Milton Friedman Speaks: What is Wrong with the Welfare State? (B1229) – Full Video

Milton Friedman Speaks: What is Wrong with the Welfare State? (B1229) – Full Video


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and process for understanding. Music The Idea Channel Would you please join me in welcoming Dr. Milton Friedman. (Applause) Thank you ladies and gentlemen, I’m glad
to be here tonight. I must say I am strongly tempted after the title, “What Is Wrong
with the Welfare State?” with a question mark, to say “nothing” and turn around
and walk off the stage. (Laughter) That would make it easier on all of us, but
I learned long ago that it was good policy to be honest. What I want to talk about tonight are, first
of all, the origins of the welfare state; and second of all, why it is that the noble
objectives which have animated the growth of the welfare state have produced results
that disappoint almost everybody- regardless of whether they were initially in favor or
initially opposed to the various measures; and finally, ask ourselves what if anything
is the alternative to it and what can we do about it? As to the origins of the welfare state, they
go a long way back. There was a book which was published quite a long time ago by a man
by the name of Cecil Driver called Tory Radicals, and it referred to a group of people in Great
Britain in the early part of the nineteenth century, 150 and more years ago. William Oastler,
Lord Shaftesbury: these were a group of people from the upper classes of the British aristocracy
who were very much concerned about the welfare of the ordinary people of the lower classes
and who became the driving force behind a whole series of legislation–the so-called
Factory Acts, the first Twelve-hour Day and then Ten-hour Day Act, and so on–which they
promoted from a point of view of noblesse oblige. Their whole attitude was, “After
all, some people know better than other people what’s good for people, we are among the
elite, we know what’s good for the ordinary man, we don’t want to force it down his
throat, but we believe that in a properly structured society he would recognize that
we do know better and would assign to us the task of structuring things for his benefit.”
That was the notion which the Tory Radicals had at that time, and it is in many ways the
basic motivating force on a moral and ethical level behind the movement for the welfare
state. The closest modern descendant of that movement
is John Kenneth Galbraith who is also a Tory Radical today. He and those who share his
views, again believe themselves to be an elite who know what is good for the ordinary man,
who again do not wish to impose their views on the ordinary man, but who believe that
the ordinary man, too ought to recognize the superiority of the elite, and assign to them
the task of choosing what goods they consume, what products are available, and so on. The
fundamental driving force is paternnalism. It’s an attempt to do good for other people. Now interestingly enough, the other source
of the modern welfare state comes from a very different yet not wholly unrelated tradition.
It comes from Bismarck’s Germany. Bismarck’s Germany, as it was established in the late
nineteenth century, was a centralized bureaucratic state, and it was the first modern state which
introduced on a fairly large scale the kind of welfare measures that have become common
in most societies in the modern day. The movement toward a welfare state in its
modern form dates in Great Britain back to the early decades of the twentieth century.
It was already before World War I that in small measures Britain started down the path
of introducing governmental provision for one contingency after another. What ultimately
came to be known as Cradle to the Grave had its start in the early 1900s in the main,
with measures for governmental provision for the old and for the mentally deficient. It
was followed by Sweden in the 1920s and 1930s. Many of you will remember a very famous book
called The Middle Way which told about how Sweden was establishing a new, different means.
The welfare state came to the United States relatively late. It came to the United States
really in any significant form only in the 1930s after the Great Depression and the beginning
of the New Deal. Now the interesting thing is that in every
case the welfare states are in trouble. The United Kingdom has obviously been having great
difficulties–social, economic, political. For a while everybody was saying, “Ah, but
there’s Sweden,” but now Sweden is in trouble; it is having great difficulties.
Its government has changed form, which is a minor matter because the substance hasn’t
changed; but it is having a good deal of discontent and a great deal of economic difficulty. Denmark
is in trouble. The United States- as we have moved farther and farther down the road, we
have had more and more dissatisfaction with what has occurred. In the case of the United
Kingdom it is tempting to attribute the problems of the United Kingdom, and many British have done so, to the consequences of World War I and World War II. To say that World War
I decimated a whole of a young generation that would have provided the leadership for
Britain, and World War II destroyed its economic capacity. And yet, in a great book that was
first published in 1899 and of which a revised edition was published in 1913, A. V. Dicey,
a famous constitutional lawyer, outlined what was going to happen in Britain in coming
decades. In the 1913 edition of his The Relation between Law and Public Opinion in the Nineteenth
Century, Dicey already saw what was going to happen from the developments that were
going on. He dated the turn in Britain back in the 1880s and 1890s, a turn from individualism
to collectivism, and he discussed what were going to be the far-reaching consequences
of the changed role that was being assigned to the state vis-à-vis the individual. And
if you read that preface, that 1913 preface, there is nothing that has happened from that
day to this that was not pretty clearly foreshadowed, so that it wasn’t the war. In any event,
Sweden is decisive evidence because, if it was the war that caused the problems in the
U.K., Sweden stayed out of both wars and indeed profited enormously on an economic level from
them, and you certainly cannot blame the problems that have been arising in Sweden on the war. The thing about the welfare state is that
when you start on this route everything goes fine. To begin with, you are imposing taxes
on 90 percent of the people–small taxes–and are able to give considerable benefits to
10 percent of the people. But the problem is that as time goes on, more and more people
come in and either express a desire, or are given a chance, at a part of the proceeds.
So you gradually get to the position where 50 percent of the people are providing benefits
to another 50 percent of the people. And then you ultimately get to the position where 100
percent of the people are paying taxes, in order to provide benefits to 100 percent of
the people. You are then in that situation which Frédéric Bastiat described so well
150 years ago, when he said that government is that fiction whereby everybody believes
he can live at the expense of everybody else. The question remains, however, what goes wrong?
Why is it that such noble objectives lead to such disappointing results? After all,
the objectives of promoting the welfare of the ordinary man, of eliminating poverty
and disease, providing security for old age and against mishaps of fortune–those are
noble objectives. I do not believe that there is anybody who can regard them as an undesirable.
Why is it that the attempt to effectuate such noble objectives by using the machinery of
government- tends to produce results which are so disappointing? In my opinion the fundamental answer is very
simple: using government to achieve these objectives means trying to do good with someone
else’s money, and when you try to do good with someone else’s money there are two
basic flaws in the process. The first of those is that nobody spends somebody else’s
money as carefully as he spends his own, and therefore you are going to have waste and
ultimately fiscal catastrophe. But the second is that you cannot do good with someone else’s
money unless you first take it away from him. And therefore- force, coercion, sending a
policeman around to pick somebody else’s pocket, is at the very heart of the welfare
state, and the situation becomes one in which bad means corrupt the good intentions. When
you try to use bad means to achieve good objectives, the end result is likely to be that the badness
of means will triumph over the goodness of the objectives. New York City provides a perfect illustration
of this point. There is no city in the country that is more welfare state oriented. There
is no city in the country, and few in the world, that have so long a list of programs
allegedly designed to benefit those in a state of difficulty. Some five or ten years ago
John Kenneth Galbraith, whom I mentioned before, wrote an article about the problems in New
York in the course of which he said that there was no problem New York had which could not
be solved by having the government spend more money on it. Since he wrote, the budget of
New York has roughly quadrupled and the problems of which he spoke- have gotten worse rather
than better. Why? Well in the first place, if the government spends money on it, somebody
else has less money to spend. The government has been spending more money on these problems
but more money has not been spent on these problems, because the government can get money
to spend only by taking it away from somebody else. And since no one spends somebody else’s
money as carefully as he spends his own, it’s not surprising that money spent by governmental
officials has produced less satisfactory, less efficient results than if people had
been spending their own money. It so happens, of course, that New York has
been, from this point of view, fortunate in not having one of those printing presses on
which you can turn out green pieces of paper so that, unlike Great Britain, unlike Sweden,
and unlike the United States as a whole, the fiscal problems of New York could not be concealed
by inflation, by printing money, and trying to acquire resources for a time with inflation.
In the case of the United Kingdom that has proven a very fruitful resource and it has
enabled Britain to postpone the evil day, but New York fortunately had no such recourse,
which is why the results showed up more clearly and more sharply. In lieu of a printing press,
all New York had were some senators and congressmen to go down to Washington. But given the great
burst of sympathy for New York from the rest of the country, those missions to Washington
were not uniformly successful. And the result is that on a fiscal level New York is bankrupt.
Whether it calls itself bankrupt or not is largely irrelevant; the fact remains that
it is. It is bankrupt not in spite of, but because of, the attempt to do good with other
people’s money. That’s one of the consequences, a necessary consequence, of the welfare state
approach. But a second consequence is a loss of freedom.
If you use force to effectuate objects, good or bad, there is going to be a loss of freedom.
New York has lost freedom and New Yorkers have lost freedom in a double sense. The City
of New York has lost freedom and the citizens of New York have lost freedom. They may elect
