. Words in
italics are as in the original essay.
We have Socialism, Q.E.D.
by Milton Friedman
Calif[ornia]: Conventional wisdom these days can be summarized in
the form of a syllogism
Major premise: Socialism is a failure. Even lifelong Communists now accept
this proposition. Wherever socialism has been tried, it has proved
unable to deliver the goods, either in the material form of a high
standard of living or in the immaterial form of human freedom.
Minor premise: Capitalism is a success. Economies that have used capitalism –
free private markets – as their principal means of organizing
economic activity have proved capable of combining widely shared
prosperity and a high measure of human freedom. A private market
system has proved to be a necessary though not a sufficient
condition for prosperity and freedom.
Conclusion: The U.S. needs more socialism. An obvious non sequitur, yet there is no denying that many
apparently reasonable people – including most members of Congress
and of the Bush administration – accept all three propositions
What is socialism? In its purest form, socialism is government
ownership and control of the means of production. Ownership of
anything implies the right to the income produced by that thing. All
means of production in the United States – people, land, machines,
buildings, etc. – produce our national income. Spending by
government currently amounts to about 45 percent of national income.
By that test, government owns 45 percent of the means of production
that produce the national income. The U.S. is now 45 percent
Ownership of anything also implies control of how it is used. An
owner may delegate detailed control to agents, as most private
stockholders of private corporations do, while retaining the right
to replace the agents. Government is in that position with respect
to many of the means of production that produce the income it
Beyond that, however, government exercises extensive direct control
over how the means of production may be used: It prohibits certain
uses (to deliver first class mail, to sell some drugs at all, to
sell others without prescription, etc.); it controls other uses
through laws governing wages, hours and working conditions, rent
control and in other ways.
I do not know how to express the importance of such controls as a
percentage of national income, but clearly they are important and
their existence means that 45 percent understates the degree of
socialism in the U.S., perhaps appreciably.
Socialism has proved no more efficient at home than abroad. What are
our most technologically backward areas? The delivery of first class
mail, the schools, the judiciary, the legislative system – all mired
in outdated technology. No doubt we need socialism for the judicial
and legislative systems. We do not for mail or schools, as has been
shown by Federal Express and others, and by the ability of many
private schools to provide superior education to underprivileged
youngsters at half the cost of government schooling.
Airlines have had no difficulty in acquiring the planes and
personnel to handle the increased traffic produced dy deregulation.
What has been the bottleneck? Airports. Why? Because they are
government owned and operated.
We all justly complain about the waste, fraud and inefficiency of
the military. Why? Because it is a socialist activity – one that
there seems no feasible way to privatize. But why should we be any
better at running socialist enterprises than the Russians or
By extending socialism far beyond the area where it is unavoidable,
we have ended up performing essential government functions far less
well than is not only possible but than was attained earlier. In a
poorer and less socialist era, we produced a nationwide network of
roads and bridges and subway systems that were the envy of the
world. Today we are unable even to maintain them.
Yet what are the loudest complaints? Government should be doing
more; government is strapped for funds; taxes should be raised; more
regulations should be imposed; build more prisons to house more
criminals created by socialist legislation. Child care? Program
trading? Earthquakes? Pass a law. And every law comes with a price
tag and is cited as a reason for higher taxes. Can we learn only
from our own mistakes? Or not even from them?”
What had Milton Friedman omitted in this 1989 essay?
While mentioning that the military spending part in the USA is a “socialist
activity”, Milton Friedman had omitted to elaborate on an important component of
military spending; that is, of spending by the gumshoes on spying. It appears to
me that some aspects of military spending such as spying were ‘no touch’
territory for even Nobel memorial prize winning economists, like Milton
Friedman. I checked the New York Times archive (LexisNexis Academic
database, from June 1980), and 521 items came up for Milton Friedman alone. But
when I combined the search for Milton Friedman and CIA, there was only
one item in the past 26 years, which was also not a direct contribution from the
Thus, while the highly decorated ivory tower academic had provided evidence that
45 percent of American spending is ‘socialist’, to learn on what he had
refrained from mentioning, I turn the readers’ attention to a thought-provoking
essay by Andy Rooney, one
of the leading American humorists/satirists, to shed light on the communist
angle of American capitalism.
