hello, i'm robert mackenzie. last week in this series, milton friedman, the distinguished economist, took us to hong kong to see a free market system in which had a great deal of confidence and faith. this week, he takes us traveling again.

india, japan to europe to see what happens. in his view, when governments decide can plan and control the economic activities of their peoples. and after the film, we return here to the harper library, the university of chicago to discuss and to debate the ideas of milton friedman. it's harvest time in japanese farmers gather their crops for

the rice market in kyoto. of course, they'll try to get as much for it as possible, and the buyers will try to buy it as cheaply as possible. that's how markets are supposed to work. that's what adam smith, the scotsman who turned economics into a modern science, observed 200 years ago. he observed something, too. in every country, it is always and must be the interest of the great body of people to buy whatever they want. of those who sell the cheapest. i got the proposition was so very manifest that it ridiculous to take any pains to prove it. nor could it ever have been called in question. and not the interested sophistry. merchants and manufacturers confounded. the common sense of mankind. their interest is, in this respect, directly opposite to that of the great body of people.

adams flash of genius was to see how prices that emerged in the market, the prices of goods, the of labor, the cost of transport. it could coordinate the activities. millions of independent people, strangers, one another without anybody telling them what to do. his key idea was that self-interest could produce an orderly society benefiting everybody. it was as though there were an invisible hand at work. the invisible hand is a phrase that was introduced by adam smith and his great book, the wealth of nations, in which he talked about the way in which individuals who intended only to pursue their own interests were led by an invisible hand to promote the public, which was no part of their intention. he thought he was talking the economic market about the market in which people buy and sell.

and he was pointing out that in order for a butcher or a baker or a candlestick maker to an income, he had to produce something that somebody wanted to buy. and therefore, in the process of promoting his own interests or to his own profit, he ended up serving the interests of his customers. when smith published the wealth of nations, britain was still a largely a rural and placid place. but the industrial revolution was already getting started, and standards of life were beginning to rise. one obstacle was the trade with other nations was still tightly controlled. merchants in the home market had persuaded the government of the day to heavy duties and taxes on all foreign imports in order to insure themselves a protected market. one of the results was to turn

britain, a nation of lawbreakers. smuggling was a national pastime brandy, wines, tobacco, anything with a heavy customs duty on it. for years, the revenue man fought a losing battle along the shores and inlets of the british isles. in 1946, after years of argument and partial success, the followers of adam smith finally persuaded the british parliament, to remove all duties on goods imported from abroad. britain embarked on complete free trade, giving a further push to the rising standard of life. what happened in britain, as a consequence of releasing the tremendous force of self-interest, had the unintended effect of benefiting millions of people all over the world. and by 1851, the evidence was proudly on show that the great crystal palace exhibition.

for free trade enabled britain to become the workplace of the world. but was it all an accident? don't think it was. consider what happened in 1868. on the other side of the world. in japan. for the preceding 300 years the japanese had lived in almost complete isolation. they had discouraged visitors from other nations, especially from the west west. the result was that by standards of the west, japan was backward. but. it was a feudal society with lords and serfs. and woe betide anyone who tried to change the order of things.

women were third class citizens. in 1868, a new generation of rulers decided that the time had come for japan to make contact with the outside world and with the arrival of the first foreign traders from the west. things began to change. the japanese. the british trading pattern. because britain was the leading nation of the world and. so free came to japan. japan became a magnet for other people's ideas and developments. one of the first traditional industries to feel the was leaving from europe. the japanese imported the jack method, a way of programing loom to control the accuracy of the wave. and so to standardize the output. workers did well in the new atmosphere, and so did their

employers. the adoption of mass production techniques meant and workers were able to move of the traditional industries and into the new industries which all to the trade boom. none of us can help affected by the intellectual atmosphere that we breathe in the middle of the century. when japan ended, her self-imposed isolation and entered the modern age. it never occurred to her leaders to follow other course than that of free enterprise and free markets. that was the intellectual atmosphere, the time created by success in applying principles of adam smith. in 1948, when india achieved