a mayor but he’s a figurehead. The actual power in running New York is now in the hands
of a commission appointed by the State of New York to supervise the bankrupt City of
New York, and the mayor and the elected officials have very little power to do anything. So
you have lost freedom in that sense, but the individuals have lost freedom in a more important
sense: that the citizens of New York, over that considerable part of their income which
is being spent for them by governmental officials, no longer have freedom to dispose of it. As
individuals, they do not have freedom in the housing area, to enter into contracts with their neighbors. Here
again, A. V. Dicey, in that preface I referred to before, was enormously prescient and farsighted,
and I want to quote for you from his preface. He was talking about a measure to provide
for mentally deficient people–state insane asylums, if you want to call them that, or
the equivalent–and he wrote: “The Mental Deficiency Act is the first step along a path
on which no sane man can decline to enter, but which, if too far pursued, will bring
statesmen across difficulties hard to meet without considerable interference with individual
liberty. If too far pursued, will bring statesmen across difficulties hard to meet without considerable
interference with individual liberty.” You are all aware of how depressingly true
those words have become in the case of Russia. He talked about Mental Deficiency Acts and
Russia has now been using insane asylums or their equivalent as a way of disciplining
dissidents. Anybody who is a dissident is obviously suffering from a disease of being
antisocial and he must be cured by being placed in a hospital where he can get appropriate
shock and other treatment from so-called psychiatrists. What’s true in the case of the Mental Deficiency
Act applies equally in respect of other measures. If we assign to others the task of taking
care of us, we cannot retain our freedom to pursue our own lives as we would. Now let me turn from this general analysis
to a more detailed analysis of why it is that the welfare state measures have so almost invariably
disappointed their well-meaning sponsors. If you ask anybody, people who call themselves
liberals–although that is a term I do not myself wish to apply to them. I am a liberal;
I believe in freedom. Liberalism means of and pertaining to freedom. Those people who
now call themselves liberals have misappropriated the term because for them it simply means
that they are liberal with other people’s money. (Laughter and applause) But suppose you asked one of those people
who styles himself a modern liberal, “What do you think about public housing? Do you
think that was a good program?” “Oh,” he’ll say, “that program had some bad
features. You know we had those wonderful houses in St. Louis, the Pruitt Igoe Houses;
we had to blow them up.” We have in the course of public housing torn
down more dwelling units than we have put up. In every city and state of the country
public housing units have become a source of crime and indigence. They have done harm.
I remember very, very well a personal episode along these lines when quite some many years
ago I was in Los Angeles not long after the Watts riots. I had a guided tour through the
Watts area of Los Angeles, and the man who was guiding me was a wonderful fellow who
was in charge of a project sponsored by a trade union for self-help for the people in
Watts. And I said to him, “Well, there are some houses over there; they look pretty good–those
dwelling units, those apartments.” And he said to me, “That? That’s the worst
thing that ever happened to Watts,” he said. “Those are public housing.” And then he
went on and he said, “Do you suppose it really helps the youngsters in Watts to segregate
all those who are poor in one place, to take all the divided families? Because after all,
a large fraction of the poor come from those in which the family is broken up. So you have
all the children with only one parent and their parents all put together in the one
building, and they have only one another to work with. That’s terrible. We need to have
a very different kind of set up.” What he said is right. Wherever it’s been used,
public housing has been a disaster. But If you ask the proponents of it, people who have
been proponents in the past, they will agree but then they will say, “But that’s because
we didn’t do it right. We ought to spend more money on it. We ought to have scattered
public housing instead of concentrated”–or we ought to have this, that, or the other
thing. And over and over again, you will find that the reaction is: what we have done in
the past has not worked but that’s because we haven’t done it right; we ought
to spend more money on it. I can understand that attitude in the 1930s,
the 1940s, when we were starting in this country on the road and when we had not sufficiently
absorbed the experience of other countries, but it is much harder to understand in the
1970s when we now have 40 years of experience behind us, and we have seen exactly the same
thing happen in area after area after area. Doesn’t the time come when we have to say,
“It’s not the particular program; it’s the system that’s wrong”? Why is the system wrong? Fundamentally, it’s
because the laws of the market work as well in the political arena as they work in the
economic arena. We have all of us had a tendency to look at economic organization and political
organization in very different ways. When we come to the economy as economists, political
scientists or what-not, we say well…it has laws of its own. We ask if you change this,
what will happen? And we say of course we will treat people in the market as pursuing
their own interests: the worker will try to get the highest wages, the consumer will try
to get the lowest price, the employer will try to get the best deal, the producer will
try to make the most profit. But then when we come to the political arena, we tend to
look at it a little differently. We tend to say, well now, let’s figure out what would
be the right thing to do from the social point of view, let’s persuade our fellows to vote
for it, and once we’ve voted for it we’ll have the results we want. But surely we have
to look at it from a different point of view. We have to say that people who are in the
political arena are also people; they are also trying to do what’s best for themselves.
The politicians are in business; they are trying to maximize the number of votes they
get…or maybe not the number of votes, but they are trying to act in such a way as to
get enough votes to get elected. The bureaucrats–I don’t mean that in any invidious way; I’ll
become more invidious about them later… (Laughter) …but at the moment I don’t want to start
that way…you or I as a bureaucrat, if we’re in that position, we’re going to pursue
our own interest. Now in saying that we pursue our own interest, they don’t have to be
narrow interests. The great martyrs in the world have pursued their own interest as they
have seen it, but everybody is going to pursue his own interest. As a great friend of mine,
an economist at UCLA, Armie Alchian, always says: “There is one thing you can depend
on everybody else to do; you can absolutely depend on him. You can always depend on him
to put his interests ahead of yours.” So if we’re going to analyze the political
arena, we have to look at that as a different kind of market in which there is also competition.
If the government is going to distribute a million dollars for whatever program, no matter
how, it will pay people to spend up to a million dollars to get it to go to them instead of
somebody else. If goodies are going to be distributed, well then you’d better go out
and try to get your share of the goodies. If you have a perfectly operating market,
if you have what we economists call equilibrium, you will end up with…just as equilibrium
in the economic market leads to zero profits, so equilibrium in the political market leads
to no net gain to anybody. Because you are going to distribute a million, people spend
a million to get it, you’re back where you started from. This is not a fanciful view. Let me give you
a couple of very simple examples which aren’t strictly in the welfare state area, but in
which the same principle applies. Consider the issuance of TV and radio licenses. If
you can manage to get the FCC to grant you a license for a TV station, under the law
you will pay nothing for it directly to the FCC. That license will immediately be worth
a considerable number of millions of dollars. We could name some fortunes in this country
that have derived from that, and some of the names would even be known to you. Now…given
that that’s the process, it pays you, if you are interested in getting one of these
so-called free grants, it pays you to devote a lot of effort and energy and money to making
sure you get it instead of somebody else. And so you will go in for a big publicity
campaign, you will wine and dine the appropriate legislators, you will see if there is some
way in which you can indirectly get influence on the commissioners, you may put on a big
program of getting public opinion polls, of developing a fancy package, and so on. You
can see what happens; you spend money and not only do you spend money–there is only
one of these going to be distributed–but it will pay 10 or 100 people to spend some
money in order to try to get it. And on the average, it will pay the whole of them to
spend as much money in total as the value of the TV license once distributed. Nobody
has any net benefit; no benefit from that program. Take the case of urban renewal legislation.
If you have urban renewal, first of all it will pay you to spend money on influencing
the legislature to have the particular area where you’ve got some property you’d like
to get rid of- included in the urban renewal area. I may say in this game there are universities,
some of which I have been associated with, which have not been innocent of playing this
game. Once the urban renewal legislation has passed, it will pay you to bid among one another
to get the property which is going to be taken over. So that the first proposition is that if you’re
going to spend somebody else’s money, somebody else’s money is going to be spent, there
will be many claimants for it and not only those to whom the well-meaning people initially
intended it to go. In the second place in this competitive game, who are the most efficient
competitors? Is it the poor suckers at the bottom who haven’t got any money? There
may be no direct and close relationship between ability to compete in the political arena
and ability to compete in the economic arena, but they are not wholly unrelated. Those people
who have not had the qualities which enable them to succeed in the economic arena- are
not likely to have the qualities that will enable them to succeed in the political arena. There has been the great fear over the centuries
of democracy on the ground that the have-nots would get together against the haves, that
the bottom 51 percent would get together in a majority rule and despoil the top 49 percent.
That fear has proved unjustified, and for very good reason; it’s not a sensible coalition.
If you are organizing an electoral coalition, that’s a silly way to organize it. What
you want to do is you want to leave out the top 5 percent, because the money you can take
from them is more important than the votes they can provide; you want to leave out the
