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Tuesday, August 19, 2008

Capitalism and Freedom Part VI

The ShadowLands' correspondent on capitalism and freedom, John Butler from the John Butler Trio continues his popular, though controversial, series on capitalism and freedom.

I have had some great feedback from readers about this series on capitalism and freedom - and some have picked up on a very strong hint of Milton Friedman in some of my views - and lets face it, many of the actual sentences. Well sure, I'm not embarrassed to say I am a fan of Friedman - and here's an example of why:

August 20 1991 will be remembered as the day when Estonians achieved independence from the Soviet Union. Soon after independence, Estonian Prime Minister, Mart Laar inherited leadership of a country with 1,000 percent inflation, 30 percent unemployment, and disastrously inefficient government-owned businesses. Laar's government removed price controls, cut regulations and welfare programs, sold state-owned businesses, introduced a new currency, and instituted a flat-rate income tax.

Inflation in Estonia has fallen below 3 percent, unemployment has plunged below 6 percent. Estonia has enjoyed the greatest growth in real per-capita income of any of the former Soviet states. Today the country is a member of NATO, the European Union, and the World Trade Organisation and rated 12th in the world for economic freedom.

On taking the Prime Ministership, the first book that Laar read was Milton Friedman's Free to Choose. Says Laar: "The first time I heard the name Milton Friedman, it was in propaganda newsletters that said there is one very bad and very dangerous economist, and his name is Milton Friedman. I was quite sure, when he is so dangerous for the Communists to be telling me this, he must be a good man."
Happy Estonian Independence Day to all readers of the ShadowLands.


daddy dave said...

I did not know that about Estonia. Let's hope they don't go the way of Georgia.

bruce said...

I had some Estonian friends in the early 70's. Refugees I guess. They taught me how to swear a bit in Est: 'asiffagaaan!' if I recall.

Also one olive-skinned doe-eyed Estonian girl asked for my precious bongo drums and 'Tubular Bells' LP - how could I refuse.

Sorry, I seem to be very sentimental these days.

I agree, free markets can't be beat. Even so-called 'market failures' may not be when properly understood - eg. 'The Environment' is not actually harmed by free markets while it is by their absence.

daddy dave said...

well, there are some free market things that need to be accounted for.
Depressions, recessions, etc... we tend to wave them away dismissively, but they're persuasive counterpoints.

The same goes for massive market failures such as the recent financial collapse; unethical - and unaccountable - behaviour by large corporations; manipulation of the law and the political process to further their aims (see recent piece by Paul Sheehan in the Sydney Morning Herald)...

There are valid criticisms of markets, and these need to be taken seriously.

I say this as a market believer, by the way. this is not a troll-post, it's a reality check. we need to be careful not to oversell markets.

bruce said...

Agreed those things you list are often called market failures DD, and it is an ongoing complex debate which we should look at carefully from all angles.

But actually we don't 'wave them away' - There is substantial agreement now that the Great Depression was caused by govt monetary policy and clumsy intervention. Also large corporations and their corruption go along with heavily managerial and unionised high-regulated economies. Milton Friedman was originally a Keynesian till he saw its errors.

Here's how I personally see it as an interested amateur-

Now, natural analogies are supposed to be bad in Econ theory, but I disagree because I think economies DO express 'our inner nature'. So-

See the Business Cycle as like ocean waves. Keynesians think we should line the shore with enclosed pools to eliminate the possibility of getting occasionally dumped. But I say instead we should become expert surfers and ride the wild waves to their peak - that is the height of creativity and productivity, of human entrepreneurial skill, and the payoff is discovering novel ways to do more with less (the classical meaning of 'economy') which, by saving resources, saves 'The' environment, humans and everyone together, win-win.

Anyway that's my unorthodox 2 cents worth, happy to be corrected.