Thursday, October 26, 2006

Milton's paradise where there's no such thing as society

Being new to this game – actually, I see that I’m not yet twenty days old in blogworld – I’m not yet clear about the rules. What counts as success? I wonder whether it’s about how many comments get posted. If so, after the initial kind words, my postings have bombed. Though, in defence, I could say look at the quality not the quantity. That’s particularly the case for the intelligent responses to my explanation.

Tristan took exception to my side-swipe at Milton Friedman, and then he had heavy-weight backing from Oxford's own liberal socialist. They really do deserve a response. What’s at issue is whether the Nobel Prize winner for Economics (1977) can be considered a liberal. He certainly would self-identity as one of us liberals, but many have taken that claim as rhetorical positioning. And after all, if we accepted what people say about themselves, we’d have accepted Vladimir Zhirinovsky as a true Liberal Democrat. But let’s give the suggestion a bit more thought.

You could construct a radical revisionist reading of Friedman which would allow us to adopt him into the liberal family. In Capitalism and Freedom, he claimed to be wanting to reduce government interference in the economy, but he did see an important role for the state. It was the government which must regulate businesses and that could be a very large job in Milton’s paradise. For, as Friedman notoriously asserted the social responsibility of a company is to maximise profits. If that's all businesses have to think about, the state is going to have a time-consuming task on its hands keeping the corporations on the straight and narrow.

But Friedman's claim is one that more enlightened business-leaders would now reject. After all, a company’s reputation affects its profits, and that reputation isn’t defined only by the hard skills of selling goods and taking over rivals. It’s also about what the experts call either social capital or goodwill. Down the road from Oxford, at Henley Management College – the oldest business school in Britain – there’s a research centre devoted to the issue.

What, in a nutshell, happens is that, in arguing for a balance between small government and free individuals, Friedman forgets about society. He doesn’t reject the concept entirely, but it’s an impoverished version of society where the only meaning of ‘value’ is the price you see on the packet.

It’s ideas like Friedman’s which are behind that most infamous political statement of the Eighties: Thatcher’s ‘there is no such thing as society.’ To be fair to her (and I’m not sure why we should considering the damage she did to Britain), the context of what she said suggests she was a victim of bad phrasing. The surviving devotees over at the Thatcher Foundation have generously allowed you to judge for yourself. What she was actually attacking was reliance on state intervention, but the force of her phrase seemed to sum up the soullessness of her brand of Conservatism: what was lacking – as in Friedman’s writings – is an understanding of the social context in which each individual exists and constructs their personality.

So, no, I can’t be persuaded to imagine Friedman is an honest liberal, no more than I would grace Margaret Thatcher with that accolade.


Jo said...

well, some folk do count success by comments but there are other options too :)

Interesting posts are still worth making even if only a few read them. And how else are we to find out what you lot do for us?

Jock Coats said...

(I was going to post this as a linked post, but since you're using the new Blogger beta it doesn't seem to let me sign in to my own older Blogger account to do so!)

Actually, it's "neo-liberal anarcho syndicalist" please...:)

But anyway. See, I actually think Milt is much misunderstood. Just like Smithy. I've seen him make that "claim" about a company. And there's a but. He is talking about the sole legal obligation of a US corporation.

When incorporation was first enshrined in US law it was in response to the sort of abuses that marked out things like the South-Sea Bubble. Investors would be conned into parting with their money and then the merchant adventurer would go off and do what he pleased with that money.

The same happened in the early US and so they created a legal framework that was solely intended to protect the stockholder from the conmen that sought to part them from their money - business could not get investors without that certainty that if they clubbed together to form a corporation their interests would legally protected.

His line is actually a philosophical one that a corporation has no moral conscience, that it's not really a "person" - I get the impression he doesn't like the later case law in the late c19th US that made a corporation into a legal person. But, he says, those people who go to make up a corporation do have moral consiences.

I don't think that's a bad way to look at it actually. We occasionally, in the Oxfordshire Social Enterprise Forum, have to define "social enterprise', and lots of people say such is a "not for profit company". But a preferred phrase amongst social enterprise "practitioners" is that it is a "more than profit company".

Profit has become in some circles a dirty word. But Friedman's line, and that of social entrepreneurs, is that it's what you do with that profit that could be dirty. Every corrporate entity, in order to justify the trust that investors and members put into it, must make a profit to be able to carry on trading, but what those "real people" involved decide to do with their profit is what counts.

For me though, it was "Free to Choose" that made me think differently of Milt. To me he before then was the academic heavyweight that gave justification to some of the worst aspects of Thathcerism. But then I read him describe how people could take control for themselves. His example was education. He suggested, for example, that something asprecious as the education of our children should not be left to the state, and advocated parents and teachers getting together and forming PTA co-operative schools to put them in control locally.

