A famous writer was once asked what the secret of being a good writer was. He said that he simply left out the bits that people skip.
I’ve tried to do that tonight given the enormous amount that has already been written about Milton Friedman.
So, firstly, what’s a mining explorer from Australia doing in Hong Kong talking about a famous international economist such as Milton Friedman?
There is an easy explanation for this.
There is one binding theme that links mining exploration together with economics, and in fact all human intellectual pursuits and even all successful careers.
It is best expressed by the words of a Hungarian physiologist who was awarded the Nobel Prize for Medicine in 1937.
His name was Albert Szent-Gyorgyi, and he put it this way:
“Discovery consists of seeing what everybody has seen and thinking what nobody has thought.”
For instance, a mere spectator will see the latest smart-phone and say, “Isn’t that great.”
However, the entrepreneur will say, “What can we do to make it better?”
When you really think about Szent-Gyorgyi’s words and their true meaning, you will get a clear understanding of the difference between a good economist and the average politician.
A good economist will see the long-term damage that is likely to flow from bad policy, whereas your average politician only will see votes at the next election.
Our average politician fears a stalled economy.
But a good economist asks why the economy has stalled and knows what to do to revive it!
He knows that when government spending runs up to about 25% of GDP, your economy is in trouble (like France at 50%, most of Europe at 40% and the US almost as bad).
How do the Australian and Hong Kong figures compare with Europe’s and USA’s average of 45%?
Australia’s figure is 32% and Hong Kong only 23.9%. Interestingly, this directly relates to the percentage of the population directly employed by Government. Again, the interesting comparison between Australia at 8.2% and Hong Kong at 3.8%
One such good economist with a clear understanding of these ratios was Professor Milton Friedman.
Let me also mention that Prof. Friedman always gave full credit to his remarkable economist wife, Rose, who jokingly claimed half of Milton’s 1976 Nobel Prize.
With parents like Milton and Rose, no wonder their son, David, is also a world-class economist and David’s son Patri continues the tradition of proposing radical solutions that benefit the human race.
Milton Friedman changed the world by using relentless and polite persuasion to help bring about floating exchange rates, the abolition of wage-and-price controls, the legalisation of private gold ownership, dramatic tax reductions, and an end to military conscription. His 1957 Theory of the Consumption Function fundamentally undermined Keynesian economics.
Friedman’s economics worked because he himself had worked. He rejected ideas that worked in smart men’s heads but failed in working men’s lives.
As author Daniel J Flynn said, “Fellow economists laughed at him, before the 1970s laughed back at them.”
He debated adversaries with unfailing patience and graciousness. It was often said that economists liked to debate with Milton, particularly when he was not there.
My favourite two Milton Friedman books are:
. Capitalism and Freedom – it contains all the theories Friedman stressed during his career as a public intellectual. It emphasised the inseparable link between economic and political freedoms;
. Free to Choose – the book that accompanied the ten-part TV series with the same name.
That reminds me of what Queen Elizabeth said to him as the Friedmans boarded the Royal Yacht Britannia in San Francisco harbour. It was, “I know you! Philip is always watching you on telly.”
Prince Philip is still a fan of Milton’s Free to Choose TV series which has had tremendous impact around the world, even in Perth, Australia, where the Mannkal Foundation sponsors an annual conference, similarly named, at Australia’s Notre Dame University.
A year before Milton Friedman died, Stephen Moore, from the Wall Street Journal asked him, “What can we do to make America more prosperous?”
“Three things,” he replied instantly.
“Promote free trade, school choice for all children and cut government spending.”
“How much should we cut?” asked Moore, to which Friedman replied, “As much as possible.”
But tonight we are in Hong Kong, a city that Milton loved, almost as much as he loved his wife Rose.
He loved Hong Kong and of often said, “If you want to see free-markets at work; come to Hong Kong.”
I first met Milton Friedman here in Hong Kong in 1978, but first let me explain how I read Milton’s words five years before then.
Has anyone heard of Hugh Hefner’s Playboy magazine?
Anyone here who subscribes to Playboy magazine to read the articles?
I have a lot to thank Playboy magazine for, in fact four things;
- In its first issue, in 1953, it introduced Marilyn Monroe to the world.