independence. her leaders had all been trained in great britain. they had sat at the feet of harold laski and his associates at the london school of economics, or of their counterparts at oxford and cambridge. it never occurred to them to follow any other course than that of central planning and government control. that was the intellectual atmosphere of the time for me. but one. and the intellectual seed took root as it grew. it needed to be honored, even worshiped. every year on the anniversary of gandhi's birth, people all over india do just that in homage to the great mahatma. they sit and spin using methods handed through the centuries on the net. but it's more than just a symbol of honoring the past. it typifies the policy that they are actually following. the new government in 1948 decided that india's traditional

weaving industry and its workers should be protected. 20th century industrialization. what were the consequences of that policy policy. this is india today. 30 years after winning independence. and these are scenes in a very typical indian, one of thousands. it's called. and a computer. and it's about a thousand miles south of the capital, delhi. this is not the of life the government intended to perpetuate. but it is one result of their policy by subsidizing the cotton and the villager spin and the that they weave, they made it difficult modern industry to develop pool repair for repair for the repair auto repair for repair.

for the repair. we're sorry it or the repair for repair. i interviewed this is sizing it's an essential in cloth production where the yarn is smoothed clean only. relative to the a modern machine could do the same thing in 100th of the time. the result is government planning to modernize industry. is that the number of handloom is roughly doubled in the first 30 years after india's independence. today, in thousands of villages throughout india, the sound of hand looms can be heard from early in the morning till, late at night. in this village alone, there are more than 3000 handloom and operational. since 1948. three general sessions of villagers have sat these loans

making cloth with that never vary. using methods that never change. there's nothing wrong with. this activity provided it survives the test of the market, provided it's way in which these people can use their abilities and their energies most effectively. after all, in japan, where the government has not specially encouraged the handloom industry, there remains a very small but very productive handloom segment. the trouble here is that this industry exists because the government has and supported it because it has in effect imposed taxes, direct and indirect, on the rest of the people of india. people who are no better off than these people are in order to enable this active state to continue. other industries, both textile industries and industries of a variety of kinds, have been restricted explicitly, kept back, prevented from providing

more productive employment. in order to make room for this industry, the effect has been to inhibit the development. to prevent the growth. to prevent the dynamic activity that could otherwise develop out of the energies and abilities of the people. of india. this looks a factory, but it's also home for the people who work here. when they're not sitting at their looms. they eat and sleep in a corner of this hut. this. throughout the world, governments always profess to be forward looking. in practice, they are always backward looking. these are protecting the industries that exist or making sure that whatever ventures they have decided to undertake are

encouraged and. this occurs at the expense of. the kind of healthy development of new dance adapted industry that would surely occur if the market were allowed to operate freely. if it were allowed to separate out the unsuccessful ventures from the successful ones, discouraging the unsuccessful and encouraging the successful. india has tremendous economic and human potential every bit as much as japan had a century ago. the human tragedy is that an india that potential has been stifled by the straitjacket, by an all wise and paternalistic government. central planning practice has condemned india's masses to poverty and misery.

we know what has happened in japan. free trade off a process that revolutionized japan and the lives of its people. improvement in material went hand in hand with the elimination of the rigid social structure a century ago. it's no has always economic freedom promote human freedom and in the meantime what has happened to the japanese weaving industry. this is how textiles start life in a japanese weaving shed today. a design for cloth is placed on a drum as it revolves. it is scanned by an electric eye. each color, each variation. and the pattern and texture is transformed faithfully to a

computer. it's all that. the modern loom of japan requires. this is fitted with electronics that make it one of the most sophisticated of its sort in the world. the fabric it produces is the best silk of its kind. thanks to the speed and efficiency of these machines, the price of the silk is competitive. the workers are highly skilled and well paid. with the new technology, very little. a loom like this produce. this piece will become the sash of a traditional bridal gown. these are machine made products, but by any standards, they are beautiful.

can stand comparison with the very finest work of the handloom and it's not merely the end product itself. that's remarkable. the sophisticated technology which was developed to make all this possible has been adapted to other processes. of the self-generating development free enterprise. and it also stems from an ancient traditional industry of weaving that imported a new method for controlling its looms. when japan turned to free trade. more than a century ago. yet believe it, not many still maintain today that markets cannot be left operate freely, that they must be controlled by government. this dark side is in scotland. a british government, a socialist government, decided that its role was to protect the workers here from competition. although sit down there and shipyards, they're building these vessels for the polish government.

