Saturday, April 16, 2011

The One Percent, And What's Wrong With Milton Friedman

In keeping with my ongoing drift to the left side of economic issues, I recently watched Jamie Johnson's documentary The One Percent. The title refers to the small number of people who control about 40 percent of the country's wealth. The filmmaker's family, heirs to the Johnson & Johnson fortune, are part of that small number. His father is also a former documentarian who, as a young man, ran afoul of his parents and their advisors by making a film about South Africa.

Jamie is young, and he's often unprepared to meet the arguments of the people he interviews in the film. Interestingly, his subjects go a long way to make up for his limitations. They're so defensive and paranoid, it's almost impossible not to believe he has a point. Warren Buffett's reaction is perhaps the most telling even though he doesn't appear in the film. Jamie meets and interviews his granddaughter Nicole instead, whereupon Buffett disowns her for her participation and writes a letter stating that she is not his real grandchild. Her twin sister is apparently still a genuine descendant, though.

The economist Milton Friedman sits for an interview and bullies Johnson rather ungracefully. Even he seems defensive, especially considering his credentials. He asks a question that sums up the right-libertarian response to the issue of income disparity--since the income of the poor is also increasing, what's the problem? Would it be better if wealth were more equally distributed but we all stayed poorer?

Anyone who knows Friedman has heard this argument a lot. I'd like to suggest that the answer is a qualified "yes." Given the choice Friedman posits, in some ways it would be better if incomes did not increase. Alexis de Tocqueville explained why. He noted that, contrary to what one might expect, low income is not always correlated with discontent or lack of public morality. Poorer societies may be happier while richer ones are full of turmoil. What causes conflict, according to Tocqueville, is not poverty but injustice or the perception of injustice. Most people are going to be angry when they get ripped off, even if they happen to get somewhat wealthier in the process. The more marginal the gains are, the angrier they're likely to be.

In a similar vein, Friedman points out that someone must always be lowest on the ladder. We must have someone to sell the french fries, mop the floors, and so on. It's hard to argue with this truism, as far as it goes. What Friedman doesn't address is the question of opportunity, meaning not just theoretical but actual opportunity to improve one's station. This is one of the essential elements that distinguish capitalist from pre-capitalist societies, which already had private property, the profit motive, and most of the other features that famously distinguish American capitalism from Soviet communism.

So, are we to assume that forced redistribution of wealth is the only solution? No. Like Friedman's question whether it would be better if we all stayed poor, this presents a false dichotomy. The One Percent happens to show an example of how redistributive policies actually create injustice--the Fanjul brothers. The Fanjuls are a pair of Florida sugar barons who have used government subsidies to shut out competition and become fabulously wealthy while seriously damaging the environment and getting taxpayers to cover the cost of cleaning it all up. Unfortunately, people like the Fanjuls aren't what most "libertarians" have in mind when they talk about cutting welfare.

Finally, a few words about the flatscreen high-definition TV. I mention it because this technology has become the poster boy for bad economic decisions by the lower classes. If you can afford a widescreen TV, why don't you have medical insurance, and how can you complain? On closer inspection, this argument is far from the truth. Given a choice between buying medical insurance for a family for two months and buying a TV that will last for ten years, anyone with any sense is going to buy the TV. My son was recently on a heart-lung bypass machine that was less technologically sophisticated than my TV, yet the procedure cost hundreds of thousands of dollars, if not more.

The TV should really be a poster boy for what's wrong with the system. Entertainment consistently gets cheaper while medical care gets more expensive. Many don't have insurance, and those who are lucky enough to have it are tied to their jobs and may have to forego other opportunities for fear of emergencies. That's not an environment that encourages creativity or entrepreneurship. In fact, it's not capitalism.

1 comment:

  1. I just saw "The One Percent" last night. While Jamie Johnson seemed a bit lost, you are right his interlocutors make up for that.

    The inherited rich are just plain lost in their bubble. Their advisers are, on the other hand, more heartless and craven. (As an aside, of the 10 or so self-made billionaires whose history I know very well, almost all were just a more successful version of the advisers: men who had validated Balzac's dictum about great fortunes stemming from great crimes).

    But Milton Friedman, that Nobel Laureate, comes off as the biggest fool of all. In the final segment with Friedman, where he walks off after a hissy-fit, Friedman basically thinks the only reason our system could collapse was because of a too-large government! Wow, that is staggeringly stupid!

    Good to know someone else saw that film and found Friedman to be seriously questionable. Maybe his mind had dulled in old age? Hmm.