“When greed is seen as acceptable even praiseworthy there is clearly something wrong with our collective value system.” Dalai Lama Beyond Religion, Ethics for a Whole World.
“All matter has condensed out of energy, all changes are driven by energy conversion, and all structures originate from energy fluctuations.” Reiner Kummel, The Second Law of Economics, Energy, Entropy, and the Origins of Wealth.
Figure 1: 12 and 13 year old boys working as coal miners. We see these boys as vulnerable children who need to be in free public schools getting an education. Milton Friedman saw them as production capital or consumer units. They do not need an education beyond what improves their exploitable economic productivity and consumption.
Years ago I read a book review of a “doomer” book, one of those pesky evidence-based books which describe very serious problems. I don’t recall the subject matter, global warming, over fishing, ocean dead zones, ocean acidification, species extinction, mountaintop removal, tar sands exploitation, inequitable distribution of wealth and income, the concentration of wealth and power, the rise of finance over the real economy or whether it documented some other human misbehavior. It doesn’t matter. The reviewer criticized the author for spending about 90% of the book describing the problem and only 10 percent detailing solutions. I recall the reviewer’s attitude was we all get it and now need to figure out how to fix it. The reviewer was wrong. The author was proposing fairly radical solutions apparently to a fairly serious existential crisis and it is pretty obvious that most Americans and certainly our main stream media did not get it. In order to convince us to modify our behavior the author was right to spend the energy convincing us that there actually was a problem that needed solving in the first place and that the problem was of sufficient magnitude to require radical solutions.
This reviewer would have loved Milton Friedman’s book Capitalism and Freedom. Friedman proposed all manner of extreme “solutions” to unspecified problems which apparently do not exist. Indeed, he didn’t really claim that there were any problems other than that some human behavior and government policy were at odds with his personal “principles” or ideology. One of his “solutions” proposed privatizing our public national parks. There is no description of the problem this remarkably radical policy would solve but any rational person can appreciate the huge problems it would create. The best possible outcome for Americans is that some private corporation exploits our former commonly held wealth by turning it into The Dells in Wisconsin, Disney Land or Las Vegas festooning Half Dome in neon lights and destroying its natural beauty for generations while exacerbating the well documented and quite serious problem of wealth inequality. The more likely outcome though would be that a powerful, rich and well-connected corporation like Halliburton or Koch Industries takes it over, clear cuts the forests and blows up Half Dome to extract whatever mineral wealth they can for obscene profit which they then use to buy off even more politicians to begin the next round of public lands sell off. Exploitive corporations would thus destroy Yosemite for all future humans as well as for us. Such a policy benefits the wealthy and powerful elites, or “Greedy Bastards” according the Dylan Ratigan in his appropriately titled book. What did Friedman think would happen?
Another “solution” Friedman proposed is to close all free public schools. Friedman makes clear that humans have value as consumer units and production capital. “Schooling … is a form of investment in human capital precisely analogous to investment in machinery, buildings, or other forms of non-human capital. Its function is to raise the economic productivity of the human being. …This … is the economic incentive to invest capital whether in the form of a machine or a human being. In both cases, extra returns must be balanced against the costs of acquiring them.” Friedman saw those 12 and 13 year old boys in Figure 1 being used productively; educating them further would not likely increase their productivity or their value to the economy and the greedy bastards. As a bonus they would use their meager wages as good consumer units. Why should they be in school? By contrast, we see them as children who need to be in school getting an education. We see that education is rewarding in its own right. It enriches us, improves our ability to think critically and skeptically, teaches us moral and ethical values such as compassion and cooperation, and the difference between greed and self-interest, satisfies our curiosity, and opens our minds to a wider world of possibilities. Education helps us to be better people not better machines. Friedman himself might have benefitted from such an education.
Friedman writes: “In recent years, there has been an encouraging development in the U. S. of private loans to college students.” This “encouraging development” has increased the cost of an education faster than the inflation rate and created yet another mechanism whereby Wall Street bankers can productively increase total indebtedness and dig their talons into America’s youth before they even graduate. Student loans add another layer of usury profit takers to the struggle to get an education. Today there is about one trillion dollars in outstanding student loan debt. Students are graduating with an average of $26,600 of debt (2011 graduates). 41 percent of these loans are in default at some point during the first five years of repayment [1]. This may be the debt that precipitates the next economic crisis especially as Friedman’s greedy bastards squeeze our country’s youth from two directions, saddling them with debt on the outset of their careers and sending their jobs overseas.
