4 vs 1 | Milton Friedman faces FOUR British Leftists in HEATED Debate (1980)

Summary

In this debate, Professor Freedman faces criticism for his free-market stance, with opponents arguing that government intervention has been crucial for economic success, citing Japan, Germany, and Sweden as examples. Freedman counters by advocating for the freedom of individuals to trade, not businesses, and uses Hong Kong as a case for free trade's benefits. The discussion highlights the historical context of economic policies, with critics asserting that protectionist measures have been essential for industrial development, while Freedman argues that free trade ultimately raises the standard of living for all.

Takeaways

• 🏆 The speaker initially held high expectations for Professor Freedman due to his reputation, but was disappointed with the level of economics discussed.
• 🤔 The speaker accuses Professor Freedman of advocating a 'religion' of free markets, with 'the Hidden Hand' as a divine presence, and criticizes the lack of substantial evidence in his arguments.
• 🗣️ There is a debate on the effectiveness of government intervention, with examples of Japan, Germany, France, and Sweden being used to argue that strong government policies have led to success.
• 🌏 The speaker challenges the premise that government intervention is inherently bad, citing improvements in the British standard of living as a result of such actions.
• 📉 The discussion highlights the economic miracles of the Industrial Revolution in the U.S., Germany, and Japan, which occurred under protectionist policies, contradicting the idea that free trade is always beneficial.
• 🔄 The speaker argues against the notion that exports are inherently good and imports are bad, emphasizing the balance and benefits of both for a country's economy.
• 🏭 The development of industries in Japan is discussed, with a focus on how they were founded and supported by the government, contradicting the idea of free enterprise without intervention.
• 📉 The speaker points out that countries like Japan and Germany have been successful with protectionist policies and government intervention, challenging the one-size-fits-all approach of free trade advocates.
• 🌾 The example of U.S. agriculture, which has been successful without protection, is used to argue that protectionism is not always necessary for economic success.
• 💡 The debate touches on the historical context of economic theories, suggesting that the principles of Adam Smith may not fully apply to the complexities of modern economies.

Q & A

What is the main disagreement between the speakers regarding economic policies?

The main disagreement is whether free trade and minimal government intervention are beneficial or if government intervention and protectionist policies are necessary for economic success.

What examples do the speakers provide to support their views on government intervention in the economy?

The speakers mention Japan, Germany, France, and Sweden as examples where government policies have been successful. They also discuss the historical development of industries in these countries and the role of government in fostering growth.

How does the speaker challenge Professor Freedman's views on free trade?

The speaker challenges Professor Freedman by pointing out that successful economies like Japan, Germany, and the United States have often been protected economies or have had significant government intervention, contradicting the idea that free trade alone leads to success.

What historical economic period does the speaker claim was not solely based on free trade?

The speaker claims that the Industrial Revolution in the United States at the end of the 19th century and early 20th century, as well as similar developments in Germany and Japan, took place behind high protectionist walls, not solely based on free trade.

What is the 'Hidden Hand' mentioned in the script, and how does it relate to the discussion?

The 'Hidden Hand' is a term used to describe the self-regulating nature of free markets, an idea often attributed to Adam Smith. It relates to the discussion as the speaker accuses Professor Freedman of advocating a religion-like belief in the infallibility of free markets.

What is the speaker's argument against the effectiveness of government intervention in Japan's economic history?

The speaker argues that Japan's economic success was not due to free trade but rather due to strong government intervention and protectionist policies, especially in the 20th century, which contradicts Professor Freedman's assertion.

How does the speaker critique the idea that government intervention is always detrimental?

The speaker critiques this idea by providing examples of countries where government intervention has led to economic success and by arguing that it is not a blanket truth that government intervention is bad, but rather it depends on the specific circumstances and implementation.

What is the speaker's view on the role of government in the economy?

The speaker believes that while there is a role for government in the economy, it should not extend to import controls, tariffs, or central planning. They emphasize the importance of considering the well-being of ordinary people and the potential benefits of government intervention in certain areas.

