It has been suggested that this article or section be merged with State ownership. (Discuss) Proposed since April 2012.

A government-owned corporation, state-owned company, state-owned entity, state enterprise, publicly owned corporation, government business enterprise, commercial government agency or parastatal is a legal entity created by a government to undertake commercial activities on behalf of an owner government. Their legal status varies from being a part of government into stock companies with a state as a regular stockholder. There is no standard definition of a government-owned corporation (GOC) or state-owned enterprise (SOE), although the two terms can be used interchangeably. The defining characteristics are that they have a distinct legal form and they are established to operate in commercial affairs. While they may also have public policy objectives, GOCs should be differentiated from other forms of government agencies or state entities established to pursue purely non-financial objectives.^[1]

Definitions[link]

GOCs can be fully owned or partially owned by Government. As a definitional issue, it is difficult to determine categorically what level of state ownership would qualify an entity to be considered as "state-owned", since governments can also own regular stock, without implying any special interference. As an example, the Chinese Investment Corporation agreed in 2007 to acquire a 10% interest in the global investment bank Morgan Stanley, but it is unlikely that this would qualify the latter as a government-owned corporation. Government-owned or state-run enterprises are often the result of corporatization, a process in which government agencies and departments are re-organized as semi-autonomous corporate entities, sometimes with partial shares listed on stock exchanges.

The term government-linked company (GLC) is sometimes used to refer to corporate entities that may be private or public (listed on a stock exchange) where an existing government owns a stake using a holding company. There are two main definitions of GLCs are dependent on the proportion of the corporate entity a government owns. One definition purports that a company is classified as a GLC if a government owns an effective controlling interest (>50%), while the second definition suggests that any corporate entity that has a government as a shareholder is a GLC.

A quasi-governmental organization, corporation, business, or agency (parastatal) or a "quasi-autonomous national government organisation" (Quango) is an entity that is treated by national laws and regulations to be under the guidance of the government, but also separate and autonomous from the government. While the entity may receive some revenue from charging customers for its services, these organizations are often partially or majorly funded by the government. They are usually considered highly important to smooth running of society, and are sometimes propped up with cash infusions in times of crisis to help surmount situations that would bankrupt a normal privately owned business. They may also possess law-enforcement authority, usually related to their functions.

Economic sectors[link]

Government-owned corporations often operate in sectors where there is a natural monopoly, or where the government has strategic interest. However, government ownership of industry corporations is common.

Nationalization also forcibly converts a private corporation into a government-owned corporation.

In most OPEC countries, the governments own the oil companies operating on their soil. A notable example is the Saudi national oil company, Saudi Aramco, which the Saudi government bought in 1988 and changed its name from Arabian American Oil Company to Saudi Arabian Oil Company. The Saudi government also owns and operates Saudi Arabian Airlines, and owns 70% of SABIC, as well as many other companies. They are, however, being privatized gradually.

Commonwealth[link]

In monarchical Commonwealth countries, particularly Australia, Canada and New Zealand, country-wide government corporations often use the style "Crown corporation." Equivalent terms include "State-owned enterprises" and "Crown entities" in New Zealand, and Government Business Enterprise (GBE) in Australia. Examples of Crown corporations include the Canadian Broadcasting Corporation and Air Canada before the latter underwent privatization. Cabinet ministers (Ministers of the Crown) often control the shares in such public corporations.

At the level of local government, territorial or other authorities may set up government corporations such as "Local Authority Trading Enterprises" (LATEs). Many local authorities establish services such as water supply as separate corporations or as a business unit of the authority.

Australia[link]

In Australia the predominant term used for Commonwealth government-owned companies is "government business enterprise" (GBE). Various States also have GBEs, especially with respect to the provision of water and sewerage; however many State based GBEs have been privatised in some States during the last decade of the twentieth century.

Four prominent Commonwealth GBEs include:

• Australian Broadcasting Corporation – fully owned and funded
• Special Broadcasting Service – fully owned and combines government funding and commercial funding
• Australia Post – Australian Postal Service
• NBNCo – fully owned and responsible for the rollout of the National Broadband Network

These corporations are a part of the Department of Broadband, Communications and the Digital Economy and currently report to Senator Stephen Conroy.

Privatisation[link]

Former Commonwealth government-owned corporations include Telstra, established in the 1970s as Telecom Australia. This company is Australia's leading telecommunications company, and was privatised in 1997 by former Prime Minister of Australia, John Howard. As of June 2010 Telstra owned a majority of the copper wire infrastructure in Australia (the rest owned by Optus) and is pending sale to its former parent, the Australian Government for a non binding amount of $11 Billion AUD, as ducts in the copper wire tunnels are needed to install the Fibre Optic cable.

In Victoria many GBEs were sold off in the 1990s to reduce the then significant State deficit, most notably the retail operations of utilities such as public transport, electricity and gas, whilst the associated infrastructure was retained in State ownership.

Canada[link]

In Canada, state-owned corporations often use the style Crown corporation, indicating that an organization is established by law, owned by the sovereign, and overseen by parliament and the Cabinet. Examples of crown corporations include the Canadian Broadcasting Corporation, Canada Post, and ViaRail. Former crown corporations before their privatization include Air Canada, St. Lawrence Seaway Authority, and Petro-Canada. Ministers of the Crown often control the shares in such public corporations, while parliament both sets out the laws that create and bind Crown corporations and sets their annual budgets.

Crown Corporations also exist at the provincial level in Canada. Saskatchewan has maintained the largest number of crown corporations, including SaskEnergy, SaskPower, SaskTel, SaskWater, and Saskatchewan Government Insurance. Crown corporations of British Columbia include BC Hydro, BC Ferries, and the British Columbia Lottery Corporation.

