Capitalism and Freedom : In Defence of Welfare and Equality

Friedman’s “Capitalism and Freedom” is packed with famous quotable phrases that seem to embody the free-market, monetarist figure that Friedman himself represented. The Right still preach Friedman’s soundbites as gospel, famously : “the scope of government must be limited”, and “underlying most arguments against the free market is a lack of belief in freedom itself.” However, considering the current definitive conflict between Right and Left, whilst recently rereading Friedman’s most celebrated book, one quote stood out for me especially.

“The twentieth century liberal regards welfare and equality as either prerequisites of or alternatives to freedom.”

(FRIEDMAN, M. (1962). Capitalism and freedom. [Chicago], University of Chicago Press. Page 5)

Broken down, this quote fascinated me.

Firstly, I believe it to be important to clarify Friedman’s differentiation between the twentieth century liberal, and his own interpretation of “true liberalism.” By “true liberalism” Friedman is referring to the origin of the term, which stemmed from the intellectual movement during the 18th and 19th centuries that aimed to present freedom as the ultimate objective for man (Latin, libertas means freedom), and the key component in forwarding economic development. However, Friedman argues that after the Great Depression, the term became corrupted, as liberalism’s focus transitioned from “freedom” to “equality and welfare”. Hence, Friedman criticises the “twentieth century liberal” as a commandeer of the true 19th century European enlightenment interpretation of the word “liberal.”

In the quote highlighted, Friedman is explicitly stating that the Left’s promotion of equality and welfare is useless, either as a requirement for, or as substitute to freedom. Hence, the maintenance of freedom is portrayed to be the greatest possible achievement of an economy, regardless for its implications for “welfare and equality”.

This ideology has vast implications. Firstly, in terms of welfare. If the importance of the preservation of freedom surpasses the necessity for a welfare system, then surely as long as the public body has the freedom to act on their capacities and opportunities, a welfare system is not necessary. In theory this may work ; the total freedom to act on one’s opportunities should be a liberating factor, and therefore improve per capita output such that each individual can support themselves and hence a welfare system is no longer necessary. However, in reality, regardless of how much freedom the public is granted, there will always be those who are unable to maximise opportunity, and subsequently will fall into a climate where they require welfare to survive. Hence, in life-sustaining terms, the provision of a broad welfare system will ensure that those who cannot make the most of their freedom will manage to survive, whereas the provision of freedom may maximise output for some, but ultimately the indiscriminate nature of the free market will punish those who are unable to make the most out of their freedom, ultimately resulting in life threatening circumstances if there is no welfare net.

Capiralism and Freedom

Similarly, Friedman criticises the twentieth century liberal for their interpretation of equality as an alternative to freedom. In nineteenth century liberalism, freedom is glorified as the ultimate entity within society, and therefore equality imposed by government means threatens this entity. However, to counter this assessment, one can analyse the impact of government imposed equality within a modern nation. According to a 2017 World Bank report, Norway is the third most equal country, with a Gini Coefficient of 25.9%. It’s fair to say that this equality is government imposed, as Norway is one of the most heavily taxed nations, with taxation revenues accounting for nearly 45% of GDP 2015. To the 19th century liberal, surely this enlargement of the state, restriction of the individual’s purchasing liberty, and ultimate curtailing of freedom would conjure images of a hellish grey communist state. However, in 2017 Norway was crowned the “happiest country on Earth” by the UN’s World Happiness Report, saying to have scored highly in  “the main factors found to contribute to happiness: caring, freedom, generosity, honesty, health, income and good governance.” Therefore, even if the Norwegian political structure does not allow for the same economic freedom of Friedman’s Reaganonomics, is this truly a burden for the society? Ultimately, a competent enlarged state ensures a more equal distribution of wealth, hence subsequent high levels welfare and equality lead to increased levels of “gross happiness”, even if this comes at the cost of reduced economic freedom.

Hence, Friedman’s literature would suggest we are faced with an ultimatum: freedom, or equality and welfare. At the time of “Capitalism and Freedom”’s publishing in 1960, the Cold-War political climate (fear of communism driven by McCarthyite “Redscare”) would have meant that it would be imperative for an American economist to choose freedom over any other ideal. However, today I would argue that due to economic developments and globalisation, we are no longer faced with that ultimatum. The two polars of the political spectrum are no longer independent, ie. The Right’s image of “freedom” can exist alongside the Left’s vision of “welfare and equality.” Norway should act as the case study for this phenomenon. In terms of equality and welfare, Norway is one of the most progressive nations in the world (25.9 Gini index), whilst in terms of economic freedom, Norway is recognised as the 25th most free country in the world (2017 index of economic freedom) with a score of 74, compared to the apparent exemplification of freedom that is the United States, scoring 75.1. Hence, Friedman’s criticism is correct. We should not view welfare and equality as alternatives to or requirements for freedom. However as discussed, this does not mean we should view freedom as the ultimate entity, in turn disregarding welfare and equality. Instead, we should view all three factors as principles to pursue, that when imposed to the correct degrees and circumstances, can be mutually complimentary for progressive policy making.

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