[Vision2020] Milton Friedman, Unperson

[Art Deco]

  [image: The New York Times] <http://www.nytimes.com/>

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August 11, 2013
Milton Friedman, Unperson By PAUL
KRUGMAN<http://topics.nytimes.com/top/opinion/editorialsandoped/oped/columnists/paulkrugman/index.html>

Recently Senator Rand Paul, potential presidential candidate and
self-proclaimed expert on monetary issues, sat down for an
interview<http://www.businessweek.com/articles/2013-08-08/rand-paul-on-republicans-voter-appeal-and-the-federal-reserve>with
Bloomberg Businessweek. It didn’t go too well. For example, Mr. Paul
talked about America running “a trillion-dollar deficit every year”;
actually, the deficit is projected to be only $642 billion in 2013, and
it’s falling fast.

But the most interesting moment may have been when Mr. Paul was asked whom
he would choose, ideally, to head the Federal Reserve and he suggested
Milton Friedman — “he’s not an Austrian, but he would be better than what
we have.” The interviewer then gently informed him that Friedman — who
would have been 101 years old if he were still alive — is, in fact, dead.
O.K., said Mr. Paul, “Let’s just go with dead, because then you probably
really wouldn’t have much of a functioning Federal Reserve.”

Which suggests an interesting question: What ever happened to Friedman’s
role as a free-market icon? The answer to that question says a lot about
what has happened to modern conservatism.

For Friedman, who used to be the ultimate avatar of conservative economics,
has essentially disappeared from right-wing discourse. Oh, he gets
name-checked now and then — but only for his political polemics, never for
his monetary theories. Instead, Rand Paul turns to the “Austrian” view of
thinkers like Friedrich Hayek <http://mises.org/Literature/Author/126> — a
view Friedman once described as an “atrophied and rigid
caricature<http://www.jstor.org/discover/10.2307/1830418?uid=3739832&uid=2&uid=4&uid=3739256&sid=21102526896661>”
— while Paul Ryan, the G.O.P.’s de facto intellectual leader, gets his
monetary economics from Ayn Rand, or more precisely from fictional
characters<http://www.slate.com/blogs/weigel/2012/08/13/what_paul_ryan_s_ayn_rand_fandom_means_for_monetary_policy.html>in
“Atlas Shrugged.”

How did that happen? Friedman, it turns out, was too nuanced and realist a
figure for the modern right, which doesn’t do nuance and rejects reality,
which has a well-known liberal bias.

One way to think about Friedman is that he was the man who tried to save
free-market ideology from itself, by offering an answer to the obvious
question: “If free markets are so great, how come we have depressions?”

Until he came along, the answer of most conservative economists was
basically that depressions served a necessary function and should simply be
endured. Hayek, for example, argued that “we may perhaps prevent a crisis
by checking expansion in time,” but “we can do nothing to get out of it
before its natural end, once it has come.” Such dismal answers drove many
economists into the arms of John Maynard Keynes.

Friedman, however, gave a different answer. He was willing to give a little
ground, and admit that government action was indeed necessary to prevent
depressions. But the required government action, he insisted, was of a very
narrow kind: all you needed was an appropriately active Federal Reserve. In
particular, he argued that the Fed could have prevented the Great
Depression — with no need for new government programs — if only it had
acted to save failing banks and pumped enough reserves into the banking
system to prevent a sharp decline in the money supply.

This was, as I said, a move toward realism (although it looks wrong in the
light of recent experience). But realism has no place in today’s Republican
Party: both Mr. Paul and Mr. Ryan have furiously attacked Ben Bernanke for
responding to the 2008 financial crisis by doing exactly what Friedman said
the Fed should have done in the 1930s — advice he repeated to the Bank of
Japan<http://www.theatlantic.com/business/archive/2013/08/rand-paul-knows-nothing-of-milton-friedmans-work/278517/>in
2000. “There is nothing more insidious that a country can do to its
citizens,” Mr. Ryan lectured Mr. Bernanke, “than debase its currency.”

Oh, and while we’re on the subject of debasing currencies: one of
Friedman’s most enduring pieces of straight economic analysis was his
1953 argument
in favor of flexible exchange
rates<http://www.interfluidity.com/files/friedman-flexible-exchange.html>,
in which he argued that countries finding themselves with excessively high
wages and prices relative to their trading partners — like the nations of
southern Europe today — would be better served by devaluing their
currencies than by enduring years of high unemployment “until the deflation
has run its sorry course.” Again, there’s no room for that kind of
pragmatism in a party in which many members hanker for a return to the gold
standard.

Now, I don’t want to put Friedman on a pedestal. In fact, I’d argue that
the experience of the past 15 years, first in Japan and now across the
Western world, shows that Keynes was right and Friedman was wrong about the
ability of unaided monetary policy to fight depressions. The truth is that
we need a more activist government than Friedman was willing to
countenance.

The point, however, is that modern conservatism has moved so far to the
right that it no longer has room for even small concessions to reality.
Friedman tried to save free-market conservatism from itself — but the
ideologues who now dominate the G.O.P. are beyond saving.


-- 
Art Deco (Wayne A. Fox)
art.deco.studios at gmail.com
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