bottom 44 percent because, first of all, they are likely to be more easily duped with respect
to providing them with your votes, but they aren’t likely to be very efficient, good
competitors. And then you form a coalition of the 51 percent in-between and benefit that
51 percent at the expense of the people at the very top and of the people at the very
bottom. A colleague of mine, George Stigler, in writing an article on this subject, called
this proposition Director’s Law after another associate or relative of mine, my brother-in-law,
Aaron Director, who first developed this idea that this was what you would expect to happen. Now that’s an oversimplified picture because,
of course, the 51 percent doesn’t become a single coalition in the middle; it’s made
up of lots of little minorities. We talk about being guided by majority rule but we’re
not, and yet we are. We are run- in a political system you are run- by a majority which is
composed of a coalition of minorities. You get 5 percent who feel very strongly on one
issue and are willing to give up their vote on that issue, forget about everything else;
you get another 5 percent, another 5 percent, and if you want to get elected to office–if
any of you in this room have political ambitions, the way to get elected to office is to figure
out how you can construct a coalition of enough 5 percents so you get 51 percent. That’s
why special interests are so powerful and get their way. Of course, over and beyond the concentrated
minorities who will get their way in the political process you have another group that develops
as the welfare state grows, that becomes increasingly important. And these are the government officials–elected and unelected. This applies to the welfare measures, but of course it applies to many
other issues. You now have, for example, a newly established Department of Energy, which
has 19,000 employees, which has contracts with contractors who employ another 100,000
people. So you now have 119,000 people who are being paid to devote a large part of their
energy to getting government more and more deeply involved in the problem of production,
distribution, and consumption of energy. But the same thing is true in the welfare area.
Some years back, when Patrick Moynihan was not a senator of the State of New York, but
was advisor to President Nixon, he was responsible for trying to get through congress a welfare
reform program called the Family Assistance Plan, a form of the negative income tax…a
program not very dissimilar to the one which President Carter has now said he’s going
to try to get through. Moynihan failed. He wrote a book about that failure and it’s
a fascinating book. Why did he fail? Well, there are a number of reasons, but one of
the most important to which he refers was the welfare establishment. Enacting that law
would have put out of business a lot of people who had nice jobs, exerting real influence
in administering one or another welfare program, because this would have been a substitute
for AFDC, for food stamps, and for a half-dozen other programs. Now again, don’t misunderstand
me. I’m not saying these members of the welfare establishment opposed it out of deliberate
malice or with the belief that they were doing harm–not at all. But everybody is perfectly
capable of persuading himself that what’s in his interest- is in the nation’s interest.
And the bureaucrats: “Here I am, I’m running a bureau. We’re doing good work; we’re
doing important things. You mean to say you’re going to put me out of business? That’s
not the way to improve the national welfare.” And so you get a concentrated group of governmental
bureaucrats, who make it more and more difficult to follow policies which are in the general
interest, if they tend to conflict with their own bureaucratic interest. Let me go from this general level of analysis
and get down to specific cases. Let me first give you some numbers to show you that I’m
not making up the problem I’m talking about. We have had an enormous number of welfare
measures passed over the past 50 years in the name of helping the poor. The total expenditures
on all these programs–the total expenditures by the federal, the state, and the local
governments excluding private expenditures, excluding private charity and the rest—total
government expenditures amount today to one-seventh of the national income. To put this in terms
that are more meaningful, the government publishes figures on the number of people
who are regarded as being in poverty. Now I warn you that’s a wholly arbitrary number;
these levels that divide people between the not poor and the poor are arbitrary, but take
them for what they are. The government estimates something like 12 percent of the people are
in what they call low-income status or poverty. Suppose I divide the total amount of money
spent on these programs by the number of people labeled poor. The answer comes out to $9,000
per person or $36,000 per family of four, to take the mythical family of four so much
beloved by statisticians. Compare this with the average per capita income of everybody;
the per capita income–per person income–of all the people in the United States after
taking away taxes, disposable income, is $6,500. If that $9,000 per person were really going
to the poor, they’d be among the rich. (Laughter) That income given to them would put them in
the top 20 percent of the income distribution. But of course it isn’t going to the poor.
It’s going to you and me. It’s going to the governmental officials. It’s going to
the various programs that are enacted in the name of helping the poor but end up helping
you and me. Let me get closer to home and go away from
these numbers. Consider one of the major programs which in a way is not really a social welfare
program but yet it illustrates the general point so beautifully that I can’t resist
referring to it, and moreover it applies to you and me. I have in mind governmental expenditures
on higher education. Now Rochester, being a private institution like the University
of Chicago, is less guilty than most others. The worst cases are the state universities,
but we all of us have our hands in the federal pot and, if not in the federal pot, in the
state pot. But consider the situation of higher education.
You have a great deal of tax money being spent on higher education. Who benefits? Primarily
the people who go to the institutions of higher education–the students. Where do they come
from? They come disproportionately from the upper-income classes. Even those of them
who come from the lower-income classes as I myself did, are going to be converted by
their college education in large part and by their own qualities- into people in the
upper-income classes. Those individuals from low-income families who have the ability and
the energy and the drive to go to college are the richer ones of the low-income class.
They are the ones who have personal wealth, personal qualities. In any event, the facts
are clear: graduates of college are on the average a very much higher income class than
people who don’t go to college. So what do you do? We impose taxes on everybody, including
those who don’t go to college, in order to subsidize the people who do go to college.
As I say when I want to be demagogic, we impose taxes on the people in Watts to send the children
from Beverly Hills to college. That’s a literally exact statement; it’s put demagogically
but the facts are literal. A study in the state of California some years back showed
that 50 percent of the students at the state universities of higher education came from
the top 25 percent of the income scale- and 5 percent came from the bottom 25 percent.
What’s true there is true everywhere. There is no social program in this country, in my
opinion, which is so clearly a case of imposing taxes on low-income groups to benefit high-income groups as government subsidies to higher education- clearly a case of this middle coalition taxing the
poor and the very rich to benefit themselves. Now that case is dramatic and shows these
forces at work, and it also shows how hard it is to do anything about it. How many people
in this room, how many of my colleagues at the various universities, or your fellow students
are going to go out tomorrow and campaign for cutting down government expenditures
on higher education? How often do you hear people in colleges, universities or graduates
of colleges and universities who will scream their head off about how we must have equality,
and down with regressive taxes, and we have to tax the rich and help the poor? How many
of them have you heard denounce this utterly unconscionable program of imposing taxes on
the poor to send people who are going to be well-to-do to college? Why not? Because we
know that what’s good for us is good for the country. I think it’s a good thing that everybody
should have an opportunity to go to college if he has the will, the capacity to do so,
provided he is willing to pay for it himself. If he can’t do it in advance, fine; let’s
set up mechanisms whereby we can finance him through college in return for a commitment
on his part to pay it back later. And we can go into details about the form and so on…I’m
just trying to get at the principle of the thing. Let me give you some other examples. A major
one of these programs, the most expensive, is Social Security. Now Social Security, as
you may know, is one of the most extreme cases of misleading advertising that I know of;
it’s not social and it’s not security. (Laughter) What it is is a combination of a bad tax and
a bad relief program–a bad distributive program. It is sold as if individuals who pay Social
Security taxes are paying for their own benefits that they are going to get later on; that’s
the language in which the Social Security Administration sells it. That’s extremely
misleading. What’s happening is that people today are paying taxes on their wages; people
today are receiving payments from the government. The relation between the taxes Mr. X pays
and the benefits to which he is entitled is very, very slight. There is a tiny bit of
a relationship to maintain this fiction, but on the whole there is very little relationship.
Two people who pay the same amount of money throughout their lives may get very different
benefits. But let’s leave that aside. I want to go to the point I’m talking about,
about the tendency for those of us in the middle class to impose programs that benefit
us at the expense of people below us. Social Security does involve a very large transfer
from the young to the old; that is, today’s young pay taxes which go to pay benefits to
the old. But over and above that, it involves a very substantial transfer from low-income
groups to middle-income groups. How come? Well consider, at what age does a young man
or young woman from the lower-income groups go to work? Sixteen, seventeen, eighteen-
he or she will start to pay Social Security taxes at that time. At what time do we go
to work, or do our children go to work? You and they stay protected in schools, stay
at college. They generally start to work at 24 or 25 maybe, and then they start to pay
taxes. If you do a little actuarial calculation, as nowadays you can all do on one of those
handy Hewlett-Packard calculators, you will discover that the effect of this is to make
the total payments of those who start earlier about a third higher in actuarial value than