In the introduction, Friedman wrote “The great advances of civilization, whether in architecture or painting, in science or literature, in industry or agriculture, have never come from centralized government.” He wrote these words in 1962, five years after the Soviet Union, an undemocratic, communist centralized government with no laissez faire free market, sent the Sputnik satellite into an elliptical low Earth orbit on October 4, 1957 launching humankind into the Space Age. If Friedman had an adequate education himself he might at least have been able to keep up with current events even if he was substantially ignorant of history. Two very different centralized governments with very different economies, the Soviet Union and the United States, launched the nuclear age. The fact is Friedman’s blanket statement is false. Friedman didn’t research this; he made it up.
Before the discovery of fire and stone tools, humans spent all their time and energy satisfying their needs and those of their clan. Today, with the exploitation of fossil fuels and other energy sources, each American enjoys on average the equivalent of about 100 energy slaves [2]. This frees up large numbers of people to engage in the arts and sciences, to satisfy their creative urges and their curiosity. The big advances were generally initiated, funded and organized by governments while other advances were made by individuals in their garages. Corporations contribute their share to be sure. But corporate contributions are muted by the many corporate disasters such as tetraethyl lead gasoline additive [3]. Considering only the imminent disaster of human-caused global warming with a likely price tag exceeding $1,200 Trillion [4], it would be a very difficult argument to make that positive contributions from corporations exceed their negative value to humanity. Meanwhile multiple different democratic governments cooperatively organize the International Space Station and the Large Hadron Collider. The necessary ingredient to all of human advances in the arts and sciences is not any specific economic policy and pointedly it is not greed but increasing energy flows. The word “energy” does not appear in Friedman’s vocabulary.
The human economy is an open complex non-linear non equilibrium thermodynamic system [5] which is required to dissipate a substantial energy gradient and which outputs significant entropy into the environment. The economy is not static and it is not a closed system. Friedman understood the economy as a closed static system. In his 1953 paper describing his methodology [6], Friedman placed economics in the realm of pseudo-science akin to astrology and distinct from science. His laissez-faire free market capitalism is an ideological construct which cannot exist in the real world. It literally does not account for energy flows or entropy. Friedman’s first mistake was being an ideologue. As I’ve pointed out as have countless others before me, ideology makes smart people stupid. His second mistake was adopting an ideology based on an economic model which is physically impossible. His third mistake was expounding an ideology in which greed “is seen as acceptable and even praiseworthy.”
On corporate power and unions Friedman observed “The most important fact about enterprise monopoly is its relative unimportance from the point of view of the economy as a whole.” He then added “Unions have therefore not only harmed the public at large and workers as a whole by distorting the use of labor; they have also made the incomes of the working class more unequal by reducing opportunities for the most disadvantaged workers.” To be precise, enterprise monopoly coal companies put pre-teenaged boys in very dangerous situations as miners and it was the labor movement that freed them. Just twenty pages after these two bizarre statements Friedman wrote perhaps the only accurate passage in his book, “… a producer group tends to be more concentrated politically than a consumer group. This is an obvious point often made and yet one whose importance cannot be overstressed. Each of us is a producer and also a consumer. However, we are much more specialized and devote a much larger fraction of our attention to our activity as a producer than a consumer. …In consequence, in the absence of any general arrangements to offset the pressure of special interests, producer groups will invariably have a much stronger influence on legislative action and the powers that be….” This one observation thoroughly contradicts the rest of his book. And this situation only presumes self-interest on the part of producers rather than the greed which is actually in play.