Privatization, or the selling of crown corporations to private interests, is very common throughout Canada. Petro-Canada, Canadian National Railway, and Air Canada are examples of former federal crown corporations that have been privatized. At the provincial level, privatized former crown corporations include Alberta Government Telephones (which merged with privately owned BC Tel to form Telus), BCRIC, Manitoba Telecom Services, and Potash Corporation of Saskatchewan which retained its name and has become the world's largest producer of potash.

New Zealand[link]

In New Zealand, the terms used for government-owned companies include "state-owned enterprises" and "crown entities". Local government councils and similar authorities also set up government corporations, such as water supply companies and "local-authority trading enterprises" (LATEs) (New Zealand), as separate corporations or business unit of the councils concerned.

Europe[link]

In Western Europe there was a massive nationalization throughout the 20th century, especially after World War II to ensure Government control over natural monopolies and to some extent industry. Typical sectors included telecommunications, power, petroleum, railways, airports, airlines, public transport, health care, postal services and sometimes banks. Many large industrial corporations were also nationalized or created as Government corporations, including among many British Steel, Statoil and Irish Sugar. Starting in the late 1970s and accelerating through the 1980s and 1990s many of these corporations were privatized, though many still remain wholly or partially owned by the respective governments.

A state-run enterprise needs to be distinguished from an ordinary limited liability corporation owned by the state. For example, in Finland, state-run enterprises (liikelaitos) are governed by a separate act. Even though responsible for their own finances, they cannot be declared bankrupt; the state answers for the liabilities. Stocks of the corporation are not sold and loans have to be government-approved, as they are government liabilities. In contrast, the state also owns controlling interest in ordinary limited liability corporations. A state-run enterprise is technically not always a corporation, it might also be a separate state entity, or simply a governmental agency acting as an enterprise, perhaps having its own budget. Conversely, the state can directly fund unprofitable business, such as railway services to remote areas, regardless of whether the operator is a private corporation.

Russia[link]

In Russia and some other post-Soviet states, unitary enterprises are commercial organizations that have no ownership rights to the assets they use in their operations. This form is possible only for state and municipal enterprises, operating with state or municipal property, respectively. The owners of the property of a unitary enterprise have no responsibility for its operation and vice versa.

The assets of unitary enterprises belong to the Federal government, a Russian region, or a municipality. A unitary enterprise holds assets under the right of economic management (for both state and municipal unitary enterprises) or operative management (for state unitary enterprises only), and that such assets may not be distributed among the participants, nor otherwise divided. A unitary enterprise is independent in economic issues and obliged only to give its profits to the state. Unitary enterprises would have no right to set up subsidiaries, but, with the owner's consent, can open branches and representation offices.

An example of such an enterprise is Mashpriborintorg.

By contrast, a state corporation (Russian: Государственная корпорация) is a non-profit organization which manages its assets as described in its charter. State Corporations are not obliged to submit to public authorities documents accounting for activities (except for a number of documents submitted to the Russian government) and, as a rule, are subordinate not to the government, but to the Russian president, and act to accomplish some important goal. Control of the Government is implemented on the basis of annual corporation, annual report on the audit opinion of accounting and financial reporting (accounting), as well as the conclusion of the auditing commission on the results of verification of financial (accounting) statements and other corporation documents. Any other federal government departments, organs of state power of subjects of the Russian Federation, the local governments have no right to interfere in the activities of the State corporation.

Asia[link]

Afghanistan[link]

In 2009, the Government of the Islamic Republic of Afghanistan formed the Afghan Public Protection Force (APPF) as a "state owned enterprise" subordinate to the Ministry of the Interior. By Presidential Decree, the APPF is mandated to replace all non-diplomatic private security companies by 20 March 2013 to become the sole provider of pay-for-service security contracts within Afghanistan.^[2]

India[link]

In India, a government-owned corporation is termed as a Public Sector Undertaking (PSU). This term is used to refer to companies in which the government (either the federal Union Government or the many state or territorial governments, or both) own a majority (51 percent or more) of the company equity. Some examples include:

Indonesia[link]

The government-owned corporation is easy to know by it names. Company names with suffix PERSERO means that the company is wholly/majority owned by the government. The government takes control the state corporation under one single ministry, the Ministry of State Enterprises act like the CEO of a holding company. Some of the government-owned corporations are;

• Bank Mandiri – Bank sector
• Pertamina – Energy, Oil/fuel, and gas sector
• Garuda Indonesia – Transport sector (international airline)
• Telkom Indonesia – Telecommunications sector
• Perusahaan Listrik Negara – the Electric company, Energy sector (national electricity utility)
• PT Kereta Api – Transport sector (national railway)
• Pos Indonesia – Postal service sector
• TVRI – National television channel
• PT Krakatau Steel – Stell producer
• PT Dirgantara Indonesia – Manufacture (aircraft manufacture)
• PT Industri Kereta Api – Manufacture (train manufacture)
• PT Barata Indonesia – Manufacture
• PT Boma Bisma Indra – Manufacture

In January 2012, the Minister of State Enterprise has decided to unite manufacturing companies and for the first stage PT Barata should acquire PT Bisma to make effective manufacture sector.^[3]

Japan[link]

In Japan, Japan Post was reorganized into Japan Post Group in 2007 as a material step of the postal privatization. It is currently wholly owned by the government, but is planned to be sold into private ownership. Japan Railways Group (JR), Nippon Telegraph and Telephone (NTT) and Japan Tobacco (JT) were formerly owned by the government.

People's Republic of China[link]

After 1949, all business entities in the People's Republic of China were created and owned by the government. In the late 1980s, the government began to reform the state-owned enterprise, and during the 1990s and 2000s, many mid-sized and small sized state-owned enterprises were privatized and went public. There are a number of different corporate forms which result in a mixture of public and private capital. In PRC terminology, a state-owned enterprise refers to a particular corporate form, which is increasingly being replaced by the listed company. State-owned enterprises are governed by both local governments and, in the central government, the national State-owned Assets Supervision and Administration Commission.