to get the order. the british government using the money of british taxpayers to subsidize the work. in other words, british people are making these ships in order to sell them at a loss to the poles. not only the poems, but also we in america benefit from this kind of philanthropy philanthropy. the steel industry in the united states makes a fine product. other countries do too, and their steel is often cheap. sometimes because their taxpayer subsidized. so why shouldn't the american consumer buy steel wherever he can get it cheapest at home or abroad? the american steel industry very hard trying to persuade us that it's not in our self-interest to buy in the cheapest market. they urge the government to restrict what they call unfair competition, though of course they recognize that there are dangers in this.

the dilemma of asking our government for assistance in this problem of, unfair competition bothers many of us because. the sword does cut both ways. but we believe that we have attempted to do is far different than the kinds of direct involvement that occur in many of the foreign nations around the world where the governments provide direct assistance in the form of either ownership or loans or subsidies in some fashion or another. what we have attempted to do is simply to get our government to enforce united states laws against unfair competition that have been on the united states books. we draw a clear distinction between that and, for example, the several hundred million dollars that the french government has granted to the steel companies or the british steel corporation has received

1,000,000,003 for capital investment this year. so that while we are on easy in any way interfacing with our government in, we traditionally believe are the free enterprise size prerogatives, yet what we're only asking for is that the government enforce the laws our congress has passed, and i'm not sure that that's really any than asking someone to arrest someone that commits a crime. i don't think would be accused of being reactionary if we reported somebody who was stealing to the police, if it were in violation of a u.s. law. we think that we're doing exactly the same thing when we bring cases against foreign producers who we believe are violating laws. the fallacy with that argument

is that it begs the real question, why should there be laws that, in effect you and me from buying in the cheapest market when anyone complains about unfair competition? consumers beware. that is really a cry for special privilege. always at the expense of the consumer. what we need in this country is free competition. as consumers buying in an international market. the more unfair the competition, the better. that means lower prices and better quality for us. if foreign governments want to use their taxpayers money to sell people in the united states goods below cost, why should we complain? their own taxpayers will complain soon enough, and it will last for very long. history provides lots of evidence on what happens when government protected industries compete with industries who have

operate in an open and free market. it's almost always the government protected industries that come out second best. asks are freddie laker the englishman who introduced low cost air traffic across the atlantic, who were his chief competitor? they were all government protected, government financed, government regulated airlines. he came out very well, made a bit of money and you and i have gotten cheaper travel. the atlantic, nothing would promote the long run of the steel industry, making it into a more efficient, profitable and productive industry than the us government to keep its hands off, neither providing privileges nor, imposing special restraints. and what's true for the steel industry is true for every other industry in the country and around. these women work in an industry

that so far hasn't asked. special protection. the silicon chip industry, every one of these small squares on this disk is a highly complicated, integrated micro circuit by. an american technician examines them for defects. it's highly skilled work and she's had a lot of training when she's done her job. the rejects will be separated from the rest and the good circuits will be packed up and sent halfway around the world to malaysia. the product of. american technological skills returns looking like this. each microchip kit has been enclosed in ceramic by a malaysian worker who is highly productive at this sort of work. but the malaysians are not able to test their products. so back they come here to america to be fed into these machines. american engineers are good at producing sophisticated machines

in an operation that lasts a of a second. these machines test every circuit can graded for quality and then can sort it into one of six different categories of reliability. the invisible hand in this free market has done wonders for both the american girls and their malaysian counterparts. and that's not the end yet, because american chips are exported to many countries where foreign workers assembled. the final product is then to our stores so that you and i the consumers can from $10 calculators as well from a lot of other electronic devices that not long ago simply did not exist. that. when this hi fi equipment came on the market only the rich could afford it.