What historical examples are given to support the argument that government intervention can improve living standards?

The speaker cites the improvement in living standards during the 19th century in the United States and Britain, attributing it to a combination of capitalist enterprise and government interventions such as public health legislation and labor laws.

How does the speaker respond to the claim that free trade is always beneficial?

The speaker counters this claim by arguing that free trade can lead to the destruction of industries that are not competitive and that government intervention can sometimes be necessary to protect and develop industries that have long-term benefits for the economy.

Outlines

00:00

🤔 Debate on Government Intervention vs. Free Market

The first paragraph presents a debate between two economists, one critical of the other's free-market stance, arguing that successful countries like Japan and Germany have strong government policies. The critic accuses the free-market advocate of promoting a religion-like belief without substantial evidence, citing historical examples where government intervention improved living standards. The advocate counters by emphasizing the freedom of individuals to trade, not businesses, and argues that free trade benefits both consumers and producers by providing access to cheaper goods and raw materials, thus raising the standard of living.

05:03

🌏 Discussion on Trade Policies and Comparative Advantage

In the second paragraph, the debate continues with the critic arguing that protectionist policies have been effective in developing modern industries, contrary to the free-trade advocate's claims. The advocate insists that free trade is beneficial, citing examples like Hong Kong and the historical development of the textile industry in Britain and Japan. The critic contends that the advocate overlooks the indirect effects of trade restrictions, such as job losses in more productive sectors, and criticizes the advocate's reliance on unsupported assertions rather than logical arguments.

10:04

📚 Historical Analysis of Economic Theories and Practices

The third paragraph delves into a historical analysis of economic theories, with the critic challenging the advocate's views by pointing out that Adam Smith's principles, formulated during the Industrial Revolution, may not be fully applicable to modern complex economies. The critic argues for a nuanced approach to economic management, suggesting that extreme laissez-faire policies have led to disasters, such as in totalitarian regimes. The advocate defends capitalism's historical benefits but acknowledges the importance of government's role in areas like public health, suggesting that improvements in living standards were partly due to government interventions and social struggles.

15:05

🏭 Reflections on the Impact of Capitalism and Government Policies

The fourth and final paragraph wraps up the discussion by reflecting on the impact of capitalism and government policies on the well-being of ordinary people. The critic argues that public health and labor improvements were often the result of government intervention and social movements, not just free enterprise. The advocate agrees that capitalism has improved living standards but emphasizes the importance of considering the broader context, including the role of government and social changes, in understanding economic progress.

Keywords

💡Free Trade

Free trade refers to the economic principle that involves the absence of tariffs, quotas, and other trade barriers, allowing goods and services to be freely exchanged across borders. In the video, the concept is a central theme with Professor Freedman advocating for it, arguing that it benefits both consumers and producers by allowing them to buy and sell goods at the most advantageous prices globally. The discussion contrasts free trade with protectionist policies, suggesting that countries like Japan and Germany have been successful despite, or because of, protectionist measures.

💡Protectionism

Protectionism is the practice of restricting international trade to safeguard a nation's industries from foreign competition by means of tariffs, import quotas, and other trade barriers. The video script uses protectionism as a counterpoint to free trade, with arguments suggesting that countries like Japan and Germany have developed strong industries through protectionist policies. The discussion implies that protectionism can be a viable strategy for economic development and national interest.

💡Government Intervention

Government intervention in the economy refers to the actions taken by the state to influence economic activities and outcomes, such as through regulation, subsidies, or nationalization. The script debates the merits of government intervention, with one side arguing that it can correct market failures and improve living standards, while the other contends that it can lead to inefficiencies and stifle economic growth. Examples from the script include the development of industries in Japan and the role of the state in the British economy.

💡Comparative Advantage

Comparative advantage is an economic concept that suggests that countries should specialize in producing goods and services in which they have a lower opportunity cost than their trading partners, even if they are not the absolute best at producing them. The script touches on this concept when discussing trade policies, suggesting that countries should focus on industries where they have a comparative advantage to improve overall welfare.

