The End of the Age of Friedman
by J. Bradford Delong

Harvard professor Dani Rodrik - perhaps the finest political economist of my generation - recently reported on his blog that a colleague has been declaring the past three decades “the Age of Milton Friedman.” According to this view, the coming to power of Ronald Reagan, Margaret Thatcher, and Deng Xiaoping led to an enormous upward leap in human liberty and prosperity. I say yes - and no - to this proposition.
Friedman adhered throughout his life to five basic principles:
1. Strongly anti-inflationary monetary policy.
2. A government that understood that it was the people’s agent and not a dispenser of favors and benefits.
3. A government that kept its nose out of people’s economic business.
4. A government that kept its nose out of people’s private lives.
5. An enthusiastic and optimistic belief in what free discussion and political democracy could do to convince peoples to adopt principles (1) through (4).
Measured against these principles, Reagan failed on (2) and (4) and adopted (1) only by default - Paul Volcker’s anti-inflation policy in the 1980’s dismayed many of Reagan’s close aides. Thatcher failed on (4). And Deng - while a vast improvement over his predecessors Lenin, Stalin, Khrushchev, and Mao - failed on all five, with the possible exception of (3). We do not know what Deng’s desired set of economic arrangements for a system of “socialism with Chinese characteristics” was, and, in all likelihood, he did not know, either.
But I say yes in part to the “Age of Friedman” proposition, because only Friedman’s set of principles self-confidently proposed both to explain the world and to tell us how to change it. Still, I would build up a counterbalancing set of principles, because I believe that Friedman’s principles do not, ultimately, deliver what they promise.
My principles would start from the observation that market economies and free and democratic societies are built atop a very old foundation of human sociability, communication, and interdependence. That foundation had a hard enough time functioning when human societies had 60 members - eight orders of magnitude less than our current global society’s six billion.
So my principles would then be developed from Karl Polanyi’s old observation that the logic of market exchange puts considerable pressure on that underlying foundation. The market for labor compels people to move to where they can earn the most, at the price of potentially creating strangers in strange lands.
The market for consumer goods makes human status rankings the product of responsiveness to market forces rather than the result of social norms and views about justice.
This critique of the market is, of course, one-sided. After all, other arrangements for allocating labor appear to involve more domination and alienation than the labor market, which offers people opportunities, not constraints. Similarly, “social norms” and “views about distributive justice” usually turn out to favor whomever has the biggest spear or can convince others that obedience to the powerful is obedience to God. Market arrangements have a larger meritocratic component than the alternatives, and they encourage positive-sum entrepreneurship, making it easier to do well by doing good.
Nevertheless, the distribution of economic welfare produced by the market economy does not fit anyone’s conception of the just or the best. Rightly or wrongly, we have more confidence in the correctness and appropriateness of political decisions made by democratically-elected representatives than of decisions implicitly made as the unanticipated consequences of market processes.
We also believe that government should play a powerful role in managing the market to avoid large depressions, redistributing income to produce higher social welfare, and preventing pointless industrial structuring produced by the fads and fashions that sweep the minds of financiers.
Indeed, there is a conservative argument for social-democratic principles. Post-WWII social democracy produced the wealthiest and most just societies the world has ever seen. You can complain that redistribution and industrial policy were economically inefficient, but not that they were unpopular. It seems a safe bet that the stable politics of the post-WWII era owe a great deal to the coexistence of rapidly growing, dynamic market economies and social democratic policies.
Friedman would respond that, given the state of the world in 1975, a move in the direction of his principles was a big improvement. When I think of Jimmy Carter’s energy policy, Arthur Scargill at the head of the British mineworkers’ union, and Mao’s Cultural Revolution, I have a hard time disagreeing with Friedman about the world in the mid-1970’s.

But there I would draw the line: while movement in Friedman’s direction was by and large positive over the past generation, the gains to be had from further movement in that direction are far less certain.

