This is one of a series of posts that will ask what the most pertinent question raised by a prominent influencer of political economy might have been, and what the relevance of that question might be today. There is a list of all posts in the series at the end of each entry. The origin of this series is noted here.
After the first two posts in this series, the topics have been chosen by me, and this is one of those. This series has been produced using what I describe as directed AI searches to establish positions with which I agree, followed by final editing before publication.
The Friedman Question
Milton Friedman was the great evangelist of free markets in the twentieth century. His book Capitalism and Freedom (1962) and his advocacy of monetarism turned him into the intellectual godfather of neoliberalism.
He taught that the purpose of business is to maximise shareholder value, that markets should be left to allocate resources, and that governments should confine themselves to protecting property rights, enforcing contracts, and controlling the money supply.
In Friedman's vision, almost everything else was waste or distortion:
- Regulation, welfare, and social safety nets were all painted as threats to liberty.
- Taxes were viewed not as an essential part of the fiscal cycle, supporting the process by which communities can build collective goods and well-being, but rather as a form of confiscation.
- Collective bargaining was recast as interference.
In the Friedmanite worldview, markets alone could deliver prosperity, efficiency, and freedom.
And yet, half a century on, the results of Friedman's intellectual crusade are visible all around us:
- Inequality has soared.
- Wages have stagnated.
- Financial crises have multiplied.
- Public services have been hollowed out.
- Politics has been captured by wealth.
- The promise of liberty has become a reality of insecurity.
This leads us to the Friedman Question: if everything is reduced to markets and money, how can society survive when its values, obligations and collective purposes are all stripped away?
1. The cult of the market
Friedman insisted that markets are the only reliable mechanism for coordinating human activity. He believed prices transmit all the information required to allocate resources efficiently. If you trust the price system, you don't need messy politics. You don't need collective decisions. You don't need government “interference.”
This cult of the market has become orthodoxy. From the 1980s onwards, governments were told their role was to “get out of the way.” Privatisation, deregulation, liberalisation — these were the watchwords. Markets would provide, and society would thrive.
But markets are not neutral. They are shaped by power, wealth, and politics. The price of a medicine may not reflect its social importance, but the monopoly of the company that holds its patent. The wage of a worker may reflect not their contribution, but their lack of bargaining power. The cult of the market does not deliver justice. It delivers the outcomes of power relationships disguised as efficiency.
2. The hollowing of democracy
Friedman saw democracy and markets as complementary, but he feared that democracy could threaten markets by allowing people to vote for redistribution. His solution was to constrain democracy in the name of liberty. Independent central banks, fiscal rules, and global treaties that enshrined free trade were all required to tie the hands of elected governments.
The result has been a hollowing out of democracy itself. Citizens can still vote, but the range of options available to them has shrunk. Almost all politicians repeat that “the markets” demand austerity, deregulation, and fiscal restraint. Democratic choice is neutered by market veto. To use a term familiar to readers of this blog, politics has been reduced to choosing which part of the single transferable party should govern.
This is not liberty; it is subordination. It is the inversion of democracy; government of the markets, by the markets, for the markets.
3. The destruction of social obligation
For Friedman, the social responsibility of business was “to increase its profits.” This phrase, now repeated endlessly in boardrooms and business schools, has had devastating effects.
- It has justified the extraction of short-term profit at the expense of workers, communities, and the environment.
- It has redefined companies as machines for shareholder enrichment, not social institutions with widespread responsibilities.
- It has been used to legitimise tax avoidance, attacks on trade union rights, and the erosion of job security.
By reducing everything to money, Friedman's doctrine stripped business of moral obligation. What mattered was not whether a company treated its workers well, served its community, or protected the environment; all that mattered was whether it delivered high returns to its shareholders.
4. The rise of inequality and insecurity
The Friedmanite revolution promised prosperity. What it delivered was inequality.
- The gains of growth since the 1980s have flowed overwhelmingly to the wealthy.
- Real wages for most ordinary workers have stagnated.
- Job security has been eroded by casualisation and the gig economy.
- Whole regions have been hollowed out by deindustrialisation.
This is not accidental. It is the predictable result of an ideology that prioritised capital over labour, shareholders over workers, private wealth over public good.
5. The fragility of a market-only society
A society cannot survive if every value is reduced to a price tag. Markets cannot measure dignity, fairness, solidarity, or care. They cannot price the bonds between generations. They cannot substitute for trust or community.
When markets are allowed to decide everything, what is not profitable is neglected:
- Care work is undervalued.
- Public health is underfunded.
- Education is starved.
- The environment is plundered.