Republic of China (Taiwan)[link]

The founding father of the Republic of China and of the Kuomintang, Sun Yat-sen, was heavily influenced by the economic ideas of Henry George, who believed that the rents extracted from natural monopolies or the usage of land belonged to the public. Sun argued for Georgism and emphasized the importance of a mixed economy, which he termed "The Principle of Minsheng" in his Three Principles of the People.

"The railroads, public utilities, canals, and forests should be nationalized, and all income from the land and mines should be in the hands of the State. With this money in hand, the State can therefore finance the social welfare programs."^[4]

Kuomintang leader, and later President of the Republic of China on the mainland and Taiwan, Chiang Kai-shek, crushed pro communist worker and peasant organizations, and the rich Shanghai capitalists at the same time. Chiang continued Sun Yat-sen's anti capitalist ideology, Kuomintang media openly attacked the capitalists and capitalism, demanding government controlled industry instead.^[5]

The Kuomintang Muslim Governor of Ningxia, Ma Hongkui promoted state owned monopoly companies. His government had a company, Fu Ning Company, which had a monopoly over commercial and industry in Ningxia.^[6]

Under the Kuomintang Muslim General Ma Bufang in Qinghai, Industries and projects such as educational, medical, agricultural, and sanitation schemes were controlled by the state.^[7]

The Chinese Muslim 36th Division (National Revolutionary Army) governed southern Xinjiang from 1934 to 1937. The General Ma Hushan was chief of the 36th Division. The Chinese Muslims operated state owned carpet factories.^[8]

Corporations such as CSBC Corporation, Taiwan, CPC Corporation, Taiwan and Aerospace Industrial Development Corporation are owned by the state in the Republic of China.

Singapore[link]

The economy of Singapore is dominated by government-linked corporations that produce as much as 60% of the country's GDP.^[9] These government-linked companies are owned by a government holding agency, Temasek Holdings. Notable Government-linked corporations include Singapore Airlines, SingTel, ST Engineering, MediaCorp and Singapore Temasek Holdings.

Africa[link]

South Africa[link]

In South Africa "the Department of Public Enterprises is the shareholder representative of the South African Government with oversight responsibility for state-owned enterprises in key sectors, including: Defence, Energy, Forestry, ICT, Mining and Transport". The current (March 2011) Minister of Public Enterprises is Malusi Gigaba.^[10]

The corporate entities that this department is responsible for are:

• Alexkor – Mining sector (diamond mining)
• Broadband Infraco – ICT sector (national backbone and international connectivity)
• Denel – Aerospace and Defence sector (armaments manufacturer)
• Eskom – Energy sector (national electricity utility)
• PBMR – Energy sector (development of Pebble Bed Modular Reactor nuclear energy technology)
• South African Airways – Transport sector (international airline)
• SA Express – Transport sector (regional and feeder airline)
• SAFCOL – Forestry sector (manages forestry on state owned land)
• Transnet – Transport and related infrastructure sector (railways, harbours, oil/fuel pipelines and terminals)
• Telkom SA – Telecommunications sector (national fixed line telephone network (PSTN))

Other corporate entities not under the Department of Public Enterprises include the South African Post Office and the South African Broadcasting Corporation.

Americas[link]

United States[link]

The government-sponsored enterprises (GSEs) are a group of financial services corporations created by the United States Congress. The United States GSEs are private corporations owned by their stockholders, rather than government-owned corporations. Their primary function is to generate profits for their stockholders, but they are structured and regulated by the US government to enhance the availability and reduce the cost of credit to targeted borrowing sectors. Congress created the first GSE in 1916 with the creation of the Farm Credit System; it initiated GSEs in the home finance segment of the economy with the creation of the Federal Home Loan Banks in 1932; and it targeted education when it chartered Sallie Mae in 1972 (although Congress allowed Sallie Mae to relinquish its government sponsorship and become a fully private institution via legislation in 1995). The residential mortgage borrowing segment is by far the largest of the borrowing segments in which the GSEs operate. Together, the three mortgage finance GSEs (Fannie Mae, Freddie Mac and the 12 Federal Home Loan Banks) have several^[quantify] trillion dollars of on-balance sheet assets.^{[citation needed]} The federal government possesses warrants which, if exercised, would allow them to take a 79.9% ownership share in the companies. The federal government has not currently exercised these warrants. government sponsored enterprises include:

• Fannie Mae
• Farmer Mac
• Federal Home Loan Banks
• Freddie Mac

The federal government chartered and owned corporations are a separate set of corporations chartered and owned by the federal government, which operate to provide public services, but unlike the federal agencies (Environmental Protection Agency, Bureau of Indian Affairs), or the federal independent commissions (e.g. the Federal Communications Commission, the Nuclear Regulatory Commission, etc.), they have a separate legal personality from the federal government, providing the highest level of political independence. They sometimes receive federal budgetary appropriations, but some also have independent sources of revenue. These include:

• Commodity Credit Corporation^[11]
• Corporation for National and Community Service (Americorps)
• Corporation for Public Broadcasting
• Export-Import Bank of the United States^[12]
• Federal Agricultural Mortgage Corporation^[13]
• Farm Credit Banks^[14]
• Federal Crop Insurance Corporation
• Federal Deposit Insurance Corporation
• Federal Financing Bank^[15]
• Federal Home Loan Banks^[16]
• Federal Prison Industries^[17]
• The Financing Corporation^[18]
• Gallaudet University^[19]
• Government National Mortgage Association^[20]
• Legal Services Corporation^[21]
• National Consumer Cooperative Bank^[22]
• National Fish and Wildlife Foundation^[23]
• Neighborhood Reinvestment Corporation^[24]
• Millennium Challenge Corporation
• National Corporation for Housing Partnerships (NCHP); Washington, DC.
• National Credit Union Administration Central Liquidity Facility
• National Endowment for Democracy^[25]
• National Park Foundation^[26]
• National Railroad Passenger Corporation (Amtrak)
• Overseas Private Investment Corporation
• Panama Canal Commission
• Pennsylvania Avenue Development Corporation; Washington, DC.
• Pension Benefit Guaranty Corporation
• St. Lawrence Seaway Development Corporation
• Securities Investor Protection Corporation^[27]
• Tennessee Valley Authority