the payments of those who start later. But that’s only half the story. Have you ever
looked at the statistics of average length of life? Who do you suppose has the longer
expected length of life, those in the lower-income groups or those in the higher-income groups?
Those in the higher-income groups. As a consequence, those of us in the middle- and upper-income
groups pay less taxes, because we start paying later and we get more benefits because we
live longer, with the end result that you have a program enacted in the name of helping
the poor and keeping the poor out of the poorhouse, which has the effect of benefiting middle-income
groups at the expense of relatively low-income groups. Over and above that there are lots
of inequities. There are lots of people in the middle-income groups who don’t benefit,
some in the low who do. I’m not saying there isn’t. It’s an enormously complicated
program and there are many different considerations. But taken as a whole, it is a marvelous illustration
of the tendency for legislation enacted in the name of helping the poor to turn out to
be a way in which middle-income people help themselves. The only program I know of for which a good
case can be made that the people who get the money have lower average incomes than the
people who pay the taxes–the only program I know of is direct welfare, AFDC and direct
welfare. And it’s not an accident that that’s the program which draws the greatest opposition
and to which there is the greatest discontent on the part of the population as a whole.
Now it is a lousy program, I agree; so are all the others. It’s no worse than the others.
There is a welfare mess and I have, as you may know, long been in favor of major reforms
of the welfare program, of substituting a negative income tax for the whole collection
of programs. But my point is that that’s the only one I know of, and it’s only a
small fraction of the total expenditures on programs labeled as being for poverty. Over and above the waste of resources through
these welfare-state measures, they have further effects which I think are very serious from
the point of view of the maintenance of a free society. In the first place, calling
on the government to solve problems strains that social fabric of agreement on basic values
that is necessary to maintain a stable society. In order to have any kind of a stable society
you have to have people agree with one another; you have to have them have a certain minimum
common set of values and beliefs, and you want to avoid straining that set of beliefs.
Now the great virtue of the market is that people who hate one another in other respects
can cooperate with one another on the market without any difficulty. As I often say, when
you buy bread at the grocery you don’t know whether the wheat from which that came was
grown by a black or a white, an Indian or a Chinaman, a Mohammedan, a Christian, a Jew,
somebody you like, somebody you dislike, and it doesn’t make a darn bit of difference.
And even though you and he disagree violently on every issue, you can cooperate–he can
produce the wheat and you can buy the bread. That’s the great virtue of the market…that
it permits cooperation without conformity, without people having to agree with one another.
Political mechanisms have the opposite arrangement. You have to enforce conformity on people.
You have to decide on the standards, you have to decide on who is going to pay, who is going
to get; and when 51 percent of the people say one thing and 49 percent say the other,
100 percent do what the 51 percent say. As a result, the more you have to use political
mechanisms, the more you tend to strain the social fabric and this has shown up very
drastically. This is the reason why you can go much farther in this direction in homogeneous
societies like Sweden’s than you can in heterogeneous societies like our own. But
it is showing up in the form of divisiveness, of things like the tendency for Quebec to
try to get independence, for Scotland to try to become separate–after all, if the government
is going to handle the oil, the Scots want to have their hands in the oil pot…so that
one of the effects of resort to welfare state measures is to promote regionalism and divisions
within our society. In the United States this has shown up by the growth of ethnic particularism,
ethnic divisiveness. We used to be proud of being a melting pot, in which we got a common
set of values, while each of us was able to go our own way with respect to our local customs
and our local backgrounds. But now that there is a great deal to be gained by forming cohesive
minority blocs, political entrepreneurs are out forming blocs of people from particular
ethnic backgrounds, and they are now going to become more cohesive blocs which tends
to divide the society. The welfare state measures develop an acceptance
on the part of the public at large of regimentation. It develops it on the part of the poor who
get their benefits by being told what to do. I remember years ago a fellow, who was doing
a study of the welfare programs in New York City, came to me and he said, “I’ve been
reading your book Capitalism and Freedom, he said, “and you talk about the conflict
between growth of the government and human freedom.” He said, “You don’t know what
you’re talking about.” He says, “You don’t have your freedom interfered with
very much. If you really want to see this conflict in action, you go down to Harlem
and you look at the people who are on welfare. They can’t move from one place to another
without getting the permission of their welfare supervisor; they can’t put in a telephone
without getting it approved, etc., etc., etc. They are the people who are having their lives
regimented.” Well it’s not only they. Those of us who are subject to Medicare have
to know about the forms we have to fill out. Those of you who are students who are getting
federal aid or loans and what-not know about the conditions to which you have to subscribe.
All of us who know that our future benefits are going to come from the government have
to think three times before we engage in actions that might prejudice our future acceptability.
So the effect of the growth of the welfare state is also to develop an acceptance of
regimentation. Furthermore, it undermines the ethical and
moral standards of the people; it undermines those standards by instilling the notion that
nobody is responsible for himself; that if something is wrong…somebody else is responsible
for it. Now, of course, what happens to people is not wholly the result of their own behavior
or their own actions; society does have an effect, outside forces do affect them. But
unless you adopt broadly the view that individuals are to be responsible for themselves, you
cannot get, in my opinion, a decent free society. In my view, we are fast approaching the kind
of situation that Dicey outlined in which we must be fearful about the extent to which
the growth of the welfare state is encroaching on our freedom–encroaching on it indirectly
by its fiscal effects, by putting us in a situation where the fiscal crisis that it
tends to produce as in Britain, as in New York City, interferes with our freedom, interfering
with our freedom through the extent to which we become subject to bureaucratic control. What can we do about it? Well obviously, the
right way to do it would be to get rid of these social welfare measures and promote
our basic objectives by other means. In getting rid of these welfare measures we cannot abandon
them overnight. We have induced millions of people to become dependent on them. We would
have to get rid of them gradually. That’s why I have always been in favor of introducing
a negative income tax as a substitute for a great many of them, as providing a way in
which you could gradually get out. But I have to admit, that that’s a romantic approach
and is inconsistent with everything I have been saying tonight, because it goes back
to the idea that the way you attack government is by trying to figure out the right answers,
persuading people, and getting it legislated. And we know that isn’t the way government
works. What we need to do is to look at an object analysis of the forces set in motion that may lead
to a reversal, and there are forces set in motion–very strong forces–because as the
welfare state moves and grows, you get bigger and bigger taxes with fewer and fewer benefits.
And people don’t like to pay the taxes without getting the benefits. And therefore, the objective
circumstances develop under which you can have a tax revolt. You have seen that, and I think that Great
Britain may be giving us a very favorable example from that point of view. Here you
have a situation in Great Britain… Great Britain went much farther than we did.
In the United States total government spending at all levels has gone to 40 percent of our
income; in Great Britain it went up to 60 percent of their income. Great Britain had
a much more severe financial crisis than we did; its inflation reached something like
25 percent a year instead of ours, just a mere 12 percent a year. Great Britain has,
as a result, had enormous pressure on its political system, and the Labour government of Great
Britain in the past two years, for example, has behaved in a way to reduce the ratio of
government spending to income and to reduce the welfare measures. So I think that there is some chance, and
that chance I think derives from the impact of two things: the inefficiency of government
which causes discontent with government policies, and the burden of taxes which cause a tax
revolt. In thinking ahead to alternatives, I want
to close on a different note. The objectives of those well-meaning people who were behind
the development of the welfare state are good objectives and we must not denigrate them
or lose sight of them. What is needed is the recognition that there are other ways of promoting
those objectives than the use of force and the use of government. There is a strong tendency
to believe that you either must have the government do it or else, at the other end, you have
only narrowly defined market activities with everybody looking after himself. That’s
wrong; there is a great middle ground. There is a great area in which you can have voluntary
activity by individuals who cooperate with one another for common purposes. That is what
we have always had. The nineteenth century in the United States, when government spending
never reached more than 10 percent of the national income and federal government spending
never reached more than 3 percent, when we had essentially no welfare state measures
on the federal level certainly and few on the state level, was the period of the greatest
outburst of the eleemosynary, charitable activity that the world has ever seen. You had the
great development of nonprofit hospitals, you had the foreign missions, and you had
the establishment of great universities like this one. The market is an effective means
for voluntary contribution in promoting charitable activities as well as all other activities
and in trying to reduce the role of government. One of the worst things, in my opinion, that
has happened as a result of the welfare state is the destruction of private mechanisms.
What we need to do is to strengthen those and use those instead of the compulsory mechanisms
of the state. Thank you. (Applause) Professor Friedman, in 1946 a McGraw-Hill
publication reported that the total tax take in the United States was about 22 percent
