I find it fascinating that as time has gone on, more and more economists are coming around to my view, which I explained in The Return of the Great Depression, that Milton Friedman was not an opponent of Keynesianism, as was always taught in the economics department of my university, but rather, a practitioner of a heretical form of it. The freshwater vs saltwater conflict was an entirely internecine battle between Keynesians, it was not on the level of Hayek vs Keynes, let alone Mises vs Marx.
In an excerpt from his new book, David Stockman writes about how Friedman’s activities as an influential economist completely contradicted his very good essays on human liberty:
At the end of the day, Friedman jettisoned the gold standard for a
remarkable statist reason. Just as Keynes had been, he was afflicted
with the
economist’s ambition to prescribe the route to higher national income
and prosperity and the intervention tools and recipes that would deliver
it. The only
difference was that Keynes was originally and primarily a fiscalist,
whereas Friedman had seized upon open market operations by the central
bank as the
route to optimum aggregate demand and national income.There were massive and multiple ironies in that stance. It put the
central bank in the proactive and morally sanctioned business of buying
the government’s
debt in the conduct of its open market operations. Friedman said, of
course, that the FOMC should buy bonds and bills at a rate no greater
than 3 percent
per annum, but that limit was a thin reed.Indeed, it cannot be gainsaid that it was Professor Friedman, the
scourge of Big Government, who showed the way for Republican central
bankers to foster
that very thing. Under their auspices, the Fed was soon gorging on the
Treasury’s debt emissions, thereby alleviating the inconvenience of
funding more
government with more taxes.Friedman also said democracy would thrive better under a régime of free
markets, and he was entirely correct. Yet his preferred tool of
prosperity
promotion, Fed management of the money supply, was far more
anti-democratic than Keynes’s methods. Fiscal policy activism was at
least subject to the
deliberations of the legislature and, in some vague sense, electoral
review by the citizenry.By contrast, the twelve-member FOMC is about as close to an unelected
politburo as is obtainable under American governance. When in the
fullness of time,
the FOMC lined up squarely on the side of debtors, real estate owners,
and leveraged financial speculators—and against savers, wage earners,
and equity
financed businessmen—the latter had no recourse from its policy actions.
For me, Milton Friedman is, like Margaret Thatcher, a tragic figure of history, an well-intentioned individual with a genuine love of human freedom who nevertheless betrayed his ideals with his professional actions.