And this is Smith's line as well in my opinion. He said that the state should get involved, amongst other things, when something needed doing that was too big for a person or small group of associated people to arrange for themselves.

And I would say that the whole story of the twnetieth century welfare state has been usurping the right, and ability, of groups of people to get on and arrange such things for themselves or amngst themselves. As John Howson reminded us when we had that consultation on the public services policy paper in the Town Hall in Oxford, state schools are legally merely the "default" option. The obligation legally is on parents to ensure their children are educated, and they are allowed to go private, to home-school, whatever, but that the state provides a fall-back. But the way state education has developed in this country at least we have had our minds numbed to the idea that there are other options. That is what one could describe as enslavement by conformity.

I believe there are other areas where Milton Friedman has been done a disservice by his connection with Reaganomics and Thatcherism. He does change his mind. But those who took his ideas and made them their political ideology don't like to hear that. Monetarism is a case in point. Friedman has had a long standing philosophical problem with fiat money. I think he's really a "hard money" advocate - one who believes that stable money means something still backed with a relatively fixed amount of some precious specie such as gold. His adaptation of this to the inflationary pressures and policies of the seventies was to advocate tight control of fiat money which became the mantra of the political monetarists - they even made a song out of it to educate the great British unwashed in the late seventies - "We'll count our blessing if we apply/Tight control to our money supply". But since then Friedman has said that if he were to go through it all again he probably would not have placed such a heavy emphasis on control of money supply.

David Rundle said...

I did say that a radical re-write of Friedman was possible -- and here's Jock providing one.

I'll express my concerns as two brief points:

(1) this is not how Friedman presents himself, with his 'liberalism' being an antedote to the so-called left in American politics and a celebration of capitalism against what he saw as the only alternative, the Soviet system

(2) the point made about a corporation is exactly how Friedman saw it -- as a legal entity devoid of any social identity. Friedman's approach is: individuals are allowed a conscience, but not organisations created by those individuals. And that leaves his sense of how a moral conscience is created bereft of its context.

If we were to be kind to Friedman, we would think he was very optmistic about humans (contrast Machiavelli's dictum that men have to be forced to be good).But what drives Friedman is a fear that any state is socialist, rather than a positive celebration of individuals.

Sorry, he's still not on my Christmas card list.

Jock Coats said...

Actually - he seems to think that humans are "seflish and greedy". And maybe he's right that "voluntary co-operation" is counterintuitive for humans compared with self-surrender to some collective entity. But I still think the former is more liberal than the latter by its very nature.

We've just been given a wad of money by the Joseph Rowntree Reform Trust. Why? Because we're the natural party of that self-help ethos, the co-operative movement, the mutual movement and so on. None of them invovle/d government, rather they involve/d "voluntary co-operation".

The best mass housing in Oxford, as an example, was not built by government for people, but by temporary building societies by people for themselves.

And okay - on the basis of this I'll accept what you say about his view of the corporation...:)

David Rundle said...
This comment has been removed by the author.
David Rundle said...

Great link -- but isn't that a case of indoctrinating the young?!

And before you or anyone jumps to the wrong inclusion: no, I wasn't suggesting we should invite Old Nick into our moderately-sized but really quite comfy tent. He and Friedman too can fight it out in the big bad world yonder.

Tristan said...

When I read Friedman's books the concept I came away with was a deep concern for society and the individual.

Talking of corporations, they do not have a concience in the same way that a country does not.

If he were unconcerned with society then why would he concern himself with education? Or with externalities and land taxes? Or with schemes to support the poor and encourage all to make the most of their natural ability?

Above all, as an economist he is fundamentally concerned with people, and people, whilst they are individuals are not isolated units, they interact within societies, it is this interaction which forms the very basis of economics.

Friedman fulfills the basic requirements for liberalism:
* an individualistic view of people - every person is a unique individual with their own talents who is best placed to make their own decisions
* a distrust of concentrations power - hence his preference for markets, they disperse power
* a concern for individual freedom - your freedom to act should be maximised.
* a belief in equality of opportunity - skin colour, ethnicity, gender, sexual preference, socio-economic background - none of these should be any barrier to exercising your innate talents.

What is he missing? His ideas are all based around trying to maximise opportunity. He proposed very redistributive taxation regimes.
He wants to increase freedom, and maximise the quality of life for all.

Okay, so he's believes in as little state intervention as possible, but that's solid liberal thinking.

Disagree with his arguments (and some can be opposed from a liberal point of view) but he is definitely a liberal.

David Rundle said...

