Tyranny (TV series)

Transcription

RONALD REAGAN: We must keep the rate of growth of government spending at reasonable and prudent levels. NARRATOR: Candidate Reagan advocated less government. REAGAN: We must reduce personal income tax rates and accelerate and simplify depreciation schedules in an orderly systematic way to remove disincentives to work, savings, investment and productivity. NARRATOR: Candidate Reagan advocated cuts in federal taxes. REAGAN: We must review regulations that affect the economy and change them to encourage economic growth. NARRATOR: Candidate Reagan advocated reducing government intervention in the economy. REAGAN: We must establish a stable, sound, and predictable monetary policy. NARRATOR: Candidate Reagan advocated moderate and stable growth with the economy. PEOPLE CHANTING: We want Reagan! We want Reagan! We want Reagan!...(Cheering) REAGAN: Thank you very much! NARRATOR: And the voters responded by giving Candidate Reagan an overwhelming mandate when he was elected president. President Reagan tried to keep his promises but like most presidents he was only partly successful. Economist Milton Friedman explains why this occurred. He discusses a political phenomenon, tyranny of the status quo. MILTON FRIEDMAN: Everywhere- whether in the United States, Great Britain, France or Germany, a new administration has just about six months to make major changes that will benefit the community at large. Those changes will have bad effects on small concentrated groups. The bad effects will be visible and immediate. The good effects will be less visible, take longer to manifest themselves and longer to be recognized. Unless the occupant of that house, republican or democrat…makes such changes in the first few months after being elected or reelected, the tyranny of the status quo will assert itself and prevent further change NARRATOR: In “Tyranny of the Status Quo,” we will examine government’s potential to act as an agent for change. Joining Dr. Friedman are young adults from throughout the United States. These men and women will share the rewards or suffer the consequences of today’s political decisions. Like all of us- they want improvements in our society. Like all of us- they have many different ideas as to how those improvements can be achieved. FRIEDMAN: I would like for us to explore the problem of: why is it that what I assert to be a distinct change in public opinion has not succeeded in changing actual policy? What is it about the tyranny of the status quo? What is it the role of pressure groups? What is it that has produced this result? And I would like to attack that problem, that issue… by discussing some of the broad areas of policy that has been very much in the forefront and have been very important in the past two years. We have…as you know in the country, a very large expenditure of governmental funds on higher education, in the form of state universities which are financed out of state or maybe city or local groups; also in the form of federal subsidies to higher education directly to the institutions, and indirectly to students in the form of subsidized loans of various kinds. Grants also, grants without condition, and the question I want to raise is: whether that higher…those higher education expenditures are a justifiable activity of government, and what their consequences are? Whether they really are a desirable element of a welfare state? I may say…my own view has always been very simply that they are not. The reason being: that in the main the benefits go to the individuals who get the higher schooling, the students on the one hand. Those students tend to be in the middle or upper-income groups. Either their parents are from that group or they themselves will be in that group when they get out. Or, as the funds come from people all over- so that you have a case in which you are imposing taxes on relatively low-income people, to confer very large benefits on upper-income people. 1ST GUEST: Um, I agree that I think the subsidies are regressive, and that the wrong people are paying for it. On the other hand, I think there are some sectors of the world which economics should stay out of, and which private interest should stay out of, and I think education is one. I think as soon as you start offering people economic incentives to get educated, or to use the education that they get for economic means… In other words once you put a price tag on knowledge I think you’re going to be. . . FRIEDMAN: What are you talking about? You mean to say that the graduates of colleges and universities don’t use their capacities in the direction which is influenced by the incomes they can earn? 1ST GUEST: Not completely, no. FRIEDMAN: Oh, but neither do the people who don’t go to college. Nobody is completely dominated by the highest income. So in what respect, in what …in what way do you think that governmental financing of higher education in any way changes the incentives to which the individuals who get the education react? 1ST GUEST: Well, it’s hard to talk about this without having the possibilities before us. Let me tell you, one possibility I have heard is that people would in effect invest in me if I went to college. Somebody would say, “He’s probably going to do well, so we’ll pay him to go to college, and then as he makes money he’ll pay us back, and it’s a good investment.” That gives, first of all- they are going to judge people, not on how well they get educated, but how well they are going to do after college. So, right there I think that’s a subversion of the educational process. FRIEDMAN: Let’s stop for a moment. You think that the, the grantors of government higher education are judging the expenditure of that education by how good the education is? How do you explain the fact that the most eminent universities disproportionally contributing to the Nobel laureates or other marks are the nongovernmental as opposed to the governmental institution? 