Friday, December 01, 2006

Milton Friedman: The Professor and his Global influence (II)

What was the real influence of Professor Friedman in Chilean economic experience?. To begin with ,he was not comfortable with the idea of fixing prices like the exchange rate, or for that matter any other price, which the Chilean economic authorities at that time did to reduce inflationary pressures. At the same time, he was critical of restraining political liberties as a justification for implementing market oriented policies. There was an unquestionable and clear connection between democracy and free market policies, he said; so that there was no way to get success with markets oriented policies without the support of democracy values. It follows that his influence was more on the ideological side, rather than on all of the practical matters related to policy implementation .However, there were some areas where his ideas were the inspiring foundation, such as education throughout the subsidy to demand programs, and privatization of retirement of labour force account and the expectation hypothesis and the Phillip curve (the acceleracionist view). On the other hand, Friedman seemed to be more distant from the argument which connect markets functioning with institutional framework, than Douglas North, so that his beliefs were strongly shaped by distrust of regulators and above all regulations. The empirical experience though, suggested that it existed an important relationship, between institutional framework and market policies results, such that it was possible to implement market policies within the frontier of a set of clear rules and institutional arrangements. If government had to intervene as an unavoidable effect of uncertainty , it had to be following certain rules .
At a global scale Friedman influence was decisive in the eighties helping to shape new macroeconomic policies ,and above all the new concept of the government intervention in the economy ,and its relationship with its citizens. The Keynes proposition that government was part of the solution, turned over to the other way around to become considered as part of the problem . As long as Government was identified as part of the problem, it was important to design the future policy scenario. The fall of the Berlin wall and Soviet Union collapse, was also part of the new paradigm concerning government role in the economy. Ireland , New Zealand followed the British economy experience ,to become later in the nineties the new stars of the Europe unified . They reduced government intervention, in such a way ,that it allowed those economies to get strong gains on economic growth and welfare improvement.
In Latin America ,at the beginning of the nineties ,following the debt crisis, there also was a new consensus about the principle that Government was part of the problem instead of the solution. So ,Latin America economies started out privatizations, deregulations, openness of markets to international trade ,and private firms were supported as the key leaders of wealth creations.-
A couple of final comments about Professor Friedman global influence. It looks like his was more political economist than most of his other colleagues, like E Phelps (Nobel Prize winner in economics, 2006) , or Alan Meltzer. However , the trade mark of Mr Friedman legacy ,is also related to his belief about intellectuals and professors ´role in modern society .While politicians and military shaped the twenty century, intellectuals and business man will shape the twenty one century. On that regard ,Milton Friedman was almost a century ahead of the rest of us.-

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