💡Industrial Revolution

The Industrial Revolution refers to the period during the 18th and 19th centuries when agrarian societies in Europe and America became industrial and urban. The video script mentions the Industrial Revolution as a time when capitalism and free enterprise led to significant improvements in the standard of living for the masses, despite the visible poverty and hardships that characterized the period.

💡Economic Miracles

Economic miracles are periods of rapid and sustained economic growth that defy expectations. The script refers to the economic transformations in the United States, Germany, and Japan as 'economic miracles,' suggesting that these were achieved not solely through free trade but also through protectionist policies and government intervention, challenging the notion that free trade is the only path to economic success.

💡Invisible Hand

The invisible hand is a term coined by Adam Smith to describe the unintended social benefits of individual actions in a free market. In the video, the concept is used to argue for free trade and minimal government intervention, suggesting that individuals pursuing their self-interest can lead to economic prosperity. However, the discussion also questions the effectiveness of the invisible hand in modern economies, where government intervention is seen as necessary to address market failures.

💡Tariffs

Tariffs are taxes imposed on imported goods and services, often to protect domestic industries from foreign competition. The script debates the role of tariffs in economic policy, with arguments for and against their use. Proponents suggest they can protect and nurture domestic industries, while opponents argue they can lead to inefficiencies and higher consumer prices.

💡Imports and Exports

Imports and exports are the goods and services that a country brings in from abroad (imports) and sends out to other countries (exports). The video script discusses the balance of imports and exports as a critical aspect of trade policy, with debates on whether countries should focus on exporting to gain foreign currency and importing to access goods and services at the best prices.

💡Structural Deficit/Surplus

A structural deficit or surplus refers to a persistent imbalance in a country's balance of payments due to underlying economic factors. The script mentions the concept in the context of Britain's economic challenges, suggesting that government policies should address these structural issues rather than relying solely on free market mechanisms.

Highlights

Professor Freedman's economic theories are critiqued as being akin to a religion, with a 'divine presence' and 'wicked principle'.

Japan, Germany, France, and Sweden are cited as examples of successful countries with strong government policies.

The necessity of government intervention is argued, with the British people's improved living conditions as evidence.

Free trade is advocated as beneficial for both consumers and producers, with historical examples provided.

The Industrial Revolution in the United States, Germany, and Japan is attributed to high protectionist walls, not free trade.

The role of government in founding and supporting major Japanese companies is highlighted.

The argument that free trade always leads to growth and employment is challenged with counterexamples.

The importance of considering indirect effects of import restrictions on exports and jobs is emphasized.

The claim that countries like Japan and Germany would have been better off without protectionist policies is disputed.

The historical context of Adam Smith's theories is discussed, with a critique of their applicability to modern economies.

The improvement in living standards during the 19th century is acknowledged, but the role of government intervention is also recognized.

The visibility of poverty during the Industrial Revolution is contrasted with conditions before and after.

The role of trade unions and government legislation in improving working conditions is highlighted.

The debate concludes with a discussion on the role of government in managing the economy and the misconceptions about capitalism.

