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But the important thing tonight is to hear from our good friend, Doctor Friedman. And it was about two years ago, I had the pleasure of presenting Doctor Freeman to a large group of distinguished Belgian economists, bankers and businessmen at a luncheon in the American embassy at

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Brussels. Tonight, I have the honor of presenting to him to this distinguished audience. Our speaker this evening is the Paul Snowden Russell, distinguished service, Professor of Economics at the University of Chicago, a member of the research staff of the National Bureau of Economic Research. He is

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a columnist and contributing editor for Newsweek Magazine. This year, he is serving as a visiting scholar at the Federal Reserve Bank in San Francisco for many years. He has been known for his incisive research and writing regarding monetary theory and policy. There is hardly a college

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economics class in the United States today that does not include a careful study of his theories. He has been a valued counselor to several United States presidents as evidence of the growing international respect which he commands. He received the Nobel Prize in Economics in 1976 on

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behalf of the Board of Regents of Pepperdine University. I am pleased to present the founding speaker of the Pepperdine Associates, Dr Milton Friedman. I like to say that that was wonderful. You have. Thank you very much uh Ambassador Firestone. I was uh very great. I recall

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with great pleasure indeed, the occasion on which Ambassador Firestone was my host in Belgium. We were over there in connection with a meeting of the Montpellier in society. It's a society which was founded as many of you may know, some 30 years ago by Friedrich Von

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Hayek in, in Switzerland. I, well remember when I came back from the first meeting of that and I was sitting around the table at the quadrangle club at the University of Chicago. One of my colleagues was Hans Morgen Hans Morgenthau, a professor of Political Science. And

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he asked me where we had been and I told him where we had been and what kind of a society we had founded. And he said, oh, I see the veterans of the wars of the 19th century. I appreciate I was very much interested in in

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the Bill Bowski s descriptions of your associates, but I couldn't help feeling that I had been faithless to my profession that I made a great mistake in not asking for a percentage of the house take. Um And I may say also, I was very much disappointed

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in Bill Bowski S announcement that the fee was $1000 a year with no indexing for inflation in turning to a more serious discussion. I ought to start by perhaps saying a word about the uh uh uh welcoming committee that many of you may have passed through

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on entering the hotel. I refer to the pickets who were picketing against me supposedly on the grounds of the fact that a year and a half ago or, well, almost two years ago now I spent six days in Chile under the auspices of a private foundation

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giving a series of lectures on inflation and how to cure it of exactly the same kind that I have given in many other countries. I have since then not known whether to be more amused or more annoyed by the attention that is received, amused at the

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extraordinary power which has been attributed to me of controlling seemingly by extra sensory perception from my office in Chicago. Every detail of economic policy in Chile or more annoyed by what I regard as evidence of a very serious threat to freedom of speech, to freedom of

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intellectual discourse that is offered by the kind of demonstration that you had here. I may say that when I was in Sweden in December, there was also a demonstration of the same kind. And on the last day before I left Sweden when I was giving a

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formal lecture, which is part of the obligations of Nobel Laureates. I pre preceded it by making a comment on the demonstrations in which I said, and I believe this very sincerely that the stench of Nazism was in the air that the idea of people trying to

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prevent other people from speaking or other people from hearing them bye, making it inconvenient to pass through picket lines by shouts and yelling, which has nothing whatsoever to do with rational discourse was a major and serious threat to free society. I mention on that occasion the

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experience of Nazi Germany in the 19 thirties when before Hitler came into power, the communists and the Nazis joined together in this effort because after all communism and Nazism are but two sides of the same coin and, and the subsequent effect of this was a chilling

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effect on the academic community in Germany. And after Hitler came to power, there was essentially no opposition offered by the academic community. It's very easy to dismiss this kind of a demonstration. There is a strong temptation on my part to say, I'm not gonna let those

00:06:41.320 - 00:06:58.779

hoodlums prevent me from going where I want to go and say what I'm going to say. And yet it would be dishonest on my part not to say that there is an inhibiting effect, the effect is to raise significantly the cost. And if one considers the

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issue that is raised, regardless of what you think about Chile, if you once take the position that a scholar or an individual of any kind scholar or not, is not supposed to travel to and lecture in a country of whose politics he disapproves and consider what

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the implications of that are. You will see that the implications of that are a completely divided world. How are we going to get our ideas behind the iron curtain? How are we going to get the our ideas to countries? We do not disapprove, we do not

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approve of unless we are willing and able to go there and to express those ideas, I have given talks of the kind I gave in Chile. I have given them in Yugoslavia, which is a communist country. I have given them in South Africa, which in a

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different respect is not a very free society. I have given them in Australia and Japan and other countries of the world. But there is no doubt that one of the effects of this kind of demonstration and I don't think we ought to underrate their importance is

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to inhibit colleagues of mine and other people myself from doing likewise. Is there any doubt that any intellectual who is invited to go and lecture in Chile will think three times now before he goes. And that is, I think a very great cost and we have

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to be on our guard against allowing these Nazi hoodlums to have that inhibiting effect on us. I may say with respect to Shelley, just to clear the air i in the fame in the words that became famous during congressional investigations from 10 or 20 years ago.

