Times Change

I’m out here in Chicago to participate in the making of a kind of followup to Milton Friedman’s 1980 TV series Free To Choose where they’re going to intersperse clips of the old show with various panels talking about the issues today. What we didn’t really talk about on our panel, but which I thought was interesting looking back at the old material, was just how much the world has changed since 1980.

In 1980, the majority of the world was governed by Communist regimes or by the kind of semi-socialism that characterized the “license raj” in India. In the developed world, important economic sectors like air transportation were beset with government price controls. Under the circumstances, a basic primer on the virtue of free markets was, in a crude sort of way, exactly what the world needed to hear. And it’s great that they don’t have Communism in Poland anymore. It’s great that China and India are seeing all this economic growth. The world as a whole is clearly much better off than it was 30 years ago.

But none of that really tells us very much about whether or not the United States of America tilted too far in the free market direction. Today it’s still the case that Communism is very bad (just look at North Korea), but the existence of Communism is not a macro-scale global problem. By contrast, uncontrolled greenhouse gas pollution is a very severe global problem in part because the world as a whole is much less poor than it used to be. Financial liberalization has been badly mishandled. Median wage growth looks to have decoupled from productivity growth. Workers in rich countries are being buffeted by a lot of shocks related to growth in the third world. It’s possible to maintain that lectures on the virtues of free markets still point to the correct solutions to these problems. But even if you want to make that case, you need to acknowledge that the problems facing the world are substantially different from the ones of thirty years ago. In retrospect, a lot of what’s happened in the developed world since 1980 seems to have been based on the logic that since the mixed economy with regulated markets and a welfare state has outperformed command and control socialism, then clearly a pure to free market purism will produce even better results. But what if the success of the mixed economy with regulated markets and a welfare state proves that we should endorse . . . a mixed economy with regulated markets and a welfare state? Just because one slice of pizza is delicious doesn’t mean you should eat the whole pie.