The federal government acquired corporations are a separate set of corporations that were not chartered or created by the federal government, but the federal government has come into possession of and operates. These are corporations temporarily in possession of the Government as a result of a seizure of property of a debtor to the Government, such as a delinquent taxpayer. Usually these are awaiting auction, and most are too small to note.

There exists a second level of sovereign government in the United States after the federal government, those of the several states of which compose the United States. State governments are bodies sovereign, like the federal government, and other sovereigns; they have sovereign existence deriving from the consent of the sovereign people of their territories who created them and wrote their state constitution; they are not bodies corporate, as they are not created by the acquis of the federal government and exist with or without that Government's consent. As sovereigns, they have the power to hold radical title to land, to exercise the four fundamental powers, taxation, eminent domain, police power, and escheat, as well as numerous other powers, including the power to grant charters, and implicit in that power to charter is the power to charter corporations, which they do, extensively. The very vast majority of non-governmental corporations in the United States are chartered by the states of the US, and not the federal government, this includes most charitable corporations (though some charities of national repute are chartered by the federal government, and not by a state government), non-profit corporations, and for-profit corporations. States, as sovereigns, also have the power to charter corporations that they own, control, or are responsible for the regulation and finance of. These include municipal corporations and state chartered and owned corporations. Municipal corporations are public corporations that have devolved, democratic control over local matters within a geographic region; they are often styled villages, towns, townships, cities, or counties. Though these municipal corporations are often regulated and sometimes financed by the state government, and often can collect taxes, they are arms-length, non-sovereign, devolved public entities, and a State government which charters them is not legally responsible for their debts in the event of a municipal bankruptcy. State government chartered and owned corporations are numerous and provide public services. Examples include North Dakota Mill and Elevator or South Dakota Public Broadcasting. Generally speaking, a statute passed by a state legislature specifically sets up a government-owned company in order to undertake a specific public purpose with public funds or public property. Lotteries in the United States are also run by government corporations, such as the Georgia Lottery Corporation and many others.

There exists a third level of sovereign government in the United States as well, the sovereignty of the Native American tribal governments. Native American tribes are comprehended as ancient sovereigns, established by their sovereign people since time immemorial, and recognized as sovereign by the federal government of the United States as well as the several states, and as such, the Native American (and Alaska Native) tribal governments have rights appertaining to sovereigns, including the power to hold radical title to land, to exercise the four fundamental powers, taxation, eminent domain, police power, and escheat, as well as other powers, for instance, the power to charter corporations and undertake public undertakings that might benefit their tribal citizens, Native Americans and Alaska Natives also being citizens of their respective US state, and also citizens of the United States. For example, a tribal council could establish a public service broadcaster along the lines of RTE and partially fund it with a television licence on tribal land and partially through advertising as a means of uniting the tribe and giving it a voice as well as a commercial venture.

The Alaska Natives are particularly advanced in using their tribal sovereignty to incorporate corporations that are owned by and for the benefit of their tribal citizens and often compete in highly competitive economic sectors through the Alaska Native Regional Corporations. The Native American tribes in the lower 48 states often use their sovereignty and their ability to charter to compete using regulatory easements; for instance, Native American tribal corporations often trade in goods that are highly taxed in surrounding states (such as tobacco), or engage in activities that surrounding states have (for reasons of public policy) forbidden, such as the operation of casinos or gaming establishments. Most of these endeavors have proven very successful for Native American tribal sovereigns and their tribal corporations, bringing wealth into the hands of Native Americans.

Uruguay[link]

Uruguay had the first welfare state of Latin America under the presidency of José Batlle y Ordoñez in 1904. Government-owned corporations monopolize services such as electricity (UTE), land-line communications (Antel) and water (OSE). Antel competes with private corporations in the cell-phone lines and international telephony markets.^{[citation needed]} In 1992, under the presidency of Luis Alberto Lacalle, the government attempted to privatize all its companies, following the neoliberal Washington Consensus. However, a referendum won by 75% of the population kept the companies in the hands of the government. By the end of his term, president Lacalle alleged that he had achieved a successful modernisation of the companies, which had made them more efficient.

Summary[link]

This list is incomplete; you can help by expanding it.

In this list, government-owned corporations are classified on their legal status: silver color represents legal monopolies, where no competition is permitted; light green represents a corporation that has private competitors; yellow means that although competition is legally permitted, there are no other corporations de facto, and uncolored refers to a free market, regulated or not.

See also[link]

• Constitutional economics
• Federal agency
• Government agency
• Non-departmental public body
• Political economy
• Public benefit corporation
• Public bodies
• Public company (public corporation)
• Public ownership
• Quango
• Regulatory agency
• Rule according to higher law
• Special-purpose district
• State within a state
• Stock market
• State-owned enterprises of New Zealand
• Statsforetak (Norwegian state enterprise)
• Statutory Agency
• Statutory corporation
• Volkseigener Betrieb (East German state enterprise)

References[link]

Profiles of Existing Government Corporations—A Study Prepared by the U.S. General Accounting Office for the Committee on Government Operations. 1988. (Document: H402-4) Washington, DC: U.S. Government Printing Office]

Further reading[link]

• The Public Firm with Managerial Incentives by Elmer G. Wiens.

