The Opposite Reaction

While Great Britain and France had already expanded provisions for public welfare, the demands of World War II and its aftermath shoved them, as well as the U.S., farther in that direction.

Von Hayek’s suspicions regarding abuse of state power proved war­ranted, especially in the case of Stalinist Russia. But he was overconfident of the efficiency of market economies. He overreached himself most con­spicuously in his critique of the very concept of altruism, which he described as a primitive, even atavistic sentiment.¹⁰ His views on this topic were popularized by a Russian emigre who adored his ideas, Ayn Rand, whose most famous novel, The Fountainhead (later made into a movie starring Gary Cooper), idealized individualism. However admirable her hero’s steadfast commitment to his own artistic vision, his rants against altruism implied that it was a destructive force: ‘‘Every major horror of history was committed in the name of an altruistic motive’’, and ‘‘The world is perishing from an orgy of self-sacrificing.’’¹¹

Von Hayek’s views remained unpopular within the academy for some time, but he influenced colleagues at both the London School of Economics and the University of Chicago, where he visited as a lecturer. His ideas gradually gained ground. In 1974 he was awarded the Nobel Prize (sharing with an ideological opposite, Gunnar Myrdal).

young man.

Von Hayek's philosophical influence is particularly visible in the work of social choice theorist James Buchanan, winner of the 1986 Nobel Prize for economics, who also warns that charity and compassion weaken economic efficiency.¹³ Pro-market views were expressed in a far more temperate and persuasive style by University of Chicago's Milton Friedman, who tended to sidestep philosophical debates in the name of ‘‘value-free'' science. His positivist stance represented a more nuanced critique, labeling moralistic concerns irrelevant to economic analysis.¹⁴ Friedman published influential research on the determinants of consumption, graciously acknowledging both the ideas and the friendship of Margaret Reid. 15 He is probably best known among economists for a monetarist account of the Great Depression that places greater emphasis on government missteps than on market malfunction.¹⁶

Friedman served as a cheerful, quick-witted spokesman for his cause. In Capitalism and Freedom, and later in Free to Choose (coauthored with his wife Rose), he accentuated the positive features of individualism. His public persona emerged both from the regular columns he wrote for Newsweek between 1966 and 1983 and the PBS television series based on Free to Choose 1⁷ He often advocated policies that could potentially increase indi­vidual choice and promote equitable outcomes. His proposal for a negative income tax that would reduce the work disincentives of public assistance contributed to the development of the Earned Income Tax Credit (EITC) in the U.S. His school voucher proposals have increased the scope of school choice, even where they have not been directly adopted.

Friedman's criticisms of social welfare programs were often animated by genuine concern for the poor. He misstepped, however, when he visited Chile to provide economic advice for the military dictatorship of Augusto Pinochet in 1975. His public pronouncements to the effect that social welfare spending would inevitably undermine democracy did not come off well: Chile's socialist president, Salvador Allende, had been democratically elected. His usurpers, advocates of free markets, were hardly advocates of free elections. Friedman wrote Pinochet a personal letter in 1975 advocating ‘‘shock therapy” in the form of reductions in government spending. The same term was later applied to the policies recommended for Eastern Europe and the former Soviet Union as they made the transition to capitalism.¹⁸

The Chilean military regime became notorious for its abuse of human rights, including use of electric shock in torture of political prisoners; Pinochet himself narrowly escaped international prosecution.¹⁹ Ever cheer­ful, Friedman and his fellow economic advisors insisted that the economic growth their policies had ultimately contributed to the re-establishment of democratic governance in Chile. The privatized Chilean Social Security system became the model for President George W. Bush's campaign to privatize the U.S. Social Security system, a campaign that foundered in the wake of dramatic stock market declines and corporate accounting scandals in 2001.²⁰

Friedman's genial tone, combined with his optimism regarding the civil­izing effects of economic growth, recalls Adam Smith. But Friedman was careful never to endorse the importance of moral sentiments. In Capitalism and Freedom, and later in the New York Times, he challenged the very concept of corporate social responsibility: ‘‘Few trends could so thoroughly undermine the very foundations of our free society as the acceptance by corporate officials of a responsibility other than to make as much money for their stockholders as possible.''²¹ Corporate management experts further developed this view, arguing that salaried Chief Executive Officers (CEOs) had little incentive to maximize profits.

Is it good for women as well as men? Von Hayek avoided the question. Oddly enough, so did Ayn Rand—the women in her novels never came close to showing her own level of selfish initiative. Milton Friedman never suggested that women had any less right to individual choice than did men. But for the most part, this generation of libertarians confined their attention to comparisons between the market and the state. Asked if the family represented a realm distinct from both, James Buchanan replied that he

had never considered that question and had no opinion to offer on it.²³ His writings describe the pursuit of self-interest in memorably masculine terms. As he put it, the assumption that public servants could be altruistic was tantamount to the assumption that they were ‘‘economic eunuchs”.²⁴