By HOLCOMB B. NOBLE
November 17, 2006
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Rising With Reagan
But then, after the 1970s stagflation, with Keynesian tools seemingly broken or outmoded, and with Ronald Reagan headed for the White House, Mr. Friedman’s hour arrived. His power and influence were acknowledged and celebrated in Washington.
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The economic expansion in the 1980s resulted from the Reagan administration’s lowered tax rates and deregulation, Professor Friedman said. But then the tide turned again. The expansion, he argued, was halted when President George H. W. Bush imposed a “reverse-Reaganomics” tax increase.
What was worse, by the mid-1980s, as the finance and banking industries began undergoing upheavals and money began shifting unpredictably, Mr. Friedman’s own monetarist predictions—of what would happen to the economy and inflation as a result of specific increases in the money supply—failed to hold up. Confidence in his monetarism theory waned.
Prof. Robert Solow of M.I.T., a Nobel laureate himself, and other liberal economists continued to raise questions about Mr. Friedman’s theories: Did not President Reagan, and by extension Professor Friedman, they asked, revert to Keynesianism once in power?
- “The boom that lasted from 1982 to 1990 was engineered by the Reagan administration in a straightforward Keynesian way by rising spending and lowered taxes, a classic case of an expansionary budget deficit,” Mr. Solow said. “In fairness to Milton, however, it should be said that one of the reasons for his wanting a tax reduction was to force the spending cuts that he presumed would follow.”
- Professor Samuelson said that “Milton Friedman thought of himself as a man of science but was in fact more full of passion than he knew.”
Mr. Friedman remained the guiding light to American conservatives. It was he, for example, who provided the economic theory behind “prescriptions for action,” as his onetime professor, Jacob Viner, put it, like the landslide Republican victory in the off-year Congressional elections of 1994.
By then Professor Friedman had grown into a giant of economics abroad as well. He was sharply criticized for his role in providing intellectual guidance on economic matters to the military regime in Chile that engineered a coup in the early 1970s against the democratically elected president, Salvador Allende. But for Mr. Friedman that was just a bump in the road.
In Vietnam, where the Constitution was amended in 1986 to guarantee the rights of private property, the writings of Mr. Friedman were circulated at the highest levels of government. “Privatize,” he told Chinese scholars at a meeting at Fudan University in Shanghai; and he told those in Moscow and elsewhere in Eastern Europe: “Speed the conversion of state-run enterprises to private ownership.” They did.
Mr. Friedman had long since ceased to be called a flat-earther by anyone. “What was really so important about him,” said W. Allen Wallis, a former classmate and later faculty colleague at the University of Chicago, “was his tremendous basic intelligence, his ingenuity, perseverance — his way of getting to the bottom of things, of looking at them in a new way.”