1ST GUEST: Well… I have to…private institutions are in general better, though certainly there are very good state institutions. 2ND GUEST: Well, I feel that there is a basic assumption that has to be challenged, and that’s that the students by themselves benefit. If you believe that society places education as a goal worthy of attainment, and that by having a more educated society, society will benefit, then I feel that no one is losing out by having an individual going to a university and becoming a professional. FRIEDMAN: Let me ask you a question. Did society benefit from the development of the electronic… microcomputer industry in the Silicon Valley? 2ND GUEST: I feel that every step … FRIEDMAN: Did society benefit from that? 2ND GUEST: I’m not familiar with that one example. FRIEDMAN: Did society benefit from Henry Ford’s introduction of the Model T Ford? 2ND GUEST: Yes, I think it did. FRIEDMAN: Should the society therefore have subsidized Henry Ford to produce the Model T? 2ND GUEST: Subsidy, see that issue is not really relevant to the issue at hand. FRIEDMAN: Why not? This is a subsidy. 2ND GUEST: But if you use the example of education, sticking with higher education. The assumption has been made that there are a group of people who are giving, and not receiving in return. I think that is false, because although there are a group of individuals who are poor, and they may be taxed, and these taxes go towards financing someone’s education; they are not losing out because society is benefited by having . . . FRIEDMAN: But that’s my whole point… 2ND GUEST: …people who indeed do obtain education. FRIEDMAN: Excuse me, that’s my whole point; society was benefited by Henry Ford’s producing it. The poor people you are talking about benefited by Henry Ford doing it, and yet you do not believe that government should have used compulsory taxation to generate that benefit. Where is the difference? 1ST GUEST: If it had to, to get Henry Ford’s achievements, if it had to then I think yeah, it should have. . . FRIEDMAN: Then let’s go back, let’s look at the evidence. If you look at collectivist states like Russia, China, they are states which use the same means for getting the Henry Fords that they used to finance higher education, and what kind of Henry Fords do they get? But I want to stick to this component of the welfare state: higher education. How do you justify using tax funds? Do you suppose, let’s suppose you did not have any tax funds. Would there be institutions of higher education? 2ND GUEST: Yes, there would be…but you would have a different brand of people going there. FRIEDMAN: How do you know? 2ND GUEST: The ones who would benefit would be those who are wealthy and can afford it. As it stands now in America… FRIEDMAN: Are you sure about that? 2ND GUEST: The greatest thing about America in my mind, you can go to a college and go to institutions of higher learning without having to worry about finances, because there are means available there for you… FRIEDMAN: You are a very young man, Gary. Historically in the United States, people of every income class have been able to get through college and universities…whatever the income of their parents. 2ND GUEST: Are you saying there is equal access? FRIEDMAN: No, I didn’t say there is equal access. There are many respects in which people are not equal, and this is no different from others. The opportunity for a person to set up in a business is not independent of the wealth of his parents; it doesn’t follow from that the government should set everyone up in business. What I am trying to argue is: that it is a matter of fact, historically, it has been possible, I speak personally, I come from a family…my parents never had an income which would have qualified for the poverty level by modern standards. And I worked my way through college and hundreds, and thousands, and millions of other people did the same thing. The question is: if you want to go to college, who should pay for it? You? Or somebody who isn’t going to go to college? 2ND GUEST: It is in the best interest on every black individual, regardless of the stage in their life, to make sure that more blacks go to college and become professionals. Therefore, by using your logic you would say by that one black person living in Harlem who does not have the funds available, he should not be made to give a dollar of his paycheck to go to a person who’s going to college. FRIEDMAN: The right word is, “made.” There have long been black colleges and universities supported in large part by the contributions from the black community. That’s a voluntary activity. The question at issue is: whether it is appropriate to make them contribute. 2ND GUEST: I think it is appropriate, because that is something that I, and a lot of other people deem as being very important. FRIEDMAN: Excuse me. For a moment let’s suppose that you didn’t to a college. You would have conducted some other career. You might have made even more money in that other career. 2ND GUEST: I may not be as influential; that’s the key. FRIEDMAN: But you might have made more money, and that you might have had more funds to put back, you might have been more influential. The question is: why should I subsidize you in going to college, but not subsidize you for a moment in setting up a business? 