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I am not now and never have been a AAA consultant in any way whatsoever to the military hunter. I went down there under the auspices of a private foundation. I saw a great many people including, uh, General Pinochet and other members of his hunt. I said

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exactly the same thing in private that I always say in public. I do not approve of the military regime, but I believe that when the military regime did take over Chile had the alternative only between two evil systems of government, between the evil system of government

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of a Communist Marxist takeover under Allende or the evil system of a military dictatorship. Both are bad but the military dictatorship at least has a virtue that there is more chance of its being ended and a democratic society established. I do not know any case on

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record in which a collectivist communist government once in office has been eliminated in a uh in a reasonably democratic society established. We know at least a we know at least a number of cases in which a military regime has moved in the direction of freedom. Greece

00:10:01.750 - 00:10:15.489

is one case. Portugal is a case which today is in great trouble but is at least in that same direction. So I must say as between the two evils, I have no doubt as to which is a lesser. Well enough about Chile. Let me turn to

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my subject. Although my subject is not unrelated to Chile because my subject is the future of capitalism. And by that term, when I speak of the future of capitalism, I mean, the future of competitive capitalism, of free enterprise, capitalism, in a certain sense, every major society

00:10:33.349 - 00:10:50.309

is capitalist. Russia has a great deal of capital, but the capital is under the control of the state, under the control of governmental officials who are supposedly acting as the agent of the state. And that turns it into a wholly different system than a system under

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which capital is under the control of individuals in their private capacity as owners, as operators of industry. And what we are. What I want to speak about tonight is what is the future of private enterprise, competitive capitalism. The reason this is very close to what I

00:11:10.330 - 00:11:32.690

was just saying about Chile is because the future of private enterprise, capitalism is also the future of a free society. There is no way, no possibility of having a politically free society unless the major part of its economic resources are operated under a capitalist private enterprise

00:11:32.700 - 00:11:57.460

system. The real question therefore, is the future of freedom of human freedom. The real question, the question that I wanna talk about is whether we are going to complete the movement that has been going on for the past 40 or 50 years away from a free

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society and toward a collectivist society, whether we're going to continue down that path until we have followed Chile in the, in the direction of losing our political freedom explicitly and coming under the thumb of an all powerful government or whether we are going to be able

00:12:15.559 - 00:12:39.830

to halt that trend, perhaps even reverse it and establish a greater degree of freedom. One thing is clear, we cannot continue along the lines that we've been moving in 1928 less than 50 years ago. Government at all levels, federal state and local spent less than 10%

00:12:39.840 - 00:12:59.229

of the national income, two thirds of that. But the federal and state level, I mean, at the state and local level, federal government spending amounted to less than 3% of the national income. Today, total government spending at all levels amounts to 40% of the national income

00:12:59.479 - 00:13:18.140

and two thirds of that is on the federal level. So federal government spending has moved in the course of less than 50 years from 3% to over 25% total spending from 10 to 40. Now, I guarantee you one thing in the next 50 years. Government spending

00:13:18.150 - 00:13:44.250

cannot move from 40% of the national income to 160%. Legislatures have tried to enact that the value of P shall be exactly three and 1/7 but they cannot repeal the laws of arithmetic. So we cannot continue on this path. And the question is, will we keep

00:13:44.260 - 00:14:00.580

trying to continue on this path until we have lost our freedom? And turned our lives over to an all powerful government in Washington or will we stop in judging this possibility in judging the direction we're going and where we may be going. It's worth talking a

00:14:00.590 - 00:14:17.960

little bit about where we are and how we got to where we are about the present and the past. Let me say at the outset in talking about the present with all the problems, I'm going to talk about this still remains a predominantly free society. There

00:14:17.969 - 00:14:34.169

is no great country in the world, there are some small enclaves, but there's no great country in the world today that offers as much freedom to the to the individual as the United States does. But having said that we ought also to recognize how far we

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have come away from the how far we have gone away from the ideal of freedom and the extent to which our lives are restricted by governmental enactments in talking about freedom. It's important at the outset to distinguish two different meanings on the economic level to the

00:14:55.630 - 00:15:15.030

concept of free enterprise. There is no term which is more misused and more misunderstood. One, meaning that is often attached to free enterprise is a meaning that enterprises shall be free to do what they want. That is not the meaning that has historically been attached to

00:15:15.039 - 00:15:33.349

free enterprise or should be attached to it. What we really mean by free enterprise is the freedom of individuals to set up enterprises, the freedom of an individual to engage in an activity. So long as he uses only voluntary methods of getting other individuals to co-operate

00:15:33.359 - 00:15:49.179

with him. And if you want to look at how far we have moved from the basic concept of free enterprise, you can look at the question of how free is anyone to set up an enterprise? You are not free to establish a bank or to go

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into the taxicab business. Unless you can get a certificate of convenience and necessity from the local or state or federal authorities. You cannot become a lawyer or a physician or a plumber or a mortician and you can name any other cases unless you can get a

00:16:07.530 - 00:16:37.460

license from the government to engage in that activity. You cannot go into the business of delivering mail or providing electricity. Oh, what's that? No wonder. Yeah. Well, we have a US postal service that does the usual government governmentally efficient job of delivering it. You cannot go

00:16:37.469 - 00:16:54.219

into the business of delivering mail or providing electricity or of uh uh uh or of providing telephone service. Unless you get a permit and a permission from the government to do so, you cannot raise funds on the capital market and get other people to lend you