This expose by Andy Rooney tells us that communism is also enmeshed with
socialism in the American capitalist economy. Here are excerpts from Andy
Rooney’s hilarious observations on the highly pampered ‘Intelligence Community’
of the USA:
A Lack of Intelligence
by Andy Rooney
a nice country like the United States doing in a tawdry, dishonest
business like spying? If they cut the $30 billion Central
Intelligence Agency budget by 75 percent tomorrow it wouldn’t be a
month too soon. ‘The CIA’ is a better way to refer to the agency
because it avoids the word ‘intelligence’. There are a dozen reasons
why the United States should not be engaged in the sort of activity
the CIA specializes in, but you can reduce those to two:
Spying is illegal, immoral and unethical.
Spying doesn’t work and it’s a waste of money.
…Intelligence agencies of every country work the same way. They
convince citizens that they’re about to be attacked by another
country and, because of the threat, there’s a need for all sorts of
spy and intelligence activity. When the threat doesn’t materialize,
the intelligence agency doesn’t admit it was wrong. It’s smarter
than that. It takes credit. It says the enemy didn’t attack because
it warned us so we built up our defences. The enemy knew we were
prepared so they changed their minds about attacking us….
The course of events in the world has been little changed by
anything spies ever came up with. They make good movies and good
novels but they aren’t good for much else… Spies are, generally
speaking, maladjusted social misfits who can’t make a living at
anything else. The spies of our country and the spies of the enemy
are the same people. They’re interchangeable. When you hear of
defectors, it’s almost always spies who defect, not other government
officials. Spies defect more often because dishonesty is what they
deal in and they get their kicks out of deception.
Intelligence agencies are impervious to the kind of inspection or
criticism that other agencies of a democratic government are
subjected to. When the CIA is questioned about anything, agency
officials have a standard answer: ‘Sorry. Torture us but we’re
patriotic Americans. To reveal that information would compromise the
security of the United States.’ They spend half their time not
spying but trying to catch other spies.
There’s a case to be made for collecting and interpreting
information from and about foreign countries. That’s why the CIA
should be left with 25 percent of its budget but with none of its
spies. The novelists of the future should have to go it alone.”
[Source: Sweet & Sour, by Andrew A.Rooney, Berkley Books, New
York, 1994, pp.201-203]
Andy Rooney had lucidly presented a case that as far as the
functioning of gumshoes in America, there exists hardly a difference
from them to those of the Communist breed. Vladimir Putin, the
current leader of Russia is an ex gumshoe of Communist Soviet Union,
from 1975 to August 1991. The same goes to Robert Michael Gates, the
newly nominated Secretary of Defense in the Land of Liberty. Gates
had served 26 years in the CIA.
Rebuttal to Milton Friedman’s 1989 Essay
should include a rebuttal to Milton Friedman’s essay from Joseph J.Fahey (a
professor of religious studies at Manhatton College), which appeared in the
New York Times of January 14, 1990. His observations on the American
military also deserve notice. To quote,
“Milton Friedman should know better than to confuse Communism with socialism
(''We Have Socialism, Q.E.D.,'' Op-Ed, Dec. 31). The ‘purest' form of
socialism is not, as he states, 'government ownership and control of the
means of production,' but worker ownership and control of the means of
production. What Professor Friedman describes are Communist societies, not
socialist ones. The difference is crucial. Worker ownership can be achieved
through cooperatives, private nonprofit corporations and labor unions, all
distinct from, maybe even inimical to, the interests of government. The
20th-century Communist governments have used some elements of socialism:
guaranteed jobs, housing, education, transportation and medical care, but
they have not been socialist societies. They have not been because the state
has owned the means of production, not the workers.
Further, Professor Friedman is wrong to accuse the United States military of
being socialistic. True, it has some elements of socialism, but military
personnel do not control the military, and they certainly do not own it.
Government (not the people) controls the military, and the host of private
military contractors are very largely the owners of the military.
Government, through the appropriate House and Senate committees, has
historically danced to the tune of the military arms inventors and
suppliers. This is not socialism, but state-sponsored capitalism.
G. K. Chesterton once stated that 'Christianity has not failed because it
has been tried and found wanting. It has failed because it has never been
tried.' The same can be said of socialism. Let us not bury an idea before we
have tried it!”
Fahey may indeed be correct that socialism in its pure form has not been tried
in any country, though quite a number of states (including the failed states
like post colonial Sri Lanka) have splashed the word for propaganda uses in
passports as well.
up, the thoughts of Milton Friedman, Andy Rooney and Joseph Fahey (all honest
Americans) do show that MGR’s Annaism concept (an amalgam of capitalism,
socialism and communism) does thrive in the Land of Liberty, but in a different