How Milton Friedman Broke The American Economy | The Class Room Ft. @FDSignifire

Summary

The video discusses Milton Friedman, a prominent right-wing economist whose ideas have shaped modern economic policies. Friedman's laissez-faire philosophy, featured in his PBS series 'Free to Choose,' promoted minimal government intervention, deregulation, and tax cuts for the wealthy, influencing leaders like Ronald Reagan and Margaret Thatcher. The video contrasts his ideas with those of John Maynard Keynes, who advocated for government intervention in times of economic crisis. It explores how Friedman's policies benefited the rich while exacerbating inequality and critiques their long-lasting impact on U.S. economic policies.

Takeaways

• 📉 Milton Friedman was a highly influential right-wing economist, whose ideas shaped conservative policies from Ronald Reagan to Margaret Thatcher.
• 💼 Friedman promoted laissez-faire economics, arguing that the free market should dictate most aspects of life, including medical care and regulation.
• 📊 His ideas were seen as radical at the time but gained prominence due to his prediction of stagflation in the 1970s.
• 📺 Friedman hosted a PBS series called *Free to Choose*, advocating for less government intervention and more economic freedom.
• 🪙 He opposed Keynesian economics, arguing against government spending and public works projects to combat economic recessions.
• 🛠️ Friedman's monetarist approach advocated controlling inflation by regulating the supply of money, not through government spending.
• 🔨 His ideas on supply-side economics promoted lower taxes and deregulation, focusing on benefiting corporations and the wealthy.
• 💰 Under Friedman's influence, Reagan significantly reduced taxes for the wealthy and weakened union power, initiating decades of economic deregulation.
• 🏗️ Friedman's policies disproportionately affected working-class people and minorities, while benefiting the wealthiest Americans.
• 📖 Despite his controversial stance, Friedman’s work left a lasting impact on global economic policies, especially in the U.S. and U.K., creating a lasting divide between Keynesian and free-market economic approaches.

Q & A

Who is Milton Friedman and why is he significant?

Milton Friedman was a highly influential right-wing economist, known for his advocacy of free-market capitalism and minimal government intervention. His ideas shaped conservative economic policies and were implemented by leaders like Ronald Reagan and Margaret Thatcher.

What was the PBS series 'Free to Choose' about?

'Free to Choose' was a high-budget PBS series created by Milton Friedman in 1980, promoting laissez-faire economics. In it, Friedman travels to various places to showcase his beliefs in minimal government regulation, the power of free markets, and personal freedom.

What were some of Milton Friedman's radical economic ideas?

Friedman advocated for deregulating pharmaceuticals, abolishing the Post Office, legalizing all drugs, eliminating the military draft, and replacing medical licenses with private enterprise competition.

How did Friedman view the role of government in the economy?

Friedman believed that the government should have minimal involvement in the economy. He thought the government's role should be limited to controlling the supply of money (monetarism) and opposed welfare programs and public works, arguing they led to inflation.

What is monetarism, and how did Friedman view inflation?

Monetarism is the economic theory that government should regulate the money supply to control inflation. Friedman believed inflation was caused by too much government spending and argued that reducing the money supply and letting markets self-regulate was the solution.

What is the difference between Keynesian economics and Friedman's ideas?

Keynesian economics advocates for government intervention to regulate the economy, including public spending during recessions. In contrast, Friedman rejected such intervention and promoted free-market policies, arguing that government spending only worsened inflation.

How did Friedman's ideas influence Reagan's presidency?

Friedman's ideas deeply influenced Ronald Reagan's economic policies. Reagan reduced taxes, cut government spending, and deregulated industries, all in line with Friedman’s free-market beliefs.

What was the economic situation in the U.S. leading up to Friedman's rise in popularity?

Before Friedman gained influence in the 1980s, the U.S. experienced high inflation, unemployment, and a deep recession. These conditions led many to question existing Keynesian policies, which opened the door for Friedman’s monetarist solutions.

What role did unions play in the U.S. economy before the rise of Friedman's ideas?

Unions played a significant role in the mid-20th century, with about 25% of American workers unionized. They helped workers negotiate better wages and benefits, contributing to the economic stability of the middle class during the period known as the 'Great Compression.'

How did Friedman’s policies affect wealth inequality in America?

Friedman's policies, which included tax cuts for the wealthy and deregulation, are often credited with increasing wealth inequality in America. As his ideas were implemented, middle-class wealth stagnated while the wealth of the richest Americans grew significantly.