00:16:54.229 - 00:17:13.359

money. Unless you go through the sec and fill out the 400 pages of forms that they require. You cannot even today any longer to take the latest restriction on freedom. You cannot engage in voluntary deals with others about the make bets with other people about the

00:17:13.369 - 00:17:46.520

future prices of commodities. Uh uh Delighted to have an echo. Yeah, I have the great advantage of having a microphone. You cannot engage, as I say in future trading unless you get the approval. Uh I forget the name of the latest batch of, of uh of,

00:17:46.530 - 00:18:04.089

of uh initials, but there has recently been set up something like the commodity futures Trading Corporation, which is a government organization approving futures trading. If you want to go away from this question of free enterprise, in that sense, another way of looking at the extent to

00:18:04.099 - 00:18:19.130

which we have moved away from a free society is that 40% of our earnings on the average is co opted by the government. Each and every one of us works from the first of January to something late in April or in May in order to pay

00:18:19.140 - 00:18:36.800

governmental expenses before we can start to work for our own expenses. If you want to look at it, it's still another way the government owns 48% of every corporation in the United States. We talk about ourselves as a free enterprise society. Yet, in terms of the

00:18:36.810 - 00:18:54.579

fundamental question of who owns the means of production in the corporate sector, we are 48% socialist because the corporate tax is 48 percent. What does it mean if I own 1% of a corporation. It means I'm entitled to 1% of the profits and 1% of the

00:18:54.589 - 00:19:14.280

losses. Well, the federal government shares 48% of your profits and 48% of your losses. At least if you have some previous profits to offset those losses. Against. Once. When I was in Yugoslavia some years ago, I calculated that the difference in the degree of socialism in

00:19:14.290 - 00:19:36.010

the United States and communist Yugoslavia was exactly 18% points because the US government took 48% of the profits of every corporation. And the Yugoslav government took whatever 48 plus 18 is, I guess that's uh 66 per uh 66% of the profits of every corporation. And of

00:19:36.020 - 00:19:54.869

course, those numbers grossly understate the role of the government because of its effect in regulating business in areas other than those which derive from its taxation. Let me give you another example of the extent to which we've lost freedom. About a year or so ago. I

00:19:54.880 - 00:20:12.089

had a debate in Washington with that uh uh great saint of the United States Consumer Ralph Nader. And I planted a question on him because I knew what the answer would be. And I wanted to extract the answer. And the question I took up was the

00:20:12.099 - 00:20:31.410

question of state laws requiring people who ride motorcycles to wear motorcycle helmets, to wear helmets. Now, I believe in many ways that law is the best litmus paper. I know to distinguish true believers in individualism from people who do not believe in individualism because this is

00:20:31.420 - 00:20:52.089

a case in which the man riding the motorcycle is risking only his own life. He may be a damn fool to drive that motorcycle without a helmet. But part of freedom and liberty is the freedom to be a damn fool part of. And so I expressed

00:20:52.099 - 00:21:09.780

the view that the state laws which make it compulsory for people who are riding motorcycles to wear helmets was against individual freedom and against the principles of a free society. And asked Ralph Nader, what his opinion was. And Ralph gave the answer, I expected he would,

00:21:09.790 - 00:21:25.530

he said, well, that's very all very well for a different society. But you must realize today that if a motorcycle drive motorcyclist driving down the road without a helmet splashes himself on the pavement, a government subsidized ambulance will come to pick him up, it will take

00:21:25.540 - 00:21:44.800

him to a government subsidized hospital. He will be buried in a government subsidized cemetery and his wife and Children will be supported by government subsidized welfare. And therefore he said, we can't let him. But what he is in effect saying is that every single one of

00:21:44.810 - 00:22:11.119

us bears on the back on our back, a stamp saying property of the US government do not fold, bend or mutilate. And that is essentially the fundamental principle, the fundamental approach that animates the Ralph Naders of our time. The people who want the power to be

00:22:11.130 - 00:22:30.160

in government. You see the example of it all over, you see it in a law which was passed a few years ago which requires the Treasury Department to report to the Congress, a category called tax expenditures. Now, tax expenditures are taxes which are not collected from

00:22:30.170 - 00:22:48.969

you because of various deductions permitted by the law, such deductions as interest or uh uh excess depreciation or whatnot. And the whole principle is that you are after all the property of the US government, you work for the US government and the US government lets you

00:22:48.979 - 00:23:00.489

keep a little of what you earn in order to be sure that they'll keep you working hard for them. But the rest of it is a property of the US government. And if the US government allows you to deduct something from your taxes, well, then it's

00:23:00.500 - 00:23:15.520

providing, that's an expenditure, it's a tax expenditure. It's not a right that you have to keep it. It's not your income, it's theirs. We have gone very far indeed along the road to losing freedom. But now you may say to me, but you're talking only about

00:23:15.530 - 00:23:32.900

economic matters about whether you can enter a profession or an occupation. What about political freedom? What about the freedom of speech? Well, do not be under any misconception in that respect either. How many businessmen has anybody in this room heard in the past 10 years who

00:23:32.910 - 00:23:52.140

have been willing to stand up on public rostrums and take issue with governmental policies. I have heard many a businessman get up and express general sentiments in favor of free enterprise and of a co co competition. I have heard very few get up and criticize particular

00:23:52.150 - 00:24:05.089

measures taken by government and I don't blame them. They would be fools to do it because any businessman who has the nerve to do that has to look over one shoulder and see what the IRS is gonna do to his books the next day. And he