2ND GUEST: As I stated, it depends on the goal of society. . . FRIEDMAN: Society doesn’t have goals, people have goals! 2ND GUEST: Well, people make up society... FRIEDMAN: Well, of course, but insofar as their goals are common, they can do it through voluntary contributions. 3RD GUEST: Why should factory workers… or why should a poor black factory worker have to work an extra hour a week in order to send any of us to college? 2ND GUEST: Well, there is good and bad points to everything. But just because others get on the bandwagon, and also this does not mean that we should allow those on the lower side of other. . . 3RD GUEST: “Others” is most of the people who go to college are middle-class… FRIEDMAN: There is no governmental program in the country which so clearly takes money from low- income groups and gives it to high-income groups. 2ND GUEST: But you’re saying…you’re making the assumption that you have a group of people from lower-class that is paying for the higher echelon .Well, the higher echelon doesn’t really have to get the money to go to school. FRIEDMAN: I beg your pardon, doesn’t have to, of course. .. FRIEDMAN: …but it does! If I take the people that are going to Berkeley, here, in California, the University of California, it is a state university. It doesn’t have any tuition, it does have some fees. If you look at the average income of the parents of the people who are going there…this was done some time ago…in all the state universities in California. 50% of the students came from the upper 25% of the income class, and 5% of the students came from the bottom 25%. 2ND GUEST: Well, if that is the current state of affairs, then that is not fair. But, that does not mean we should scrap the whole institution of government subsidizing education. FRIEDMAN: Well, tell me how you would arrange the subsidies? 2ND GUEST: Oh, I don’t have any easy answers, but I still wouldn’t say scrap the whole system. I think that’s where we differ. FRIEDMAN: It just so happens that the oldest form of government subsidization education was for higher education. And it is inherent in higher education that it will, in fact, be regressive. But now look, here you are defending- two of you at least, defending these welfare state payments to students going to intuitions of higher education. Do you feel the same way about welfare for business? 1ST GUEST: I think if we can’t get a great car through private industry, if getting a good car is a good in itself, which it is, then we should federally fund it. FRIEDMAN: And who is going to decide, and how are you going to decide whether government is more effective in doing that then private in the market itself? 1ST GUEST: It is not a question of who is more effective. I think I would agree, especially getting a good car, the private is always more effective. But we are taking a hypothetical case where the private market won’t do it. FRIEDMAN: Well, let’s not take hypothetical cases; let’s take real cases, for example: there is the Chrysler Corporation. 1ST GUEST: Right. FRIEDMAN: The government, in effect, bailed it out by guaranteeing it a loan. Should the government have guaranteed that loan? 1ST GUEST: Not on principle, I really can’t defend it on principle. But the fact is that a tremendous amount of our population is reliant on the auto industry and on Chrysler, in particular. FRIEDMAN: What would have happen if Chrysler had gone bankrupt? 1ST GUEST: I don’t know. FRIEDMAN: It would’ve continued to operate! But it would have operated under a receiver. The people that would have been hurt would have been the people that owned Chrysler shares, or who had loaned money to Chrysler. In fact, the odds are that the properties would have been taken over by more efficient automobile producers, and for all I know, you would have had more jobs. Now the question is…that is why I say this is welfare. The Chrysler loan is a form of welfare to the people who own stock and bonds…just as government subsidies to higher education is a form of welfare for the students who are in higher education. 1ST GUEST: Nobody would argue that what we did to Chrysler we should do for every folding firm. But I think. . . 3RD GUEST: Only for the largest firms then? 1ST GUEST: Only for the firms that can bounce back, as Chrysler did. And I think that congressmen looked at that very closely before they voted that for the grant or the loan. But, I think government does have an opportunity to provide security. It’s not fair to a Chrysler employee that he gets laid off and he gets impoverished because Lee Iacocca- or somebody on the top of Chrysler made a mistake. So, the government has the opportunity to offer him some security, and that’s basically what we go to government for, for security. 3RD GUEST: But the government does provide a lot of that security by providing unemployment insurance, by providing all sorts of assistance for people who are put out of work. The only question at stake here is: whether he is in addition entitled to a job which brings in much more pay than the average American makes, producing products which nobody wants for the benefit of a multibillion dollar corporation… 1ST GUEST: Again, you’re switching it to industries that won’t bounce back. In this case we had an optimum use of security. He became secure and at the same time he got to work and contribute. 