and suggested that if it became 25 percent that it would lead to the destruction of our
capitalist economic system. Now it’s 40 percent as you suggested tonight. Is this
a gradual destruction that takes place or is it catastrophic? How much can the tax take
become before it really gets to be dangerous? It’s dangerous now, but there is no magic
number. It’s clear that as that number grows it becomes more and more difficult to maintain
a free society, but where the breaking point is will vary from case to case. To illustrate;
in the case of Chile the breaking point came at 40 percent. The level of government spending
had risen to 40 percent of the national income under Allende. And that was the point at which
the breaking point came, and the system fell apart, a military government stepped in, and
you had a loss of freedom. But Chile is a much less developed and a much less wealthy
country than we are. In Great Britain the percentage has gotten up to 60 percent and
Great Britain has not collapsed. The breaking point there is apparently higher than 60 percent.
In Israel the percentage is something like 70 percent. Now I should explain a little
bit to you on that, because that percentage is a very misleading percentage. You know
accountants are marvelous people, and the way in which you run the national accounts
there is really nothing to prevent government spending as a ratio to national income from
being 120 percent- because these are two different concepts. And I believe all of these numbers
really greatly overstate the role of government spending. They don’t overstate the role
of government influence. Now the other thing that needs to be said
is- that government can have a lot of influence over your life without spending any money.
Those two are quite different. For example, every automobile you drive has maybe $500
or $700 of equipment on it that is mandated by the government. You paid for it; that doesn’t
enter into government spending. Or again, the administrative body that administers the
Interstate Commerce Commission doesn’t spend much money, but its effect has been to destroy
the railroad industry. So that you can have great effects without spending money. So the simple answer to your question is that
there is no magic number but the larger it is, the more dangerous it is. I have a question about public housing. I
agree with you when you say that the number of dwellings destroyed is greater than the
number of dwellings put up. But you are comparing…the dwellings that are destroyed are three-story
apartment buildings left over from the nineteenth century and the dwellings that are put up
are about twenty stories high and have about eight families per floor. Oh, I mean the number of dwelling units, not
the number of buildings. When I spoke I was not careful and I should have been. I
meant the number of dwelling units where a dwelling unit is something that houses a family.
So in the case of the buildings you’re talking about, I wouldn’t count that as one eight-story
building versus one three-story building. The number of dwelling units built is less
than the number destroyed. How does that improve the housing? Maybe you dislike the public housing because
of the institutional look to it and it looks more like a hotel and looks less homey. No, no, that has nothing to do with it. The alternative is either you have a public
house, or you have a badly maintained apartment building by an absentee landlord and… There are no dwelling units in this country
that are more badly maintained than public housing dwelling units. (Applause) In the South Bronx people are destroying their
houses… Of course. Why? They are burning their houses to move into
public housing. Of course, but why are they burning those
houses and abandoning them? Why? Because they are badly maintained. No siree, because you have rent control in
New York City which makes it uneconomical to maintain the houses, and it means that
the only way in which you can get any money out of them is by burning them down. Also absentee landlordism is very… Absentee landlordism, of course. But do you
mean to say that the public housing units are not under absentee landlords? (Laughter and applause) Look, you must understand… I think it’s
important for people to have decent housing. My objection to public housing is that it
has made the housing of the poor worse. You’ve torn down dwellings in which they lived. If
you take the whole housing program, urban renewal plus public housing, the situation
is even worse: You’ve torn down more dwelling units than
you have put up. Of those you put up, a considerable fraction have not been available to the poor.
You’ve torn down low-income dwelling units–take any urban renewal area in this country you
want—you’ve torn down low-income dwelling units and you’ve put up luxury apartments.
And that’s helping the housing of the poor? Not by a long sight. So that the problem is…and
then in the public housing units you’ve set up, because of the income requirements
and so on, the people who can qualify for them tend to be broken families. They have
an abnormally high rate of juvenile delinquency, of sabotage, of destruction, they are poorly
maintained. You see…the problem that this young man
is illustrating is the tendency that we often have to take the will for the deed. The problem
isn’t the objective of the public housing units; the point is to go out and see what’s
actually happened with them. And there is hardly anybody who has studied the subject
who will defend the public housing program as having improved the housing of the poor. I was interested… before you had mentioned
a comparison between nineteenth-century and twentieth-century America. I’d like to know
if you that… I don’t see how that could be considered a legitimate comparison in terms
of the fact that there were unlimited resources essentially in the nineteenth century and
now we have a kind of very limited resource and allocation situation. At least this seems
to be the thrust of a lot of you economists who say… No, but that’s fundamentally wrong. Well just let me finish the question. In the
nineteenth century when you had a completely free economy, you seemed to have situations
developing where tycoons would come along like Rockefeller or the railroad barons essentially
and they’d come to dominate society. So is it not a choice, do we not have a choice
between developing that kind of situation where John D. Rockefeller and that crowd will
decide what’s good for our society or whether the government officials will? Well…let’s take the Rockefellers and just
stick with them… He created the University of Chicago incidentally. I know, he founded the University of Chicago.
John D. Rockefeller did a great deal of good for this country. He developed and promoted…I’m
not talking about his charitable activities–that was separate; not even about the founding
of the University of Chicago. But he developed into a major industry the oil industry of
refining, discovering, and making oil available; he reduced its cost. He never got a dollar
from anybody with a gun; he got his money by selling people products at a lower cost
than other people could provide it. His grandson, Nelson Rockefeller, did enormous harm to the
country by operating through the political channel. If we had the nineteenth century
version, and Nelson Rockefeller with all his accumulated wealth had tried his hardest to
spend that in such a way as to reduce the freedom and the affluence of other people,
he could not have come close to achieving what he did achieve in that direction as a
political figure. He couldn’t even have afforded to put up the Albany Mall, (Laughter) …let alone to have undertaken the measures
which made New York State a basket case, which changed the educational structure of New York
State in my opinion in a very adverse direction. But let me go back to your first question.
First place, it is simply not true that we have limited resources now whereas we had
unlimited resources in the nineteenth century. On the contrary, from every important economic
point of view we have a greater volume of resources now than we had then. Tell me, in
1850 how much oil did we have? It hadn’t been discovered; it was useless. We had no
oil. The first oil well was drilled in Titusville in 1858. We have more oil now than we had
in 1850 in any meaningful economic sense. Before nuclear power was discovered, how much
nuclear power and energy did we have? The progress of technology has had the effect
of increasing the effective volume of resources available to us, so that we have far greater
resources available now than we had in the nineteenth century as a result of the technological
and business developments that were produced… Is government regulation of the resources
necessary? Not at all. Government regulation of the resources
of the kind we have had has led to waste and misuse of resources. Go back and look at your
analysis. What matters are the resources that are available to be used, not those that will
be discovered later on. Of course one more thing needs to be said.
We are of course wealthier and better off than were the people in the nineteenth century,
but we are their heirs. We could not be where we are if they had not done what they did,
and I think it’s a false comparison not to take into account the debt which we owe
to the enormous economic progress and development of the nineteenth century, to the fact that
our ancestors came here with empty hands and have made it possible for us to have a decent
life. I hate to use the old cliché about standing on their shoulders, but that’s
what we do. Professor Friedman, how is it that Germany
which has one of the highest social security systems in the world is better off economically
than the U.S.A.? Germany is not better off economically than
the U.S.A. It’s a great deal better off economically than Great Britain is at the
moment, but it is not a great deal better off than the United States. It is relatively
well off, why? Because in 1948 there was a man by the name of Ludwig Erhard who had the
good sense on one Sunday afternoon–and he did it on Sunday because the American, British,
and French occupation forces offices were closed on Sunday, and he knew if he did it
on a weekday they would countermand his order—and so on that Sunday, he abolished all price
and wage controls and rationing that had been in existence, and he unleashed in Germany
a free market economy. And Germany, with a free market economy, had an economic miracle.
That miracle will not last if Germany long continues to hamper its free market economy
by a still greater growth of social security, welfare, and other measures. But in general,
the actual extent and level of those measures is not terribly different in Germany from
what it is now. In some areas it’s greater; in some areas it’s less. But the most important
difference between the two countries is that Germany in the past 30 years has been willing
to rely to a far greater extent on private markets and private market arrangements than
we have. I was saying before in answer to an earlier
question there is no magic number–30 percent, 25 percent, 40 percent–which a government
can spend while having a viable economy. How much it can spend depends on the other policies
which it follows. It depends also on the attitudes and structure of the people, as I was saying
with a homogeneous people you can go much farther than with a heterogeneous people.
