Milton Friedman (1912 – 2006)

MILTON FRIEDMAN, the a most celebrated and arguably most influential economic thinker of over half a century died in San Francisco last week at the age of 94.  His works have influenced many around the world from students of basic economics to state leaders.  He said “Freer market leads to free people”.  Arguably yet to be witnessed in Burma and indeed Burma with past experience in command economy, the exile Burmese economists seem to levy their criticism on military regime for lack of market liberalism. It would be beyond the scope of this article to list Milton Friedman’s work and influences in the global economy but his most notable work on inflation can be helpful in understanding Burma’s hyperinflation.

Like many other free market economists, Mr Friedman never argued for a state to role back from economic responsibilities and let market decide by itself but state can use supply and demand of money to manage or act as a guardian of free market economics or economic prosperity of the nation.  Samual Brttian, a leading British economic journalist writing for the Financial Times described him as “Iconoclastic economist who put freedom first”.

His works revolutionised the conduct of central banks around the world. But to non-economists Mr Friedman’s great achievement is not his challenge to Keynesian demand management but the popular writings that challenged a consensus favouring ever-greater state intervention in the economy. This work, too, came long after his peers had recognised him as a leading light. At the time of his death on Thursday November 16th, the 94-year-old economist was still working to spread his ideas about free markets, this time through a documentary for American public television.

Certainly, on the monetary side, Mr Friedman remains a giant. His critics point out that central bankers no longer try to target the money supply directly, but to those who remember the inflationary 1970s it is perhaps more important that futile attempt to push unemployment to zero no longer trigger inflationary spirals. In developed countries politicians may talk like Keynesians, but they behave like monetarists, looking to the central bank, rather than fiscal policy, to stave off inflation and recession.

The monetary policy, an economic tool like any other instruments is prone to be used and abused by the many politicians.  Most notably in 1980s Margaret Thatcher, ex premier of UK and others leaders of world influenced the World Bank and Institute of Monetary Funds (IMF) to use his laissez-faire economic policy benevolently as policy prescription for many developing countries under the auspices of “Structural Adjustment” policy.  Mass privatization of public utilities like electric city and water supply was introduced in many parts of developing countries.

In the late 1980s many African countries paid a heavy prize for embracing the Structural Adjustment policy.  In total fairness Mr Friedman is not be blamed for the outcome in Africa but the politicians from the West.  His support for the market mechanism (as opposed to government direction) as a guide for developing an economy also had a considerable influence on Chinese economic policy from the late 1970s onwards and so in some measure and it is widely believed that he had a role in setting the groundwork for the Chinese boom.

Today, Burmese military junta is seen to have abandoned the command economy and introduced free market with heavy regulations for the benefit their cronies or oligarchs.  The country is well known for it is record in hyper inflationary economy.  It is evidently not following the guidance of Militon Friedman’s monetrism and laissez-fair economics. 

Milton was not just an elite intellectual but also had a sheer innate ability to demonstrate theory into practice or in every day language.  According to monetarists, hyperinflation can disturb the calmness of a room in which a musician is trying to fine tune his musical instrument.  The hammering and pounding noises of workers in streets to keep up with the rise in price of goods or inflation disturbs the calmness requires by a musician.

For Milton Friedman, inflation is caused by too much money chasing fewer goods.  In Burma the regime does not have set policy to temper the supply of money.  The exaggerated supply of money also signifies the choices in the economy.  People prefer to hold less paper money than goods.  It in turn reflects the confidence in the economy.  In the export side the junta seems to over exaggerate the supply of agricultural goods which results in too many international buyers chasing for a limited supply of agricultural products that actual market can offer.  It pushes the cost of food in the domestic market. 

General Tin Oo, ex – Secretary 2 of the State Peace and Development Council once conveniently blamed people who demanded democracy and open door economic policy for rising price in food and cost of living.  The junta in Burma can neither be described as abuser or user of free market economic principles but as a government without or wishy-washy sound economic policy.  I am not in favor of using Fredman’s legacy as prescribed economic policy in Burma but some his theories and principle can used in correcting the economic ills of the country.

I will remember a legendry figure like Militon Fredman with his practical humor and ability to explain applicability of his principle in everyday lives.  The recession in Britain in late 1980s led many to question his works and it is never free of controversy.  I personally used his articles in journals to provoke academic arguments in my seminars during my university days.  I was once labeled as a blind believer of free market principals. 

The lefty students did not hate me but they found it really strange for someone with experience of being born and brought up in Burma to support free market in an extremist manner.  I used free market obsession to create a debate to which was denied upon me by the regime Burma but I did not bother explaining my reasons to the happy lefty fellow students.

I do not provide economic policy prescriptions in Burma but it is a duty of the future democratic government of Burma to introduce and implement policies.  In doing so it is worth dwelling upon some of Fredman’s legacy and his goal of controlling inflation.  It would a lengthy piece of list on number of his contribution to our economics knowledge but he had many other views and hypothesis which are totally unmatched with the US Republican or UK Conservatives ethics such legalization of drugs.  A shining star of this century will be immensely missed.

* Useful Link: http://www.friedmanfoundation.org/