3RD GUEST: I don’t see how we can know it was optimum, because we don’t know what would have happened with that plan if it had been broken off, and divided under new management. It might be that other people other than Lee Iacocca could have managed that plant much more effectively, and maybe the workers who would have been working for that management would have better off today, than if they would have stayed under Iacocca’s management. In any event, I just don’t see why the government should be supporting Lee Iacocca any more than it should be supporting, you know, middle-class college students. NARRATOR: The Great Depression of the 30s brought distress to the farm. Prices plummeted, surpluses accumulated. In response, government initiated subsidies to support the prices of farm products. They are still with us at an estimated cost to the American tax payer of over 21 billion dollars this year. PIK PARTICIPANT: It was designed to be a short-term program to take care of our burdensome supplies, and to raise commodity prices, and that’s the reason I went into it. NARRATOR: Obviously, many farmers big and small, real farmers, and professionals quick to cash in on a good thing have benefited from these programs. They would loudly protest the end of these benefits, but everyone else would reap lower taxes and lower food bills. DICK WARNSHUIS: We have higher productivity and that should help the consumer. The problem is the government has intervened and put support on milk, which means they guarantee the price that is going to be paid for powdered milk and butter, and tea and things like that. And in doing this, the government has made it very profitable to produce milk, and we can produce all the milk we want, and we know we are going to get a price for it. So we just keep producing, and we produce more and more and more. Therefore, we have generated a huge surplus, and the government can’t afford to keep buying this surplus. And so, I think… in the end the best thing would be for the government just to get out of it; allow supply and demand to take over. Of course, if there is too much milk, then the price is going to go down, and this is good for the consumer. If there is a pre-demand for milk, then the price is going to go up and we’ll produce more. NARRATOR: Some farmers would just as soon get rid of the artificial prop of government support, but the tyranny of the status quo has so far prevented that from happening. FRIEDMAN: The welfare state is a many-headed giant, I was going to say “monster,” but I figured I better say giant. WOMEN: HAHAHA! FRIEDMAN: Now I want to turn to another head of the welfare state, and that is the subsidies to agriculture. Those are a major matter; they amounted in the last year to about 12 billion dollars, if my memory serves me right. They have been getting larger rather than smaller. They go to subsidize people who produce everything from tobacco, to dairy products, to wheat to corn, you name it…and there is a subsidy program for them. Of course, it is not labeled “subsidy.” It’s always labeled a “price support program.” And the form which it takes is: that the government guarantees the farmer that if the price in which he can sell his product falls below a certain level; the government essentially buys up the surplus, buys up what can’t be sold at that price and stores them. And as a result, we have mountains of goods: cheese, dairy products, and store it. And it’s worth noting that this is a phenomenon not only in the United States, but around much of the western world. Europe has a butter mountain which it’s trying to dispose of, and so on. Now the question is: What we can say about the agricultural subsidies? Are they an appropriate element of a welfare state? WOMAN: Well, it seems a little simple for those of us who have no experience with farmers to say we are absolutely opposed to agricultural price supports. But, I think that if you had a little bit more familiarity with what life was like when you were at the mercy of the weather, and you had no idea whether you were going to be able to sell your crop from one year to another because you didn’t know in advance what your crop was going to be like, it seems like something of a reasonable way to try to stabilize people’s income source. FRIEDMAN: Well, if I understand your argument, you’re saying that the government should provide crop insurance, which is a very different thing from price support. WOMAN: How is it different? FRIEDMAN: Unemployment insurance is a very different thing from guaranteeing you a price for your labor. WOMAN: Well, I guess that that might be a preferred alternative way to make sure that people were not going to starve when they had a bad…when everyone had a good year. FRIEDMAN: So, there is one thing that farms are pretty well-protected against… WOMAN: HAHAHA! Other than losing their houses and farm… FRIEDMAN: Yes, many of them are losing their houses because they have borrowed a great deal of money on the basis of their houses. We tend to think, you see, the image you people are projecting is the image that is common in the United States for good reasons; of the small pioneer farmer, on a small plot of land that is scraping the ground to earn a living. Now in fact, most farmers in the United States who are really commercial farmers have properties and assets that have to be measured in the millions of dollars, not in the tens of thousands of dollars. 