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The End of Friedmanomics [1]

['Zachary D. Carter', 'Richard J. Evans', 'Hannah Zeavin', 'Adam Nayman', 'Boyce Upholt', 'Illustrations Mike Mcquade']

Date: 2021-06-17

The financial crisis of 2008 should have demolished this thinking. Markets, the crash made clear, often simply don’t serve the public interest. But the Democratic leaders who ascended to power in the Obama administration had been educated at the height of Friedman’s intellectual hegemony. There simply weren’t many New Deal–style thinkers in the top echelons of the Democratic Party anymore. Obama was as intellectually serious as American presidents get, but his coterie of intellectuals had been working under Friedmanesque assumptions for so long that they could not adapt to the reality that events had discredited those assumptions. Obama ultimately devoted more political energy to reducing the long-term federal budget deficit than to combating economic inequality. A unique historical moment to reclaim political democracy became, instead, the era of bending the cost curve.

If Obama’s presidency revealed the durability of Friedman’s legacy within the Democratic Party, Donald Trump’s presidency revealed its fragility among Republicans. On an almost weekly basis, Trump subjected sacred tenets of Friedman’s worldview—from free trade to monetary policy to fiscal stimulus—to overt rhetorical abuse. And the party faithful loved it. But some of Trump’s most consequential policies—a massive tax cut for the rich and a big bank deregulation bill—were perfectly aligned with 1980s-era Friedmanism. For today’s GOP, Friedman’s ideas seem to be valuable only insofar as they can be used to persecute undesirable elements in a political milieu constructed almost entirely of identitarian grievance—Keynes for me, Friedman for thee.

Epilogue: What’s Next?

Predicting the future course of Republican ideas is like estimating the blast radius of a bag of unlit fireworks. But whatever the GOP chooses to do with Friedman’s ghost, the future of his legacy—or lack thereof—lies with the Democratic Party. Friedman may have devoted his life to the American right, but the political magic of his persona was always on the left. His insistence that market mechanisms could be used to promote essentially progressive social values was the key to popularizing a worldview that ultimately amounted to little more than the celebration of political rule by the rich. In 2021, it is extremely difficult to imagine a Republican leader persuading Democrats that the QAnon brigade is really on board with Black Lives Matter, if you could just see it from the perspective of consumer choice.

Whatever the GOP chooses to do with Friedman’s ghost, the future of his legacy— or lack thereof—lies with the Democratic Party.

Friedman’s major theoretical contribution to economics—the belief that prices rose or fell depending on the money supply—simply fell apart during the crash of 2008. “Whether people openly admit it or not, his monetary views are no longer included in serious analysis and forecasting,” said Skanda Amarnath, research director at Employ America, a think tank focused on economic policy. “The Fed’s balance sheet swelled enormously during and after the financial crisis, and it did not matter a lick for inflation. There was a huge role for fiscal policy that Friedman just ignored.”

And few serious economists today accept Friedman’s hard divide between economic fact and political reality. “Friedman developed a fantasy land of theory that ignored the way economic power can be used to capture elements of the political system to generate additional economic gains for those at the top,” said the New School’s Hamilton.

This vicious cycle has been degrading American democracy for decades. Joe Biden is the first president to desecrate not only the tenets of Friedman’s economic ideas, but the anti-democratic implications of his entire philosophy. He is also the first Democratic president since the 1960s who has formulated and publicly endorsed a coherent defense of American government as an expression of democratic energy. It is a powerful vision that enjoys the support of a large majority of American citizens. He has nothing to fear but Friedman himself.

* A previous version of this article misstated when the voucher system was implemented.

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[1] Url: https://newrepublic.com/article/162623/milton-friedman-legacy-biden-government-spending

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