Markets liberate

He attracted so much flak in the West, even from those who were neither Marxists or even socialists, that it is little wonder that Milton Friedman, who died on Thursday, isn8217;t exactly Indian academia8217;s favourite economist. Never mind. Friedman is extremely relevant to India, more now than, say, in the 1970s, when Indian socialism was the ruling ideology. Now, India is grappling with its transition to a mature market economy and it can learn a lot from arguably the most remarkable advocate of economic freedom of our times. This goes beyond the small government-big government debate; although in remembering Friedman it is good to note that the fiscal responsibility legislation is a standard in India now.

But take what Friedman had said on welfare. Those on the Left especially have made a cottage industry out of demonising him as anti-disadvantaged but the Friedmanian thesis meets both the test of logic and compassion: guaranteed minimum income every year for the poor on the condition that every welfare scheme be scrapped. Why does this make sense? Because while it guarantees public money goes to the poor it also guarantees public money is not wasted in the name of helping the poor. In a country that wastes fortunes in the name of social sector schemes, how can such an idea not be incredibly important? How can it not be seriously discussed? It can8217;t be, because the majority of India8217;s intellectual establishment has a problem with the concept of economic liberty. The essence of capitalism is free economic choice, not rich businessmen having a good time. Capitalism sometimes needs to be rescued from capitalists.

So it is important to remember, too, that it was Friedman who explained best why markets can act as correctives to institutions 8212; because markets hate bad performers. In India, though, the conventional wisdom still is that institutions must correct markets. Ordinary Indians who have used and benefited from the market don8217;t think, contrary to what Keynes once observed, that capitalism is 8220;a somewhat disgusting morbidity, with semi-criminal, semi-pathological propensities8221;. Milton Friedman didn8217;t think that either.