Jock's link to the Friedman interview is SO informative. Friedman attacking the New Deal; Friedman against a minimum wage; Friedman the vituperative opponent of trades unions. He makes it clear that he wants to rewrite the American politican lexicon by claiming, against accepted parlance, to be a liberal. We don't have to let such libertarians into our ranks here.

People like Friedman pretend to support the individual, but deny that the individual gains strength through their social contacts. An individual, for a liberal, is a social being, and individuals can't fulfill their potential without those social structures. To atomise the individual, as Friedman does, is to place power in the hands of either the state (which he rejects) or corporations (which he idolizes). But corporations are the latterday equivalent of established wealth. As Liberals, they are as much are opponents as faceless state intervention exemplified, say, by ID cards.

If we want to find an American Liberal, we can debate around Rawls. We shouldn't even be pretending that Friedman's right-wing rhetoric and second-rate logic add up to a liberal position, whatever he disingenuously claims for himself.

Jock Coats said...

There was an interesting comment from a blog I read simply because its name encapsulates my entire political philosophy that I found apt for this discussion:

The state is not society.

In that Open Minds interview I thought Friedman explained quite well why he was against those things - New Deal, Minimum Wage etc. That however well meaning their initiators, they had had empirically the opposite effect. Something which is once again being evidenced here in respect of Tax Credits, recent state pension chages like the minimum income guarantee and Labour's "New Deal for xxx".

As an aside I was particularly interested in his idea of the reasons for the Great Depression - the artifical tightening of money supply acting counter to the market's current needs - something more usually found in more Keynesian types I would have thought.

As to the Trade Unions, I think we have to remember the sort of beast they were when Friedman was talking in that video. They were far from free associations of workers. They were organized gangs, at times legitemized gangsters. A far cry from the sort of body of which ninetheenth century British liberals were likely to say "an attack on the Trade Unions is an attack on the free market".

The thing he praises more than anything seemed to me to be "voluntary co-operation" which is at the very roots of modern Liberal social policy I would say - the co-operative movement, the provident societies and the enlightened capitalists like Rowntree, and even what the Trade Unions ought to be.

He's not saying that the individual has to be alone to be free, but has to have the freedom to chose the social associations they want to meet their needs, not the social associations someone foists on them in the name of someone-else-knows-best government.

To go back to corporate social responsibility for a second or two though - I am very skeptical about the reasons for it. But there is no reason why CSR is incompatible with what Friedman says of corporations either. CSR is a means to make money in an era when that is what consumers seem to want in particular - if you don't please your consumers, however powerful you may seem now, you will soon fail completely. Or by extension to get investors in an era in which that is what investors or those who have their money invested by others seem to want.

In other words, if they didn't "do CSR" they would be failing in their single duty to produce a return for their shareholders. And I think that rationale for it is clear from the early days of "ethical investment" funds (in the late 80s) which were quite marginalised things until much research showed that they could in fact make as much money as (or more than) other businesses. It was not so much a feeling on the part of investors that they were a fuzzy "good thing" to be in, it was cold hard financial evidence that they were a good investment that changed the wind in favour of CSR.

The real question he leaves dangling for me though is why, if enlightened self-interest is so good for us, why has it been very much the exception rather than the rule in the political-economy of human history? My guess is that we simply do not have the courage of our own individual convictions by and large to say "we can achieve this without someone telling how to".

Which is what I was/am trying to prove possible with Community Land Trusts. And what are the main blockages to that form of "voluntary co-operation"? The bureaucracy that tells us there's only so many right ways of achieving the desirable ends of housing for all. Yet we are not there. We do not have housing for all. For all their efforts to achieve it by central planning.

Tristan said...

Jock puts this well, Friedman explains why he is against measures and it is because they impinge on freedom and have negative effects.

Redistribution does not imply liberal. The means of redistribution are essential to creating or denying opportunity and freedom.

A minimum wage decreases employment, it directly harms those whose skills are not worth the minimum wage, those who the scheme is meant to help. They then get shifted onto welfare dependency where they become a burden on society.
That is why I contend Friedman's suggestion for negative income tax is far more liberal, it has the effect of the minimum wage in that people get a 'living wage' but doesn't cause job losses (unless the overall tax burden is too high and damages the economy sufficiently).

Liberalism starts from two premises:
1) Individual freedom is the ultimate freedom, and must be preserved
2) The individual knows what is best for themselves and state or government action cannot act in the best interests of all (or even those it seeks to help)

You may not like some of Milton Friedman's conclusions, but he applies these principles and comes to those conclusions. He is conscious of society, he is concerned with the interactions of individuals which builds community.
He recognised the problems of neighbourhood effects and that there are those in society who need the support of others, but he didn't turn to the state to provide for them, he turned to the society of individuals working together.