Outlines

00:00

🤑 The Legacy of Milton Friedman and Wealth Inequality

This paragraph opens with a comparison of modern conservative economic rhetoric by figures like Ben Shapiro and Donald Trump, linking them to the ideas of economist Milton Friedman. It discusses how Friedman's ideas influenced policies adopted by Ronald Reagan and Margaret Thatcher, which have been carried forward by subsequent U.S. presidents. Friedman's economic philosophy, despite its radical nature, became foundational to right-wing economic policies, benefiting the wealthy while affecting the middle and lower classes. The narrator, F.D. Signifier, humorously comments on his attire, making himself relatable to the audience.

05:02

🎓 Milton Friedman's 'Free to Choose' and His Radical Ideas

This paragraph delves into Milton Friedman’s PBS series, 'Free to Choose,' which presented his laissez-faire economic views. The paragraph highlights Friedman’s controversial ideas, including his opposition to government regulation, such as the abolition of the Post Office and medical licenses. Friedman's advocacy for free market solutions to societal issues is critiqued, especially his belief that the market should dictate medical care and drug legalization. The narrative humorously notes how Friedman's ideas have come to shape the modern economic landscape, albeit with severe consequences.

10:03

📉 Economic Decline and the Rise of Wealth Inequality

This paragraph discusses the economic downturn of the 1980s and contrasts it with the post-World War II period, known as the 'Great Compression,' when the middle class thrived and wealth inequality shrank. It attributes this prosperity to high taxes on the wealthy and strong unions, which helped secure better wages and worker rights. The narrator explains that the economic issues of the 1980s led to a shift in policies, ultimately reversing the gains of the middle class. Milton Friedman is positioned as a key figure in advocating for policies that prioritized deregulation and reduced taxes for the rich.

Keywords

💡Milton Friedman

Milton Friedman was an influential right-wing economist whose ideas about free-market capitalism shaped policies under Ronald Reagan and Margaret Thatcher. In the video, his laissez-faire economics and belief in minimal government intervention are explored, particularly his opposition to Keynesian economics and his role in shaping modern economic policy.

💡Keynesian Economics

Keynesian economics, based on the ideas of British economist John Maynard Keynes, argues that government intervention is necessary to manage economic cycles. In the video, Keynes's views are juxtaposed with Friedman's, with Keynes advocating for public spending and regulation to combat economic downturns, especially during the Great Depression.

💡Supply-Side Economics

Supply-side economics is the belief that reducing taxes and regulation on businesses will spur investment, create jobs, and stimulate the economy. This concept is a cornerstone of Milton Friedman's ideology and was put into practice by Ronald Reagan, with the video critiquing its impact on wealth inequality.

💡The Chicago School of Economics

The Chicago School of Economics refers to a group of economists, including Milton Friedman, who championed free-market principles and deregulation. The video highlights how this school of thought influenced major global leaders and policies, emphasizing deregulation and limited government intervention.

💡Neoliberalism

Neoliberalism is a political and economic philosophy advocating for free markets, privatization, and minimal government intervention. The video discusses how Friedman's ideas were foundational to the neoliberal policies that were implemented globally in the 1980s, with a focus on the social and economic consequences of these changes.

💡Stagflation

Stagflation refers to the simultaneous occurrence of high inflation and stagnating economic growth, a phenomenon that challenged Keynesian economics in the 1970s. The video notes that Milton Friedman correctly predicted stagflation, which helped popularize his free-market solutions as an alternative to government intervention.

💡Reaganomics

Reaganomics refers to the economic policies of President Ronald Reagan, which focused on tax cuts, deregulation, and reducing government spending. The video ties Reaganomics to Milton Friedman’s theories, highlighting its impact on wealth inequality and the shift towards favoring the rich in American economic policy.

💡Monetarism

Monetarism is the economic theory that emphasizes controlling the money supply to manage inflation. Friedman, a key proponent, argued against government spending and believed that inflation is caused by too much money being printed. The video criticizes monetarism for neglecting the needs of working people during economic crises.

💡Union Power

Union power refers to the influence of labor unions in negotiating higher wages and better working conditions for employees. The video notes that, during the mid-20th century, strong unions helped create a more equitable distribution of wealth, contrasting this with the later decline in union influence due to policies inspired by Friedman’s ideas.

