Who Says Milton Friedman Was Right?
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.
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, Ohio