Society becomes brittle because its foundations are treated as “externalities.”
This is the core of the Friedman Question. By reducing everything to markets and money, we undermine the very conditions that make markets possible: a stable, cohesive, fair society.
6. What would answering Friedman require?
To answer the Friedman Question is to reject the fantasy that markets alone can sustain society. It requires:
- Restoring democracy over markets. Policy must be guided by social purpose, not by what financial markets demand.
- Reasserting social obligations. Business is a social institution. It must be taxed fairly, treat workers decently, and serve the public good.
- Valuing what markets neglect. Care, education, health, and environmental stability are the foundations of prosperity. They require public investment, not marketisation.
- Constraining capital. Wealth must be taxed, monopolies broken up, and finance directed into productive, sustainable uses.
Inference
The Friedman Question asks us to confront the consequences of an ideology that made a god of the market and a heresy of social obligation. For forty years, we have lived under its shadow: rising inequality, collapsing services, hollowed-out democracy, and an economy that works for the few while undermining the many.
Friedman told us that liberty would flourish when markets reigned. The truth is the reverse. Liberty, fairness, and democracy decline when society is reduced to a balance sheet.
The lesson is clear: a civilisation cannot be built on markets alone. It must rest on values beyond money, such as care, justice, solidarity, and the recognition that we are citizens before we are consumers.
Previous posts in this series
- The economic questions
- Economic questions: The Henry Ford Question
- Economic questions: The Mark Carney Question
- Economics questions: The Keynes question
- Economics questions: The Karl Marx question
- Economic questions: The Hayek question
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Monday, Brussels, meeting to discuss: “Decarbonise heat whilst Ensuring Energy Affordability”
Various lobby groups plus head of Unit (HoU) from the Euro Commission. All comfortably middle class and well paid (= little idea how the 75 – 80% live).
Markets are the solution apparently. I pointed out that currently elec markets cannot (due to marginal market “design”) even price elec @ the cost of production. No response.
Engaged with the HoU from EC – afterwards. I would have got more sense from a “Speak you weight” machine. Does not even have a basic understanding of price formation (&/or the “information” that price carries). Instead, such people rely on jargon & recitations/articles of faith: “our market which art in heaven”.
Friedman, like Hayek & others never stood back and contrasted their “theories” with the real world – why would you? – doing so would endanger a “glittering” academic career and the adulation that comes with it. That your theories stuff much of humanity? Irrelevant. These theories are not just wrong, they are dangerous because they cause suffering, instabilty, conflict and death. (Had Russia taken a non-libtard route following the collapse of the USSR, I rather doubt we would have the current war).
The economics of walking about has never occurred to such people.
Upton Sinclair, eat your heart out.
Friedman assumed two things firstly, that the market always has certainty of profits and therefore automatically makes use of available real resources. The rise and fall of unemployment by large amounts negates this. Secondly, that profits automatically go back into productive investment when in fact they also go into forms of saving that aren’t productive. A house price bubble can hardly be called the kind of productive investment Friedman had in mind that led to the 2007/2008 GFC.
“profits automatically go back into productive investment when in fact they also go into”………insane conspicuous consumption.
Marigo bay (Carribean) 1995. Massive turd brown motor yacht sails in. Seaplane in the middle, helicopter on the after deck. Turns out that the dolt that owned it made his money from producing motor vehicle parts. When he bought the yacht he had it sawn in half to add a bit for the seaplane FFS (I speak as an eye witness to this witlessness).
Key point: the rich compete in terms of “conspicuous consumption” (the owners of various UK motorbike companies in the 1950s spent profits on personal consumption – not productive investment – & did not understand that volume markets for small machines were developing)
See my recent discussion on this with John Christensen.
The Twitterer ‘EuropeanPowell’ has been running a one-man campaign to draw attention to single transferable party’s strategy to parcel up the UK into Milton ‘Freedman plus’ mini states without corporate taxes and no rule of law against compulsory purchase of property , etc . These mini states seem to be actually governed by corporations.
https://x.com/EuropeanPowell/status/1971833439037833714
The whole thing was brought in by the Tories and embedded by Labour – often with no consultation or democratic scrutiny.
In Naomi Klein’s book “The Shock Doctrine”, she says that Milton Friedman’s neoliberalism and the CIA are co-conspirators in a strategy she calls “disaster capitalism.” She argues that Friedman’s free-market theories are implemented through a “shock”—often a crisis orchestrated or exacerbated by the CIA, such as military coups. Klein alleges that these shocks create an opportunity for authoritarian regimes, supported by the CIA, to impose radical, unpopular neoliberal policies while the population is too traumatised and preoccupied with survival to resist.
