Mon, Nov 20, 2006 page8

• Editorial: Friedman's straightforward legacy

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  Milton Friedman, who died on Thursday in San Francisco of heart failure at age 94, was considered one of the 20th century's most influential economists. Although advocates of his policies seem to have diminished, Friedman's free-market and anti-government philosophies will always retain their appeal.

  Friedman, a 1976 Nobel laureate for economics, visited Taiwan three times and was well known here -- as elsewhere -- for his famous quote: "There is no such thing as a free lunch."

  During his visits, Friedman had tried to inspire the government to move toward a more liberalized, free market system, despite the era's prevailing economic philosophy -- inspired by John Maynard Keynes -- that called for greater government involvement in addressing the economy.

  Friedman advised establishing a floating foreign exchange rate system, improving control of the money supply, privatizing state-owned enterprises and getting rid of government red tape.

  Although his advice was not widely accepted by the nation's conservative leaders at the time, his principles have come to be widely accepted now.

  Friedman was an approachable man who loved to argue. One legacy Friedman left for Taiwan was the debate he engaged in with Chao Yao-tung (趙耀東), the former chairman of China Steel Corp, in May 1981 in Taipei. The debate centered on the pros and cons of free-market policies, government intervention, and the privatization of state-owned businesses.

  In that debate, Friedman said that government should take a hands-off approach to private businesses and that regulations were unnecessary or even harmful to market efficiency.

  But Chao, who later served as economics minister, argued that the government played a pivotal role in protecting consumers and workers from the excesses of the capitalist marketplace.

  Lauded as a great economist who invented modern monetarism, Friedman's idea of maintaining a steady growth in money supply to keep inflation at bay has influenced the formulation of monetary policies in many countries around the world, including Taiwan.

  But there is another Friedman tenet that has come under attack these days: he believed that man's essentially humane nature would find its full expression under free-market capitalism.

  In his 1962 book Capitalism and Freedom, Friedman wrote: "Few trends could so thoroughly undermine the very foundations of our free society as the acceptance by corporate officials of a social responsibility other than to make as much money for their stockholders as possible."

  The main social responsibility of a company, as Friedman saw it, is to maximize profit. By doing so, a company allows its employees to keep their jobs, benefits its suppliers, gives customers the products they need and reimburses its investors.

  But Friedman's beliefs -- that success in business is a virtue and that by serving their own interests, companies also fulfill their social responsibilities -- apparently carry little weight in today's society.

  Following a series of greed-driven corporate scandals, societies are demanding a new type of corporation that not only makes profits for investors, but also conducts itself in a morally acceptable way to benefit stakeholders and the communities in which they are embedded.

  Some may find Friedman's views too narrow for today's business environment. But the debate about corporate social responsibility also raged in his day, and the late economist remained firm in his beliefs and didn't really care whether others liked them.

  To many in Taiwan, Friedman's legacy not only stems from that landmark debate in 1981, but also from the straightforward way he expressed his economic views.
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