Fifty years ago this week a stunned america was still groping from the greatest stock market crash in history. It had happened 80 days before. In 1980 historians are still debating the cause of the crash and the nearly 10- year depression that followed. Now comes eager, aggressive Nobel-prize laureate Milton Friedman (who has invented a whole new monetarist economic school of his own) to try to persuade us that the cause was fairly simple. It wasn't a failure of capitalism; it was a failure of government policy.
Mr. Friedman is launched on 10 TV shows, each an hour long, hailed by the conservative Reader's Digest and the Wall Street Journal. He is trying to sell his laissez-faire economics to the masses. He is attractive, and articulate, and engaged in a kind of long-range duel with John Kenneth Galbraith, who gave his own left-of-center interpretation of the same field in a TV series, in 13 parts, in 1977. Nearly everything Mr. Galbraith said Mr. Friedman contradicts. It's good fun and may stimulate debate.
Mr. Friedman repeats views expressed before. Asked last August whether he thought the 1929 crash could reoccur, he said not likely. What caused it? He blamed it on an overly stringent central bank policy -- the government's fault. "The depression was produced by a monetary policy that permitted the money supply to fall by one-third between 1929 and 1933," he said. Whichever political party is in power, he continued, "the odds are minuscule that shortages of little bits of green paper [i.e. dollars] will again be the limiting factor" on business activity. Collapse of share prices in October, 1929, he said, was "only a small aspect" of why the depression was so severe.
Mr. Friedman's TV series started Jan. 11 accompanied by publication of his book, "Free to Choose," which covers substantially the same ground. It is an attack on centralized government and planning: a forceful conservative surge against Big Government. As the Reader's Digest put it, "renowned economist Milton Friedman shows us the path back to our heritage."
Economist Robert L. Heilbroner takes an opposite view. In a provocative article in the New Yorker ("Boom and Crash") of Aug. 28, 1978, he argued that we are in a new era. Old- fashioned capitalism almost automatically produced a slump, he says, at the end of one of its recurrent business cycles. But things have changed since 1929: now capitalism is apt to produce inflation rather than a crash, or maybe a concurrent recession and inflation, as now. Mr. Heilbroner lists several different kinds of capitalism in his analysis: "competitive capitalism" (1700 to 1875); "monopoly capitalism" (1875-1930); then we had "welfare capitalism" to the middle '70s. Now, according to his theory, the shortage of oil, government intervention, the rise in world population will produce a new kind of approach -- "planned capitalism."
It is the idea of bureaucratic centralized planning from which Mr. Friedman recoils with loathing. Alfred Malabre summarizes Friedman's views in the Wall Street Journal: Government controls? -- get rid of them; the welfare system? -- scrap it; egalitarianism? -- it's dangerous; public education? -- overhaul it; consumer protection? -- don't trust Uncle Sam or Ralph Nader; worker protection? -- don't trust the unions; inflation? -- control the money supply. How do you sustain individual freedom? -- battle bureaucratic bloat!
Mr. Friedman starts straight off in his new series: he is in free enterprise Hong Kong and extols it. There's no eight-hour day for the chinese and little bureaucratic interference. He takes us nostalgically back to the old New York sweat shops: his mother worked in one, he says; sure they labored hard but it was the path of ambitious immigrants into the free- enterprising new world.
He is plain-spoken. The Associated Press notes that, "with characteristic bluntness," Mr. Friedman declared that government subsidies for the Public Broadcasting Service were a waste of money -- "I have strongly and for long been opposed to government subsidies for PBS." PBS distributes Mr. Friedman's series. Its production was subsidized by private foundations and corporations.
Startled interviewers asked how he felt about the government's partial grain embargo of Russia. He doesn't think it will work -- besides, it will weaken the "system of free markets that is our greatest source of strength."
I wish Mr. Friedman success. Not that I agree with him (I don't) but because it is splendid to stir debate and to make these big issues lively.