Stuck in a 40-year Time Warp…Stop Looking to Milton Friedman

The next time you shop at Wal-Mart, here is something to ponder. Nobel Memorial Prize winner Milton Friedman published Capitalism and Freedom in 1962, written against the backdrop of unrivaled American industrial dominance as Western Europe and Japan rebuilt under the benevolence of the Marshall Plan.

During this period, the American policy of absorbing the world’s exports while turning our back on our own industries was perfected under Friedman’s guidance. Friedman points out that “inconvertibility of currencies” is of authoritarian origin, “most probably invented by the Nazi regime.” The core financial policy practiced with religious zeal by Communist China today was invented by the Nazis.

Yet freedom-loving, free-trade-proselytizing Americans continue to turn a blind eye to Communist China’s corrupt exchange rate manipulation that has cost millions of Americans their jobs. Over 70% of the merchandise sold by Wal-Mart was made or partially made in China. We have truly come full circle.

Friedman believes that we should not require reciprocal trade concessions but instead grant free access to our market without any benefits to foreign markets for our manufacturers. That’s right: Unfettered, unrestrained one-way trade is our ticket to paradise. He justifies this by simply stating, “He moves fastest who moves alone.”

He cites Britain in the nineteenth century, at the height of its empire, as an inspirational model for America to follow. Britain embraced unilateral free trade and opened its markets to the world without any reciprocal consideration for its industries. It is fitting to remember that within seventy years of this charitable gesture, Britain was broke and beaten. According to this time line, we have less than twenty years before we meet a similar fate. Friedman goes on. “We should say to the rest of the world: We believe in freedom and intend to practice it. No one can force you to be free. That is your business. … Our market is open to you. Sell here what you can. Use the proceeds to buy what you wish.”

Our Friedmanist trade policies over the past forty years have not won us many friends around the world that I can detect. It is clear, however, that they have eroded American incomes and weakened our nation. Years of deficits, resulting in the massive accumulation of American debt by the Japanese, Chinese and other trade partners, was not supposed to happen. But it did. It is no coincidence that the point at which American real incomes began their decline was at the same time America lost its global competitiveness and our trade deficit began to grow.

Instead of making the necessary adjustments to deal with the world as it is instead of how they wish it to be, the Friedmanists continue even today to reinterpret the results to make them fit into their bankrupting global trade view.We have become a nation frightened to act for fear of having our economy held hostage by China and Japan, which hold large amounts of American debt that has financed our exploding deficits. The fear of being blackmailed over the “paper money export industry prank” that Friedman mused about is a cruel twist of fate. To those continuing to preach the worn-out sermons of large deficits, paper money pranks and unequal access for our exporters, I say the world has long passed you by;  if we continue to heed your advice, we are heading for disaster.

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