It has been suggested that this article or section be merged with Government-owned corporation. (Discuss) Proposed since March 2012.

State ownership, also called public ownership, government ownership or state property, are property interests that are vested in the state, rather than an individual or communities.^[1]

State ownership may refer to state ownership or control of any asset, industry, or enterprise at any level, national, regional or local (municipal); or to common (full-community) non-state ownership. The process of bringing an asset into public ownership is called nationalization or municipalization.

In primarily market-based economies, government-owned assets are often managed and run like joint-stock corporations with the government owning a controlling stake of the shares. This model is often referred to as a state-owned enterprise. A government-owned corporation (sometimes state-owned enterprise, SOE) may resemble a not-for-profit corporation as it may not be required to generate a profit. Governments may also use profitable entities they own to support the general budget. SOE's may or may not be expected to operate in a broadly commercial manner and may or may not have monopolies in their areas of activity. The creation of a government-owned corporation (corporatization) from other forms of government ownership may be a precursor to privatization.

User rights[link]

When ownership of a resource is vested in the state, or any branch of the state such as a local authority, individual use "rights" are based on the state's management policies, though these rights are not property rights as they are not transmissible. For example, if a family is allocated an apartment that is state owned, it will have been granted a tenancy of the apartment, which may be lifelong or inheritable, but the management and control rights are held by various government departments.^[2]

Public property[link]

There is a distinction to be made between state ownership and public property. The former may refer to assets operated by a specific organization of the state used exclusively by their operators or that organization, such as a research laboratory, while public property refers to assets and resources that are available to the entire public for use, such as a public park (see public space).

By nation[link]

In Norway[link]

In 2011, the political editor of Dagens Næringsliv said that few nations resemble the Soviet Union, more than Norway, when it comes to State ownership.^[3]

See also[link]

• Consumer debt
• Cooperative
• Corporatization
• Deregulation
• Government debt
• Public finance
• Liberalization
• Municipalization
• Nationalization
• Ownership society
• Private property
• Private sector
• Privatization
• Public company
• Public good
• Public sector
• Public services
• Regulation
• Social sector
• Sovkhoz
• State enterprise
• Stock exchange
• Stock market
• Volkseigener Betrieb

References[link]

This law-related article is a stub. You can help Wikipedia by expanding it. v t e

Gregory Allyn Palast
Born	(1952-06-26) June 26, 1952 (age 60) Los Angeles, California
Occupation	Author, journalist
Website
GregPalast.com

Gregory Allyn Palast (born June 26, 1952)^[1] is a New York Times-bestselling author^[2] and a freelance journalist for the British Broadcasting Corporation^[3] as well as the British newspaper The Observer.^[4] His work frequently focuses on corporate malfeasance but has also been known to work with labor unions and consumer advocacy groups. Notably, he has claimed to have uncovered evidence that Florida Governor Jeb Bush, Florida Secretary of State Katherine Harris, and Florida Elections Unit Chief Clay Roberts, along with the ChoicePoint corporation, rigged the ballots during the US Presidential Election of 2000 and again in 2004 when, he argued, the problems and machinations from 2000 continued, and that challenger John Kerry actually would have won if not for disproportional "spoilage" of Democratic votes.^[5]

Palast spoke at a Think Twice conference held at Cambridge University^[6] and lectured at the University of São Paulo.^[7] He lives in New York City. Palast is originally from Los Angeles, and was educated at the University of Chicago,^[8] and eventually earned an MBA.

Selected stories[link]

Presidential elections[link]

Palast's investigation into the Bush family fortunes for his column in The Observer led him to uncover a connection to a company called ChoicePoint. In an October 2008 interview Palast said that before the 2000 Election ChoicePoint "was purging the voter rolls of Florida under a contract with a lady named Katherine Harris, the Secretary of State. They won a contract, a bid contract with the state, with the highest bid."^[9]

After subsequently noticing a large proportion of African-American voters were claiming their names had disappeared from voter rolls in Florida in the 2000 election, Palast launched a full-scale investigation into voter fraud, the results of which were broadcast in the UK by the BBC on their Newsnight^[10] show prior to the 2004 Election. Palast claimed to have obtained computer discs from Katherine Harris' office, which contained caging lists of "voters matched by race and tagged as felons.^[9] "

Palast appeared in the 2003 documentary film, Florida Fights Back! Resisting the Stolen Election, along with Vincent Bugliosi, Former L.A. Deputy D.A. & Author of " The Betrayal of America", and including footage from the 2001 Washington D.C. Voter Rights March^[11] with founder Lou Posner. Palast also appeared in the 2004 documentary Orwell Rolls in His Grave, which focuses on the hidden mechanics of the media.

Palast alleges that Andrés Manuel López Obrador — and not Felipe Calderón — won Mexico's last presidential election.^[12]

In May 2007, Palast said he'd received 500 emails that former White House Deputy Chief of Staff Karl Rove exchanged through an account supplied by the Republican National Committee. Palast says the emails show a plan to target likely Democratic voters with extra scrutiny over their home addresses, and he also believes Rove's plan was a factor in the firing of U.S. Attorneys.^[13]

After Palast was invited by Robert F. Kennedy, Jr. to appear on his Air America talk show to discuss, among other things, election fraud, the pair teamed up to find out if democracy was in a better state in 2008. In their report, which was published in October 2008 in Rolling Stone, they concluded that the 2008 Election had already been stolen. "If Democrats are to win the 2008 election, they must not simply beat John McCain at the polls -- they must beat him by a margin that exceeds the level of GOP vote tampering", Palast and Kennedy summarized.^[14]

To combat the extensive acts of voter suppression that Palast and Kennedy uncovered, the duo launched a campaign called Steal Back Your Vote,^[15] which features a website and free downloadable voter guide / adult comic book.