J.Bradford DeLong is Professor of Economics at the University of California at Berkeley and a former Assistant US treasury Secretary

The moral vulnerability of markets
By Robert Skidelsky
First Published: March 13, 2008

Today, there seems to be no coherent alternative to capitalism, yet anti-market feelings are alive and well, expressed for example in the moralistic backlash against globalization. Because no social system can survive for long without a moral basis, the issues posed by anti-globalization campaigners are urgent — all the more so in the midst of the current economic crisis.
It is hard to deny some moral value to the market. After all, we attach moral value to processes as well as outcomes, as in the phrase “the end does not justify the means.” It is morally better to have our goods supplied by free labor than by slaves, and to choose our goods rather than have them chosen for us by the state. The fact that the market system is more efficient at creating wealth and satisfying wants than any other system is an additional bonus.
Moral criticisms of the market focus on its tendency to favor a morally deficient character type, to privilege disagreeable motives, and to promote undesirable outcomes. Capitalism is also held to lack a principle of justice.
Consider character. It has often been claimed that capitalism rewards the qualities of self-restraint, hard-work, inventiveness, thrift, and prudence. On the other hand, it crowds out virtues that have no economic utility, like heroism, honor, generosity, and pity. (Heroism survives, in part, in the romanticized idea of the “heroic entrepreneur.”)
The problem is not just the moral inadequacy of the economic virtues, but their disappearance. Hard work and inventiveness are still rewarded, but self-restraint, thrift, and prudence surely started to vanish with the first credit card. In the affluent West, everyone borrows to consume as much as possible. America and Britain are drowning in debt.
Adam Smith wrote that “consumption is the sole end and purpose of production.” But consumption is not an ethical aim. It is not positively good to have five cars rather than one. You need to consume in order to live, and to consume more than you strictly need in order to live well. This is the ethical justification for economic development. From the ethical point of view, consumption is a means to goodness, and the market system is the most efficient engine for lifting people out of poverty: it is doing so at a prodigious rate in China and India.
But this does not tell us at what point consumption tips us into a bad life. If people want more pornography or more drugs, the market allows them to consume these goods to the point of self-destruction. It oversupplies some goods that are morally harmful, and undersupplies goods that are morally beneficial. For quality of life, we have to rely on morals, not markets.
No doubt it is unfair to blame the market for bad moral choices. People can decide when to stop consuming or what they want to consume. But the market system relies on a particular motive for action — Keynes called it “love of money” — which tends to undermine traditional moral teaching. The paradox of capitalism is that it converts avarice, greed, and envy into virtues.

We are told that capitalism discovers wants that people did not realize they had and thus moves humanity forward. But it is truer to say that the market economy is sustained by the stimulation of greed and envy through advertising. In a world of ubiquitous advertising, there is no natural limit to the hunger for goods and services.
The final moral issue is capitalism’s lack of a principle of justice. In a perfectly competitive market, with full information, models of the market show that all the factors of production receive rewards equal to their marginal products, i.e. all are paid what they are worth. The full competition and information requirements ensure that all contracts are uncoerced (there is no monopoly power) and all expectations are fulfilled, i.e., people get what they want. Justice in distribution is supposedly secured by justice in exchange.
But no actually existing capitalist market system spontaneously generates justice in exchange. There is always some monopoly power, insiders have more information than outsiders, ignorance and uncertainty are pervasive, and expectations are frequently disappointed. Justice in exchange has to be supplied from outside the market.
Moreover, the endowments that people bring with them to the market include not just their own innate qualities, but their starting positions, which are radically unequal. That is why the liberal theory of justice demands at a minimum equality of opportunity: the attempt — as far as is compatible with personal liberty — to eliminate all those differences in life chances arising from unequal starting points. As a result, we rely on the state to provide social goods like education, housing, and health care.
Finally, the claim that everyone is — under ideal conditions — paid what they are worth is an economic, not a moral, valuation. It does not conform to our moral intuition that a CEO should not be paid 500 times the average wage of his workers, or to our belief that if someone’s market-clearing wage is too low to support life, he should not be allowed to starve to death. As our societies have become richer, we have come to believe that everyone is entitled to a minimum standard, whether in work or sickness or unemployment, which allows for a continuing level of comfort and flourishing. The market system does not guarantee this.
While the market today has no serious challenger, it is morally vulnerable. It has become dangerously dependent on economic success, so that any large-scale economic failure will expose the shallowness of its moral claims. The solution is not to abolish markets, but to re-moralize wants. The simplest way of doing this is to restrict advertising. This would prune the role of greed and envy in the operation of markets, and create room for the flourishing of other motives.