and. so on. but even when the international market and labor is seen to work to everyone's advantage, people still put up arguments against i the usual argument against complete free trade is that cheap labor from abroad will take jobs away from workers at home. so what is cheap? japanese workers paid in yen and american workers paid dollars. how do we compare the yen with the dollars? we need some way of transforming the one into the other. that is where exchange rate enters in the price of yen in

terms of the dollar. suppose at some exchange rate, japanese goods are in general cheaper than american goods. then we won't be buying much from japan and selling little to them. but what will the japanese do with the extra dollars they earn? they don't want to buy american goods by assumption. those all, dear. they want to buy japanese. but to buy japanese goods. they needn't. calls will come from all over the world to places like this, offering to buy for dollars. but there will be more offers to buy in the sale. yet in order to get customers, those offering to will have to raise the price. the price of yen in terms of dollars will go up. as you remember, that is what happened in 1977 and 1978. by late 1978, it took 50% more dollars to buy a given amount of yen than it had taken a earlier. but what happens when the price of the yen in terms of dollars goes up?

jeff in his life was no longer so cheap japanese goods are no longer so attractive to american consumers. on the other hand, american labor is no longer so dear to japanese american. goods are more attractive. the japanese. we will export more to them. we will import less from them. new jobs will be created in export industries to replace any jobs and might have been lost in industries competing with imports. that is how a free market and foreign exchange balances trade around the world when it is permitted to operate. want. the problem is that more often not a free market is not to operate for reasons that seem to make sense if you don't examine them carefully. governments insist interfering, but when they do, it's not possible to hide the harmful effects for very long. the main reason why the japanese

yen went up so sharply in price in 1977 and 1978. but the japanese government had been trying to prevent the yen from going up in price in the process. what might have been a small disturbance is were allowed to accumulate into a major gap in trade. as a result when market forces finally were permitted to operate as sooner or later they must be. it took a major change in the yen exchange rate to bring things back into line. why don't governments learn? because governments never learn. only people learn. and the people who learned today may not be the people charge of economic policy tomorrow. as you contemplate this you may come to agree with me that what we need are constitutional restraints on the power of government to interfere with free markets in foreign exchange in foreign trade. in many aspects of our lives.

for the. now here in chicago, the special guests have been watching that to have their say. this film has set me on edge. there is political social ethical considerations which do not reflect it in the economic philosophy put out there is a pervading feeling in this that the individual worker is to be totally sacrificed for the overall good of society. i see i don't see how possibly you can sacrifice this individual's overall good for society because society is nothing but those millions and millions of individuals put together and nowhere is there any consideration given to the social and the ethical aspects of, the free trade formula that you advocate. let's get other views now around the group. what's your reaction? don rumsfeld, a businessman, to the idea that milton friedman is advanced, that america ought to

buy in the cheapest markets, cheapest goods without protecting against them? i swore i would never even try to defend milton friedman, and i won't. but but let me comment first on -- comment. it bothers to hear so social and moral arguments invoked in an issue like this, because it seems to me the measure is what happens to human beings. each individual will ought to be concerned about humanity. for a single individual who's unemployed that's 100% unemployment and we recognize i recognize that. but the world is if you as the did go to india if you want to see things that one can describe as inhumane and poverty and problems of human beings they exist and the test ought to be what works. what in fact will provide a circumstance that will be more than dynamic and more productive the world. it is true that in the long run we would all be better off with

free. i agree with milton, but it's the short run that matters and in the short there are serious adjustment problems. now, there's no question that the developing countries need access to markets such as american markets, and america needs to export so that they can export more to developing countries. american exports to developing countries have moved from something like 20% of total exports to 30% over the last ten years. but they're is important because is what is happening at present is it's not just a random of workers that is affected by this trade. it's the most disadvantaged and underprivileged workers in america which are being affected. and they are, by and large, women and members of minorities in garments, in electronics. and i think that the adjustment consists of action on both the developing and the developed countries sides from the let's take the american side on the

american side the unions and industry i think have to get off discussion about moral issues and get their act in order. i couldn't agree more with, helen. i think there is a very valid income distribution problem involved here. certainly society gets better off. consumers get better off as a result of cheaper imports. and i'm all for that. and there i agree completely with milton. but if the incidence of the adjustment falls on disadvantaged groups, then you would want to do something about it. it really becomes an ethical issue. but the other point, which i think milton does bring up, which i disagree sharply with, is suppose a foreign governments do subsidize and actively promote exports to you. should you just sit back, just say, well, we're going to be better off as a result of this. i don't think that's that takes into account the fact the whole international system can break down as a result of people perceive in pluralistic economies as as unfair emerging. and i think this is really what

