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America's current struggles notwithstanding, life here is pretty good. We have a standard of living that's the envy of most of the world.
Why did that happen? Prosperity isn't the norm. Throughout history and throughout the world, poverty has been the norm. Most of the world still lives in dire poverty. Of the 6 billion people on earth, perhaps 1 billion have something close to our standard of living. Why did America prosper when most of the people of the world are still poor?
Milton Friedman taught me the answer. More than any other American, Friedman, who won the Nobel Prize in economics in 1976, clearly warned the world about the unintended consequences of big government.
"We've become increasingly dependent on government," said Friedman. "We've surrendered power to government; nobody has taken it from us. It's our doing. The results—monumental government spending, much of it wasted, little of it going to the people whom we would like to see helped."
That's from Friedman's PBS TV series Free to Choose, which aired 30 years ago and became the basis of his No. 1 bestseller by the same name.
The title says a lot. If we are free to make our own choices, we prosper. That was a new idea to many back then. At the time—when inflation and interest rates were in double digits and unemployment approached 10 percent—people thought a wise government could ensure economic growth, guarantee full employment, and eliminate poverty. Friedman explained that the opposite was true, that bigger government had brought us "burdensome taxes, high inflation, a welfare system under which neither those who receive help nor those who pay for it are satisfied. Trying to do good with other people's money simply has not worked."
No, it hasn't. So why, 30 years later, is America doing so much more of it?
Because people still have not learned Friedman's lesson.
Because of that, I give money to a charity that offers teachers free copies of some of my TV news videos that explain the benefits of free markets. The video most popular in high schools is one in which I ask students, "When so many nations remain poor, why did America become prosperous?" Many answer, "Because we have democracy." Yet India has democracy, and India has been poor for years. "India is overpopulated," they say. They don't know that India has the same population density as New Jersey.
Other students suggest that America prospered because of our natural resources. But Hong Kong has no natural resources. It's basically a rock. It is also more densely populated than India. Yet, in just 50 years, Hong Kong went from poverty to American levels of wealth.
How? In Free to Choose, Friedman explained that it was the free market. Overlooking the amazing Hong Kong skyline, he said: "This miracle hasn't been achieved by government action—by someone sitting in one of those tall buildings and telling people what to do. It's been achieved by allowing the market to work."
Walking down a crowded street, he added, "They are free to buy from whom they want, to sell to whom they want, to work for whom they want. Sometimes it looks like chaos, and so it is, but underneath it's highly organized by the impersonal forces of a free marketplace."
At the time of his series, India was a symbol of enlightened central planning.
"India has tremendous economic and human potential," Friedman commented. "The human tragedy is that in India that potential has been stifled by the straightjacket imposed by an all-wise and paternalistic government. Central planning has condemned India's masses to poverty and misery." What counted most for Friedman was that people should be free to try innovative ideas and succeed ... or fail.
"The free market enables people ... to trade with whomever they want; to buy in the cheapest market around the world; to sell in the dearest. ... (B)ut most important of all: If they fail, they bear the cost."
Originally posted by Merigold
Sorry but I'm struggling to see the benefits.
Originally posted by pieman
The US has been the prosperous centre in the Americas in the 20th century but we are currently undergoing the upheaval and centre shift that has been bought about by the rise cheap transport and fast communication.
At this point, anything can be moved anywhere cheaply so the centres will probably become disperse. It's hard to know what happens next, we're undergoing the biggest shift since the discovery of agriculture.
The free market is the way things were best run with 3 or 4 centres but now.......
Originally posted by pieman
Actually, centralising buying power and to create economic strength might be the best way to go unless you want corporations to have more power than government. That's the Chinese strategy and they're kicking ass in the new climate.
Originally posted by pieman
The free market can't work in the present climate as there are too few centres to create any reasonable competition. With 5 or 10 markets available to the investor, competition keeps the markets honest because the smart investor will not invest in a dishonest market, meaning they wither and fail, but now there is only one or two left and so there is no choice for the investor and dishonesty won't be punished.
(just an aside)The free market hasn't bought about any technological advancement, new technology is too expensive and the demand is so small that it can't come out of a market. It comes from government sponsored programs. (just an aside)
Originally posted by IcarusDeepSea
America is the promised land. Land of our inheritance.
It will prosper as long as it follows God.
The problems facing us today are the result of America slowly drifting away from God and good morals.
Originally posted by NewlyAwakened
reply to post by traditionaldrummer
I won't go into too much depth because this could take a book. I just want to point out a couple things.
For one, and this is directed at the guy who talked about how there are always winners and losers, economics is not a zero-sum game. Stealing is. The difference is that in economics, goods are produced and traded, thus increasing the total wealth of civilization. There is more "stuff" in existence after this process.
If you look at any of the more wealthy civilizations that bubbled up throughout history, including ancient Greece, Rome, the Phoenicians (Carthage), the British and USA, you will see a major common current among these: individuals were allowed, for the most part, to keep the fruits of their labor.
Unfortunately, in all these cases, the general prosperity produced a parasitic elite that wanted to feed off the system without contributing to it. And all of these civilizations started to crumble when this happened. And this is why our civilization is crumbling.
I don't know if there's a way out of this cycle. It may just be how human nature works. Under conditions of freedom and private property, a civilization grows rich. Once grown rich, the new generations are complacent and selfish and greedy, and more and more you see people acting as parasites rather than producers, because they can. And they make the dwindling population of producers look like suckers, causing them to defect even more to the dark side. Thus the civilization declines.
Marx was right when he said capitalism "evolves" into socialism. But he was wrong in seeing this as a forward march of progress rather than a cycle. Actually socialism is when the parasitic elite have absolute power, and keep the masses down through the dogma of "equality". But without incentives to produce, socialist civilizations rapidly self-cannibalize and become poor.
Later on, perhaps a long time later, people once again throw off their chains, demand that they be free to give or withhold their labor and belongings as they see fit, and civilization begins to grow again.
That is the cycle.
(I should add that, confounding the issue, the parasitic elite is almost always composed of wildly successful capitalists and especially their descendants and friends.)
[edit on 11-6-2010 by NewlyAwakened]
I agree with both Stossel and Friedman here. The benefits of free markets (and I use the term loosely) far outweigh the negatives, and free markets are far superior to centrally planned government economies. Such a centrally planned economy appears to be what Obama is pushing for and I have serious fears that this will drive our once great nation into the dirt.
Thoughts, praise, rebukes, verbal abuse welcome
Originally posted by sligtlyskeptical
This is a great post and sums it up fairly nicely. Of course it offers no solutions.
A perfect lasting system has not yet been developed. A perfect system is a system that progresses society to the highest level possible.
Originally posted by GeosAlien
The system in the US however is one of selfish greed, without an heart for the less fortunate neighbours in your country. Example is the health care bill (how it was received and condemned)