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  • Milton Friedman: “Only a crisis — actual or perceived — produces real change.”

    Posted by Lexington Green on September 29th, 2014 (All posts by )

    Milton Friedman

    There is enormous inertia—a tyranny of the status quo—in private and especially governmental arrangements. Only a crisis — actual or perceived — produces real change. When that crisis occurs, the actions that are taken depend on the ideas that are lying around. That, I believe, is our basic function: to develop alternatives to existing policies, to keep them alive and available until the politically impossible becomes politically inevitable.

    Milton Friedman, Capitalism and Freedom, Preface to the 1982 edition.

    This could easily have been the quote at the front of America 3.0.

    A crisis, or series of crises, are likely to be coming in the years ahead as the economy and government based on industrial era (America 2.0) models fails more and more completely and obviously. The inertia, the tyranny of the status quo, embedded in our existing institutions is going to resist meaningful reform. It will not be an inert resistance, either, it will be attacks on agents of change. To use Clausewitz’s phrase, the defense of the status quo will be “a shield of blows.” Some people will be hurt by the blows.

    But it won’t work. It cannot work.

    Our task in the book was and is precisely to offer alternatives to existing policies, and explain why our proposed alternatives suit America’s inherited underlying culture, and the technology which will shape our future. Many of the things we suggest in the book have been dismissed as “impossible” even by friendly critics. But as Milton Friedman correctly noted, the politically impossible can become the politically inevitable, if it is an idea whose time has come.

     

    10 Responses to “Milton Friedman: “Only a crisis — actual or perceived — produces real change.””

    1. MikeK Says:

      The 1929 crisis produced “real change”that we are still suffering under. I can only hope the next one produces better ideas.

    2. Michael Hiteshew Says:

      The New Deal was – by today’s standards – a limited response to the problems of the early 20th Century. And many of the projects designed to help the unemployed, the WPA and CCC for example, required the recipient to work, sometimes in hard, demanding jobs like road construction. There’s an idea long out of vogue.

      From Wiki:

      The WPA built traditional infrastructure of the New Deal such as roads, bridges, schools, courthouses, hospitals, sidewalks, waterworks, and post-offices, but also constructed museums, swimming pools, parks, community centers, playgrounds, coliseums, markets, fairgrounds, tennis courts, zoos, botanical gardens, auditoriums, waterfronts, city halls, gyms, and university unions. Most of these are still in use today. The amount of infrastructure projects of the WPA included 40,000 new and 85,000 improved buildings. These new buildings included 5,900 new schools; 9,300 new auditoriums, gyms, and recreational buildings; 1,000 new libraries; 7,000 new dormitories; and 900 new armories. In addition, infrastructure projects included 2,302 stadiums, grandstands, and bleachers; 52 fairgrounds and rodeo grounds; 1,686 parks covering 75,152 acres; 3,085 playgrounds; 3,026 athletic fields; 805 swimming pools; 1,817 handball courts; 10,070 tennis courts; 2,261 horseshoe pits; 1,101 ice-skating areas; 138 outdoor theatres; 254 golf courses; and 65 ski jumps. Total expenditures on WPA projects through June 1941, totaled approximately $11.4 billion. Over $4 billion was spent on highway, road, and street projects; more than $1 billion on public buildings, including the iconic Dock Street Theater in Charleston, the Griffith Observatory in Los Angeles, and the Timberline Lodge on Oregon’s Mt. Hood.
      More than $1 billion was spent on publicly owned or operated utilities; and another $1 billion on welfare projects, including sewing projects for women, the distribution of surplus commodities, and school lunch projects. One construction project was the Merritt Parkway in Connecticut, the bridges of which were each designed as architecturally unique. In its eight-year run, the WPA built 325 firehouses and renovated 2,384 of them across the United States. The 20,000 miles of water mains, installed by their hand as well, contributed to increased fire protection across the country.

      I guess they were shovel ready.

    3. Lexington Green Says:

      The Depression hit bottom under Hoover and the economy began to recover under FDR.

      Millions of people who got jobs and had grocery money were grateful for the real change that happened.

      Conrad Black explains this.

    4. MikeK Says:

      “the economy began to recover under FDR.”

      It wasn’t the economy, itself, that recovered. Conrad Black is one of my favorites but he goes overboard on FDR. Amity Schlaes is far better on the economics. What Roosevelt did that worked was 1) the SEC and the FDIC which worked until the 80s when Democrats lost all fiscal discipline. Nicole Gelinas explains what happened. The WPA and CCC were excellent ways to absorb the unemployed and get useful work accomplished. The feminist revolution, with its man-hating, was still half a century away. The CCC was largely run by Army officers.

      2) Social Security was a good idea although it did not anticipate the advances in life expectancy. Bismarck chose 65 as retirement age because that was life expectancy in 1880 Germany. Secondly, Congress stole the SS Trust Fund so there is no money to pay the benefits.

      The war is what saved FDR’s legacy as the Army absorbed all the unemployed and trained them in some useful skills. After the war, the rest of the world was prostrate so the economy had no competition until the 1970s.