you're beginning to see. so we do need some sanctions. i mean, i may receive stolen property and i'm better off. of course i'm better. but if as a result of this, i theft, i think few people would agree that that was something one didn't want to worry about. i called in milton friedman on this reaction to, the comments. yes. really? to and to helen dunn. you choose to set aside or you appear to choose to set aside the social and the ethical considerations. and what i said, you have to put the fact on a scale that there are social and ethical considerations with a free market or without one. and and the tendency is for people to invoke morality only on side and not to recognize that are problems of human being in this world that are going to occur in each case. and the measure the test ought to be what actually happens out there and address that question which you you must also very much consider the social aspect of this situation. helen's comment the short term

displacement. i have a question for milton at this point. how long do you put as a timetable on the displacement of these people of these workers? five years. ten years, a generation. how long will it be before overall society balances itself out in the individual is no longer hurt? let me take your first and your last question first and then go to your basic question. i have always been in favor phasing out tariffs over a five year period, a 20% reduction a year for five years to give people time adjust. now to your fundamental issue. i thought i had heard objection to my views imaginable. but you one of the first one who has ever accused of putting the interests of society as a whole ahead of the interests of individuals. if there is one element in my social philosophy, in my ethical philosophy that's predominant, it is that the ultimate unit is the human being, the individual,

and that society is a means whereby we jointly achieve objectives. i would argue that the social and moral issues are all on the side of free, that it is you and people like you who who introduce protection, who are the ones who are violating fundamental social and moral issues. tell me what trade union represents the workers who are displaced because high reduce exports this country because high tariffs, steel, for example, or goods more expensive as a result those industries which you still have fewer have to charge higher prices. they have fewer employees. the export industries that would grow up to balance the imports. tell me what union represents them. what moral and ethical view do you have about their interests? you still answered my basic question. how? how long of a time? how long of a frame? five years. ten years? a generation should have an

answer that five years. and could we be clear? five years? you're saying, though, that tariffs should be phased out over five years regardless, the action of other countries is not a sort of regardless, regardless of the actions of other countries. so far, obviously, i would prefer to have other countries reduce so that they don't move. america should lose. you go along with that down until. no other word. you're against reciprocal. the i the the i'm not in favor getting to truly reciprocal trade but you're willing to get there unilaterally? yeah. yeah. it seems to me that it's probably worth moving in that direction. i don't know where i would stop. i am not a five year program, but will you buy that? well, it seems to me that you get action reaction to the extent you're doing something that makes sense for human beings. presumably that would be persuasive with others. presumably there would be a logical sequence where countries would begin to that that had a

certain degree of validity in the world that haven't held views, providing you do something for the displaced in the in the country in which they're displaced. because if you don't do something, if you don't take some action and there's generally got to be government action, you will get such a backlash that you'll be back in the thirties with, the sort of thing that happened with high unemployment, that there's a direct challenge. what would you do about displaced workers or let the slack be taken up by other? i believe that you have to separate should separate sharply. the issue what you do about people in distress from how you handle the industrial system. i do not believe you ought to have a program for displaced workers. what you ought to have and what all societies have is some mechanism. voluntary or governmental which will assist people in distress. we another program in this series which deals with with exactly that issue and in which i come out, as you know, in favor of a negative income tax as a way to do it. but i think it's a great mistake to try to link it directly with

tariffs. and the reason is that many people who are displaced are not in trouble. many of those have good alternatives. some of them will benefit it. there are some who will be in distress, of course, but there are always people who are in distress for all of reasons. in a dynamic society. the demands are going up here. demands are going there. there is no more reason, in my opinion, to have a special for those who are displaced because of the changes in demand and supply on the international scene and because of the changes on the domestic reaction to that, why would you want to return to a to a concept that this country exists? you know i had in 1900. why would you to return to where a few control the economic destiny of every working man and woman. it's the other way, mr. jason. the best way to limit the control of a few is free trade on a worldwide basis. there is no measure whatsoever that would do more to prevent private monopoly development than complete free trade. it would be far more effective

