The “Age of Milton Friedman”: an Era of Free Market Reform and its Lessons for the Future

Defending the free market is difficult in a day and age where millions of Americans are turning against the ideals of economic liberalization. A recent Pew Research poll shows that just 43% of Americans feel unrestricted and globalized markets benefit their families. As David Frum notes, “pluralities of Americans believe that free [enterprise] slows economic growth, lowers wages, and leads to job losses.” Evidently, Americans feel disillusioned by what they view as failures of uninhibited industries that widen the gap between rich and poor. And every election cycle, the political left directs American anger towards unregulated corporate interests that pollute the environment and outsource American jobs.

These issues should not be ignored. However, we can’t write off the vast improvements free market policies have made over the past several decades. Even more so, we can’t accept interventionist policy as the next best solution.

History shows us that when governments control the outcomes of market activity, an efficient dispersion of prosperity is nearly impossible. This is evident when analyzing the state of the world, in aggregate, by 1981. In countries where market activities were dictated by central authorities – like China, Chile, Venezuela, Bengal, India, Russia and other South Asian, Eastern European or Latin American countries – rates of poverty remained at a steady high, wealth distribution was very iniquitous and technological productivity was low. According to United Nations estimates, about 42 percent of the world’s population lived in extreme poverty (1.4 billion living under $1.25 a day) with classes of individuals in countries like India holding rates of poverty, on average, in excess of 59% living under $1.25 a day (PPP, at 1990 prices). India and other South East Asian countries like China and Bangladesh were typically centralized states whose prosperity increased markedly after vast privatization and market liberalization efforts in the 1980s, along with the rest of the world.

The era which followed from 1981-2005 (also known as the Age of Milton Friedman) is described in detail by Harvard economist Andrei Shleifer, who notes that free market policy reform accounted for a dramatic increase in living standards, life expectancy, educational attainment and democratic governance on a global scale. As quoted by Jean Drèze in his book An Uncertain Glory, India has experienced an overall GDP increase of $1,284 (PPP), an increase in Gross National Product (value of goods and services produced by nationals) of $66.9 (PPP), a 7% increase in the primary through tertiary sectors, and a 6% reduction in poverty in the span of a decade due to a decrease in the regulatory state (the license raj) and increasing instances of privatization. On a global scale, the numbers were even more promising. Worldwide, GDP per capita increased by approximately $3,500 (PPP), world inflation rates fell by 10.2%, the top down marginal income tax rate decreased by 28.3%, and the black market to official exchange rates became nearly nonexistent, all as a result of financial liberalization through decreased central control and relaxed government regulation.

The economy grew exponentially, and so did the levels of social development that result from greater wealth distribution. Child mortality rates fell by 27%, life expectancy grew in nearly every region, the average years of schooling doubled worldwide, and overall poverty rate was reduced by 16%. The World Bank estimates that by 2010 we reached the millennium goal dire poverty rate without the exclusive use of foreign aid, thanks to vast financial liberalization.

The bottom line is the free market has created a massive increase in general prosperity worldwide for the past several decades. The United States is not exempt from this growth. Since 1981, U.S. GDP has grown from 3.2 to 18.6 trillion dollars (by 2017), and per capita income has grown from $28,975 to $52,296, the combined value of real imports of goods and services has increased by 693% (2.4 trillion dollars), and the number of employed Americans has grown by 60% (55.3 million jobs). Our country’s past commitment to free trade policies like NAFTA and regulatory reforms across various industries has accelerated growth in the United States. However in recent years, growth has stagnated, workforce participation is low and poverty rates are nearly the same as 30 years ago. The solution is simple, we must embrace the free market principles that have brought us success in the past. The guidelines are these: pursue free trade, repeal arbitrary regulations, remove barriers to entering the workforce like occupational licensing and pursue a more privatized national market system.

We as a populace must realize the power unbound markets have to spread prosperity, as they have done for most of the world over the last half century. Freedom in our capitalist society is the only venture necessary to promote the well-being of all. The movement toward greater market liberalization starts with us at the local and state level. Only through grassroots momentum and education will it become clear that Friedman’s ideology of market independence is a driving force for good in our country, and the world.


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