In the opening paragraph of his multi-volume, quasi-official History of the Federal Reserve (2003), monetary policy scholar extraordinaire Allan H. Meltzer wrote: “The founders did not intend to create either a central bank or a powerful institution; had they been able to foresee the future accurately, they might not have acted.” They might not have acted—given a little time, those who started the Fed back in 1913 could well have looked upon the result and found it undesirable.
There are so many canards about our dear, departed Great Recession of 2007 to 2009. Some favorites:
Deregulation caused it.
The government had to bail out Wall Street from its own mess.
The stimulus bill of 2009 stopped an economic free fall and forestalled a second Great Depression. (This last is why Hillary Clinton, on the stump, gives President Obama an “A” for his economic policy.)
The thing about canards is that they cannot help but contain a pointer toward the facts. Their evasiveness and stridency create a sort of outline, in shadow, of the very reality that it is the point of canards to suppress and obscure. Prevarication, as Shakespeare had it, protests too much.
Why do we still have the International Monetary Fund? It began life in 1944 with one rather specific purpose, to make sure that currencies traded at fixed rates of exchange. Since at least 1973, few currency issuers (brave exceptions include China and Panama) have shown the slightest interest in fixed exchange rates. Shouldn’t the IMF have folded a long time ago? What happened was mission creep. For about thirty years, from 1944 to 1973, the IMF did in fact supervise a world generally on fixed exchange rates. These were the “thirty glorious years” in France; the time of the “economic miracle”…
Did Friedman Give the Slip to “Money Mischief”?
In the preface to the twenty-year anniversary (1982) edition of Capitalism and Freedom, Milton Friedman had reason to gloat. He got to point out that since its publication in 1962, the book had sold 400,000 copies despite not getting reviewed, as Friedman put it, “by any national publication—not by the New York Times…or by Time or Newsweek,” the latter having sponsored beginning in 1966, on the strength of Capitalism and Freedom, an immensely popular column of Friedman’s. Friedman also could observe that by the time his next magnum opus had rolled around (1980’s Free to Choose, co-authored with his wife Rose), it was already set up on publication with a television deal and the expectation of huge print runs.
In 1982, in addition, Ronald Reagan was president of the United States and Margaret Thatcher prime minister of the United Kingdom, with Friedman advising the former in an official capacity. It was fairly clear at that point that the principles and recommendations of Capitalism and Freedom stood an excellent chance of being realized in policy and practice over a good portion of the developed world.
And yet it remains true that today, even given the free-market revolution that swept through the advanced world a generation and some ago, there are not too many concrete things in Capitalism and Freedom that one can identify as normative. Indeed, the most commonly cited “victory” of Capitalism and Freedom is the institution of an all-volunteer military in the United States, and that achievement dates from quite early on, 1973.
Now to be sure, many things have moderated in the direction indicated by Capitalism and Freedom a half a century ago. There has been a considerable degree of trade liberalization across the globe since the 1980s; the progressive income tax got cut down such that since 1987, 40% is the closest we in the United States have come to the top rate that prevailed in 1962 of 91%; and there has been a round of welfare reform. But some signature items still seem a universe away, above all the cause to which the Friedmans dedicated their last years: voucher-led school reform.
There is one item in Capitalism and Freedom, however, that has had a rather splendid career since shortly after the book came out, and the results have been at best ambiguous. This concerns the very center of the Friedman expertise: monetary arrangements. Two chapters of the book, those on “The Control of Money” and “International Trade Arrangements,” go over policy reforms that by and large have been adopted. We can see, and not altogether to our pleasure, where we have been led by them.