So I would say that Germany has done as well as it has despite, and not because, of the
welfare measures you were mentioning. In America, it has been argued by some that
there are no pervasive values that would form the basis of the private sector performing
in the altruistic manner you think it will, but instead the only pervasive value in this
country is material self-interest, and therefore the private sector is not inclined to perform
in the altruistic way that you think it will, and as a result of that, the welfare state
has sprung up as the only alternative for the disadvantaged in this society. Well, let’s look at the situation. Was it
a pure interest in material welfare and self well-being that built the University of Rochester
and the thousands of other private universities around the country? Was it the material interest
and immediate self-welfare that produced the private nonprofit hospitals around the country
that were so prominent a feature, let alone the Carnegie libraries, let alone all the
others? It’s quite the opposite. There is no question about the evidence that the
United States has had a unique…almost unique experience of private charitable, eleemosynary
activity on a broad scale. But now I come to the other score. Again,
you are looking at it in terms of objectives and not results. You are assuming that these
welfare programs do help the disadvantaged; you are assuming that government activity
helps the disadvantaged. If I take people of your race, in what respect are the black
people in this country most disadvantaged? In respect of the kind of schooling they can
get. Why? Because that schooling is provided by the government. Where do you get the idea
that the disadvantaged are being helped? The blacks are in the first place forced to have
bad schooling because the state provides it. In the second place, having been put under
that disadvantage, they are being prevented from getting on-the-job training by a minimum
wage law, which is the most anti-Negro law we have on our books, all in order to help
the poor no doubt. That’s said to be the purpose of it, but what’s the effect of
it? So what I’m trying to say to you is that it’s all very well to talk about using
the state, but explain to me how it is that a people who in their separate lives are driven
only by material self-interest are somehow in their collective capacity driven by altruistic
impulses. How do you reconcile the one to the other? See…the basic situation as it
appears to me is almost the opposite: most people are selfish in a narrow material sense,
and when the government is run by most people–when you have a majority democracy–the government
is going to reflect their preferences and their tastes. The only way in which you can
have nonmaterial values become effective is by having a society in which a minority can
express itself. Which are the most materialist countries in the world? There is no country
in the world more materialist than Russia. All it talks about is its five-year plans,
its material accomplishments, its material plans. It is not altruistic. At any time
in any society–I don’t care what it is–the fraction of the public that is going to be
interested in the well-being of others and in things other than their fairly narrow self-interest
is going to be a minority. And the question is: how do you construct
a system in which that minority is least hindered? And in my opinion, that’s a system in which
government has very limited power, and in which private voluntary activity has a maximum
of opportunity to develop. Thank you. Given that the best intentions of the government
have failed to provide adequate… Government has no intentions. Only people
have intentions. …the best intentions among the people in
power in government has failed to provide adequate housing for the poor… Go slowly. I never talked about the best intentions
of the people in power in government; I talked about the good intentions of the people who
promoted that legislation. Once you get legislation–the people who get in power in government are
people who want power; not people who have good intentions. That’s a very different
thing. No…it’s not really the question I had
in mind. (Laughter) Okay, we’ll work our way around to it. What I was hoping to ask is, what specific
policies do you propose which would lead to adequate housing for all the poor? Well in the first place, you know these are
words that really have no clear meaning: “adequate housing for all the poor.” Those are not
definable words. What’s “adequate”? What we now consider inadequate would have
been considered a palace 150 years ago; it would be considered a palace abroad. I don’t
know if you all know the story about the movie that was made out of John Steinbeck’s Grapes
of Wrath. And it was shown during the war or I think shortly thereafter, but I think
during the war, in the Soviet Union, and it had to be withdrawn because the people were
so excited and interested about the quality of the clothes and shoes that the Okies going
out West were wearing…it backfired. So adequate? Poor? The income which we now use in this
country as a governmental standard to separate the poor from the not poor is higher than
the average income of all the people in the Soviet Union. It’s decidedly higher than
the average income of most of the people in the world. These are not absolute standards;
they are relative. So you have to ask a very different kind of question: What kind of system
will give the widest range of people the greatest opportunity to make the most out of themselves,
out of their own capacities, their own resources? What are the plans for doing that? I’m not
going to try to have a program which will give adequate housing to the poor. I want
to have a system under which individuals can have as much opportunity as possible to develop
themselves, and in which other people can have as much opportunity as possible to help
other people. I say that system would be a system of essentially free enterprise, private
enterprise capitalism with a very limited government. And in that system you have in
fact achieved a higher standard of housing than you have through other methods. The number
of privately built houses has always vastly exceeded the number of government built houses.
So I’m not answering your question directly but I’m going at it indirectly. You and
I seem to have been involved in indirect circles. Thank you. Professor Friedman, there are certain social
goods that cannot be supplied by the private marketplace. Such as what? Well, let’s say there are goods that the
marginal benefits cannot be separated or that they are so lumpy that… Such as what? I want examples. Roads, for instance. Roads? You can have private toll roads. You’ve
had them for years. Is there any reason why this interstate highway that you have, the
New York Thruway, is there any reason why that couldn’t be leased out to private enterprises
to run and they could finance it by charging a fee? Okay, my question concerns social goods. Do
you accept the fact that there are certain goods that the private economy cannot supply? I accept that there are goods which the private
economy is not likely to supply. I accept that there are goods in which it is difficult
through a private economic system to charge everybody who gets the benefits from them.
In those cases, however, it is also true that it’s not easy for the government to supply
them. You see the problem with the direction you are going in is that there is a strong
tendency to say, “Here’s a market failure.” I have no way in which Rochester University
can be made to pay those citizens of Rochester whose shirt is dirtied by the amount of smoke
that comes from Rochester University’s chimneys. Alright, that’s a market failure. Rochester
is imposing a cost on people; it ought to pay them for it. It’s buying their services
in effect; their services of letting their shirts get dirty so that Rochester can heat
its buildings. That’s true, that’s a problem, but in those same cases it’s also difficult
to have government do anything about it. And if you are going to consider cases of market
failure like that, you have to put into the balance the fact that when government seeks
to achieve an answer to it you are likely to have a government failure. I agree. Okay, I was leading up to this question:
considering that there are externalities like, as you said, pollution, how can government
limit itself to distinguish between the social goods and the private goods? Well it cannot, and there is no easy way to
limit it. There are hard questions; there isn’t an easy answer for every question.
And my answer would be to you twofold. It would be first of all, if government decides
to do something in that area, it will do least harm and most good if it does it via effluent
charges or the equivalent, rather than via setting standards or imposing specific requirements.
Second, government ought not to step in and try to do anything unless there is a very,
very strong case that the net disadvantages, the net third-party effects are of significant
magnitude, because the costs of doing it are significant. Government is going to do it
imperfectly and you are comparing one imperfection with another. And I think we have had a great
deal of experience by now which suggests that you are about as likely to make matters worse-
as you are better. That’s not a clean and neat answer, and I don’t think you can get
a clean and neat answer, because I think in all of these cases you are dealing with a
balance sheet in which there are certain advantages of the proposed action, there are certain
disadvantages, and you have to weigh them up. And all I’m urging is that you make
sure you look at both sides of that balance sheet and not only at one; that you don’t
take the naive view which so often is taken that, lo and behold, there’s an evidence
of a market failure- Boom!, government should step in and do something about it–without
taking into account the possibility of a government failure as well. Thank you. If the middle class controlled this coalition
that you were talking about earlier, why are they so upset with the way the government
is handling their life and their share of the pie? I was explaining that to you earlier, and
that was because they really don’t get anything out of it. They are you see, each one separately…
it’s a fallacy of composition. It is true, every individual program works this way, but
what you gain on the one, you lose on the other. And the problem is that you have a
system under which each one of us tends to have concentrated interests in certain ways
and the costs are diffuse. And therefore, each one of us gets our program, but at the
expense of paying everybody else’s. And so the net outcome is- that we may be worse
off. And what you have is a situation in which you have, as it were, a local equilibrium
but you don’t have a global equilibrium in which there is a drastic rearrangement
which would make everybody better off. But if that’s the situation, why can’t
we find a method to overcome all these impediments and arrive at this global equilibrium because… I hope we can. The purpose of my talking this
way, and of your listening, and of our trying to persuade one another is to try to see if
we can find a way to do it. And I think the way to do it is to try to wrap these programs
together and attack it through some kind of constitutional limitations on the aggregate
amount that can be spent in these ways. Thank you.