Long Island Lighting Company[link]

In 1988, Palast directed a U.S. civil racketeering investigation into the nuclear power plant builder Long Island Lighting Company. A jury awarded the plaintiffs US$4.8 billion; however, New York's chief federal judge reversed the verdict. The racketeering charges stemmed from an accusation that LILCO filed false documents in order to secure rate increases. LILCO sought a dismissal of these charges on the grounds that Suffolk County lacked authority under the Racketeer Influenced and Corrupt Organizations Act and that the allegations of a history of racketeering did not qualify as a continuing criminal enterprise.^[16]

[edit] Exxon Valdez

Palast has also taken issue with the official story behind the grounding of the Exxon Valdez, claiming the sobriety of the Valdez's captain was not an issue in the accident. According to Palast the main cause of the Exxon Valdez accident in 1989 was not human error, but an Exxon decision not to fix the ship's radar in order to save money. The Raytheon Raycas radar system would not have detected Bligh Reef itself - as radar, unlike sonar, is incapable of detecting objects under the waterline of a ship. However the radar system would have detected the "radar reflector", placed on the next rock inland from Bligh Reef for the purpose of keeping boats on course via radar.

Palast argues the original owners of the land, the local Alaska Natives tribe, took only one dollar in payment for the land other than a promise not to pollute it and spoil their fishing ground.

UK "LobbyGate" Scandal[link]

In 1998, working as an undercover reporter for The Observer, Palast, posing as a US businessman with ties to Enron, caught on tape two Labour party insiders, Derek Draper and Jonathan Mendelsohn, boasting about how they could sell access to government ministers, obtain advance copies of sensitive reports, and create tax breaks for their clients.^[17]

Draper denied the allegations.^[18] At Prime Minister's Question Time July 8, 1998 British Prime Minister Tony Blair claimed that all the specific claims had been investigated and found groundless "every allegation made in The Observer has been investigated and found to be untrue".^[19]

Vulture funds[link]

Starting in 2007 Palast published a series of investigations on what aid groups and investors call "vulture funds." Vulture funds are a private equity or hedge funds where companies or people buy the debt of poor countries and sue in courts to recover the funds, often at the expense of aid and debt relief. Prime Minister Gordon Brown commented on the practices saying "We particularly condemn the perversity where Vulture Funds purchase debt at a reduced price and make a profit from suing the debtor country to recover the full amount owed - a morally outrageous outcome".^[20]

In 2011, the UK made permanent the Debt Relief (Developing Countries) Act 2010, which severely restricts the activities of vulture funds in the UK.^[21]

[edit] Newsnight

Since 2000, Greg Palast has made more than a dozen films for the BBC programme Newsnight with the Investigations Producer Meirion Jones, which have been broadcast in the UK and worldwide. In addition to the films on US elections they have investigated oil companies, the Iraq War, the coup against Hugo Chávez, and the vulture funds which target the poorest countries.

Alternative Ending to Harry Potter and the Deathly Hallows[link]

Following the publication of Harry Potter and the Deathly Hallows, the final book in the seven part series by JK Rowling, Palast released an alternative ending to the series, as told to him by Rowling.^[22] Differences in this ending to the one that made it into the book include Voldemort reuniting with his parents, Harry Potter getting a post at Hogwarts School of Witchcraft and Wizardry and Harry's wife permanently transforming into a bird. Neither JK Rowling nor her affiliates have made any claim regarding the validity of this article.

Criticism[link]

In An Open Letter to Greg Palast on Peak Oil^[23] Richard Heinberg offers friendly criticism of Palast who conflates the "amount of oil left" with "peak (maximal) flow rates" for oil, the latter being key to Peak Oil.

Left-wing MP George Galloway also criticised Palast by claiming he "conflates meetings, truths and half-truths, statements taken out of context to produce a toxic smear which would be actionable in the country he claims to work in" ^[24]

Bibliography[link]

Wikiquote has a collection of quotations related to: Greg Palast

Books[link]

• The Best Democracy Money Can Buy. London: Pluto Press. 2002. ISBN 0-452-28391-4. 
• Democracy and Regulation. London: Pluto. 2002. ISBN 0-7453-1943-2. 
• Armed Madhouse. New York, NY: Dutton. 2006. ISBN 0-525-94968-2. ^[25]
• Vultures' Picnic. New York: Dutton. 2011. ISBN 978-0-525-95207-7. ^[26]

Films[link]

• American Blackout
• Big Easy to Big Empty [Part 1],^[27] Part 2^[28]
• Bush Family Fortunes^[29][30]
• The Election Files^[31][32]
• Palast Investigates^[33][34]

Newsnight[link]

• "Vulture Funds attack Liberia 2010"^[35]
• "Vulture Funds attack Zambia 2007"^[36]
• "Bush and the Vultures 2007"^[37]
• "US Election 2008 (2008)"^[38]
• "Tim Griffin (2007)"^[39]
• "US Election 2004 (2004)"^[40]
• "US Election 2000 (2001)"^[41]
• "Bush and the Bin Ladens (2001)"^[42]
• "Bush dances with Enron (2001)"^[43]
• "Chevron and Ecuador (2007)"^[44]
• "Secret US plans for Iraq's oil (2005)"^[45]
• "Iraq - Jay Garner's story (2004)^[46]
• "Chavez and Oil (2006)"^[47]
• "Chavez and the Coup (2002)^[48]
• "Stiglitz (2001)"^[49]
• "Microsoft (2000)"^[50]

See also[link]

• 2004 United States election voting controversies
• International Monetary Fund
• World Bank
• World Trade Organization

References[link]

External links[link]

• GregPalast.com - 'The Writings of Greg Palast' (official website)
• GregPalastOffice Greg Palast's YouTube page
• Election 2004 Shoplifting the Presidency? - interview on Democracy Now!
• Scoop.co.nz - 'OPEC & The Economic Conquest Of Iraq', Greg Palast
• New York Inquirer Interview with Greg Palast
• Palast article 'On the 2006 Mid-Term Elections'
• "A Sleeper Cell of Rove-Bots" - May 24, 2007 interview
• Greg Palast Tracks Vulture Funds Preying on African Debt - video report by Democracy Now!
• "Greg Palast "Vulture's Picnic"". C-Span. December 16, 2011. http://www.c-spanvideo.org/event/200266&timeline. Retrieved February 4, 2012. 

