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Free Markets and Big Government,
This review is from: Free to Choose: A Personal Statement (Paperback)
Every once in a while a book crystallises a world view. Free To Choose has a good claim in this respect arriving as it did in 1980 . It's a clear exposition of the free market economics that influenced Margaret Thatcher and Ronald Reagan, leading to one of the greatest economic booms in history and arguably spelling the end of communist power.
Milton Friedman is a Nobel prize-winning economist, winning the prize in recognition of his work on the money supply and inflation. However the main (and more important) theme of Free To Choose is a critical look at the road that the free market idea has travelled since it's first clear presentation in 1776 by Adam Smith in the remarkable book, The Wealth of Nations.
To quote Friedman on the power of the free market idea, "if an exchange between two parties is voluntary, it will not take place unless both believe that they will benefit from it" or "the price system is the mechanism that performs this task without central direction, without requiring people to speak to one another or to like one another. When you buy your pencil or your daily bread, you don't know whether the pencil was made or the wheat was grown by a white man or a black man, by a Chinese or an Indian. As a result, the price system enables people to co-operate peacefully in one phase of their life while each one goes about his business in respect of everything else."
When this concept is repeated millions of times one has a flexible evolving system that can meet peoples needs in a way that no top-down planned price and production system can hope to match. Is this stating the obvious? - Well it seems not . Friedman uses the greater part of the book to show how the free market idea has been under attack, often in the places where it has generated the greatest wealth in the past.
One way or another government comes into the picture and the reader enters a strange Orwellian world of double-talk where "for your own good" means "for our own good" and "we" are "you".
As democratic governments respond to the question "What are you going to do about it?" without having a clear idea about what is their responsibility, and what isn't , the need for government departments, institutions, committees, etc. continues to grow, adding more leaves and branches to the tree. If one doubts the reality of the growth of government, a good survey of the world economy ( by Clive Crook in The Economist 20th Sept.97) gives figures that support Friedmans observations:
U.S.Government spending as % of GNP
Crook notes that this is after the pro-market anti-big government rhetoric of Thatcher and Reagan. In the U.S. government spending remained unchanged, in the UK it only fell 1% as a result the new philosophy and everywhere else it continues to rise reaching for example 55% in France last year and 65% in Sweden.
The unstated assumption is that somehow governments can undertake activities more successfully than individuals in the new areas that they enter - an idea that Friedman comprehensively shows to be false.
At the end of the book he offers an interesting set of suggestions based around an "economic constitution" and highlights market solutions to government only areas. Nevertheless his own solutions seem to create a problem of their own that he doesn't address at all, namely - "pay enough and you can do what you want" whether this is polluting a lake or limiting quality of education to what you can pay for.
Even if the reader isn't particularly interested in economics this is an exceptionally worthwhile book.
UPDATE: US government spending is now (2011)40% of GNP.