Milton Friedman - Inflation Deceiver

(c) by Mark Dempsey

 

The narrative explaining inflation coming from every conceivable media outlet--including Jon Stewart's podcast interview with Steve Hanke--is Monetarist Milton Friedman's statement that "Inflation is always and everywhere a monetary phenomenon." This explanation is at least inadequate.

To understand where he comes from, know that Friedman's economics gave respectability to the notion that profit excuses any bad behavior. He said corporations owed their shareholders only larger profits, and they owed their workers and communities nothing--exactly the opposite of the considerations that guided public policy conversations when limited liability corporations were invented. 

 

Yet thanks to well-funded backing, people continue to believe the plausible fantasies that Friedman's economics promotes. His manifesto Free to Choose is not only still in print, it has a page full of videos translations, and other promotional material on its Amazon page. The rebuttal--Not So Free to Choose by Friedman's student Elton Rayack--is out of print, and roughly seven times as expensive to buy. Could big money be behind this state of affairs? Friedman's economics certainly favor the plutocrats.

Here's an excerpt from the shareholder profits link above: "The shareholder value theory ... failed even on its own narrow terms: making money. The proponents of shareholder value and stock-based executive compensation hoped that their theories would focus executives on improving the real performance of their companies and thus increasing shareholder value over time. Yet, precisely the opposite occurred. In the period of shareholder capitalism since 1976, executive compensation has exploded while corporate performance declined. "

Friedman's economics influenced those replacing the Chilean government in 1973 when the CIA helped install human rights abuser General Pinochet as the Chilean leader and overthrew the elected Allende government. Friedman's "Chicago Boys" were the top economic advisors to Pinochet, and any economist who disagreed was exiled or assassinated. Apparently winning the argument about what's legitimate economics justifies even killing! ("Both the National Commission on Political Imprisonment and Torture [Valech Report] and the Commission of Truth and Reconciliation [Rettig Report] approximate that there were around 30,000 victims of human rights abuses in Chile, with 40,018 tortured and 2,279 executed. ")

"Commenting on developments in Chile, the conservative British journal The Economist observed, 'Chile, under the stern eye of President Pinochet, has provided laboratory conditions for a prolonged experiment by Mr. Milton Friedman's disciples...Chile is another economic disaster. The 'Chicago boys' have gone grey watching their achievements...slowly wasting away.'" - p.70 Not So Free To Choose , by Friedman's student, Elton Rayack.

"Contrary to Friedman's claim that Chile's free-market experiment is an economic miracle, the overwhelming evidence indicates that the experiment has been an economic disaster. In eight of the nine years under the Chicago model, the unemployment rate was in the double-digit range, three to four times greater than the average of annual employment rates in the decade prior to the takeover by the junta, and in 1982 and 1983 soared to well over 20 percent. Throughout most of those nine years, real wages were significantly less than what they were in 1970 and in 1983 they fell below the 1970 level by 13 percent.

"The record on economic growth is equally deplorable. In the decade of the 1970s, while Latin America's (19 countries) per capita gross domestic product increased by 40 percent, Chile's rose by a mere 8 percent. By 1982, Chile's per capita GDP, as a result of a severe depression, was actually 5 percent lower than it was in 1970." (Ibid p. 72)

The Chilean economy has lagged behind other South American countries' economies too...so just on scientific grounds, Friedman is baloney. His theories don't match reality. If you're curious about this, read Not So Free To Choose. After you read it, you'll understand why I say Friedman was lying all the time in his theories.