Robert Skidelsky, a member of the British House of Lords, is Professor emeritus of political economy at Warwick University, author of a prize-winning biography of the economist John Maynard Keynes, and a board member of the Moscow School of Political Studies.

Q. Quotes

1. This is not the end. It is not even the beginning of the end. But it is, perhaps, the end of the beginning – Winston Churchill (1874-1965), of the victory in Africa, Speech at the mansion house , 10 Nov, 1942.

2. Progress, therefore, is not an accident, but a necessity…It is part of nature- Johnny Speight (1922-1998), Social Statics

3. I don’t care who writes the nation’s laws- or crafts its advanced treaties-if I can write its economic books- Paul A. Samuelson (1915-) Author of Economics: An introductory Analysis ,1948, the largest selling economics textbook in history.

4. If the Treasury was to fill old bottles with banknotes, bury them at suitable depths in disused coalmines which are then filled up to the surface with town rubbish, and leave it to private enterprise on well-tried principles of laissez-faire to dig the notes up again…there need be no more unemployment and, with the help of the repercussions, the real income of the community…would probably become a good deal larger than it actually is – John Maynard Keynes (1883-1946), The General theory of Employment

5. If a man can write a better book, preach a better sermon, or make a better mouse-trap than his neighbor, though he build his house in the woods, the world will make a beaten path to his door- Ralph Waldo Emerson (1803-1882), Lecture noted down by Sarah Yule, quoted in her Borrowings.

6. People who don’t want anything worry me. The price isn’t right- Harold L. Lindsay and Russell Crouse, The State of the Union (film), 1948, spoken by Adolphe Menjou

7. I never saw so many shocking bad hats in my life –Arthur Wellesley, Duke of Wellington (1769-1852), on seeing the first Reformed Parliament

8. Perhaps the most central characteristic of authentic leadership is the relinquishing of the impulse to dominate others – David Cooper (1931-?), Psychiatry and Anti-Psychiatry

9. Economics is our contemporary theology, regardless of how we spend Sunday- James Hillman, “Opening the Book,” Kinds of power: A guide to its intelligent uses ,1995.

10. You don’t go through a deep personal transformation without some kind of dark night of the soul- Sam Keen (1931-), Jerry Brown radio interview, KPFA, Berkeley

Why is the pulpit non-committal?
(Pulpit is a platform or rasied structure in a mosque from which the preacher delivers the sermons)

By Nasser Yousaf

THE people of the Frontier Province in Pakistan can do little more to further establish their sincere Islamic credentials. Throughout the length and breadth of the province the mosques are overflowing with the faithful. Come time for the evening prayer and the bustling Saddar Road in Peshawar ceases to exist; shoppers and shopkeepers from all around convert the road into a makeshift mosque.

Men are sporting beards in large numbers as one keeps bumping into hordes of them at every step. No women on the streets or at university campuses in the province have ever been spotted in skirts and those few who wear jeans do so with long flowing shirts. Similarly, women driving cars keep to their cultural ethos in the most profound sense of the word. Little is needed to substantiate the Pakhtuns’ way of adherence to the month of fasting. The severity of fasting in the Frontier is such that the rest of the country lightly refers to Ramazan as the headache of the Pathans. There are no nightclubs, pubs or casinos anywhere and life comes to a halt when the night is still pretty young.

But this does not seem to be enough in the eyes of those currently at war with the defenceless people of the Frontier. The puritans’ brigade killed 12 innocent people on Aug 12, 2008, in a suicide attack in Peshawar and then called it a fidayeen (holy warriors) onslaught against forces presumably inimical to their cause. Two veiled women and a minor girl on their way to a wedding, two persons on bicycles and some lower-ranking officials of the air force were among the targets.

Before this, the militants twice targeted the 500 KV power tower on the outskirts of Peshawar in the infamous summer heat of the plains. As a result power supply to the provincial capital and scores of other districts remained suspended for days causing untold miseries to the sick and old.

