Friedman and Marx Essay

Throughout the development of the concept of capitalism, the majority of theorists indicated that this problem is of multifaceted category. Practically, there are several concepts of capitalisms with different characteristics and consequences, for instance classical, Anglo-Saxon and Rhenish capitalism. In his book “Freedom and Capitalism” Milton Friedman makes one important distinction (neglecting other varieties) by speaking of competitive capitalism with free and unregulated markets in contrast to other forms of capitalism where freedom is restricted through government or private interference (taxes, social provisions, monopoly, trade unions etc.). By equating “competitive capitalism” more or less with the picture of a Smithian fully competitive market economy where all firms, customers, and employees are price-takers, he achieves an idealized benchmark of an economic system which is free of power elements. All processes are based on purely voluntary individual actions.

Friedman realizes that in practice some mixture with regulatory measures is unavoidable and desirable for the maintenance of a workable economy and above all a regulated monetary policy, but on the whole, he regards competitive capitalism as a realistic aim which is mainly threatened by the state and its interfering activities. Deregulation and privatization become important demands and in the book’s preface Thatcher and Reagan get praise for having moved in this direction.

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From the critical standpoint, writing in the era of imperialism, Marx’s primary concern was with distribution and the class relations implicit in and derived from the ownership and use of the means of production. In this regard, he never asked questions about the reasons and determinants of technology and the mode of production – and this for the very simple reason that he did not think there was anything to explain.  However, as Wheen justly points out “Marx” did predict that under capitalism would be relative – not absolute – decline in wages” (Wheen, 300).  According to Marx, capitalism is an economic system based upon private property, production for profit, (mostly) wage labor, and a market mechanism to allocate a society’s productive resources.  Continuing neoclassical idea of capitalism, Friedman views democracy as a political system founded on the basic principle that people should have a voice in the decisions which affect their lives. Therefore, capitalism and democracy are theoretically compatible in the sense that each system is organized to maximize individual choice and liberty.

Capitalism maximizes the choices available to the consumer, whose spending patterns drive the resource allocation process in the economy (hence the concept of consumer sovereignty). Democracy maximizes the choices available to the voter, whose political interests and voting patterns result in government which is accountable to and representative of the body politic. The form of political economy formulated and advocated by Friedman may thus be termed democratic capitalism.  Unfortunately, much of the theoretical compatibility between capitalism and democracy, as well as the manner in which each system is supposed to operate, breaks down in reality, and this notorious breakdown can be considered in the case of the US, world famous capitalistic system.

Simultaneously, Friedman avoids this realistic problem of the mixed economy not only by sticking consistently to his model of a fully and efficiently working private capitalist market economy, without even mentioning that another view might be legitimately taken, but also by an extremely one-sided view of governments and bureaucracies, for instance of the “state”. While individuals in the market sector can be “good” guys (competing entrepreneurs, peace-loving employees), fostering freedom and welfare, or “bad” guys (monopolists, trade unionists) who hinder them, state action outside some restricted fields (particularly security of people and property, infrastructure) seems to be always “bad ” irrespective of the motives of the agents. To act against the free market as such is the crime. Once the state has fulfilled its basic tasks there is no room for looking for “good” economic and social policies and avoiding “bad” policies. Policy as such is dangerous. “Any use of government (to accomplish social aims) is fraught with danger” (Friedman, 2). “The great tragedy . . . of the drive to extend the scope of government in general is that it is mostly led by men of good-will who will be the first to rue the consequences” (Friedman, 3).

From the critical standpoint, Marx predicted that the evolution of capitalism leads to significant distribution of capital and resource allocation.  Practically, history has shown quite clearly that capitalism leads to a massive concentration of economic resources in the hands of a tiny minority of firms and property holders. This point is not disputed even by the staunchest defenders of capitalism. In the United States today there exists around 12 million business firms, yet the fifty largest firms make almost half of all profits. According to UCLA sociologist Maurice Zeitlin, “the richest 1% of families own 31.50 of everything owned by all American families”, while the bottom 50% of families retain only 3% of the national wealth (Zeitlin, 231-232).  This incredible concentration of economic resources translates, however imperfectly, into political power and undermines the democratic process.

Moreover, as the labor market segments into dual categories of secure high-skill/high-wage professionals and low-wage/ low-skill service workers, with tremendous mobility barriers in between, the hegemony of the work ethic is undermined.  Importantly, it is not only the working classes but the entire society which has been vulgarized by the hegemony of consumption and the commodification of human relations. In the United States today, Marx’s caveats on the pernicious aspects of capitalism are largely ignored. The political implications of the economic concentration are hard to ignore. How else to explain the 1980s, when trillions of dollars of wealth were shifted upward through massive tax cuts for the wealthy, defense spending, and the savings and loan scandal. Meanwhile, middle class incomes stagnated, investment in social programs (education, housing, welfare) decreased, poverty increased, homelessness mushroomed, and prison populations doubled nationally.

Bibliography:

Wheen F. Karl Marx: A Life. Boston Books, 1997

Milton Friedman. Capital and Freedom, London 2002

Zeitlin, Maurice: “Who Owns America?” in M. Zeitlin (ed.), The Large Corporation and Contemporary Classes. Rutgers University Press, New Brunswick, NJ, 1989