The Friedman Doctrine 50 Years On: A Total Disaster

On September 13, 1970, Milton Friedman penned and Op-Ed for the New York Times that was essentially the opening shot of the economic civil war between the rival economic ideas of John Maynard Keynes and F. W. Hayek. Friedman, a disciple of Hayek, argued in that op-ed that the only social responsibility of the corporation was to maximized the return on investment in which he ultimately argues, “in a free society, and have said that in such a society, “there is one and only one social responsibility of business—to use its resources and engage in activities designed to increase its profits so long as it stays within the rules of the game, which is to say, engages in open and free competition without deception fraud.”

A few years after the coup in Chile, Thatcher won election as Prime Minister of the UK and Regan followed in the US. The counter-revolution against Keynesianism was brutal and swift. As Naomi Kelin points out, though, the establishment of Friedman’s doctrine never worked without brutality and a high body count. by 2001, even the Chinese Communist Party folded and allowed “capitalists” to become party members.

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This is not meant to be so much a review of the article (rife with straw man arguments, ignoring the reality of “corporate democracy”, and generalizations), as it is a review of the devastating damage that 50 years of adherence to the Shock Doctrine and primacy of profits has unleashed upon our world and our communities. The documentary, Commanding Heights, by Daniel Yergin and Joseph Stanislaw, provide a decent review of the attack on local communities and “logic” of the neo-liberals. It creates an interesting construct of Keynes v. Hayek v. Lenin early on and then dives into the collapse of the planned economies and primary of Friedman’s view. It largely ignores co-operation as an economic model (although the uprising in Bolivia during the water wars was led by the co-ops).

Friedman is to economics what Ayn Rand is to literature.

Today, we battle the ravages of climate change that have brought the second most devastating plague to the world within a century and record setting destruction by fire in Australia and the western United States. Not to mention a prevalence for “market solutions” to social problems, a withering of the social safety net, and a destruction of our access to information and news through for-profit social media. The world we live in today, with massive unemployment, significant environmental degradation, and a democratic republic exposing its prevalence for a police state is the end result of the belief that corporations can be legal people AND not have any social responsibility.

The roots of our dystopia lie in Friedman’s simplistic argument for greed. He ignored the ability of those with vast wealth who depend on maximizing profit to be able to corrupt the political system. He argues that that corporations should stay within the “rules of the game” while ignoring that they have the power to write those rules through campaign donations and access to power. Friedman is to economics what Ayn Rand is to literature.

Fortunately, the world is changing even if it might be too late for many of us. When I began my journey into the co-op world outside of Union Cab in 2004, there were an estimated 300 worker co-ops in the country. Today, that estimate is over 800! In addition, more people are starting to see co-ops as a means of rebuilding our communities. This year marks the 25th anniversary of the Statement on the Cooperative Identity, a doctrine in its own right that focuses the purpose of the economy on supporting people, not profit.

We have a long way to go and some of the damage may be irreversible. However, everyday I am amazed at the intentions of the people that I meet to redesign the world. One group that I am working with, a farm worker co-op, has the mission, “we grow food to employ people, we don’t employ people to grow food.” Arizmendiarietta would be glowing at this slogan. The work we do is about creating a community built on human development and engagement, not on enriching a smaller and smaller class of the world.

Friedman liked to pretend that stockholders were everyday joes and that corporations were democratic. It was the Big Lie that he peddled and many politicians (and union leaders) believed. Everybody could be a stockholder and enjoy the benefits of corporate America, but the reality is that only a tiny fraction of those shareholders have any agency in the company and realize the real benefits. As the wave of panics and recessions have hit our economy since 1970 (about 6 in 5 decades), the small investors and pension funds have seen only dashed hopes and disaster. He also had a Pollyanna-ish belief in open and free competition: it has never existed and by his own doctrine, a corporation should seek to establish a virtual (if not actual) monopoly. His logic is broken.

On this 50th Anniversary of Friedman’s attack on our community, let’s renew our faith in cooperation (and celebrate the 125th Anniversary of the International Cooperative Alliance). To do so, let’s push our co-ops to reject the false promises of neo-liberalism and embrace the co-operative definition, values, and principles. Let’s start rebuilding this world out of the literal ashes of Hayek’s Hellscape that lies before us.

About John McNamara

John spent 26 years with Union Cab of Madison Cooperative and currently helps develop co-ops in the Pacific Northwest. He holds a Ph.D. in Business Administration and Masters in Management: Co-operatives and Credit Unions from Saint Mary's University.
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