Transcripts

say this professor Freedman I really

thought when when originally before I

ever met you and heard your arguments

that because you're no Nobel Prize

winner you really were something special

I have to say you haven't even reached a

level economics in this country I have

to be quite blunt about well that says

something very bad about a-level

economics in this

country I find it very difficult really

to argue with Professor fredman because

he's advocating essentially a religion

and like all religions he has a sort of

divine presence in this case The Hidden

Hand and so forth and he has the wicked

principle and the wicked principle being

governments and by S balancing one off

against the other he can really turn the

argument anyway he likes Japan is a very

successful country uh Germany's a very

successful country another country where

the government has had very strong

policies or modern France is another

case or Sweden all of them are ones

where the government has succeeded

visibly and it's not enough for you to

say the government in a few places has

made major mistakes therefore the

government is terrible because I can

provide all these other examples where

governments have been very effective I

think we're all being too polite because

I see why Professor Freedom has become a

world figure he doesn't allow anyone

else to get a word in edgeways he plows

on he plows on with unsupported

assertions which had really got a very

tenuous connection just here and there

you can just see the tentac Ping down to

a bit of fact where are the support

would you give me a supported assertion

sir there must be government

intervention and the condition of the

British people has fundamentally changed

despite all our problems our people live

at a totally different level now now and

that could have only been done because

of government intervention so I don't

accept your premise at all I think it's

a totally false premise I put it to you

that the three I suppose greatest

economic miracles of the last 100 years

in uh the Industrial Revolution in the

United States at the end of the 19th

century early 20th century same thing in

Germany at the same time and in Japan

since 1948 took place behind very high

protectionist walls so what evidence do

you have that freedom of imports

contributes to growth and employment

freedan your argument is that free trade

is always good let me start by saying

that I am not in favor of the freedom of

business to export and import but of the

freedom of people to buy goods and sell

wherever it is cheapest and to sell

their products wherever they can get the

highest price business has no interest

business is an intermediary between

people in their capacity as workers and

producers as investors and in their

capacity as consumers so the freedom I

am interested in is a freedom of

individual people people now if we look

at the history of various episodes as

you have done you've left out some very

important ones you left out the

experience of Japan from 1867 to 1897

which was discussed in the film a period

immediately after the ma restoration

when they had complete free trade they

were prohibited by law by an agreement

with Britain from having a tariff of

more than 5% they had great many Imports

Imports of textiles that destroyed in

large measure their hand Loom weaving

industry

but the result of a free market was that

people were better off both as producers

and as consumers they are better off as

producers because you cannot export

without importing to say that you should

export and not import is a prescription

for denuding a country of its wealth for

transferring it to other people exports

are the cost that you incur in order to

get Imports if you get Imports if you

get cheap Imports that benefits people

as consumers but it also benefits them

as producers by providing them with raw

materials to work with to exercise their

skills on to use their capital on the

consequence is a higher level of living

for everybody in the country you also

left out I might say Hong Kong which has

had complete free trade has had a

tremendous rise in the standard of Life

of its people here's an a Barren Rock in

which the population is Multiplied

tenfold since the end of the war and per

capita real income allowing for price

changes has gone up about fourfold so

there are many examples I believe of the

great virtue of free trade for both

people in their capacity both as

consumers and as workers you use an

extraordinary line of argument because

what you say is you say well people have

made mistakes in the past governments

have made mistakes therefore government

intervention is wrong and the point is

that you can you can get all kinds of

examples as for example in Germany

Brazil today Japan where in fact

governments have been very effective at

fostering the development of modern

Industries now if they were as

incompetent as us as as you say this

would never have happened in fact if you

look at the Japanese economy to go back

to it there many big efficient companies

almost all of those companies were were

were founded by the government they were

provided money by the government they

provided special privileges and they've

had those privileges to this day the

formula of both of these gentlemen is a

formula for the

impoverishment of Britain and

particularly for an attack on the

consumer this is the most anti-consumer

measure you can take is a measure me to

limit Imports and protect uh inefficient

Industries I don't know where that maybe

the textile industry should have been

destroyed maybe it's not an area in

which you have a comparative advantage

if it should there would be some other

industry that would develop in which you

would have a comparative advantage

abroad look at the situation in the

United States where I know better what's