than. all handy trusts to totally disagree you would wind up with a situation like in the movie rollerball where corporations carve out their spheres of economic influence throughout the world and controlled it would be controlled by corporations in its entire day. excuse me. you saw the picture of hong kong, didn't you? yes. where are those corporations? there. we might get down. that now. we have a difficulty finding our way out of it. could we move to another big theme in the that is the third world countries? and broadly speaking made a very serious error moving into planned economies from beginning to end. and you use the phrase the case of india, central planning has condemned the indian masses to poverty and misery. now, what's your reaction? i partly agree, milton, as always, and largely disagree with him. i think s true the invisible hand ought to be seen more in poor countries than it is. and i would like to the iron fist disappear.

and unfortunately, it's the other way around. on the other hand, i think it cannot be maintained that laissez faire is the answer. either it's a necessary or a sufficient for development. let me go to milton's examples and, you know, refer to japan. japan is a prime example, actually, where the visible hand invisible to everybody who is outside japan, but it's writ large. the wall for the japanese, the japanese government, right from the meiji restoration mission has taken a very active interest in the development of country does regulate the technology imports to this date the government business have a sort of strong relationship. i think it's just a really paternalistic and business is highly paternalistic. i don't think it's a valid example at all of what i believe or simply notion of milton's program. helen hughes on this theme has the third world made a disastrous mistake in almost unanimously moving in to planned

economies rather than the free market? well, first of all, it hasn't almost unanimous certainly moved into planned economies. well, maybe not even overwhelmingly, i mean india's is a large, but the majority of developing countries are not centrally they have some sort of planning. secondly, of the countries which have been most successful or have had the highest government intervention, the best examples are taiwan, korea, brazil, singapore and even in hong kong is often held up as an example of no government intervention. i mean, this is just not true. the kong government has provided infrastructure. it has provided the roads and the ports and the schools and been very important. but when move to a country like malawi or papua new guinea, you can't without government intervention. there is nothing there. there are no entrepreneurs in place. and the american entrepreneurs are not interested in small places like that. i'm not in of no government

intervention. i never have. i point out in the film that what the government did in hong kong very important. the question is what kind intervention? and in the state you've described, in the places you've described, where you've had success. governmental intervention been of a rather kind. it has provided infrastructure. it has not tried to determine the outline of industrial, the areas in which industries go, exactly what the allocation of. it has not gone in for central planning. well that's just not true in korea. i mean, it's you're factually wrong because in korea, the government what is true in taiwan, it's fairly true in taiwan. but not in korea, which is growing faster. any other country where korean exports have been determined to a very large extent by the recover and intervention. i think your point is what sort of government intervention in what for and what are the tradeoffs between government intervention and the free

market. these the relevant issues. what is the role government in relation to the market economy? how do you see it performing dominance or do you want to see governments, as it were, enforcing competition, chasing down monopoly, restrictive practices and all the rest the society? the record is clear that. they don't do it well. they can't manage. does that mean they shouldn't do it in the united states of america? i happen to have been involved and i don't say it with great pride. the real is i don't care about good intention. i don't care about brains. i don't care integrity. the fact of the matter is, they're not smart enough to manage the wages prices of every american, 215 million strong. they can't it well, they do it poorly. and the weight of that is harmful. it's it's it's graphically shown in document issued by. the council of economic advisers in the united states. what about the additional question, though? does the government properly in this country or elsewhere ensure

competition by other devices? i'm not talking about price wage control, but ensuring competition rather than permitting price fixing or agreements and monopoly. what do you say about i feel the government properly acts in that area. it must the government must be there. ensure competition. the government's not smart enough. look, the antitrust law, you talk about a the implementation of the antitrust regulations in the united states between the department of justice and the ftc. it's a it's patchwork mess. there isn't any logic to it. people know what to do. they don't. they get answers there inhibit it from from mergers and consolidations. that would make a lot sense from the standpoint of the consumer and would make even more sense from the point of multinational corporations. i think that one of the points you're making is that it's very hard for the government to intervene in a very large country like india or the united states, but compare government in some of these small

