Milton Friedman on Free Trade

Libertarian Economist


Chain of producers making a pencil need not like each other

Milton Friedman provided a powerful answer to the argument that government is necessary to get people to cooperate together for the greater good. In Free to Choose, an essay about the making of a pencil illustrates the power of human economic freedom--and the damage government can do when it replaces the decision making of free individuals:

"None of the thousands of persons involved in producing the pencil performed his task because he wanted a pencil. Some among them never saw a pencil and police enforced the orders that were not given. These people live in many lands, speak different languages, practice different religions, may even hate one another--yet none of these differences prevented them from cooperating to produce a pencil."

Source: America by Heart, by Sarah Palin, p. 87-88 , Nov 23, 2010

Protectionist trade policies caused the Great Depression

Bad monetary policy and protectionist trade policies by the government, according to Friedman, caused the Great Depression. The public, however, believed that the economic breakdown was a failure of free market capitalism. This led to a loss of confidence in freedom and an increase in confidence in government. "Emphasis on the responsibility of the individual for his own fate was replaced by emphasis on the individual as a pawn buffeted by forces beyond his control."

Friedman writes that Americans still have time to make the choice between freedom and socialism. "We have not yet reached the point of no return." He challenges all American to make their choice wisely:

"Will our golden age come to an end in a relapse into the tyranny and misery that has always been, and remains today, the state of most mankind? Or shall we have the wisdom, the foresight, and the courage to change our course, to learn from experience, and to benefit from a "rebirth of freedom"?"

Source: Saving Freedom, by Jim DeMint, p.226 , Jul 4, 2009

Floating foreign exchange rate is necessary for free trade

One mechanism for free trade is an international gold standard, [but that] is neither feasible nor desirable. The other is a system of freely floating exchange rates determined in the market without governmental intervention. This is the proper free- market counterpart to the monetary rule [of free supply]. If we do not adopt it, we shall inevitably fail to expand the area of free trade and shall sooner or later be introduced to impose widespread direct controls over trade.
Source: Capitalism and Freedom, by Milton Friedman, p. 67 , Nov 15, 1962

Tariffs & trade restrictions impede economic growth

Governmental measures constitute the major impediments to economic growth. Tariffs and other restrictions on international trade, high tax burdens and a complex and inequitable tax structure, regulatory commissions government price and wage fixing, and a host of other measures give individuals an incentive to misuse and misdirect resources, and distort the investment of new savings. What we urgently need, for both economic stability and growth, is a reduction of government intervention, not an increase
Source: Capitalism and Freedom, by Milton Friedman, p. 38 , Nov 15, 1962

Interfering with trade is the road to authoritarianism

Interferences with international trade appear innocuous; they can get the support of people who are otherwise apprehensive of interference by government into economic affairs; many a business man even regards them as part of the "American Way of Life"; yet there are few interferences which are capable of spreading so far and ultimately being so destructive of free enterprise. There is much experience to suggest that the most effective way to convert a market economy into an authoritarian economic society is to start by imposing direct controls on foreign exchange. This one step leads inevitably to the rationing of imports, to control over domestic production that uses imported products or that produces substitutes for imports, and so on in a never-ending spiral.
Source: Capitalism and Freedom, by Milton Friedman, p. 57 , Nov 15, 1962

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Page last updated: Apr 30, 2021