Socialism, as the government ownership of all property and firms, is dead. Despite this markets have not been fully embraced, especially in Europe. Many still believe that a free market is not the path they wish to walk, especially in labor markets, and so seek to have the government involved in pursuit of neither socialism nor the free market as they search for a third way. Here is Milton Friedman's take in a recent interview for New Perspectives Quartarly (NPQ) the Winter 2006 issue (and available here - no subscription required)
NPQ | British Prime Minister Tony Blair argues there is a “third way”—for example, flexible labor markets without hire-and-fire American-style. This, he argues, is more suitable to the “European social model” with its enduring concern with social justice. Is there an in-between way, or must it be all or nothing?
Friedman | I don’t think there is a third way. But it is true that a competitive market is not the whole of society. A great deal depends on the qualities of the population and the nation in how they organize the non-market aspects of society.
NPQ | Perhaps the Scandinavian countries are a model to look at. They are high-tax but also high-employment societies. And they have freed up their labor markets much more than in Italy, France or Germany.
Friedman | Though it is not as true now as it used to be with the influx of immigration, the Scandinavian countries have a very small, homogeneous population. That enables them to get away with a good deal they couldn’t otherwise get away with.
What works for Sweden wouldn’t work for France or Germany or Italy. In a small state, you can reach outside for many of your activities. In a homogeneous culture, they are willing to pay higher taxes in order to achieve commonly held goals. But “common goals” are much harder to come by in larger, more heterogeneous populations.
The great virtue of a free market is that it enables people who hate each other, or who are from vastly different religious or ethnic backgrounds, to cooperate economically. Government intervention can’t do that. Politics exacerbates and magnifies differences.
A great, classic Friedman quote. Thanks for posting it.
Posted by: John | 13 February 2006 at 10:28 AM
The "enduring concern with social justice" quote is such lazy thinking in my opinion. So many 'free thinkers' in Europe like to believe that they have cornered the market on empathy and compassion. Unfortunately for those groups who are the recipients of their compassion, the problem is always 'out there' waiting to be solved by the government and still no real solution is realized.
Posted by: John | 13 February 2006 at 05:39 PM
I would like to add a book to the reading list here:
"Plan B 2.0 -Rescuing a Planet Under Stress and a Civilization in Trouble."
Author: Lester R. Brown @ Earth-Policy.org. The book can be downloaded in PDF format for free at:
http://www.earth-policy.org/Books/PB2/
Posted by: Richard Anderson | 27 February 2006 at 03:10 PM
Shall I also say that the great evil of government ownership is the lack of sincere personal motivation and commitment to public interest? As a result, the economic potential can never be fulfilled. After sticking to their socialist system for decades, even the very closed society like China realized the pitiful situation they were in under socialist system. And they were quick to evolve into the capitalist system. However, they are still steadfast in hanging on to the socialist political and ideological system. How ironic!
Posted by: Joe Smith | 27 February 2006 at 03:38 PM
Great comments Joe. I read (or heard) recently that roughly 1 million Chinese everyday are escaping poverty, under this new capitalist-powered economy.
Posted by: John Cooke | 01 March 2006 at 08:07 AM