homogeneous countries of, europe or a singapore. and i think that's very important. switzerland has great deal of government intervention. sweden, denmark, norway. i've just quoted you the full highest income countries in the world. they do have intervention to try and protect the functioning, the market system, and to make it more efficient. milton is absolutely right that if you're talking about central planning, that has been disastrous. absent italy, in terms of having targeted industrial allocations. and so on i mean, there's absolutely no doubt in anybody's who has studied the problem of disaster in india in india as well. very definitely advised on that. didn't you? no, not on centralized. you know, it wasn't a crisis. there is a on the side of the on that for a number years to a point where i'm supposed to be a friend of melody, which is disastrous to give advice is one thing. to have it taken is a different

one. i agree very much with what helen just said, that the more homogeneous country, the less harm a government will do by intervening. i don't believe it does. positive good. i just simply believe it does last. aam but as to antitrust yeah i am in favor of the laws which make agreements in restraint of trade illegal most of the rest of the antitrust apparatus has promoted monopoly instead of hindered monopoly. if you look at where there are monopolistic elements in the world and the united states including the multinationals. you want to to in almost every case that monopoly derives a special grant by government. and therefore, the problem is not how does government enforce competition? how do you keep government from setting monopolies? that's the real problems. look at the real world and not of the preamble or the language of antitrust measures and similar laws. how close are what this was

saying a moment ago on? this area? he would seem to be arguing with you. there was a responsibility to make competition work. the response ability is to set up a framework of laws, have arrangements under which competition will flourish. and the most inevitably those mean or well so far as i know, i don't know of any case in history in which monopolies have been able to maintain themselves for very long without, having government assistance directly come in on their side. the trade union monopolies and mr. decent represents would have the kind of power they do now if weren't for the special privileges which government has granted to them. i can perfectly well understand his being in favor of such action of antitrust action, the government, because it really is pro monopoly action in the main. why were those exemptions to monopoly laws given to unions? because of the political power of unions. course, i'm not questioning that. and of the tremendous imbalance of power of companies at the time that unions were getting

their start, there's one concluding idea toward the end of your script that i'd like to look at, because it seemed to me be both provocative. you talked about need for constitutional restraints on governments, prevent them interfering in foreign exchange, free markets and in foreign trade. now, what have you in mind, milton when you say constitutional restraints? i no doubt what i have in mind if. i if i could persuade the public i would like it to adopt a constitution or an amendment strictly paralleled the constitutional prohibition. the text of the constitution against, the central government i'm sorry against state governments imposing or impose. i would like to have a amendment which would read the congress shall not impose any any taxes, any taxes on imports or give any subsidies to export except such as may be necessary. i think the wording of the constitution is that the states

are permitted to do it if it's necessary for inspection. that's the excuse under which california inspects you every time. drive past to see whether you're carrying any planter fruit or vegetable. let me ask you a how long do you think that the united states would survive if the united enacted what you would like have? i think the united states would prosper a way that is hardly imaginable today would be an example and a beacon to the rest of the world. what kind of sense does it make here? we are supposedly the leaders of the world. we are the ones who promote freedom and free enterprise and individual initiative. and what do we do? we force puny little hong kong to, impose limits, restrictions on its exports of tariffs in order protect our textile workers. we go to japan and we say to japan. for god's sakes, you got to limit the number of television sets you come out instead of that, we ought to be setting an example to the world. and if we set the kind of an example, the world that great britain sent to the world in the 19th century, it would a tremendous it have tremendous

impact. it would strengthen our moral position in the world. it would strengthen our position in the world instead of money to underdeveloped countries to produce products which we then refuse to buy and don't let them export to us. we would be saying to the rest of the world, if you produce anything, if you can produce anything that can have a market come, we're delighted to buy it. and produce things for you to buy. that's the kind of a pattern i would like to see the united states establish their members by that never, never ends a long yes. join your most distinguished between never say never you union officials would not buy it, but i am not sure your members would buy members would never buy it either. i cannot conceive of the united setting itself up to become a for the rest of the world. it's not a target. there would be absolutely nothing that would require or compel any other country to enact any reciprocal agreements relative to tariffs. and until such time as they had succeeded in dumping the united

