September 14, 2007

State versus Freedom

Filed under: Economics, Friedman, Politics — duncan @ 8:50 pm

The most dominant theme in Friedman’s book is the infringement on individual liberty by the state. The corollary of this theme is that decisions made through the market are voluntary.

This simplistic opposition is deeply flawed; it is the root source of Friedman’s malign political thinking.

In his chapter on social welfare measures, Friedman is attacking paternalism. “This position [a paternalistic advocacy of compulsory pensions] is internally consistent and logical. A thoroughgoing paternalist… cannot be dissuaded by being shown that he is making a mistake in logic. He is our opponent on grounds of principle, not simply a well-meaning but misguided friend. Basically, he believes in dictatorship, benevolent and maybe majoritarian, but dictatorship none the less.” (p. 187).

If Friedman is serious that paternalistic welfare is a form of dictatorship, then I see no way in which this argument can be restricted to welfare alone. If it is dictatorship for the state to interfere with the freedom of its citizens, then all state power is dictatorship. Democracy is majoritarian dictatorship.

This position, “internally consistent and logical”, leads to libertarian anarchism. But Friedman is not a libertarian anarchist. He believes in the legitimacy of some state power. Indeed, one of the chief claims of his book is that democracy is the best form of government.

How can Friedman square this advocacy of democracy with his condemnation of majoritarian dictatorship? It seems to me that he either needs to scale up his attack on government, or scale down his condemnation of paternalism. To attack welfare as a form of dictatorship, while making no such claims about other forms of democratic power, isn’t playing fair.

That’s the first problem with Friedman’s position: when it suits his argument, he presents state power as inherently and absolutely dictatorial. The second, bigger, problem is that he presents market transactions as inherently and absolutely voluntary.

“The possibility of co-ordination through voluntary co-operation rests on the elementary – yet frequently denied – proposition that both parties to an economic transaction benefit from it, provided the transaction is bi-laterally voluntary and informed.

“Exchange can therefore bring about co-ordination without coercion. A working model of a society organized through voluntary exchange is a free private enterprise exchange economy – what we have been calling competitive capitalism.” (p. 13).

But, as should be obvious, coercion is a matter of degree. Even the most horrific torture leaves a sliver of freedom; even the most bilaterally voluntary transaction involves dissymmetries of power. Every exchange involves a power relation; and these power relations have their influence on the movement of our economy. Friedman’s reification of free exchange evades the extent to which no exchange is ever wholly free.

On which subject there’s a whole lot more to say…

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