00:24:05.099 - 00:24:16.060

has to look over the other shoulder and see whether the justice department is gonna launch an antitrust suit. And then he has to find two or three more shoulders to see what the FTC is going to do. And you take any other three letters of the

00:24:16.069 - 00:24:34.010

alphabet and you have to ask what they're going to do to you too. So, in fact, you cannot get a businessman today does not have effective freedom of speech. He cannot do it. Well, businessmen don't matter. They're only material business people. What about those people of

00:24:34.020 - 00:24:52.030

whom we are really concerned? The intellectuals. Well, I asked my fellow colleagues, suppose I take a professor from a medical school whose uh whose research and training is largely being financed by the national institutes of health. Do you suppose he wouldn't think three times before he

00:24:52.040 - 00:25:09.650

gives a speech against socialized medicine? Suppose I take one of my colleagues in economics who has been supported by a grant from the National Science Foundation. I personally happen to think there is no justification for the National Science Foundation. I have, as it happens, I haven't

00:25:09.660 - 00:25:25.020

received a grant from them, but I might have, I haven't asked him, it hasn't been that they've turned me down. But nonetheless, do you suppose my colleagues would not be inhibited in speaking out? In fact, I've often said about the only people who have any real

00:25:25.030 - 00:25:49.010

freedom of speech left are people who are in the fortunate position of myself, tenured professors at major private universities on the verge of retirement. Now, let me give you an even more chilling story about freedom of press. Uh The other day, I got a clipping from

00:25:49.020 - 00:26:07.979

a friend of mine, a clipping from an English paper to the effect that the London Times had been prevented from publishing on one day because the unions that controlled the press refused to publish it because the issue carried a story that was critical of the policies

00:26:07.989 - 00:26:27.430

of unions. Now, what, what does that make of freedom of press? And do you mean to say there aren't American newspapers and many of them which would hesitate very much before printing stories and articles that would be regarded as antagonistic by the trade unions on which

00:26:27.439 - 00:26:42.949

they depend to get out their paper. So do not kid yourself. There is no way of separating economic freedom from political freedom if you don't have economic freedom, you don't have political freedom. And, uh the only way you can have, the one is to have the

00:26:42.959 - 00:26:58.670

other now, so much for the present. What about the past, the closest approach to free enterprise we've ever had? In my opinion, the United States was 1/19 century period. And yet you and your Children will hear over and over again in their schools and in their

00:26:58.680 - 00:27:17.760

classes, the myth that that was a terrible period when the robber barons were grinding the poor, miserable people under their heels. That's a myth constructed out of whole cloth. The plain fact is that never in human history, has there been a period when the ordinary man

00:27:18.489 - 00:27:35.030

improved his condition and benefited his life as much as he did during that period of the 19th century, when you had the closest approach to free enterprise that you have ever had. Most of us in this room. I venture to say our beneficiaries of that period.

00:27:35.810 - 00:27:51.760

I speak of myself. My parents came to this country in the 18 nineties, like millions of others, they came with empty hands and they were enabled to find a place in this country and to build a life for themselves and to provide a basis on which

00:27:51.770 - 00:28:11.430

their Children and their children's Children could have a better life. There is no saga in history remotely comparable to the saga of the United States during this era, welcoming millions and millions of people from all over the world and enabling them to find a place for

00:28:11.439 - 00:28:31.890

themselves and to improve their lot. And it was possible only because you had an essentially free society. If the laws and regulations of today, hamstring industry and commerce had been in effect in the 19th century, our standard of living today would be the standard of living

00:28:31.900 - 00:28:47.849

below that of the 19th century. And it would have been impossible to have absorbed the millions of people who came in this country. The question is what produced the shift? Why did we move from that situation in which we had an essentially free society to a

00:28:47.859 - 00:29:08.380

situation in which today we are moving toward an increasing regimentation by government. The fundamental course of the shift in my opinion and the fundamental cause of most government interventions is an unholy coalition between well meaning people seeking to good, do good on the one hand and

00:29:08.390 - 00:29:26.959

special interests, meaning you and me on the other, taking advantage of those activities for our own purposes. You have had the great movement toward government has not come about as a result of people with evil intentions trying to do evil. The great growth of government has

00:29:26.969 - 00:29:46.069

come about out of good people trying to do good. But the method by which they have tried to do good has been basically flawed. They have tried to do good with other people's money and doing good with other people's money. Has two basic flaws in the

00:29:46.079 - 00:30:06.939

first place. You never spend anybody else's money as carefully as you spend your own. So, so a large fraction of that money is inevitably wasted in the second place. And equally important, you cannot do good with other people's money unless you first get the money away

00:30:06.949 - 00:30:29.180

from them. So that force sending a policeman to take the money from somebody's pocket is fundamentally at the basis of the philosophy of the welfare state. And that is why the attempt by good people to do good has led to disastrous results. It was this movement

00:30:29.189 - 00:30:47.270

toward welfare statism that produced the phenomenon in Chile under which ended up in the Allende regime. It is this tendency to try to do good with other people's money, which is, has brought Great Britain once the greatest nation of the earth, the nation, which is a

00:30:47.280 - 00:31:03.689

source of our traditions and our values and our beliefs in a free society has brought Great Britain to the edge of catastrophe to a position in which it will be touch and go. Whether over the next five years, it will be able to maintain a free