💡Deregulation

Deregulation is the removal of government controls and regulations over industries, a central tenet of Friedman's economic philosophy. The video critiques how deregulation under Reagan and subsequent presidents led to increased corporate power and wealth inequality, with less protection for workers and consumers.

Highlights

Milton Friedman is considered one of the most influential right-wing thinkers of the 20th century, praised by institutions like the Cato Institute and The Heritage Foundation.

Friedman's ideas were pivotal in shaping the policies of Ronald Reagan and Margaret Thatcher, with his economic philosophies carried on by every U.S. president since 1982.

In the 1980s, Milton Friedman hosted a PBS series titled 'Free to Choose,' promoting laissez-faire economics and advocating for minimal government intervention.

Friedman believed that government should not regulate pharmaceuticals, the Post Office should be abolished, and that medical licenses should be replaced by private enterprise.

Friedman argued that free market control over health care decisions is essentially the system we live in today.

The Great Compression, a period from the 1940s to the 1980s, saw a significant shrink in wealth inequality, largely due to high taxes on the rich and strong union power.

The Roosevelt administrations raised income taxes on the wealthiest Americans to as high as 90%, contributing to the economic success of the middle class during this era.

Union power in the mid-20th century ensured higher wages and better working conditions for workers, which also benefited non-unionized sectors.

Friedman’s economic philosophy rejected the New Deal and Keynesian economics, advocating instead for 'monetarism,' which focused on controlling the money supply and reducing government intervention.

Friedman popularized the notion that government spending should be likened to household spending, advocating for spending cuts even during recessions.

Friedman and the University of Chicago economists advised the Pinochet dictatorship in Chile, advocating for neoliberal reforms in the wake of the country’s socialist policies.

Friedman’s free-market ideas gained prominence in the 1970s during the economic crises of stagflation, presenting his solutions as alternatives to government regulation.

Ronald Reagan’s policies, influenced by Friedman, slashed tax rates for the wealthiest Americans from 70% to 35% and weakened union power.

The 1970s economic crisis provided an opportunity for neoliberal policies to take hold, which led to decades of deregulation and low taxes on the rich.

The current wealth inequality crisis and mounting debt among the working and middle class echo the economic conditions that spurred the rise of neoliberalism, raising questions about future economic reforms.

Transcripts

When Ben Shapiro says things like:

Once you remove all of the money

from the rich people who are saving all their money

and give it to all the poor people to buy hamburgers,

that doesn't help the economy or spur the economy.

Or when Donald Trump cut taxes for corporations and the wealthiest Americans and said:

This is going to be one of the great gifts

to the middle income people of this country.

They're actually just plagiarizing one of the most influential right wing

thinkers of the last century.

In fact, he might be the most influential right wing thinker.

The Cato Institute calls him the greatest champion of liberty.

The Heritage Foundation says he was the father of economic freedom.

Arnold Schwarzenegger even said his work changed my life.

His policies were adopted

by the right wing and put into action by Ronald Reagan and Margaret Thatcher.

The results were so good for wealthy Americans

that they were carried on by every single president after.

We've basically had the same president in America since 1982.

Yes, that includes the Black one.

Just keeping it a buck.

I'm F.D. Signifier, this is The Class Room from More Perfect Union, and today

we're talking about Milton Friedman, the man who broke economics.

Oh, man, are my crocs in the shot?

Oh, God.

Don't show that I'm wearing crocs.

Or do, whatever. It's fine.

It makes me relatable. Maybe. I don't know.

In 1980, the economist

Milton Friedman was asked to produce a series for PBS about laissez faire

economics called Free to Choose, a high budget ten part series

with Friedman

traveling the world, visiting sweatshops in New York and Hong Kong, and dropping in

on welfare recipients and public housing residents in Manchester and the Bronx.

That's gross.

When Friedman was asked to host Free to Choose, he was a well-known economist,

and had won the Nobel Prize.

But his ideas were considered radical if not downright weird.

He believed that the government shouldn't regulate pharmaceuticals

and that the Post Office should be abolished.

He thought all drugs should be legal, the military draft illegal.

He loved freedom so much, he argued that medical licenses

should be abolished and replaced with private enterprise.

Why should medical care be a monopoly of licensed physicians?

Imagine letting the free market control whether you live or die.

You don't actually have to imagine it.

It's what we're doing right now. He won.