our major export industry it's

agriculture not because of Any

protection it has never been protected

very much if you look at the history of

Britain when Britain developed the

textile industry in the 19th century

there were no tariff walls here was

Japan had no tariff walls at that time

at all and yet it was able to develop an

effective textile industry destroy the

textile industry of India of course

that's we had all our

many manufacturing so destroy just as

you say the Japanese IND but again are

you going to tell me that no industry

every vested interest must be protected

that you must have no

change in the American steel industry

there is no no doubt that the protection

from Imports has had the effect of

causing them to be slow and introducing

new techniques has had the effect of uh

make having essentially agreements with

labor which is meant

overstaffing there is no doubt in my

mind that if in the United States we

threw the steel industry open to The

Winds of competition you would end up

with a somewhat smaller steel industry

but a much more efficient one you see

Professor Freedman your argument is that

free trade is always good now it's quite

clear there are some countries in the

world that have done very well on the

basis of free trade that's undeniable

but your film for example resting

entirely on the uh example of Japan and

in actual fact the Japanese economy for

the last 100 years has been either a

very highly protected economy or else it

has had an extremely large degree of

government intervention in Industry that

is not correct it was true in the 19th

century there was there no there was

free trade in the 19th century which by

the way was not chosen by the Japanese

leaders as you as you say it was forced

upon them at gunpoint by the United

States in 1854 followed by Britain and

France they did not choose it they

resented free trade very bitterly

Japanese leaders they fought a long

agitational battle against it and when

they were Strong Enough by the end of

the 19th century they went over to

protection and through the whole of the

20th century Japanese industry has been

highly protected and the modern

industries of Japan we know today

Electronics uh engineering for example

all developed on the basis of very

strong government intervention and very

strong protection and yet in your film

you get no other serious example other

than Japan and as far as I can see that

is an extraordinary incompetent

performance in the sense that you do not

discuss in any way how uh Japanese

industry developed you just imply

throughout the film that it was based

upon completely free trade and Free

Enterprise in the 19th century in the 30

years after the ma restoration there

were some government in was some

government involvement primarily in

sending people abroad to be trained

primarily also in the steel industry

uh and the uh Navy ship building for

military purposes that was costly to

Japan and did not benefit Japan you have

the other examples we gave in the

earlier film the example of Hong Kong we

have given the example of Britain in the

19th century but in any event let me go

back to your point you know I find this

a very amusing situation in one respect

25 years or so ago when I was in Britain

I was arguing with the people at Oxford

at that time mostly and they were

arguing that there was a structural

dollar shortage that the United States

was a strong country that everybody else

had to protect themselves against now we

have the argument coming from Cambridge

I guess it shifts from Oxford to

Cambridge exactly the opposite that

there's a structural uh dollar Surplus

or that uh Britain has a structural

pound uh Sur shortage that Japan is

somehow structurally uh uh to be feared

but let's look at the situation of Japan

just in the the past few years Japan has

shifted from a large balance of payment

Surplus on current account to a large

balance of payment deficit on current

account because of the changes in

exchange rates and the effect which that

had the real fallacy in all of your

arguments is not to take account of the

indirect

effects if you restrict Imports here you

restrict exports there if you save jobs

here you lose jobs there and you save

jobs that are less productive

you lose jobs that are more productive

Professor Freedman Are you seriously

arguing that countries like Japan and

Germany for example Japan in the 20th

century when it protected its major uh

Industries to build up a modern

industrial base or or Germany in the

19th century or may I say the United

States in the 19th century or Brazil in

uh the last 20 years are you saying that

these policies were completely useless

because the of course that's what I'm

saying I'm saying that those countries

would have been far better off yes but

they had provided let me go back to the

American wait but you provide the

interesting thing about this is you

provide no evidence of this whatsoever

other than assertion and in your film

for example you relied on example you

didn't rely upon argument you relied

upon example you kept on referring to

Japan and what I'm saying is that Japan

is a bad example and in fact you can

point to many other countries that have

developed on the basis very successful

on the basis of very strong government

intervention into industry and very

strong import controls and the point is

that since those countries succeeded it

seems to me that what you're doing is

asserting as in fact Lord Kon said a

religious view you're saying things

would have been much better if they

hadn't done it on the basis of no

evidence there no major country excuse

me the logic logical argument was fully

developed by Adam Smith and The Wealth

of Nations 200 years ago Smith the was

relating to a situation when we had an

industrial revolution he was really

relating to a position when we had