00:31:03.699 - 00:31:20.550

society or relapse into collectivism. It's when you start on this road to do good with other people's money, it's easy. At first, you've got a lot of people to pay taxes and a small number of people with whom you're trying to do good. But the later

00:31:20.560 - 00:31:37.400

stages become harder and harder as a number of people there on the receiving end grows, you end up in the position where you're taxing uh 50% of the people to help 50% of the people or really 100% of the people to help to, to, to distribute

00:31:37.410 - 00:32:00.959

benefits to 100%. The reductio aurum of this policy is a proposal to send out a rain of $50 checks to all and sundry in the next few months. But Bill Bowski has told me I've got to keep my comments short. So I've got to move on

00:32:00.969 - 00:32:16.560

and get away from that question to the next question of where do we go from here? People will say, well, you can't turn the clock back. How can you go back? Well, the thing that always amuses me about that argument is that the people who make

00:32:16.569 - 00:32:33.329

it are who, who accuse me and my colleagues of trying to turn the clock back to the 19th century are themselves busily at work trying to turn the clock back to the 18th or the 17th century. Adam Smith 200 years ago in 1776 wrote the wealth

00:32:33.339 - 00:32:54.300

of nations. It was an attack on government controls of his time on mercantilism on tariffs on restrictions on governmental monopolies. But those are exactly the results which the present day reformers are seeking to achieve in any event. That's a foolish question. The real question isn't, are

00:32:54.310 - 00:33:10.589

you turning the clock back or forward. But are you doing the right thing? The answer to those who say are going to turn the clock back is, do you mean to say you should never learn from your mistakes? But people argue, well, this is silly. Technological

00:33:10.599 - 00:33:26.449

changes require big government. You no longer can talk in the terms of the 19th century of a government which only absorbs 3% of federal government of the national income. You have to have big government because of these technological changes. That's a bunch of nonsense. From beginning

00:33:26.459 - 00:33:48.130

to end some technological changes, no doubt require government to engage in activities different from those which they did before. But other technological changes reduce the need for government. The improvements in communication and transportation has greatly reduced the possibility of local monopoly which requires government intervention to

00:33:48.140 - 00:34:05.380

protect consumers. Moreover, if you look at the record, the great gold growth of government has not been in areas dictated by technological change, the great growth of government has been to take money from some people and give it to others. Now, the only way technology has

00:34:05.390 - 00:34:24.570

entered into that is by providing the computers which make it possible to do that. But then other people will say, but how can you talk about stopping this trend? What about big business? Is it really any different whether automobiles are made by General Motors, which is

00:34:24.580 - 00:34:40.449

an enormous bureaucratic enterprise employing thousands of people or whether it's made by an agency of the US government, which is another bureaucratic enterprise. And the answer to that is very simple. Yes, it makes all the difference in the world because there is a fundamental difference between

00:34:40.459 - 00:34:55.790

the two. There is no way in which General Motors can get a dollar from you unless you agree to give it to them. That's a voluntary exchange. They can only get money from you by providing you with something that you value more than the money you

00:34:55.800 - 00:35:14.889

give them if they try to force something on you that you don't want. Well, I asked Mr Henry Ford, what happened when they tried to introduce the INS? On the other hand, the government can get money from you without your consent. They can send policemen to

00:35:14.899 - 00:35:32.419

take it out of your pocket. General Motors doesn't have that power and that is all the difference in the world between a society in which exchange is voluntary and a society in which exchange is not. It's all the reason why the government when it is in

00:35:32.429 - 00:35:51.129

the saddle produces poor quality and high cost. While industry when it is in the saddle produces high quality at low cost because the one does have to satisfy its customers and the other do does not. Where shall we go from? Here? I come to the end.

00:35:51.239 - 00:36:09.760

There are two possible scenarios. The one and I very much fear it's the more likely is that we will continue the direction in which we've been going, that we will continue in the direction of gradual increases in the scope of government of gradual extensions of government

00:36:09.770 - 00:36:29.739

control. If we do continue in that direction, two results are inevitable. One is financial crisis and the other is a loss of freedom. The example of the United Kingdom of England is a frightening example to contemplate England has been moving in this direction. We're about 20

00:36:29.750 - 00:36:48.600

years behind England in this motion. But England has been moving in this direction from earlier than we were moving and has moved much farther and the effects are patent and clear. But at least when England moved in this direction and as a result lost its power

00:36:48.760 - 00:37:06.689

politically and internationally, the United States was there to take over the defense of the free world. But I ask you when the United States follows in that direction, who is going to take over from us? That's one scenario. And I very much fear it's a more

00:37:06.699 - 00:37:26.320

likely one, the other scenario is that we will in fact halt this trend, call a halt to the inevitable to the apparently increasing growth of government, set a limit and hold it back. Now. There are many favorable signs from this point of view. I may say

00:37:26.330 - 00:37:55.270

that the greatest reason for hope that we will not continue in the former direction that we will stop. This. The greatest reason for hope in my opinion is the inefficiency of government many people complain about government waste. I welcome it. I welcome it for two reasons.

00:37:56.300 - 00:38:25.379

In the first place, any efficiency is not a desirable thing. If somebody is doing a bad thing. A great teacher of mine, Harold O telling a mathematical economist once wrote an article on the teaching of statistics and he said pedagogical ability is a vice rather than

00:38:25.389 - 00:38:43.199

a virtue if it is devoted to teaching error. Well, that's the fundamental principle. Government is doing things that we don't want it to do. Well, then the more money it wastes the better. But in the second place, the waste brings home to the public at large.