      I still wonder if Coolidge had been in office (As many seem to think he was ) in 1929, would we have recovered without the Depression. The 1920 depression was ended in 18 months after Harding took office. Coolidge was probably too depressed after the death of his son to function but it is one of those questions like, what if George III had listened to Grenville or especially Pitt the Elder in the 1760s.

    5. Grurray Says:

      “The 1929 crisis produced “real change”that we are still suffering under”

      We paid for his cockamamie gold price fixing scheme for years. Keeping the price of gold fixed took international collusion and manipulation at unprecedented cost until the system eventually collapsed anyway into the stagflation 1970s.

      In 1933, Roosevelt became President and appointed Morgenthau governor of the Federal Farm Board. Morgenthau was nonetheless involved in monetary decisions. Roosevelt adopted the idea of raising the price of gold to inflate the currency and reverse the debilitating deflation of prices. The idea came from Professor George Warren of Cornell University. When Roosevelt told Morgenthau he was thinking of raising the price of gold by 21 cents, his entourage asked him why. “It’s a lucky number”, Roosevelt said. “Because it’s three times seven.” As Morgenthau later wrote, “If anybody knew how we really set the gold price through a combination of lucky numbers, etc., I think they would be frightened.”

      To be fair, it was England that came off the gold standard two years earlier, but FDR delivered the decisive blow in 1933, a move that some recognized at the time would be the end of western civilization.

      A bit too overwrought perhaps, but it was definitely the official end of the pre-1914 liberal economic system that ushered in the modern era.

    6. Lexington Green Says:

      “… the pre-1914 liberal economic system …” was in ruins by the time FDR came in. We had 25% unemployment, the banking system was not operating.

      You have to remember a few things.

      1. No one knew how it was going to come out, and no one was thinking decades ahead. They were trying to survive in the immediate term.
      2. No one knew about options that did not exist yet. Friedman was in graduate school, Hayek was young and not yet famous.
      3. The best minds were stumped by the Depression by the time FDR came in. Hoover did all the orthodox stuff and it had failed.
      4. FDR initiated a mix of policies based on a variety of expert sources of advice. Some were worse than others, like the NRA, which he gave up on and which the Supreme Court fortunately killed off for him.
      5. Deficit spending on public works and getting people working mitigated economic problems but was a political stroke of genius, since it put money in the pockets of people who were genuinely desperate, at a time when the entire democratic-capitalist system in the USA was up for grabs.

      FDR is far too much of a demon-figure for people on the right. It is as if he died last week. We are still in the revisionist-debunking stage 80 years later. We should be into the post-revisionist phase of cool assessment. But we are not. FDR still raises blood pressure.

    7. Lexington Green Says:

      As to the cockamamie gold price scheme, Milton Friedman approved with FDR’s efforts to reflate the currency in the face of a catastrophic deflation and the Fed’s failed response to it. These articles are helpful: Roosevelt’s Gold Program, Spring 1933 and Gold Reserve Act of 1934, January 30, 1934.

    8. Grurray Says:

      Yeah, guilty as charged.
      Hatred for FDR in my family was like an old heirloom, passed down from generation to generation.

    9. Bill Brandt Says:

      Think how America was before and after the Great Depression (for better or worse)

    10. Brendan Doran Says:

      You write as if those with power don’t already have their own America 3.0 underway, and as far as “cannot work” it’s working right now. Get rid of those pesky, uppity don’t know their place ‘Muricans.

      America 3.0 is underway, it’s called American Indians 2.0; with Tribe Muricans as the victims.

      For the People are despised, but their resources coveted.

      It’s been underway since the Rust Belt began, remember most of the destruction of the Indians was economic. It will now accelerate exponentially for the same reason it accelerated at 10X pace after 1865: Fantastic levels of Debt. The Debts of the Civil War were paid with the very rapid destruction of the Western Indians in 25 years. No loans would ever have been made without the ability to repay.

      The $1000 Trillion now owed by the identical combination of Global Finance [London and New York] and the American Government can’t be paid unless those resources, again mostly in the unpopulated by comparison American West are extracted at levels the current Tribes [of the necessarily despised rural Whites] are ruthlessly plundered.

      We’re in the Way. And the next stuffed animal in the museum. Your posterity will read about us in the History Books. Perhaps they’ll get to indulge in delicious vicarious guilt as well. The Cigar Store Indian will be replaced by the Cannabis Store Redneck. Without leadership [which the Combine is good at decapitating preemptively] the remnants of the Redneck Redskin Tribes will turn in their guns for food stamps at the end, just as Geronimo and the Apache did.

      What I have just described is of course the true story of economics in the New World, certainly any passing acquaintance with the Conquistadors History will also ring familiar.

      History usually rhymes, and this is the Rhyme of the Western Hemisphere. This is the most likely outcome because it happened before here, and is already well underway. Truly Chicago Boyz you remind me most of the Pueblo Indians. They were peaceful and agrarian as well [academia is an agrarian development].