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Yves here. Richard Murphy may not fully convey the profound impact Milton Friedman had as an advocate for free markets. His book, Free to Choose, became a bestseller and inspired a multi-part PBS series. Additionally, a self-contradictory op-ed he wrote for the New York Times in the 1970s effectively legitimized the myth that corporations bear an obligation—often cited as their primary duty—to prioritize maximizing shareholder wealth.
By Richard Murphy, Emeritus Professor of Accounting Practice at Sheffield University Management School and a director of Tax Research LLP. Originally published at Funding the Future
Milton Friedman emerged as the principal advocate for free markets in the twentieth century. His influential book, Capitalism and Freedom (1962), along with his promotion of monetarism, solidified his status as the intellectual architect of neoliberalism.
He advocated that the primary aim of business should be to maximize shareholder value, that markets should govern resource allocation, and that governments should limit their roles to the protection of property rights, enforcement of contracts, and regulation of the money supply.
According to Friedman’s perspective, most other activities were deemed unnecessary or detrimental:
- Regulation, welfare, and social safety nets were denounced as threats to individual liberty.
- Taxes were treated as confiscatory rather than vital components of a healthy fiscal cycle that supports community well-being.
- Collective bargaining was dismissed as an intrusion.
In Friedman’s view, markets alone could ensure prosperity, efficiency, and freedom.
However, decades later, the outcomes of Friedman’s intellectual pursuits are evident:
- Inequality has increased dramatically.
- Wages have stagnated.
- Financial crises have become more frequent.
- Public services have been severely diminished.
- Wealth has captured the political sphere.
- The promise of freedom has devolved into widespread insecurity.
This raises what we may call the Friedman Question: If everything is reduced to markets and money, how can society endure when its values, responsibilities, and collective goals are systematically dismantled?
1. The Cult of the Market
Friedman argued that markets are the sole effective mechanism for organizing human activity, asserting that prices provide all necessary information for efficient resource allocation. Trusting the pricing system eliminates the need for complex political processes, collective decision-making, and governmental “interference.”
This market-centric approach has become the prevailing doctrine. Since the 1980s, governments have been encouraged to “step aside.” Concepts like privatization, deregulation, and liberalization have become synonymous with progress. The notion was that markets would take care of everything, allowing society to flourish.
Yet, markets are not impartial; they are molded by power dynamics, wealth, and political influence. The price of a medication may not reflect its societal significance but rather the monopoly of the company that holds its patent. A worker’s pay may not correlate to their effort but to their degree of bargaining power. This market-centric ideology does not deliver justice; instead, it reproduces existing power structures disguised as efficiency.
2. The Hollowing of Democracy
Friedman viewed markets and democracy as partners, but he was wary that democracy might threaten market integrity by enabling redistributive policies. His response was to constrain democracy in the name of preserving liberty. He advocated for independent central banks, strict fiscal rules, and international treaties aimed at safeguarding free trade—all intended to limit the power of democratically elected governments.
The consequence has been the erosion of democracy itself. While citizens retain their right to vote, the spectrum of choices has become increasingly narrow. Politicians nearly universally echo the sentiment that “the markets” demand austerity, deregulation, and fiscal discipline. Consequently, democratic decision-making is hampered by market constraints. As familiar to readers of this blog, politics is now reduced to selecting which faction of the same party governs.
This is not freedom; it is subjugation. It signifies the inversion of democracy—government of the markets, by the markets, and for the markets.
3. The Destruction of Social Obligation
In Friedman’s view, the primary social duty of business was “to maximize profits.” This mantra, which is now universally parroted in boardrooms and business schools, has had damaging repercussions.
- It has justified the pursuit of short-term profits at the expense of workers, communities, and the environment.
- It has transformed companies into profit engines for shareholders, rather than social entities with broader obligations.
- It has provided a justification for tax avoidance, assaults on union rights, and the deterioration of job security.
By reducing everything to monetary value, Friedman’s philosophy eliminated the moral dimensions of business. The focus shifted away from whether a company treated its workforce ethically, contributed positively to its community, or acted as an environmental steward; the sole concern became whether it yielded substantial returns to its shareholders.
4. The Rise of Inequality and Insecurity
Friedman’s ideology promised economic growth but delivered increasing inequality.
- The wealth generated since the 1980s has predominantly benefited the affluent.
- Real wages for average workers have remained stagnant.
- Job security has been compromised due to a rise in part-time and gig work.
- Entire regions have suffered due to deindustrialization.
This is not a coincidence. It is a foreseeable outcome of an ideology that values capital over labor, shareholders over employees, and private wealth over the public good.
5. The Fragility of a Market-Only Society
A society cannot thrive if every value is reduced to a financial metric. Markets cannot quantify dignity, fairness, community, or care. They cannot assign value to intergenerational bonds. They can’t replace trust or local connections.
When markets dictate every aspect of life, those items lacking profitability are neglected:
- Care work is undervalued.
- Public health is underfunded.
- Education suffers from a lack of resources.
- The environment continues to be exploited.
Society becomes fragile when its fundamental supports are treated as “externalities.”
This encapsulates the Friedman Question. By limiting all things to markets and monetary value, we jeopardize the essential components that make markets feasible: a stable, cohesive, and equitable community.
6. What Would Answering Friedman Require?
Addressing the Friedman Question necessitates rejecting the illusion that markets alone can uphold society. It calls for:
- Reasserting democracy over markets. Policies must be informed by social objectives rather than dictated by financial markets.
- Restoring social responsibilities. Businesses are social institutions that must be taxed equitably, engage with their workforce respectfully, and promote the public good.
- Recognizing the value of what markets overlook. Care, education, health, and environmental stability are fundamental to prosperity and demand public investment, not privatization.
- Regulating capital. Wealth should be appropriately taxed, monopolies dismantled, and finance directed toward sustainable, productive purposes.
Inference
The Friedman Question compels us to confront the ramifications of an ideology that venerates the market while undermining social obligations. For the past four decades, we have lived under its influence, resulting in soaring inequality, deteriorating public services, weakened democracy, and an economy structured to benefit the few at the expense of the many.
Friedman assured us that liberty would thrive under market dominance. In reality, the opposite is true: liberty, justice, and democracy diminish when society is boiled down to a ledger.
The message is unequivocal: a thriving civilization cannot be based solely on market forces. It must be grounded in values that transcend financial considerations, such as care, equity, solidarity, and the acknowledgement that we are citizens before we are consumers.
