In my view when Milton Friedman died in 2006 at age 94, his passing was was a good 60 years overdue. Friedman claimed to champion the individual and the "free market" over government intervention. He famously said late in life that government had to be starved of taxes in order to curtail its excesses. Of course, in Friedman's view government "excesses" were things like Social Security, Medicare, Medicaid and any regulation that inhibited the swashbuckling of "free market" pirates. His disciples extend far beyond the infamous "Chicago School" of economics and the odious Hoover Institution into international institutions such as the International Monetary Fund and World Bank.
Friedman's essential insanity was the proposition the markets are "rational". By this he meant that unfettered markets would always correct themselves achieving balance between buyers and sellers, supply and demand. The concept is insane because, first, we have centuries of evidence that markets are nothing like rational and, second, because his postulate presumes that the people who participate in those markets are, ultimately, rational too. We haven't a single shred of evidence in all of human history for that preposterous proposition.
Essentially Friedman was a very smart man who, for some reason probably unknown even to himself, proposed an economic ideology as foolish and destructive as Scientology. That ideology was very congenial to a widely separated and utterly unprincipled collection of capitalist plutocrats who saw the potential for profit in such an insane ideology and financed its promulgation. Those plutocrats lionized Friedman and those of his acolytes who were most dedicated and least principled. The plutocrats gave the true believers forums, fellowships and fame thereby insuring that they would become confirmed toadies of those plutocrats. Friedman and his followers became famous because those whose interests they served promoted them, published their books and paid their expenses. Most of us tend to succumb to bombardment. The more often we hear that someone is famous the more we tend to believe that publicity. Thus Friedman and his followers, rather like Paris Hilton, became famous, even lionized, because their publicity said they were. We are not supposed to notice that there is nothing whatever that is rational in that process.
At this point some toady is going to offer the fact that Friedman won a Nobel Prize in Economics as if that validated his ideology. Actually, the Nobel Committee cited Friedman's work before his conversion to unfettered free marketism. His theory of rational markets is part of that work. His fanatic pursuit of it is not. Thus in Friedman's case and rather like another Nobel Laureate and neo-fascist darling, William Schockley, the Nobel Prize is simply a red herring.
As ideology became more and more important to Friedman and, simultaneously, he became further and further divorced from economic reality, he failed to notice that the plutocrats who kept him as their pet were systematically removing all countervailing forces to themselves. They brutally reduced and blocked greater union participation, evaded anti-trust laws, bought legislators and legislation that made them ever richer and burdened the middle class with disproportionate taxes - disproportionate because the middle class was the only group left to absorb the shortfall as the plutocrats ceased to pay even a modest fee for running the government that protected their wealth. Just as the forced collectivization in the U.S.S.R. under Stalin destroyed the Russian economy, the Friedman ideology destroyed the American economy...but only for the middle class.
The great mass of us were faced with rising taxes, curtailed services, increasing bureaucracy and wages that fell in real buying power faster than they grew. This environment set the stage for tax revolts, like California's Proposition 13, which were themselves financed by the plutocrats who most benefited from them. Each of these Trojan Horse "limitation" initiatives served only to exacerbate the problem.
In contrast to the ideological, through-the-looking-glass world of Milton Friedman let's consider the real world for a moment. As was proved in October, 1929 and 2007-2008, when consumers can't afford the products they are supposed to consume, they cease buying. When consumers cease buying, producers cease selling. When producers cease selling they cease generating capital for their investors. When capital ceases to grow, this whole house of cards comes tumbling down, stock markets crash, deflation ensues and there is economic disaster.
The Friedman ideologues, rather like Bert Lahr's Cowardly Lion stand about with their eyes shut tight intoning, "I do believe in free markets! I do! I do! I do!" Meanwhile, all about them, the economy comes tumbling down. There is nothing rational about "securitizing" mortgages or credit card debt. Worse still, there is nothing rational about credit default swaps that back those attempts to pretend that a debt is really an asset. The fact is that markets are greedy and greed is not rational. Markets are greedy because the people drawn to operate them are, themselves, greedy. It is only by regulating markets up the yin-yang that we inject even a modest amount of rationality by curbing their instincts toward greed.
For 40 years we have systematically dismantled the regulations put in place during the Roosevelt Administration to prevent the Great Depression's recurrence. During that same time we have reduced personal incomes and increased prices, forcing people to live on credit. As the middle class' debt rose many who were less ideological than Friedman and his disciples understood that there would come a point when all the cards were maxed out and consumers had no ability to buy. We have reached that point. Actually, we reached it almost a decade ago but the plutocrats then encouraged everyone to turn the equity in their homes into ready cash because property values could go nowhere but up. Another ideologically inspired farrago. Finally, within the last year even that resource was tapped out and the collapse we now endure inevitably came. There is nothing complicated about the economics. It's simple. If consumers can't buy....
I wish I could claim that there is an evil genius behind this, that there is some conspiracy to be uncovered and rooted out. There isn't. Each of us has greed in his heart. Given the chance and the right information every one of us would have "securitized" debts and called them assets in order to feed our greed. But, that said, it is just more reason to say, "Fuck you, Milton Friedman!"
The sole bright spot in this whole economic meltdown is that the Republican Party, a wholly owned subsidiary of the plutocracy and unvarying force for evil has had the disaster they were so eager to make laid right in its lap. As in 1929 they deserved it. With any luck it will be at least another 20 years before they can regain anything even vaguely resembling power and we can rebuild our society again.