states, i use dumping in the broader sense of the word any and every product, either government subsidized by a foreign government, either put there because multinational corporations manufacturing facilities in a foreign country until they had succeeded in absolute draining as dry draining as dry. i want of of every asset how of what would they do with the dollars got they'd probably buy up as they are now as the if they had if bought up farmland. yes. yes. okay, let's let's broaden this on this very argument now in the men would argument we've learned from our union friend he wouldn't cancel it and wouldn't sell it would business buy it. oh no they i speaking. you live but secondly are not saying whether i'd buy it the business would sell it which is the question. no. one, i speak not as a businessman but as a government employee. whenever proposals like that came up. one of the first things people see happen is government,

business and labor come in in lockstep saying horrors, horrors. the sky is falling. there's a commonality of interests there and people get used to what is they get terribly and they know how to work the system the way it exists. and particularly the big unions and the big business. and they get very satisfied with it. they can manage it pretty well. and any time you try unravel any kind of regulation or restriction or government intrusion, they're philosophically for it. but in the practical world, they don't want you to change the drill. they've just figured out how to work this. why should you then change it and make it all but all that more complicated? no, i think you'd get a good deal of reaction. just you did at the steel company and you a television show and what would be international, do you think, as international economists, supposing milton got his amendment, constitutional amendment, which had that effect? how other countries react to it? well, i think milton's fundamental example of why not be like britain, the 19th

century is wrong. britain in the 19th century was the industrial country. it was well ahead. everybody else, many decades of many decades ahead of everybody else. and it was making larger profits, economic rents on its production. and it was doing it at very great cost to the workers in britain the workers in britain were, greatly exploited under those circumstances. and we don't want to go back to that. the international situation is much more complex as the countries there are countries at different levels of countries with different social and countries with different social objectives. so i think the solution, you know, is wrongly founded and it's millenarian, it's utopian. i think that we have to think of a more realist process of discussion, negotiation, such has taken place through get to

get to where we're going without it hurting the people who pay for the adjustment. and that is basically the workers, not the economists. could i just comment briefly? i worry that the argument that because of the complexities of international relations that therefore they must be planned and managed by definition we're not capable of managing the world economy each each when we try to do it, it doesn't out quite the way we intended. i don't apologize for a moment for for being millenarian, because i think unless we know where we want to go the timid steps that we take in that direction will go in the wrong direction. and if we're going to go in the right direction, we ought to have a view. but i want to be sure to get down on the record a very strong objection to the statement of fact by helen hughes about 19th century britain, i believe it, is simply wrong. the workers were exploited. the studies that been done recently have shown over and over again that the 19th century was a period in which the

english worker experienced, a very rapid and very substantial rise in the standard of life. england does not stand alone. japan had complete free trade 30 years after the meiji restoration. japan in more recent years, has not. japan in more recent is not an example i would cite, but in its early years and had complete free trade. so i don't believe england stands alone now on the moral of it, on the politics of it. of course not politically feasible. why? because it's only in the general interest and in nobody special interest. each of us is a has more concern with role as a producer of one product than we have a consumer of 1001 products. the benefits of a tariff are visible. mr. decent can see that his workers are quote the harm which a tariff is invisible. it spread. there are people who don't have jobs because of the tariff, but they don't know. they don't have jobs. there's nobody who can organize

them. consumers all over are paying a little more for this, that and the other thing they. don't recognize that the reason they're paying for is because of the tariff. the businessmen i have never been in i'm not pro-business. i'm pro free enterprise which is a very thing. and the reason i'm pro to say that no, no i don't mean to point to you, don. i point to the business community because you are an extension because i see that there was a tacit alliance across that way to prevent you from achieving some points. there's no doubt that there's such an alliance in opinion. the strongest argument for free enterprise is that it prevents anybody from having too much power, whether that person is a government official, a trade union official or a business executive, it forces them to put up or shut up. they either have to deliver the goods, produce something that people are willing to pay for or willing to buy or else they have to go into different business. well, then we must leave the

argument. so this week and i hope you'll join us again for the next episode of free to the course. 50 years ago, the worst economic depression in history changed the course of the world. did it have to happen or could it have been avoided? for the first time on television, milton friedman gives his account of the inside story of the desperate years that changed the world. that's next week on free to choose. don't miss it.