Americans should be free to choose: Nobel prize winner Milton Friedman expounds on the U.S. economy and the societal effects of government policy.

• Author: Arnn, Larry
• Position: Economics - Interview

The following is an edited transcript of a conversation between Hillsdale (Mich.) College President Larry Arnn and economist Milton Friedman--which took place almost six months before Friedman's death at age 94 on Nov: 16, 2006--during a Hillsdale College National Leadership Seminar celebrating the 25th anniversary of Milton, and Rose Friedman's book, Free to Choose: A Personal Statement.

LARRY ARNN: In Free to Choose, in the chapter on "The Tyranny of Controls," you argue that protectionism and government intervention in general breed conflict and that free markets breed cooperation. How do you reconcile this statement with the fact that we think of free markets as being competitive?

MILTON FRIEDMAN: They are competitive, but they are competitive over a broad range. The question is, how do you make money in a free market? You only make money if you can provide someone with something he or she is wilting to pay for. Therefore, in order to make money, you have to promote cooperation. You have to do something that your customer wants you to do. You don't do it because he orders you to. You don't do it because he threatens ... you. You do it because you offer him a better deal than he can get anywhere else. Now, that's promoting cooperation, but there are other people who are trying to sell to him, too. They're your competitors. So, there is competition among sellers, but cooperation between sellers and buyers.

LA: In the chapter on "The Tyranny of Controls," you seem gloomy about the prospects for India. Why?

MF: I was in India in 1955 on behalf of the American government to serve as an economic advisor to the minister of finance. I concluded then that India had tremendous potential, but none of it was being achieved.... Now, in the past 10 or 15 years, there has been movement in India, and maybe those hidden potentials I saw ... will finally be achieved, but there is still great uncertainty there.

LA: In that same chapter, you wrote the following about China: "Letting the genie of ... initiative out of the bottle even to this limited extent will give rise to political problems that, sooner or later, are likely to produce a reaction toward greater authoritarianism. The opposite outcome, the collapse of communism and its replacement by a market system, seems far less likely." What do you think about that statement today?

MF: I'm much more optimistic about China today than I was then. China has made great progress since that time. It certainly has not achieved complete political freedom, but it has come closer. It certainly has a great deal more economic freedom. I visited China for the first time ... right after the publication of Free to Choose. I had been invited by the government to lecture on how to stop inflation, among other things. China at that time was in a pretty poor state. The hotel we stayed in showed every sign of being run by a communist regime. We returned to China twice, and each time, the changes were tremendous. In 1980, everybody was wearing the dull and drab Mao costume; there were bicycles all over the place and very few cars. Eight years later, we started to see some color in the clothes; there were things available for sale that hadn't been available before, and free markets were breaking out all over the place. China has continued to grow at a dramatic rate, but in the section of Free to Choose you refer to, I talked about the political conflict that was coming--and that broke out in Tiananmen Square. The final outcome in China will not be decided until there is a showdown between the political tyranny on the one hand and economic freedom on the other--they cannot coexist.

LA: Let me ask you about demographic trends. Columnist Mark Steyn writes that, in 10 years, 40% of young men in the world are going to he living in oppressed Muslim countries. What do you think the effect of that is going to be?

MF: What happens will depend on whether we succeed in bringing some element of greater economic freedom to those Muslim countries. Just as India in 1955 had great but unrealized potential, I think the Middle East is in a similar situation today. In part, this is because of the curse of oil. Oil has been a blessing from one point of view, but a curse from another. Almost every country in the Middle East that is rich in oil is a despotism.

LA: Why do you think that is so?

MF: One reason, and one reason only--the oil is owned by the governments in question. If that oil were privately owned and, thus, someone's private property, the political outcome would be freedom rather than tyranny. This is why I believe the...