Milton Friedman

Chicago School of Economics
Born	(1912-07-31)July 31, 1912 Brooklyn, New York
Died	November 16, 2006(2006-11-16) (aged 94) San Francisco, California
Nationality	American
Institution	Hoover Institution (1977–2006) University of Chicago (1946–77) Columbia University (1937–41, 1943–45, 1964–65) NBER (1937–40)
Field	Economics
Alma mater	Columbia University (Ph.D.), 1946, University of Chicago (M.A.), 1933 Rutgers University (B.A.), (1932)
Opposed	John Maynard Keynes, John Kenneth Galbraith, Murray Rothbard
Influences	Adam Smith, Irving Fisher, Frank Knight, Murray Rothbard, Jacob Viner, Harold Hotelling, Arthur Burns, Friedrich Hayek, Homer Jones, Ludwig von Mises, Henry Simons, George Stigler
Influenced	Margaret Thatcher, Alan Greenspan, David D. Friedman, Anna J. Schwartz, Ben Bernanke, Gary Becker, Thomas Sowell, Harry Markowitz, Chicago Boys, William F. Buckley, Jr., Cato Institute
Contributions	Price theory, Monetarism, applied macroeconomics, floating exchange rates, volunteer military, Permanent income hypothesis, Friedman test
Awards	John Bates Clark Medal (1951) Nobel Memorial Prize in Economics (1976) Presidential Medal of Freedom (1988) National Medal of Science (1988)
Signature

Milton Friedman (July 31, 1912 – November 16, 2006) was an American economist, statistician, and author who taught at the University of Chicago for more than three decades. He was a recipient of the Nobel Memorial Prize in Economic Sciences, and is known for his research on consumption analysis, monetary history and theory, and the complexity of stabilization policy.^[1] As a leader of the Chicago school of economics, he influenced the research agenda of the economics profession. A survey of economists ranked Friedman as the second most popular economist of the twentieth century behind John Maynard Keynes,^[2] and The Economist described him as "the most influential economist of the second half of the 20th century…possibly of all of it."^[3]

Friedman's challenges to what he later called "naive Keynesian" (as opposed to New Keynesian) theory^[4] began with his 1950s reinterpretation of the consumption function, and he became the main advocate opposing activist Keynesian government policies.^[5] In the late 1960s he described his own approach (along with all of mainstream economics) as using "Keynesian language and apparatus" yet rejecting its "initial" conclusions.^[6] During the 1960s he promoted an alternative macroeconomic policy known as "monetarism". He theorized there existed a "natural" rate of unemployment, and argued that governments could increase employment above this rate (e.g., by increasing aggregate demand) only at the risk of causing inflation to accelerate.^[7] He argued that the Phillips curve was not stable and predicted what would come to be known as stagflation.^[8] Friedman argued that, given the existence of the Federal Reserve, a constant small expansion of the money supply was the only wise policy.^[9]

Friedman was an economic adviser to conservative President Ronald Reagan. His political philosophy extolled the virtues of a free market economic system with minimal intervention. He once stated that his role in eliminating U.S. conscription was his proudest accomplishment, and his support for school choice led him to found The Friedman Foundation for Educational Choice. In his 1962 book Capitalism and Freedom, Friedman advocated policies such as a volunteer military, freely floating exchange rates, abolition of medical licenses, a negative income tax, and education vouchers.^[10] His ideas concerning monetary policy, taxation, privatization and deregulation influenced government policies, especially during the 1980s. His monetary theory influenced the Federal Reserve's response to the global financial crisis.^[11]

Milton Friedman's works include many monographs, books, scholarly articles, papers, magazine columns, television programs, videos, and lectures, and cover a broad range of topics of microeconomics, macroeconomics, economic history, and public policy issues. His books and essays were widely read, and have had an international influence, including in Communist countries.^{[12][13][14][15]}

Early life[link]

Friedman was born in Brooklyn, New York, to recent Jewish immigrants Jenő Friedman and Sára Landau from Beregszász in Austria-Hungary (now Berehove in Ukraine), both of whom worked as dry goods merchants. Shortly after Milton's birth, the family relocated to Rahway, New Jersey. A talented student, Friedman graduated from Rahway High School in 1928, just before his 16th birthday.^[16][17]

Friedman graduated from Rutgers University in New Jersey, where he specialized in mathematics and initially intended to become an actuary. During his time at Rutgers, Friedman became influenced by two economics professors, Arthur F. Burns and Homer Jones, who convinced him that modern economics could help end the Great Depression. After graduating from Rutgers in 1932, Friedman was offered two scholarships to do graduate work; one being Mathematics at Brown University and the other being Economics at the University of Chicago.^[18]Friedman chose the latter, thus earning an M.A. in 1933. He was strongly influenced by Jacob Viner, Frank Knight, and Henry Simons. It was at Chicago that Friedman met his future wife, economist Rose Director. During 1933–34 he had a fellowship at Columbia University, where he studied statistics with renowned statistician and economist Harold Hotelling. He was back in Chicago for 1934–35, spending the year working as a research assistant for Henry Schultz, who was then working on Theory and Measurement of Demand. That year, Friedman formed what would prove to be lifelong friendships with George Stigler and W. Allen Wallis.^[19]