In the first episode,

The Power of the Market, Friedman goes to a garment factory in New York

and talks about how his own mother arrived in the city at age

14 and was able to get a job in one of these factories.

This is exactly the same kind of a factory that my mother worked

in when she came to this country for the first time

at the age of 14, almost 90 years ago.

It's not totally clear to me if Milton is saying that his mom

got this job in the 1890s at age 14 when garment factory workers

were mostly teenage girls who couldn't speak English, and they sometimes locked

the factory doors to keep them from leaving.

But either way, Friedman is definitely excited about it.

His main point is that America, because of all its regulations,

had gone soft and lost its former economic glory.

Here is the thing you need to understand.

In the 1980s, the United States had just experienced an international oil

embargo, record inflation, and it was entering a deep recession.

Things were going bad.

But before that, from the end of World War Two to the 1980s, middle class Americans

were doing better than basically anyone had done in the history of the world.

Middle class Americans held 68% of the country's wealth.

That sounds fucking amazing.

If only not for the racism of the time.

This era is what economists call the great compression.

For 40 years in America,

the gap between the richest and poorest shrunk significantly.

And most people - “most people” - were considered middle class.

There was a simple reason for this: taxes.

Loads and loads of taxes on the rich.

This started under Theodore Roosevelt, who decimated the enormous wealth

that the 1% enjoyed during the Gilded Age

and continued under Franklin Roosevelt, who raised income taxes

for the richest Americans to 63% in his first term, and to 79% in his second term.

The very richest were paying as much as 90%.

Imagine that.

The second thing to understand is that union power was strong.

The second thing to understand is that union power was strong.

One in every four American workers was unionized,

so workers were able to bargain for higher wages.

Even if you weren't in a union during this period,

unionized businesses knew you would raise your wages as well.

Union members also tend to vote, so there was a big bloc of Americans

who would turn out to keep their wages fair and maintain rights for workers.

Let's go back to Friedman.

Each episode ends back at the University of Chicago,

where leading intellectuals and policy makers of the time react.

Friedman had come to work at the University of Chicago

to be with other economists

and legal scholars who were opposed to the dominant economic policy of the time.

The school had Aaron Director and Robert Bork,

who would reshape our antitrust laws during the Reagan administration.

Libertarian George Stigler

and most important, Frederick Hayek, the author of The Road to Serfdom, a book

that argued that all government planning inevitably led to totalitarianism.

These economists were some of the first to really challenge John Maynard

Keynes, the most influential economist of the early 20th century.

So next, we're going to talk about some economic theory.

I know this sounds

boring, so just to keep you awake, we're going to soundtrack

all of this section with some pounding EDM music.

So you're welcome.

Keynes was a British economist who wrote a book in 1936 that would shape

economic policy in America, the United Kingdom, and most of Europe.

It was after the Depression and much of the world economy had not recovered.

The basic idea of Keynes's work was that capitalism was inherently volatile.

There would always be booms and busts in the market.

To combat this,

the government could break up monopolies, spend money, and manipulate

interest rates to keep unemployment low and money flowing into the economy.

This is the principle behind many public works projects in the New Deal.

The government would create demand whenever demand was low.

Now you're making a strong case for Keynesian economics.

Milton Friedman hated the New Deal, and he hated that government

used welfare and public works to combat the Great Depression.

Friedman thought

there was only one resolution for the Depression: bail out the banks.

This was called monetarism, the idea that government should control

the supply of money and basically leave everything else to the market;

and that printing and spending money would only cause more inflation.

Sound familiar?

Milton Friedman tells you inflation only gets created in Washington.

Friedman was one of the first to compare government

spending to household spending, that it was more responsible

to tighten your belt and cut spending no matter the cost to working people.

Keynesians, by which we mean every American president

from Roosevelt to Nixon,

believed that if you get money into the pockets of people

when there is a recession,

it will make their lives easier, stimulate the economy and lower unemployment.

Friedman, on the other hand, believed that there was a natural rate of unemployment

that I bet you just so happened to include as many black and brown people as possible

and that the market would find the perfect balance between the wages

that workers demanded, and what the price bosses were willing to pay.

And he believed in supply side economics.

If we lower taxes and do away with regulations, we'll get money

into the pockets of the rich who will invest in factories,

create jobs, and just overall increase the freedom.

Sounds—it sounds so stupid.

It sounds so stupid.

Maybe—maybe if he saw what was happening today, he would feel differently.