- In a 1960 issue, a series of articles by Hugh Hefner with the title ‘The Playboy Philosophy’ introduced me to philosophy and led me to enrol as an external student at the University of Western Australia (UWA) to study Philosophy 1. Prof. John Hospers (University of Minnesota and University of Southern California) was the author of Introduction to Philosophical Analysis, the text book we studied, and this led me to a lifetime friendship with Hospers until his death, at age 93, in 2011. Hospers was a member of Ayn Rand’s Group cryptically called “The Collective”, along with Alan Greenspan. In 1972 he ran as the Libertarian Party’s Presidential candidate.
- The 1964 issue featured a Playboy interview with Ayn Rand, which was my introduction to her influential book Atlas Shrugged.
- Then, in 1973, there was the famous Playboy interview with Milton Friedman.
Although I’d heard of Milton Friedman before 1973, because of his relationships with several US economic think tanks, I’d not fully absorbed his wisdom and it was the punchy style in that Playboy interview that prepared me for his probing curiosity and the questioning which I came to enjoy on the several occasions that I spent in his company.
At one meeting with Milton Friedman I presented him with a copy of In Support of Free Enterprise, a document prepared by the local Chamber of Commerce and Industry, as an example of the understanding of the benefits of the enterprise system that existed in Western Australia.
He later wrote me a delightful congratulatory letter which made me uncomfortable because I had deserved no credit for the origination of this document. However, his letter showed that he had digested the publication and taken the trouble to write to me. Not bad for a busy 90-year-old!
Tonight’s 101st birthday party for Milton Friedman, here in Hong Kong, is all about personal recollections and I’ll single out one particular occasion when I was invited to attend the 20th anniversary of the Atlas Economic Research Foundation, held in San Francisco in May 2001.
One evening of that Atlas event was called ‘An Evening with Milton & Rose Friedman’ and it formed part of the approaching 90th birthday celebrations for Milton Friedman.
Apart from his own presentation and congratulatory speeches from various notables, several of we think-tank directors then had the opportunity of each spending some ‘personal time’ with him and we all had our list of questions that we wished to ask during that valuable time together.
Professor Friedman’s focus earlier that evening had been on money being too important to be left to central bankers. He said, “You essentially have a group of unelected people who have enormous power to affect the economy one way or the other.”
Friedman’s proposal was simple, “I’ve always been in favour of replacing the Fed with a computer; in essence a PC could determine the economy’s monetary base and consistently increase it by, say, 3% annually, to keep up with expected growth in population and production.”
My own focus was really on asking Dr Friedman what he regarded as his priority challenges as the clock ticked over to his 90th birthday.
“Yes,” he said, with a smile, with words to the effect, “Yes, by now everyone should know that inflation in the long-run is always and everywhere a monetary phenomenon with an unrestrained Fed, and that government’s solution to any problem is usually at least as bad as the problem itself.”
He said, “So, I’m now focused on competition in education.”
He explained how their Friedman Foundation was set up to study this issue as they were totally against the idea of the government running the schools and allocating places primarily by address.
His comments to me were:
“If government has to subsidize anyone, it should be the customer (parents and children) and not the producers (the schools and their highly unionised teachers).”
“Empower the customers, and create competition, and you will achieve much better results.”
“The purpose of having free choice is to have competition and allow the educational industry to get out of the 17th Century and get into the 21st Century and have more involvement.”
Now, largely as a result of the Friedman Foundation’s work, 13 US States and Washington DC have adopted school choice programmes and the momentum is continuing to build.
So, in my own view, if that momentum continues, Milton Friedman may well be judged, in another 100 years, in terms of his major achievement in revolutionizing the education system.
On every one of these occasions, when I was confronted with Milton Friedman ‘live’, it struck me that he always had to have the last word.
If anyone was interviewing him or thanking him for a speech, in any way, Milton always had the final quip.
In the case of my colleague Deroy Murdoch’s session with Milton in San Francisco, Deroy concluded his session with a comment, “Well that’s all of my questions thank you.”
Milton’s response was, “Yes, it may be all of your questions, but it certainly is not all of my answers.”
In my case, I concluded my ‘Individual time with Milton’ by simply thanking him. He then said, “Just a minute. Do you know what else we have in common?”
Naturally, I was curious. So he had the last word by saying these profound words—see if they apply to you too! He said, “I can tell that we both had happy childhoods. That is obvious to me because a happy childhood lasts forever.”
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