00:38:44.699 - 00:39:02.689

The fact that government is not an efficient and effective instrument for achieving its objectives. One of the great causes for hope is a growing disillusionment around the country. With the idea that government is the all wise, all powerful big brother who can solve every problem that

00:39:02.699 - 00:39:17.350

comes along that if only you throw enough money at a problem, it'll be resolved. Some four or five or six years ago, John Kenneth Galbraith wrote an article in which he said that there was no problem that New York City had that could not be solved

00:39:17.360 - 00:39:32.540

by a bi by an increase in government spending in New York. Well, since that time, the government, the budget of the city of New York has more than doubled and so have the problems of New York and the one is causing the other effect because what's

00:39:32.550 - 00:39:49.310

happened is that the government has spent more, but that meant that people have less to spend. And since the government spends money less efficiently than individuals spend their own money, it's because government spending has gone up, that the problems have gotten worse. Well, my, my main

00:39:49.320 - 00:40:08.290

point is that this inefficiency, this waste brings home to the public at large, the undesirability of governmental intervention. And I believe that that's a major source of hope is in the widespread rise in the tide of feeling that government is not the appropriate way to solve

00:40:08.300 - 00:40:29.810

our problem. But there are also many unfavorable signs. It's far easier to enact laws than to repeal them. There is uh uh uh the every special interest including you and me has a great resistance to giving up its special privileges. I remember two years ago, roughly

00:40:30.050 - 00:40:48.250

when a shortly after Jerry Ford became president, you may recall, he called a summit conference to do something about the problem of inflation. And I suddenly at that summit conference and heard one representative of one group after another, go to the podium, the representatives of business,

00:40:48.260 - 00:41:02.780

the representative of farmers, the representatives of labor, you name the group, they all went to the podium and they all said the same thing they said, of course, we recognize that in order to stop inflation, we must cut down government spending. And I tell you the

00:41:02.790 - 00:41:22.620

way to cut down government spending is to spend more on me. That was a universal reframe. Many people say that one of the causes for hope is a rising recognition by the business community and business enterprises of the threat to the free enterprise system. I wish

00:41:22.629 - 00:41:40.889

I could believe that, but I do not. I you must recognize the fact business corporations in general are not a defense of free enterprise. On the contrary, they are one of the chief sources of danger. The two greatest enemies of free enterprise in the United States,

00:41:40.899 - 00:41:57.379

in my opinion, have been and are on the one hand, the my fellow intellectuals and on the other hand, the business corporations of this country for opposite reasons. Every one of my fellow intellectuals believes in freedom for himself. He wants free speech, he wants free research.

00:41:57.389 - 00:42:11.389

If I tell him, gee, isn't this a terrible waste that a dozen people are studying the same problem, oughtn't we to have a central planning committee to decide what research projects various individuals ought to undertake? He'll look at me as if I'm crazy and he'll say,

00:42:11.399 - 00:42:26.600

what do you mean? Don't you understand about the value of academic freedom and freedom of research and duplication? Well, when it comes to business, he says, oh, that wasteful competition, that duplication over there, we've got to have a central planning board to make those things intelligent,

00:42:26.610 - 00:42:45.610

sensible. So every intellectual is in favor of freedom for himself and against freedom for anybody else, the business man, the business enterprises and businessmen are very different. Every businessman, every business enterprise is in favor of freedom for everybody else. But when it comes to himself, hm.

00:42:45.699 - 00:43:00.270

That's a different question. We have to have that tariff to protect us against competition from abroad. We have to have that special provision in the tax code. We have to have that subsidy. So businessmen are in favor of freedom for everybody else, but not for themselves.

00:43:00.909 - 00:43:17.399

I say businessmen and I don't mean it, there are many notable exceptions. There are many business leaders who have been extremely farsighted in their understanding of the problem and who have come to the defense of a free enterprise system. But as to the business community in

00:43:17.409 - 00:43:34.760

general, its tendency to take out advertisements us steel company, taking out full page ads to advertise the virtues of free enterprise and then pleading before Congress for an import quota on steel from Japan. The only result of that is for everybody who is fair minded to

00:43:34.770 - 00:43:51.669

say what a bunch of hypocrites and they're right now. I don't blame, don't misunderstand me. I don't blame the business enterprise. I don't blame us steel for seeking to get those special privileges. The managers of us steel have an obligation to their stockholders and they would

00:43:51.679 - 00:44:06.209

be false to that obligation if they did not try to take advantage of the opportunities to get assistance. So I don't blame them, but I blame the rest of us for letting him get away with it. I I say we must recognize what the real problem

00:44:06.219 - 00:44:18.409

is and recognize that that is not a source of strength. I could go on there for that for a long time, but my time is limited. I only want to say, where are we going to end up? I do not know. I think that depends on

00:44:18.419 - 00:44:32.169

a great many things, but I am reminded of a story which will illustrate what we may need. This is one of those shaggy dog stories that I heard some time ago and it has to do with a young and attractive nun who was driving a car

00:44:32.179 - 00:44:45.340

down a road down a superhighway and ran out of gas and she remembered that a mile back on the highway, there had been a gas station. And so she got out of her car and hiked up her habit and walked back up the mile to the

