Romney interprets: “Government does not create prosperity. Free markets and free people create prosperity,” he said referring to Milton Friedman. Yesterday, Milton would have been 100 years old.
“History suggests that capitalism is a necessary condition for political freedom. Clearly it is not a sufficient condition.”
Referring to the crash of 1929, Friedman and Anna Schwartz concluded that “by imposing high interest rates when disaster struck, the Federal Reserve did not funnel enough money into the economy, turning the crash into a depression.”
Read the article by Nicholas Wapshott to gain more insight about Friedman’s advice: “close control of interest rates would stabilize prices.”
Calling up the spirits is to me an attempt to align with a symbol of conservative economics without actually thinking about it. There is a need for changes in the economic system that goes far beyond tweaking the current system.
Manipulating weaknesses in the current capitalist system, Romney accumulated personal wealth through the turnaround business. That demonstrated ability to play the game, not invent solutions.
I am using every available opportunity to introduce alternatives to capitalism, including the Progressive Utilization Model (PROUT). Using PROUT as a starting position and considering the qualities of capitalism worth preserving, I am integrating them into something actionable called Optimized Sustainment Model (OSM) to be fully introduced in January 2013.
““Some Basic Components of PROUT’s Social Vision
Progressive Utilization Theory offers a comprehensive and synthetic social vision. Some significant components of this social vision are briefly summarized below.
Guiding Design Principles of Development
• Basic necessities. The basic necessities and common amenities of life must be guaranteed to all. This fundamental right must extend to the whole of humanity.
• Effective incentives. While maintaining social equity, incentives should be distributed to those who make meritorious contributions through their labor.
• Limited accumulation. There must be limits placed on the accumulation of wealth by individuals, limits which can only be exceeded by social permission.
• Rational distribution. The resources of the planet should be equitably distributed so that all human societies have proper capacity for development.
• Maximum utilization. Natural resources and human potentialities should be utilized without waste, and for purposes that promote the quality of life.
• Balanced development. Everyone should have opportunity and encouragement to develop, in a balanced way, their physical, mental and spiritual potentials.
• Social balance. The full development of individual potentialities requires a vital society, and the development of society’s potentials requires vital individuals.
• Progressive adjustment. All aspects of social life should maintain dynamic equilibrium by undergoing proactive and progressive adjustments.”
“How conservatives misread and misuse Milton Friedman
By Nicholas Wapshott, Published: July 27
Milton Friedman, the combative, impish free-market economist, died in 2006, too early to witness and diagnose the financial crisis of 2008 and the long economic slump we’ve experienced since. But that doesn’t mean he’s absent from the debate over how to handle it.
“I wish we could find Milton Friedman again,” Mitt Romney lamented in an October debate during the Republican primary campaign, when asked if he had any candidates in mind to run the Federal Reserve instead of Chairman Ben Bernanke. And speaking at a University of Chicago forum this spring, Romney enlisted Friedman in his side of the political fight over economic policy.
“Milton Friedman understood what, frankly, our president, President Obama, I don’t think has learned even after three years and hundreds of billions of dollars in federal spending,” Romney said. “And that is: Government does not create prosperity. Free markets and free people create prosperity.”
Tuesday will mark the 100th anniversary of Friedman’s birth in New York. In the midst of a global economic slump and a U.S. presidential campaign focused almost entirely on the economy, it is worth considering what he might really think of our economic troubles.
Friedman burst onto the national stage when, in pioneering work with Anna Schwartz, he rewrote the history of the stock market crash of 1929 and the Great Depression. The pair concluded that, by imposing high interest rates when disaster struck, the Federal Reserve did not funnel enough money into the economy, turning the crash into a depression. If the Fed had provided plentiful cheap money, Friedman argued, the slump would have lasted a couple of years, not a decade.
Friedman leveraged this insight into a cure for “stagflation” — that crippling combination of inflation and feeble economic growth that took hold in the United States in the mid-1970s. He believed that inflation resulted from too much government spending on Keynesian stimulus programs, which led to too much money chasing too few goods. His remedy was “a steady rate of monetary growth at a moderate level,” providing “a framework under which a country can have little inflation and much growth.” In short, close control of interest rates would stabilize prices.
Paul Volcker, the Fed chairman appointed by President Jimmy Carter and kept on by Ronald Reagan to cure stagflation, took Friedman’s advice and rebooted the economy, provoking a recession and purging hyperinflation by raising interest rates. Inflation came down, and economic growth resumed.
On the face of it, there are enough similarities between the financial crises of 1929 and 2008 for Friedman to remain relevant. Before the Great Depression, ample supplies of cheap money fueled a stock market bubble. Attempting to curb such rampant speculation by tightening the money supply, the Fed plunged the economy into destructive deflation. Seventy years on, Alan Greenspan’s cheap money policy as Fed chief at the turn of the century stoked a housing bubble based on reckless lending. A stock market crash, the financial freeze, panic in the banks, George W. Bush’s “troubled asset” rescue and Obama’s near-trillion-dollar Keynesian stimulus followed in short order.