2ND WOMAN: One of the reasons that I presume that we provide those kinds of subsidies, and I think it’s not always the case that they are referred to as something other than subsides, um, is that we want to ensure that people stay in the business of agriculture, and that there is a certain diversity of products available. FRIEDMAN: If we want to ensure that people say in the business of agriculture, we have been doing a lousy job because the number of people in agriculture has been declining drastically. You know, there is no industry in the United States which comes closer to being a high-tech industry. At the outset of the American Republic, 1776 or ‘8, it took 19 farmers to feed themselves and one other person 95% of the population. Today it takes less than 1 farmer to feeds himself and 19 other people. 2ND WOMAN: I understand that. In fact, there have been lots of small famers dropping out of the business, in the agricultural business remaining. Perhaps we could change to a more central question which I have for you. Which is that: you characterize it as though the 12 billion dollars which we spend in subsidies is a kind of loss, and that if we didn’t spend that… we would be better off. And what I would like you to do is flesh that out a little bit. FRIEDMAN: Well the effect of spending the 12 billion dollars is mostly to induce farmers to spend money to grow crops which go into storage. Now who benefits from that? 2ND WOMAN: Or which might be, in fact, sold abroad. FRIEDMAN: Well, that’s a more difficult problem- if the only way… if we try to sell them abroad- we can only sell them at the world price. The world price is below the domestic support price, and so in effect, the difference is precisely the subsidy that is being paid to farmers. Now, if we offer a higher price at home than is available in the world market, it has to take an act of government to export. See let’s suppose we had no price supports, we weren’t spending this 12 billion dollars. It would be the same price abroad and at home. You would have a world market for all of these products, and what wasn’t sold at home would be sold abroad, and we would, in fact, be exporting at least as much as we are now exporting. In addition, however, the program makes food more expensive and imposes a cost on all of the people in the community who consume food. Agriculture is one of our major export industries. We have had a very large movement toward protection, and this carries us back to the automobile industry, because here there is a very close connection. The argument is that Japanese automobiles have been coming into the country, and taking jobs away from American workers in Detroit, and we ought to do something about it, we ought to impose a tariff on it, or we ought to impose a quota. Or, what we have done is to have what’s called a “voluntary quota” on part of the exports from Japan. Now the question is: that’s another component of the welfare state, and what is there to say about that? 2ND WOMAN: The underlying claim is that we would all be better off if there were no constraints placed on anything, and I think that a certain comparison can be made between the American governmental support structure, and support structures of West Germany and Japan. It’s not clear to me that part of that comparison usually ends up saying: that Japanese are better off than Americans, because of the competitive advantage that they’ve gained in the car industry. Japan, as well as the United States, imposes similar kinds of constraints on what they import. FRIEDMAN: Oh, absolutely. Most countries around the world. . . 2ND WOMAN: Right…The question is: if we are talking about our position vis-a-vis Japan, and both of us have certain kinds of export and import quotas, can we clearly tie the fact that we are worse off to those export and import quotas? FRIEDMAN: Let’s for a moment come back, and I want to tie back into agriculture and ask a question. Let’s suppose that we did do everything the automobile industry asks. We cut off imports of automobiles from Japan. Who would suffer? 2ND WOMAN: Those of us who drive Toyotas. HAHA! FRIEDMAN: And who else? 2ND WOMAN: And who else? FRIEDMAN: Yeah, who else? 2ND WOMAN: Well, I’m not sure what. . . FRIEDMAN: The farmers, the farmers. You said they were a big export industry. Where does Japan get the money to buy their exports? Japan is a big importer of food from the United States. Where does it get its money? 2ND WOMAN: Well, I agree that they’re interconnected. There would also be certain people who might benefit- those who would not be displaced. FRIEDMAN: Of course, I didn’t say they would. Of course, if you cut off all the people who would benefit would be the automobile workers, the steel workers in the United States who would produce American cars instead of Japanese cars. The people, who would lose obviously, are the people who buy the cars and drive them. But the thing that is more interesting…and the reason I brought it in, in this connection is because of its tie-in with agriculture. WOMAN: Mm hmm… FRIEDMAN: Because I suspect that if you went to farmers, if you went to farmers and asked them the question: How would you be affected by increase in the tariff on automobiles? Very few of them would say, “My God! That would do me a great deal of harm!” For at least 200 years since Adam Smith wrote the Wealth of Nations in 1776, there has been an almost unanimous agreement among economists that tariffs impose a net loss. And that hasn’t prevented country after country from having tariffs and adopting them. 2ND WOMAN: We can’t guarantee that there will be a tariff-free market for … FRIEDMAN: Of course not! Of course not! Two wrongs don’t make a right. It would be better for the world if all the other countries would also go in for no tariffs. But even if they go in for tariffs, we are better off not having tariffs.