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Businessweek Archives

Who Says Milton Friedman Was Right?

Readers Report


In "Milton Friedman: Being right is the best revenge" (Economic Viewpoint, July 13), Robert Barro confuses being in fashion with being right. That the Republican leaders in Congress now spout Friedman's right-wing, antigovernment ideas doesn't make them correct.

In fact, time is proving Friedman wrong on most counts. The Fed, under the leadership of Friedman acolyte Alan Greenspan, has jettisoned all vestiges of money-targeting and now unabashedly pursues old-fashioned Keynesian interest-rate targeting (albeit with a non-Keynesian agenda). Emerging markets have fallen victim to a classic Keynesian financial panic and debt deflation. And our Friedmanians in government, so quick to praise free-market solutions at home, urge Japan to pass a Keynesian-style fiscal stimulus. We might be Friedmanians today, but when the Asian flu hits home a few months from now, we would do well to dust off the old Keynesian texts.

Ellen Frank

Brookline, Mass.

In declaring Milton Friedman's version of laissez-faire economics triumphant over Keynes's activism, Robert Barro's statement that "free-market theories rule the roost" is for the birds. It assumes that impersonal market forces set wages and prices. In fact, oligopolies pay artificial wages and salaries because they charge artificial prices (which they can do because capital requirements restrict the entry of competition, thus denying a prime requirement for the free market to prevail).

Artificial rewards, including 20-year retirement, explain why the "volunteer army has worked very well," although Barro attributes it to the free market. While Barro praises the earned-income tax credit as a "boon to the working poor," it is a direct government subsidy, as is true of school vouchers, of which he also approves. Barro embraces the privatization of Social Security, which would also amount to a subsidy, feeding profits to the securities industry in exchange for insecurity for the old people who cannot afford to speculate in stocks.

Mack A. Moore


Like Barro, I have great respect for Milton Friedman. I do fault Barro for overlooking Friedman's role in bringing monetarism into the Reagan White House, which led to the wrenching depression of the early 1980s. Reagan's support of the monetarist's recommendations encouraged Federal Reserve Chairman Paul Volcker to induce devastatingly high interest rates. These high rates resulted in record unemployment and huge losses in agriculture and manufacturing. Much of the blame lies at Friedman's door.

Newell D. Sanders

Olmsted Township, OhioReturn to top


The "HP way" is getting in the way. ("Lew Platt's fix-it plan for Hewlett-Packard," Information Technology, July 13). True innovation requires radical ideas, and radical ideas can grow only in a climate of constructive dispute. This stands in diametrical opposition to Hewlett-Packard Co.'s consensus-oriented culture.

For HP's traditional markets, this culture may have nurtured fine organizational values. With the brutal commoditization of technology in the Internet era, however, it has become a competitive disadvantage. Fortunately, HP has a history of reinventing itself. I'm positive this tradition will prevail at last.

Marc W. Fleischmann

Menlo Park, Calif.Return to top


"At last, telecom unbound," (Cover Story, July 6) offers an interesting but incomplete account of the deal's significance for consumers and the telecommunications industry. The authors of the lead story appear to have bought the line from the long-distance companies that it is the local phone companies that are stifling innovation and competition in the local market.

The fact is that Bell Atlantic Corp. is exceeding the requirements of the Telecommunications Act to open its market to competitors. Bell Atlantic submitted a draft of its long-distance filing with the New York State Public Service Commission last year and recently received favorable support from New York State Public Service Commission Chairman John O'Mara and Justice Dept. antitrust chief Joel I. Klein. The only reason there is not more competition in the local market is that some of our largest potential competitors, such as AT&T and MCI, have taken a deliberate pass at the local residential phone market in an effort to keep Bell Atlantic out of the long-distance market.

Regarding innovation, Bell Atlantic is leading its customers into the 21st century with state-of-the-art data solutions. We're beginning construction on a next-generation long-distance data network, using the latest technology to support services such as virtual private networks and audio and video streaming over the World Wide Web. Additionally, Bell Atlantic's customers will soon be able to order "always-on" high-speed Internet access. And Bell Atlantic's ISDN (integrated service digital network) is already available to nearly 20 million households in the region.

Competition, innovation, and high-speed access to the Internet are already here. The only thing standing in our way is regulatory approval to offer long-distance voice and data--not a merger.

Ivan G. Seidenberg

President & CEO

Bell Atlantic Corp.

New YorkReturn to top

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