Maybe. Is he still alive?

Let's find out. We'll get to it in the video.

In the 1980s "freedom" in America was easily contrasted

with our Cold War enemy, the Soviet Union.

Many in the Chicago school had escaped repressive regimes

and were horrified by fascism in Europe and communism in Russia.

Keynes's ideology was also shaped by his experiences in World

War One and the rise of the Nazi Party.

But he had come to a different conclusion: after Germany was defeated

in World War One and before the Nazis took power,

Keynes argued that Europe should strive for economic balance to prevent

poverty, inflation and political extremists from taking power.

You know what?

That's a good take.

It's almost as if this guy was kind of based.

Maybe.

Maybe the guy Keynes is as based as economists can get.

I don't know. I'm not an economist.

Ultimately, Milton Friedman and other members of the Chicago

School of Economics didn't actually have a problem with authoritarianism.

They willingly advised the bloody Chilean dictatorship under Pinochet,

who wanted to rapidly overturn the socialist

economy and institute extreme neoliberal policies.

But Friedman does a neat trick in the show.

Freedom becomes free to be without constraints.

A business should be free from regulation, just like a corporation should be free

from taxes, and just like a worker should be free from union dues.

Friedman's ideas gained traction when he correctly predicted

stagflation in the 1970s.

There was an oil embargo and prices were rising.

Workers had unions

so they were able to get their wages to rise with the cost of living.

This, Friedman claimed, caused inflation to spiral out of control.

In his book Capitalism and Freedom, Friedman wrote:

"Only a crisis—actual or perceived—produces real change.

When that crisis occurs,

the actions that are taken depend on the ideas that are lying around.

That, I believe, is our basic function: to develop alternatives

to existing policies to keep them alive and available

until the politically impossible becomes politically inevitable."

Monetarism and the other anti-government policies were a convenient solution

that Friedman and the other University of Chicago

thinkers had been developing and promoting,

waiting for just the right crisis.

Free to Choose happened to air right when Ronald Reagan was running

his second presidential campaign, in the Republican primaries.

Reagan was a well-known and well-loved candidate.

He was already sold on Friedman's ideas.

His TV series was about choices, risks, freedom, equality,

and making a better future for all of us.

As governor of California, Reagan's concerns were

low taxes and eliminating government waste and bureaucracy.

Government programs like Social Security, Medicaid and programs

for home owners in America were actually still quite popular in 1980.

However, certain social programs were not.

In his book, Reaganland, Rick Perlstein wrote that Reagan appealed

to voters who benefited from things like government backed mortgages,

but also felt that programs that benefited minorities had gone too far.

Ronald Reagan understood that white Americans resented the progress made

by the civil rights movement.

When he ran for governor of California in 1966, he ran on repealing the state's

Fair Housing Act and opposed both the 1964 Civil Rights Act

and the Voting Rights Act.

This idea that the undeserving poor were receiving

too many benefits was gaining popularity among suburban whites.

This was the base that helped make Reagan president.

It always comes back to white supremacy, y'all.

When Reagan took power, he set out to radically reform tax policy

and the economy.

He reduced the tax rate on the wealthiest from 70% to 35%.

He went after the unions.

He appointed pro Wall Street figures

to the Securities and Exchange Commission and the National Labor Review Board.

Friedman might have been right about one thing: a crisis can make

people rethink the big policies that shape the world.

The Depression ushered in decades of progressive taxes and a larger

social safety net for Americans.

The recession of the 1970s

brought on decades of deregulation and low taxes on the rich.

How will our current crisis of wealth inequality and rising debt for the working

and middle class create policies that we actually want to see?

If your profits are

abusive, we're going to claw them back and we're going to give them back to people.

It's punishing people who produce things you don't like.

It's the woke-ism of the tax.

Tax reform must substantially increase the share of long term revenues

paid by big corporations.

I would like to see us cut taxes.

I think in particular corporation tax.

Now is the time to demand that the wealthiest people in this country

and the largest corporations stop paying their fair share of taxes.

Thanks for watching The Class Room.

This video was based in part on Rick Perlstein's Reaganland and Paul Krugman's

Conscience of a Liberal as well as his 2007 obituary on Milton Friedman.

Are there other American thinkers and ideologues who want to see us cover?

Who is the pundit from history you love to hate the most?

Comment below and as always, like share and subscribe for more videos like this.

This has been F.D Signifier. Thank you.

Peace.