Starmer’s government?
The Shock Doctrine: The Rise of Disaster Capitalism (2008) by Naomi Klein
https://amzn.eu/d/fVI7pcE
A useful book.
Both Friedman and von Hayek seemed to accept authoritarianism as a stepping stone to asserting the market dominance of human affairs – Philip Mirowski goes into lots of detail about this (and quotes them verbatim) in his book ‘Never Let a Serious Crisis Go to Waste’ (2013). Basically, they both confessed to supporting un-democracy/unfreedom and are guilty as charged.
Nancy McLean takes it further in ‘Democracy in Chains’ (2017) and whilst looking through public choice theorist James Buchanan’s papers in a Virginian university reveals that at the heart of Neo-liberalism is a simple Confederate slave owner attitude. Everything is there – even people – to be grabbed and taken in order to benefit personally and gain power. It is shocking to consider that the vouchers for private education that the Tories offered for people to opt out of state education in Britain, were developed by Confederate racists in U.S. to prop up the racial segregation of schools in the Southern states.
BTW in this (4) you say ‘Constraining capital. Wealth must be taxed, monopolies broken up, and finance directed into productive, sustainable uses.’
Should it be wealth must NOT be taxed?
I have Buchanan on my list of people to do in this series….
When it comes to Milton Friedman, there is no seem. He openly openly preferred removing democracy for capitalism. He didn’t believe democracy and institutions were necessary for freedom. He believed the market could do it all.
What do Friedmanites say to entrepreneurs and business owners/shareholders who say, “I’m NOT chasing higher profit. I enjoy running my business, I have ENOUGH to live on, I get a kick out of supplying a good product, providing secure rewarding employment and helping my community. Just because the MARKET says I could double my prices, doesn’t mean I HAVE to, rspecially as doing that would make me miserable.”
Do Friedmanites have an answer to that? Because it has always puzzled me. If a business isn’t leveraged to the hilt snd controlled by the bank, why does it have to maximise profit at the expense of everything else?
(I’m very naive.)
When I was senior partner of my firm the staff were always slightly bemused by my suggestion I ran the firm to serve clients whilst making enough to pay them and ensure survival. When we took part in inter firm comparisons we were much more profitable than average, because service was our goal.
[…] 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 […]
The average rate of profit has declined and there is no boost to these from new innovations. The AI surge will only emiserate the 99 per cent and enrich the 1 percent. Wages are falling so markets are starved of consumers.. Rentier capitalism is destroying it self and society. Natural resources are becoming scarcer, especially rare earth’s and minerals for climate saving technologies. Hayek and Friedman’s free market nirvana is turning to dust before our very eyes.
I will read the above thread as soon as I can but I have just picked up ‘The Hidden History of Neoliberalism’ by Thom Hartman. Am horrified by it, so far. Its cruelty and its greed.
It is
I like Galbraith’s comment on Friedman:
“Milton Friedman’s misfortune is that his economic policies have been tried.”
Very good
Excellent summary, Richard.
Whilst I can’t explicitly say why, how, etc., I wholeheartedly agree with Mike Parr’s comments as it certainly mirrors my experience. The phrase ‘there’s none so blind as those who will not see’ springs to mind. Partly this is because – again in my experience – they don’t walk about enough (posing in hi-vis jackets, etc., doesn’t count), they don’t have the requisite experience (or technical, commercial, etc., knowledge) and virtually all politicians I have dealt with (with some rare exceptions) believe their only choice is a neoliberal / Friedman- / Hayek-style approach and/or focus solely on political soundbites as opposed to considering core issues (e.g., poverty) and proposing and effectively implementing solutions to address it.
Recent UK governments (arguably almost all) seem wholly unable to ‘deliver’. Part of the reason for this is that having adopted aforesaid neoliberal approaches, they have hollowed out their capability and capacity to deliver and, instead, resort to organisations such as Serco or management consultants to deliver(?) for them or PFI-type approaches. It’s like handing your front door keys to your house to a burglar before going on holiday. They simply further hollow-out internal capacity and capability in their own (neoliberal, market-driven) self-interest. The English water companies and the railway sector are prime examples of how effective the market-driven approach is in serving the interests of the wider public. Electricity / energy pricing is another. It’s all happening in plain sight and, fundamentally, propped-up and justified by (artificial) fiscal rules and economic ineptitude (household analogy and homage to the ‘market’ and ‘market’ self-interests) coupled with political short-term thinking and sound bites.
Thank you and much to agree with.