Noam Chomsky on Milton Friedman was wrong about!
Coucha Ahmad, Chief Strategy Officer | Entrepreneur | TEDxCairo Co-Founder:I find both of you & Milton Friedman to have some of the most influence in shaping the current world’s different thought schools & streams. Nevertheless, i also find that you both don’t agree on the very basic fundamentals of how the world should be.
What do you think is the one most thing that Milton Friedman got wrong about the world & humanity in general?
Noam Chomsky: I think Milton Friedman’s interpretation of the success of market systems is historically seriously wrong and his faith in market systems to achieve desirable ends I think is grossly mistaken. And I don’t accept his values either. I don’t think that the ability to succeed in a system of competition is much of a value to be admired. …
Take the United States, the richest society and most powerful society in the world. How did it develop economically? Well, through massive state intervention. Huge state intervention.
I mean what economists sometimes talk about is the high level of protectionism, which is true. The United States was a pioneer in protectionism in order to develop first the textile industry, the beginnings of industrial development, and on through steel and other industries. It had to protect itself from superior British technology and production. And meanwhile stealing technology from Britain and others. But that’s the least of it. That’s what economists talk about, but that’s the periphery.
I mean, the U.S. economy was built on vicious and murderous slave labor. The slave labor camps in the south, producing cotton, would have impressed the nazis. And they were quite efficient. Efficiency was in fact increased, productivity was increased rapidly through the technology of a bullwhip and a pistol, just by torturing people much more viciously. And that’s a large part of the source of the modern economy. Cotton of course was the fuel of the early industrial revolution, but it’s not just cotton production. Cotton production which expanded over the world, based very heavily in slave labor camps here, was the basis for the development of a lot of the merchant class, of early industrialization. The biggest industrializations anywhere were the textile mills of Lowell and Lancashire and so on. It developed the financial systems which were used to finance it, and the range of interactions became globalized. That’s an enormous contribution to the developing economy of the United States, of Britain, of other European countries, and so on.
What’s that go to do with markets? I mean that’s just a violent intrusion in market systems. And that’s only part of it. What about clearing the continent of its indigenous inhabitants? That’s a pretty severe interference of the state of course in human interactions and social and economic systems. I mean they had an economy. In fact it was a pretty advanced economy. It was destroyed. They were destroyed. There’s some margins left somewhere in reservations. And that’s just the beginning. I’m not even talking about the effect of imperial aggression on developing the economy.
I mean the idea that economies develop from market systems is so grossly false that you can hardly even talk about it. Of course, I talked about the United States but the same was true of England before it. Basically the same methods. And every other developed economy. Germany, France… France, for example, it’s estimated that about roughly twenty percent of France’s wealth comes from murderous vicious slave labor in one colony: Haiti, which France virtually destroyed and is still contributing to destroying today. They participated in throwing out the elected president a couple years ago. And that generalizes around the world.
You can argue – it may be right or it may be wrong – that markets are useful for things like conveying information. That can be disconnected from giving gain and profit to those who are participating in them.
If you come to the present, let’s take a look at contemporary markets. Forget the history. So on the eve of the last recession, for which the financial institutions were largely responsible, their share of corporate profits in the United States was about forty percent. So they’re a huge part of the economy. Where do they get their profit from? Well actually there was an IMF study about a year or so ago which tried to estimate the source of the profits of the six biggest American banks – JPMorgan Chase, Citigroup and so on. It concluded that the profits come almost entirely from a public subsidy, an implicit public subsidy – it’s called “too big to fail,” informally, which is an implicit government guarantee that we’re not going to let you fail. Of course the credit rating agencies know this very well. They get higher credit ratings. They get access to cheap money. They get incentives to carry out risky transactions, which can be quite profitable, because they’re going to be bailed out if they collapse. All of this amounts to a huge subsidy. The business press estimated it at over eighty billion dollars a year. There are various debates among economists as to what it is but it’s huge. That’s the beginning.
What about energy industries? Huge part of the economy. The IMF just came out with another study more recently which estimated that worldwide, of course concentrated in the rich countries, the subsidy from the public – it’s called government subsidy, meaning from the public – amounts to maybe five trillion dollars a year.
This is a market system?
September 25, 2015