Free To Choose: a personal Statement



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Milton y Rose Friedman - Free to Choose

Concentrated versus Diffuse lnterests
Both the fragmentation of power and the conflicting government
policies are rooted in the political realities of a democratic sys-
tem that operates by enacting detailed and specific legislation.
Such a system tends to give undue political power to small groups
that have highly concentrated interests, to give greater weight to
obvious, direct, and immediate effects of government action than
to possibly more important but concealed, indirect, and delayed
effects, to set in motion a process that sacrifices the general inter-
est to serve special interests, rather than the other way around.
There is, as it were, an invisible hand in politics that operates in
precisely the opposite direction to Adam Smith's invisible hand.
Individuals who intend only to promote the general interest are
led by the invisible political hand to promote
a
special interest
that they had no intention to promote.
A few examples will clarify the nature of the problem. Con-
sider the government program of favoring the merchant marine
by subsidies for shipbuilding and operations and by restricting


The Tide ls Turning
293
much coastal traffic to American-flag ships. The estimated cost to
the taxpayer is about $600 million a year—or $15,000 per year
for each of the 40,000 people actively engaged in the industry.
Ship owners, operators, and their employees have a strong incen-
tive to get and keep those measures. They spend money lavishly
for lobbying and political contributions. On the other hand, $600
million divided by a population of over 200 million persons comes
to $3 a person per year; $12 for a family of four. Which of us
will vote against a candidate for Congress because he imposed
that cost on us? How many of us will deem it worth spending
money to defeat such measures, or even spending time to become
informed about such matters?
As another example, the owners of stock in steel companies,
the executives of these companies, the steelworkers all know
very well that an increase in the importation of foreign steel into
the United States will mean less money and fewer jobs for them.
They clearly recognize that government action to keep out im-
ports will benefit them. Workers in export industries who will
lose their jobs because fewer imports from Japan mean fewer ex-
ports to Japan do not know that their jobs are threatened. When
they lose their jobs, they do not know why. The purchasers of
automobiles or of kitchen stoves or of other items made of steel
may complain about the higher prices they have to pay. How
many purchasers will trace the higher price back to the restriction
on steel imports that forces manufacturers to use higher-priced
domestic steel instead of lower-priced foreign steel? They are far
more likely to blame "greedy" manufacturers or "grasping" trade
unionists.
Agriculture is another example. Farmers descend on Wash-
ington in their tractors to demonstrate for higher price supports.
Before the change in the role of government that made it natural
to appeal to Washington, they would have blamed the bad weather
and repaired to churches, not the White House, for assistance.
Even for so indispensable and visible a product as food, no con-
sumers parade in Washington to protest the price supports. And
the farmers themselves, even though agriculture is the major
export industry of the United States, do not recognize the extent
to which their own problems arise from government's interfer-


294
FREE TO CHOOSE: A Personal Statement
ence with foreign trade. It never occurs to them, for example,
that they may be harmed by restrictions on steel imports.
Or to take a very different example, the U.S. Post Office. Every
movement to remove the government monopoly of first-class mail
is vigorously opposed by the trade unions of postal workers.
They recognize very clearly that opening postal service to private
enterprise may mean the loss of their jobs. It pays them to try to
prevent that outcome. As the case of the Brennans in Rochester
suggests, if the postal monopoly were abolished, a vigorous
private industry would arise, containing thousands of firms and
employing tens of thousands of workers. Few of the people who
might find a rewarding opportunity in such an industry even
know that the possibility exists. They are certainly not in Wash-
ington testifying to the relevant congressional committee.
The benefit an individual gets from any one program that he
has a special interest in may be more than canceled by the costs
to him of many programs that affect him lightly. Yet it pays him
to favor the one program, and not oppose the others. He can
readily recognize that he and the small group with the same spe-
cial interest can afford to spend enough money and time to make
a difference in respect of the one program. Not promoting that
program will not prevent the others, which do him harm, from
being adopted. To achieve that, he would have to be willing and
able to devote as much effort to opposing each of them as he does
to favoring his own. That is clearly a losing proposition.
Citizens are aware of taxes—but even that awareness is diffused
by the hidden nature of most taxes. Corporate and excise taxes
are paid for in the prices of the goods people buy, without separate
accounting. Most income taxes are withheld at source. Inflation,
the worst of the hidden taxes, defies easy understanding. Only
sales taxes, property taxes, and income taxes in excess of with-
holding are directly and painfully visible—and they are the taxes
on which resentment centers.

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