Today, 31 July 2009, marks what would have been the world-renowned economist Milton Friedman’s 97th birthday. The Lion Rock Institute, based here in Hong Kong, put on a cocktail celebration for the late superstar economist, with a panel discussion, a few youtube clips featuring Mr. Friedman’s thoughts on the markets, and an open bar that I made sure to take advantage of.
The timing couldn’t have been better. Many of the principles that Mr. Friedman was an advocate for are apparently being trampled over by President Obama and a seemingly clueless US congress. The panel, which was comprised of well known Hong Kong economists who actually went to school in Chicago and studied under Mr. Friedman, were quick to critique the rational behind President Obama’s stimulus package, pointing to the fact that as the US begins to exit the recession, only the tinniest amount of stimulus money has actually been spent.
One thing Mr. Friedman was not, and it is important to highlight in order to save him from the hands of disenfranchised Americans, was a protectionist. If your business were going under because of outsourcing to India, “you are mistaken” Mr. Friedman would have said. Your business is actually going under because you have failed to innovate—“Tuff luck”. Only by exposing our businesses and industries to increased competition and pressure will we increase the necessity for innovation. Furthermore, it is innovation that is the key to providing the new and higher paying jobs necessary in order to continue raising living standards. An industry protected by government will likely destroy the need for innovation, in turn causing incomes and living standards to stagnate.
Mr. Friedman was very fond of Hong Kong. In the youtube clip below, he points out some of the reasons why Hong Kong has been able to increase it’s living standard so dramatically.
The world is getting crazy. As the US government, the spokesperson for freedom and capitalism around the globe, begins taking over banks and car manufacturers, it is the People’s Republic of China, the last great stronghold of communism that has adopted an increasingly free market economy. One has to wonder what will happen to Friedman’s teaching. In the US, will they be washed away by fiscal irresponsibility and a sense of entitlement? Will they gain further adoption by the hard working, status seeking Chinese? Or will Mr. Friedman’s free market system be blended with some sort of social collectivism, which is beginning to seem necessary in order to combat long-term imperatives such as climate change and resource conservation. Only time will tell.