Who Will Cast a Longer Shadow on the 21st Century: Friedman or Galbraith?
Both of these economists greatly influenced the political economics of the twentieth century. But what of this century? Which set of views will most shape the policies of governments and our way of life?
Like all good discussion topics, this month's issue split respondents nearly equally, with a slight nod to the notion that Milton Friedman's views will have a bigger impact on us in the twenty-first century than those of John Kenneth Galbraith.
Margie Parikh commented that "I see the twenty-first century as the epoch-making era of playing fields becoming more level and opening markets, reducing government control, and spreading lifestyles and products of different cultures from all over the world. In this context, Friedman seems more influential." Ashutosh Tiwari added: "I think Friedman will cast the longer shadow . . . the expansion of markets has speeded up the process of globalization . . . the corporate power of multinationals has not been as dominant as Galbraith had envisioned."
In contrast, several respondents pointed to the influence of future global challenges on their responses. Sudip Bose put it this way: "Venerated works of Milton Friedman have influenced government policies. . . . But, his shadow will be relentlessly chased primarily by global climatic concerns and then perhaps by human development issues. . . ." Stever Robbins expanded on this idea: "With regard to national security, pollution, energy policy, education, global warming, and other commons issues, it's hard to see how individual self-interest can add up to the community-wide base we need to remain a competitive nation in the twenty-first century."
But I was struck by the number of respondents who suggested that the ideas of both Friedman and Galbraith had relevance, perhaps at different times and in different places. Henry Kwok wrote, "They brought to us two perspectives—the need for freedom to choose and the need for the government to provide an order to the economy. We cannot live with one without the other." Kamal Gupta noted that, "in the case of an economy that is coming out of poverty, like India . . . [the ideas of Galbraith] would provide for a faster redistribution of wealth. But once the economy reaches a certain threshold . . . the state should move to minimize its involvement." Gaurav Goel opined, "I think Galbraith will be more relevant in the first half of this century. . . . For markets to act in coherence with society, it is necessary for government to put some checks in place. . . . Friedman's view may be more applicable in economically uniform societies. I hope that the later part of this century will be more suitable for Friedman's views." Ruth Rama was more succinct: "Friedman will prevail in the U.S.; Galbraith will prevail in Europe."
These comments emphasize the influence of context on the continuing importance of the views of these two influential figures of the past century. How are the issues we will face in this century different from those of the twentieth century? Will they require more or less attention to common as well as individual needs? Will they best be addressed by individuals free to choose, communities (represented by governments) interested in influencing choice, or a combination of both? What do you think?
With the death of John Kenneth Galbraith on April 29, it is perhaps appropriate to reflect about the influence of two economists, Galbraith and Milton Friedman, described by Time magazine in 1975 as the modern world's most important economists along with John Maynard Keynes and Adam Smith. There were remarkable similarities between them. Both strongly influenced government policy. Both wrote prolifically, and for a broader audience than just theoretical economists. Both, of course, lived to see the age of ninety and then some. And despite their sharply contrasting views of political economics (Friedman regarded Galbraith as a socialist), the Friedman's occasionally vacationed with the Galbraith's at the latter's Vermont farm, according to biographer Richard Parker.
Galbraith, in his book The Affluent Society, argued for the importance of fiscal policy in influencing the allocation of resources between rich and poor. This was to be done through the maintenance of a progressive tax system to insure that the wealthy provided their proportionate share of funding to enable government to channel funds to such endeavors as the environment, support for the poor, and the development of the arts. The objective was to create a society that would provide a better standard of living for all.
Friedman, on the other hand, in a book Free to Choose, advocated a minimalist role for government, relying instead on lower tax rates to provide the wherewithal for Americans to decide for themselves how they wished to live and spend their increased take-home pay. In another work coauthored with Anna Jacobson Schwartz, The Monetary History of the United States, he had earlier argued, however, for a significant government role in managing monetary policy to guard against the booms and busts that characterized the early part of the twentieth century. According to this thesis, by regulating the supply of money, governments could have an immediate and important impact on such things as interest rates, inflation, and general economic prosperity.
Galbraith advocated the state's involvement in insuring the defense of the country, education for all, a just society, support for the arts and environment, and most important, a minimum standard of living. Friedman, on the other hand, while advocating a strong government role in maintaining a strong defense and the enforcement of antitrust laws, placed his primary bets on the individual. According to a friend, Ben Stein, "Professor Friedman and his wife stood up for the glory of the rights and choices of the individual. From the individual, not from the state, came creativity, progress, freedom, prosperity. From the state came oppression and stagnation." One illustration of this philosophy was contained in an article written for the New York Times Magazine in which Friedman opposed corporate philanthropy, arguing that corporations should let individual investors choose how to spend or give away their money.
One can argue that both of these economists had an important influence on the political economics of the twentieth century. But what of this century? Which set of views will most shape the policies of governments and our way of life? Or have both served their purpose, only to be forgotten? If so, will we have to relearn them at a later time? What do you think?