00:44:45.350 - 00:44:56.280

gas station. When she got to the gas station. She found that there was only one young man in attendance there. He said he'd love to help her, but he couldn't leave the gas station because he was the only one. But he said he would try to

00:44:56.290 - 00:45:08.929

find a container in which he could give her some gas. He hunted around the gas station, he couldn't find a decent container. The only thing he could finally found was a little baby's potty that happened to have been left there. So he filled the baby potty

00:45:08.939 - 00:45:19.280

up with gasoline and he gave it to the nun and she took the baby potty and walked a mile down the road to her car. She got to her car and opened the gas tank and started to pour it in. And just at this moment, a

00:45:19.290 - 00:45:38.129

great big Cadillac came barreling down the road at 80 miles an hour and the driver who was looking out couldn't believe what he was seeing. So he jammed on his brakes and stopped and backed up and opened the window and looked out and said, sister, I

00:45:38.139 - 00:46:08.580

only wish I had such faith. Thank you. Do you wanna hand asking questions those questions again? Now we're going to take some questions. I have about 10 min, 10 minutes of questions. Please stand where you are seated, speak loudly so that the question will not have

00:46:08.590 - 00:46:42.800

to be repeated and address it to Doctor Friedman and we believe in freedom. So those of you who have to leave. Thank you for coming. Goodbye. Yes. No, I don't believe so at all. I believe that the cost of

00:46:42.810 - 00:46:58.310

having troops overseas in Japan and elsewhere has undoubtedly imposed a burden on all of us. It means that there's a part of our national income that is not available for other purposes, but there is no special way in which that impinges on us steel and there

00:46:58.320 - 00:47:18.000

is no way in which that justifies anything but complete free trade in steel. The point of the matter is that, that illustrates the great fallacy in people's analysis of the economic of economic problems. Almost all fallacies arise out of overemphasizing the visible effects of policy and

00:47:18.010 - 00:47:37.300

under emphasizing the invisible effects. If us steel is uh has competition from Japan. If Japan sends over steel at relatively low cost, that does of course hurt us steel, us steel can produce less. But on the other hand, it means in the first place that consumers

00:47:37.310 - 00:47:53.600

of steel are benefited by having steel at lower price in the second place and equally important. It means that Japan has dollars to spend in the United States which increases the demand for other goods, which means that other industries in the United States are benefited by

00:47:53.610 - 00:48:10.270

being able to sell more to Japan. I understand the US steel's personal interest, but from the national point of view, I do not believe there is any justification whatsoever. I am uh one with Adam Smith and believing that the best course of action for this nation

00:48:10.419 - 00:48:27.389

would be complete free trade throughout in every area unilaterally achieved and not by means of international negotiation. We're a great nation, we ought to set a standard for the world. You know, you take us steel. Let me take some other cases. Do you think it really

00:48:27.399 - 00:48:42.010

befits us as a great nation to go worrying about little Hong Kong and saying you mustn't compete with us by sending over your textiles. You have to set quotas on them. That isn't the way we should behave as a great nation. The argument is a very

00:48:42.020 - 00:48:57.209

tempting one. But we must beware. We believe in freedom and we must not be selective in our beliefs. We must not say we believe in freedom when it benefits us, but we don't believe in it when it hurts us because then what we're gonna get is

00:48:57.219 - 00:49:43.520

a collection of all those things that hurt us. Yes, I don't know that Pepperdine University can do it because I don't believe that that is really the function of Pepperdine University. I think Pepperdine University and every other university has to try to teach uh what

00:49:43.530 - 00:49:59.969

it can to the students it has. But I believe that the problem you're raising is a very important one and goes to a very different question. We are in a paradox from this point of view. We have a socialist school system. How do we expect a

00:49:59.979 - 00:50:19.090

socialist school system to teach free enterprise principles? It can't, every institution is going to act in accordance with its own nature. And one of the great problems we have, in my opinion, in the area you're talking about is introducing a reform in the public so-called public

00:50:19.100 - 00:50:37.260

school system. I say so called because we mean governmental, you know, supposedly Pepperdine is a private institution and uh UCL A is a public institution. That's a bunch of nonsense. Pepperdine is every much as, every bit, as much a public institution as UCL A is, it

00:50:37.270 - 00:50:56.360

serves the public and UCL A is every bit as much a private institution. It serves the interests of the people who are employed by UCL. A. In fact, in a fundamental way, pepper die UCL A is far more private than Pepperdine is because Pepperdine has to

00:50:56.370 - 00:51:10.389

satisfy the public or it doesn't exist. And the UCL A, well, it does have to satisfy the public in a certain way, but it's only the legislature and the taxpaying public rather than the public who comes to its schools. But I go back to your question.