In the 1982 reprint of his book Friedman complained that when first published in 1962 it was ignored. That happens to be the most rational response. If we contrast this initial reaction to one of the weirdest books ever written with the initial reaction to one of the most important, The Limits to Growth, which sparked immediate serious discussion, we gain some respect for human instincts and intelligence. The public was right to dismiss Capitalism and Freedom as useless and take interest in The Limits to Growth as worthy of consideration. Unfortunately, Friedman’s book, recommending elimination of corporate taxes, a reduction in taxes on the extremely wealthy, deregulation, elimination of unions and the sell-off of national parks, while solving no apparent problem and creating no advantage to human society, became a hit with the extremely wealthy and powerful. The Limits to Growth, being a threat to neo-classical economists as well as the wealthy, was attacked politically. Since the Reagan Administration Friedman’s book has been widely read by conservatives and his philosophy has become the prevailing view of the American conservative movement specifically because it justified the greed and corruption of concentrated wealth and power.
In a previous article I showed [6] that Friedman’s methodology was equivalent to astrology or pseudo-science. In this article I’ve tried to show that it is not based on fact nor does it have any morally redeeming quality. It is based on a perverse adulation of greed.
Reiner Kummel [2] writes that “Global Society faces a threefold challenge: provide sufficient energy for the future, observe the biosphere’s limited capacity of absorbing pollution, and prevent the growth of social tensions.” Milton Friedman did not acknowledge these problems and his policies uniformly make matters worse.
To be fair to Friedman, he did not invent greed and the aggregation of wealth and power any more than capitalism itself invent these conditions. Freidman, appalled by totalitarianism, thoughtlessly embraced its apparent opposite, unregulated capitalism, not recognizing that these are the same thing. In fact [5], “individuals and their freedoms are destroyed as collective dictatorial or market-based organizations are built.” Friedman as it happens is just another in a long line of sycophants. Besides Freidman, the greedy bastards have found plenty of politicians, economists and lobbyists to champion their interests. If humankind has evolved with one negative characteristic it is greed. And if we are going to survive as a species we will have to learn how to control it. The problem space for humanity can be thus summarized with that one word, greed.
For the solution space I quote Schneider and Sagan [5]:
“Can humans live sustainably on an ever more crowded earth? There are some reasons for hope. …[F]orests have robust means of survival from which we may learn. One of the most crucial is to slow down our growth rates and integrate more deeply with diverse climax ecosystems. Since we have expanded by use of intelligence and detection of not necessarily sustainable gradients, continued civilization is not a foregone conclusion. To ensure it, we must follow in the footsteps of our successful planetmates. The most successful long-term ecologies on Earth involve photosynthesis; indeed, our oil economy freeloads on photosynthetic fossil fuels, buried treasures that the rest of life passed by. But these treasures are running out. Moreover, access to them is predicated on oligarchic international alliances unafraid to politicize their interests under nationalistic, religious, and democratic banners.”
They continue, to survive sustainably they recommend that we must [5]:
“Use sustainable energy gradients
Control our human population
Increase energy efficiency
Recycle
Close leaky cycles whenever possible
Develop ecology as a worldview
Encourage cultural and biological diversity
Encourage interconnectivity.”
I would add to this that we must overcome the greed inherent in both totalitarian regimes and in corporate capitalism and for all that embedded in the human genome. We are what we are, true, but that is why we each have a brain. We can start to use it by recognizing what we all intrinsically know is true that greed is evil. We have to stop supporting politicians and political parties which praise greed. We can only make capitalism work for us if we control its excesses via a democratic process. That means that regulation is a requirement.
[1] http://www.asa.org/policy/resources/stats/default.aspx
[2] Reiner Kummel, The Second Law of Economics, Energy, Entropy, and the Origins of Wealth, Springer, 2011.
[3] http://en.wikipedia.org/wiki/Tetra-ethyl_lead
[4] In 2009, researchers from the International Institute for Environment and Development and Grantham Institute for Climate Change estimated the cost of human-caused global warming to have a mean net present value of $1,240 trillion assuming the IPCC A2 scenario. Since this report was published, there has been nothing but bad news. Sea level estimates have tripled and the 2012 arctic sea ice loss and its implications have surprised everybody and we’ve done nothing except increase our carbon emissions. http://pubs.iied.org/pdfs/11501IIED.pdf
[5] Eric Schneider and Dorion Sagan, Into the Cool, Energy Flow, Thermodynamics and Life, University of Chicago Press, 2005.
[6] Tony Noerpel, The Con in Economics, March 5, 2013, http://brleader.com/?p=10734