19 thoughts on “Milton Friedman Speaks: What is Wrong with the Welfare State? (B1229) – Full Video

  1. Providing to senior citizens? I'm sorry but this is the only thing I disagree with. I PAID!! For 46 years, and for a few more, I will pay. This was MY money, and I had no choice about giving it. But had I been able to just have that money, I could retire comfortably. The rest I agree on. But Social Security? Neve was I given a choice!

  2. When Milton talks about the Mental Deficiency Act he is ABSOLUTELY describing the whole “mental health” agenda now. All you hear about is mental health on the mainstream news anymore. There is an agenda to label dissidents mentally ill. These tactics will be used here. Amazing how the psychological warfare is perpetrated. And all of the stupid sheeple who listen to the nightly news lacking critical thinking skills, will go right along with the program. Because they have been programmed. This nation has been in big trouble for a long time. And once our Constitutional Republic goes up in flames, world socialism is complete.

  3. I'm from France, i've done some calculations the same way Milton does and i found that the total amount of "welfare" subsidies divided by the number of "poor people" amounts to about 7000$ per month per capita ! All the money goes to the bureaucratic state machinery….Milton is right, fact checking is easy to do with internet now.

  4. "He and those who share his views, again believe themselves to be an elite who know what is good for the ordinary man, who again do not wish to impose their views on the ordinary man , also should recognize the superiority of the elite, and assign to them the task of choosing what goods they consume, what products are available and so on…."