Perhaps the militants did not know that a majority of cancer patients being treated at various reputed hospitals of the country hail from the Frontier or else their think tank would have reconsidered their plans.

The ongoing frenzy in the province might be sending very confused signals to the outside world. Those not familiar with the area might be imputing this fracas to a battle between the Islamists and non-Muslims. The record says otherwise: Muslims constitute 99.4 per cent of the population of the Frontier.

This leaves little room for people of other faiths to figure on the map. Nevertheless the census report does put the Christians and Ahmadis way down at less than one per cent while Hindus are so few that they easily evade even telescopic review. What is the issue at stake then? With the holy month of fasting to begin next week, why has Bajaur Agency been exorcised of most of its 900,000 inhabitants? The pulpit was supposed to shield the faithful but it is keeping mum or has it also been silenced into submission?

Friday prayers hardly get ignored when, in accordance with the teachings of the Holy Quran, Muslims stop working and find themselves mosque-bound as if by instinct. Several mosques in the Frontier have built separate enclosures for women. Children invariably make it to the mosques, adding an aura of special festivity to the congregational prayer in the true spirit of the ritual. The preacher leads the congregation, according to his own sweet will, reinforced by his easy access to the loudspeaker that now forms a part of his dress code through his buttonhole.

Garrulous preachers are what no administration would like to have in its jurisdiction but yet they are there occupying the pulpits till death do them part. A candidate being interviewed for the civil service was once asked why it was considered ominous to have the Eid festival on a Friday. After the interviewee drew a blank, the suave examiner explained that the issue was not one of superstition but one that concerned the management of two congregations gone awry on the same day as the enormity of the occasion entailed great cost for the government of the time. This in a nutshell shows the importance of the Friday sermon. But why is the preacher turning a blind eye to the melee in his own ranks?

No doubt, it is the presence of hundreds of worshippers listening to him in rapt attention that lends vanity to the tone of the preacher sitting on a higher pedestal. A politician spends a fortune on assembling a crowd of a few hundreds and then trying to keep it in good humour. On the other hand, preachers have facile access to an audience of more than 20m every Friday in Pakistan. People make it to the mosques without anybody’s persuasion or prodding. But the preacher seems to be oblivious of the added responsibilities that the enviable position bestows on him. He can thus be heard busying himself with inanities.

In a mosque in one neighbourhood, the preacher vents his spleen on those who according to him are throwing away their fortunes in the laps of dancing girls, a euphemism for a term that the preacher would have preferred. The sermon is relayed to all houses down the street on airwaves as the preacher repeats the charge more vociferously. This happened on a Friday when a woman fleeing from the battlefields of Bajaur Agency gave birth to a child on the roadside. The preacher then invoked curses on the enemies of Islam not knowing that salvation was one prayer away: the prayer that the pulpit may be restored to its conceived status in Islam.

courtesy Dawn, printed on August 30, 2008

Q. Quotes

1. God has two dwellings: one in heaven, and the other in a meek and thankful heart – Izaak Walton

2. God is really one another artist. He invented the giraffe, the elephant, and the cat. He has no real style. He just goes on trying other things -Pablo Picasso(1881-1973) quoted in Francoise Gilot and Carlton Lake, Life with Picasso, Pt I.

3. Willy Loman never made a lot of money. His name was never in the paper. He’s not the finest character that ever lived. But he’s a human being, and a terrible thing is happening to him. So attention must be paid – Arthur Miller (1915-)

4. Show me a hero, and I will write you a tragedy- F.Scott Fitzgerald (1896-1940). “The Note-Books” (E), The Cracked Up, ed. Edmund Wilson, 1945

5. Yes, as I have already told you, here they hang a man first and try him afterwards – B.Poquelin, called Moliere (1622-1673)

6. If you give me six lines written by the most honest man.. I will find something in them to hang him – Cardinal Richelieu (1585-1642) [Attr. in various forms and to other authors]

7. In the last analysis, it is our conceptions of death which decides ours answers to all the questions that life puts to us – Dag Hammarskjold (1905-1961) Diaries

8. It’s a damn poor mind that can only think of one way to spell a word – Andrew Johnson