Village black Smiths about the largest

Enterprise and so forth and this idea

that each chap following his own private

interest essentially of single Artisans

working with themselves is applicable to

the modern world is just not so his

basic principles are applicable and you

know the funny thing about this kind of

an interchange is that what you want to

do is to go back to the period before

Adam Smith when you had a meral societ

adducing to us extreme views the fact

that I am not 100% free Trader under all

conditions doesn't mean to say I'm

absolutely all for import control in in

a massive sense what I'm saying is in a

very complex situation which different

countries find themselves at different

times you've got to have some overall

management of the economy and the idea

you can you can leave it to the

so-called invisible hand just seem to be

a bit of the high nonsense well all that

I can say is that wherever you've had

overall management of the economy in the

extreme case it's been a disaster the

most extreme cases of course are cases

that fortunately we're not faced with

here are the totalitarian countries

countries like uh uh Russia China Etc

nobody would say that that kind of over

a oil management has been successful if

we take the case of Britain let's take

the case of Britain you've had overall

management for the past 20 or 30 years

Britain is not exactly in a state of of

prosperity listening to the arguments

and listening particularly to your

arguments about the position of Britain

in the last century and so on one would

get the impression that the mass of

ordinary people did very well in that

Society they didn't a few people at the

top did very well the mass of Ordinary

People many of them lived in abject

poverty had to struggle in order to find

a job they had no sort of support in any

way and it was only when the state began

to intervene did the Ordinary People of

this country begin to live decently and

even before the second world war we can

take you to areas of Britain where there

was misery mass m misery under the free

enterprise system to such an extent that

one of our Tory Prime Ministers Harold

McMillan actually wrote a book called

the middle way in which he looked at

where he represented and said we have to

have government intervention in order to

help us out of that sort of thing which

was never happen again in the first

place your description of the 19th

century is wrong there has in the past

several decades been a reconsideration

by economic historians of the experience

of the 19th century and what that has

shown is that what happened during the

Industrial Revolution was to take people

out of agricultural areas where poverty

is invisible and bring him into

industrial and urban areas where poverty

exists and is visible there is no doubt

that there was a great deal of poverty

and difficulty and misery the question

is whether conditions were improving or

not during the whole of the 19th century

both in the United States and in Great

Britain there was a very great

Improvement in the lot of the ordinary

person and not merely those people at

the top as evidenced by everything that

was happening to population uh to health

standards and the like the thing is that

what happens during a period like that

is that poverty the the exceptions the

areas which have been held back the bad

things that happen because of course

always things are mixed there some bad

and good become much more visible A

Dickens could not have written his

novels 100 years earlier because what he

would have been describing would not

have seemed exceptional but in the 19

century he could write his novels if we

take the America during the 19th century

uh the evidence for the Improvement in

the lot of the people is the way they

voted with their feet we had millions of

people my own parents who came from uh

Europe from and flooded into the United

States they didn't flood into the United

States to be exploited they flooded into

the United States because they lot their

lot and a lot of people like them was

being improved a great deal interrup PMS

as well which you have had some point

Professor Freedman is not you see

whether capitalism has not brought

benefits to the world there's no doubt

whatsoever that has done there's no

doubt whatsoever that in the 19th

century the position of the mass of the

people improved as a result of

capitalist Enterprise I think there's no

doubt about that the point about it is

whether their condition also improved

for example because of things like trade

unions or government intervention the

point is that many of the things you

point to like public health improvements

were not just because the standard of

living was high due to capitalism it's

the fact is there was public legislation

on it for example many of the

improvements that took place in the 19th

century in Britain followed things like

legisl over Maximum working day over

things like working conditions and so on

and you can't say those are all the

result of free enterprise because in

fact they were they were struggles to

force the government to intervene

against free enterprise look in the

first place let's be clear about one

thing I am not an anarchist I believe

there is a very important role for

government to play the question that

we're talking about here is whether that

role includes import controls tariffs

Central planning decisions about which

activity uh uh which area industry

should move again I want to

emphasize that the the interest I have

is in the well-being of the ordinary

person and I think there's a great

misconception about free enterprising

about capitalism there's a misconception

which regards it as oblivious to the

problems of the disadvantage if we go to

the 19th century again it was the

greatest period of alinary activity in

the history of the world