00:51:10.399 - 00:51:27.620

I think the fundamental thing we need in your, uh in your question is an introduction of a voucher system for schooling, a system under which parents would be able to, if they chose to send their Children to Nongovernmental schools would be able to get some part

00:51:27.629 - 00:51:48.030

of the money which they are saving the community and thus have free choice for the schools to which they send their Children. We have one more question we can take according to Bill and in, in the, in the principles that we have been following. How much

00:51:48.040 - 00:52:13.620

am I bid? Yes. Many of us agree with what resource. Yes. Well, there a question is a very good one. It's what recourse do we have personally against government interference? We have two recourses one of the points I should have mentioned of hope is the extraordinary

00:52:13.629 - 00:52:35.820

ingenuity of the American public in finding ways to get around laws years ago. Right after the war in 1947 on our way to the founding meeting of the Montpellier and Society, my colleague and friend George Stigler, and I went first to Britain and then to France

00:52:36.010 - 00:52:49.229

and then to Switzerland. And after we had been in Britain, which at that time was in the throes of the post war period of extensive controls, rationing and so on. And in France, which in that period was in the throes of extensive black markets. And then

00:52:49.239 - 00:53:08.889

to Switzerland. George said now I know the difference between Britain, France and the United States. He said the fundamental difference is that the British obey all laws, good, bad or indifferent. The French obey no laws, good, bad or indifferent. The Americans obey the good laws. That's

00:53:08.899 - 00:53:22.760

one recourse and it's a very important one. The second is, and now I'm going to take you more seriously on a different level because I think the real question is what can we as a practical matter do to try to promote something which will stop this

00:53:22.770 - 00:53:40.479

process? I think we have two problems. We have a long range problem of changing the attitudes and opinions of people. A fundamental reason for the drift we've been in has been a change in philosophy from a doctrine of individual responsibility to a doctrine of social responsibility.

00:53:40.889 - 00:53:55.360

And that is a long range project of changing that opinion. I think such change is underway. I see it on all sides among the young, among others. The question is in the interim, how do we hold the fort to give that, that development of ideas a

00:53:55.370 - 00:54:13.550

chance to work? And there I must say if you'll pardon me in going into specifics, I think the most promising idea is one which was tried out here three years ago under the sponsorship of Ronnie Reagan prop one, a proposal to have a constitutional amendment that

00:54:13.560 - 00:54:37.520

would set a limit to spending at the state level as a fraction of the income of the people. We tried that last fall in Michigan as proposal C we were beaten in California. We were beaten in Michigan in both cases by the same groups, namely primarily

00:54:37.530 - 00:54:55.159

by the educational association, the association of, of the uh school teachers, not the teachers themselves, but their officials operating behind the cloak. I am sorry to say of the league of women voters, an organization which has for long been in favor of expanding the scope of

00:54:55.169 - 00:55:10.780

government and therefore was willing to offer itself for this purpose. We were beaten those times, but we gotta keep on trying. If you look at the way in which the collectivist measures have been adopted, they have been beaten, they have been beaten, they have been beaten

00:55:11.110 - 00:55:24.709

and they have kept on pushing them until finally they get past, we must take a leaf of their book and do the same. And I think the most promising way of trying to hold the fort for the time being, preventing this from going farther is through

00:55:24.719 - 00:55:47.219

pushing for tax and or rather spending limitation amendments on both the state level and on the federal level, there is widespread, there is widespread interest in this. In many states. The Southern Governor's conference had a task force which worked out an amendment for the federal constitution

00:55:47.229 - 00:56:02.169

and which was endorsed at the last meeting of the Southern Governor's conference. I think this is not an idea which is impossible. I think of all the things on the horizon. It's the most promising single political initiative, not as a final solution but as a stop

00:56:02.179 - 00:56:44.399

gap to give us time to get the final solution, which must be a change in ideas. Thank you very much. Please remain. Please remain standing. Doctor Friedman has a book for all of the Associates. His book on public policy. There's no such thing as

00:56:44.409 - 00:57:03.370

a free lunch at the door and it has something in common with President Carter in that in that it includes his famous essay in his famous interview in Playboy magazine. This group of Pepperdine Associates next meets in February 1978. I don't know what we do for

00:57:03.379 - 00:57:23.949

an encore with this Nobel laureate, but I can tell you we have been in touch with Alexander Sosa Kittson. Now, tonight, tonight, we have raised over $1 million. I'll tell you how there are 428 428 associates at $1000. Each seven of you are founding life members

00:57:23.959 - 00:57:41.879

following the US C CAL tech pattern of a $10,000.01 time gift. They are Mrs Frank Roger Seaver, Fritz Hunt singer, Senior Mark C bloom, Senior George A Evans Leonard H Strauss Richard Ralphs, George W Elkins. That's $70,000. And then one person here tonight choosing to remain

00:57:41.889 - 00:58:15.840

anonymous has given us a gift of $557,000 as in matching amount for 1 million $55,000. Now, while you're standing, while you're standing, if you'll stop the music, we're going to ask the person who in my judgment has done more in 40 years given with his wife.

00:58:15.850 - 00:58:41.469

22 of those years to this school has done more to make this evening possible than any other person. Our chancellor, Doctor Norville Young, as we have the benediction, Doctor Young. Thank you. Shall we pray dear God. We are thankful that we have a country in which

00:58:41.479 - 00:59:12.090

a man who is free like Milton Friedman can speak his mind to us as free to hear and to act. And we are thankful for these 428 associates who are joining us at Pepperdine in the battle against ignorance, fear, prejudice. Superstition and hate and collectivism. And

00:59:12.100 - 00:59:31.820

we pray that this night may be multiplied to the blessing. Not only of the thousands of people who will come under the influence of those touched by teachers, like those that have been presented and who serve on our faculties, but will reach many others even to

00:59:31.830 - 00:59:44.229

those yet unborn and that our country may always be free. We make this prayer in the master's name. Amen.