    Gotta love Friedman's humor.

  5. The title of this video is a no brainer. When there are no living wage jobs available, people will look to the state for a means of support. Outsourcing 75,000 manufacturing facilities produced that environment. Friedman's policies accomplished that globalist agenda – to weaken the US to the degree that we become so weak that the global plutocracy could sweep a great nation into global governance.

  6. The founders of our republic, solved this problem at the same time they implemented our constitution. They passed the Hamilton Tariff Act of 1789. The concept of protecting our markets by implementing the concept of reciprocal trade. They allowed industry to develop in America behind the walls of protection. As a result of that wisdom, the greatest manufacturing economy in history developed, producing the greatest middle class in history.
    When those tariffs were removed, the welfare state developed. It is the duty of the governing body, to pass legislation, with the intention of providing living wage jobs for the citizens of the country they govern.

  7. The so called free-market is a top down system of minority rule with markets dominated by monopoly. This power structure is a state sanctioned social system that runs at a deficit of over $85. billion to maintain a warehousing system for the underclass called the corrections industry. Promoting the cause of inequality to be individual moral failure rather than class privilege is called science of economics. Many prizes are awarded to economists for whomever comes up with the best excuse for the markets chronic state of crisis. Blaming unemployment on the unemployed and environmental ruin on environmentalists reflects the desire of the wealthiest 5% to ignore the devastation and misery that engulfs us. Milton Friedman is the high priest of this, the 20th Century's last great utopian dream.

  8. People today know his name. Unfortunately people today will never hear his message. This man uses logic to defeat those who believe they deserve to reap the reward of success by those who are not them just because they exist. Brilliant

  9. Milton was in bed with all the other child molesters. Mr Free Trade – Except for with taxation, licensing, permits, fines, regulations, land cost, and 3 Billion dollars sent to Israel (sex traffickers – Epstein style) every year. That's called "free trade when we feel like it in certain circumstances and give jewish people money".

  10. As a Libertarian, I would be really interested to see what Friedman had to say about Big Tech monopolies and online censorship.

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