Wednesday, April 3, 2013

Own or Be Owned, I: Milton Friedman, Master of Debate


There is a Just Third Way. Not just any third way. The problem is that Gates or Buffett, other well-intentioned thinkers across the ideological spectrum, including the UK advocates of a “third way,” have never taken it seriously.
The Just Third Way can be summed up in four words: "Own or Be Owned." The underlying principles of economic justice were first articulated in The Capitalist Manifesto, a 1958 best-selling book by Louis O. Kelso and the Aristotelian philosopher Mortimer J. Adler.

In his Preface, Adler acknowledged that Kelso had developed a new paradigm of political economy based on the logic of a just market system now known as "Binary Economics." Milton Friedman, a proponent of capitalist greed, in a June 29, 1970 article in Time magazine, tried to attack Kelso's Just Third Way by declaring,

“[Binary economics is] a crackpot theory. Instead of saying that labor is exploited, Kelso says that capital is exploited.  It’s Marx stood on its head.” (The Man Who Would Make Everybody Richer,” Time: The Weekly Newsmagazine, June 29, 1970, Vol. 95, No. 26.)

To this incisive and in-depth analysis, Kelso responded in an equally pithy manner but more to the point, “Damn’ right — and what’s wrong with that?” (Ibid.)

This was, frankly, about as polite as Friedman got toward anybody — or about as close as he got to saying something substantive when denigrating them or their ideas.  A few years earlier, in a conference on the draft held at the University of Chicago, December 4-7, 1966, Norman G. Kurland (now president of CESJ) sat next to Friedman at a lunch.  Kurland, who had taken the same position as Friedman on conscription, took the opportunity to ask Friedman about the “Kelso ideas.”  Friedman got up and left the table without speaking.

A few months later Kurland sent Friedman a letter challenging Friedman to a debate.  In response, Friedman reprised his performance four years earlier at the University of Chicago by declaring,

“My considered judgment is that it is an unwise, unsound plan that promises much and cannot conceivably achieve what it promises.  It reflects a lack of understanding of the operation of the economic system and of the effect of changes in it.  If the proposed reforms and miracles could be brought about through the governmental measures that Mr. Kelso proposes, they would also be entirely feasible by private measures that he could undertake on his own.

“I recognize that I am stating conclusions and not the reasons for them, but I state them as dogmatically as I do to make it clear to you that the issue is not one of avoiding or not avoiding an open debate on the merits of Kelso’s idea; the issue is one of whether it is worth the time and effort involved.  My own answer is in the negative, but needless to say that is my own personal opinion, and those who feel otherwise should be encouraged to have the plan get as much attention as it possibly can.” (Letter from Friedman to Kurland, January 26, 1971.)

Friedman, “needless to say,” never actually said what he considered wrong with binary economics, or responded to Kurland’s follow-up letter of February 1, 1971.  Ironically, within a few years, the initial enabling legislation for the ESOP was enacted.  The late Senator Russell Long of Louisiana championed the effort. (Norman G. Kurland, “Dinner at the Madison: Louis Kelso Meets Russell Long,” Owners at Work, Winter, 1997-1998.) Today, more than 11 million workers in more than 10 thousand companies benefit from Kelso’s “unwise, unsound plan.”

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