Public service[link]

Friedman was initially unable to find academic employment, so during 1935, he followed his friend W. Allen Wallis to Washington, where Franklin D. Roosevelt's New Deal was "a lifesaver" for many young economists.^[20] At this stage, Friedman said that he and his wife "regarded the job-creation programs such as the WPA, CCC, and PWA appropriate responses to the critical situation," but not "the price- and wage-fixing measures of the National Recovery Administration and the Agricultural Adjustment Administration."^[21] Foreshadowing his later ideas, he believed price controls interfered with an essential signaling mechanism to help resources be used where they were most valued. Indeed, Friedman later concluded that all government intervention associated with the New Deal was "the wrong cure for the wrong disease," arguing that the money supply should simply have been expanded, instead of contracted.^[22] In the publication Monetary History of the United States by Friedman and Anna Schwartz, they argue that the Great Depression was caused by monetary contraction, which was the consequence of poor policymaking by the Federal reserve and the continuous crises of the banking system.^[23]

During 1935, he began work for the National Resources Committee, which was then working on a large consumer budget survey. Ideas from this project later became a part of his Theory of the Consumption Function. Friedman began employment with the National Bureau of Economic Research during autumn 1937 to assist Simon Kuznets in his work on professional income. This work resulted in their jointly authored publication Incomes from Independent Professional Practice, which introduced the concepts of permanent and transitory income, a major component of the Permanent Income Hypothesis that Friedman worked out in greater detail in the 1950s. The book hypothesizes that professional licensing artificially restricts the supply of services and raises prices.

During 1940, Friedman was appointed an assistant professor teaching Economics at the University of Wisconsin–Madison, but encountered antisemitism in the Economics department and decided to return to government service.^[24][25] Friedman spent 1941–43 working on wartime tax policy for the Federal Government, as an advisor to senior officials of the United States Department of the Treasury. As a Treasury spokesman during 1942 he advocated a Keynesian policy of taxation. He helped to invent the payroll withholding tax system, since the federal government badly needed money in order to fight the war.^[26] He later said, "I have no apologies for it, but I really wish we hadn't found it necessary and I wish there were some way of abolishing withholding now."^[27]

Academic career[link]

Early years[link]

In 1943, Friedman joined the Division of War Research at Columbia University (headed by W. Allen Wallis and Harold Hotelling), where he spent the rest of World War II working as a mathematical statistician, focusing on problems of weapons design.^[28]

During 1945, Friedman submitted Incomes from Independent Professional Practice (co-authored with Kuznets and completed during 1940) to Columbia as his doctoral dissertation. The university awarded him a Ph.D. during 1946. Friedman spent the 1945–46 academic year teaching at the University of Minnesota (where his friend George Stigler was employed). On February 12, 1945, his son, David D. Friedman was born.

University of Chicago[link]

University of Chicago

During 1946, Friedman accepted an offer to teach economic theory at the University of Chicago (a position opened by departure of his former professor Jacob Viner to Princeton University). Friedman would work for the University of Chicago for the next 30 years. There he helped build an intellectual community that produced a number of Nobel Prize winners, known collectively as the Chicago School of Economics.

At that time, Arthur Burns, who was then the head of the National Bureau of Economic Research, asked Friedman to rejoin the Bureau's staff. He accepted the invitation, and assumed responsibility for the Bureau's inquiry into the role of money in the business cycle. As a result, he initiated the "Workshop in Money and Banking" (the "Chicago Workshop"), which promoted a revival of monetary studies. During the latter half of the 1940s, Friedman began a collaboration with Anna Schwartz, an economic historian at the Bureau, that would ultimately result in the 1963 publication of a book co-authored by Friedman and Schwartz, A Monetary History of the United States, 1867–1960.

Friedman spent the 1954–55 academic year as a Fulbright Visiting Fellow at Gonville and Caius College, Cambridge. At the time, the Cambridge economics faculty was divided into a Keynesian majority (including Joan Robinson and Richard Kahn) and an anti-Keynesian minority (headed by Dennis Robertson). Friedman speculates that he was invited to the fellowship because his views were unacceptable to both of the Cambridge factions. Later his weekly columns for Newsweek magazine (1966–84) were well read and increasingly influential among political and business people.^[29] From 1968 to 1978, he and Paul Samuelson participated in the Economics Cassette Series, a biweekly subscription series where the economist would discuss the days' issues for about a half hour at a time.^[30]

Friedman was an economic adviser to Republican presidential candidate Barry Goldwater during 1964.

Nobel memorial prize and retirement[link]

In 1976 Friedman won the Nobel Memorial Prize in Economics "for his achievements in the fields of consumption analysis, monetary history and theory and for his demonstration of the complexity of stabilization policy."^[1] During the banquet speech he made a reference to “the Prize in Economic Sciences in Memory of Alfred Nobel”. In that he was the first recipient to do so, and it wasn’t until 2006 that a recipient of the prize called it by its proper name.^[31] During 1977, at age 65, Friedman retired from the University of Chicago after teaching there for 30 years. He and his wife moved to San Francisco where he became a visiting scholar at the Federal Reserve Bank of San Francisco. From 1977 on, he was affiliated with the Hoover Institution at Stanford University. During the same year, Friedman was approached by the Free To Choose Network and asked to create a television program presenting his economic and social philosophy. The Friedmans worked on this project for the next three years, and during 1980, the ten-part series, titled Free to Choose, was broadcast by the Public Broadcasting Service (PBS). The companion book to the series (co-authored by Milton and his wife, Rose Friedman), also titled Free To Choose, was the bestselling nonfiction book of 1980 and has since been translated into 14 foreign languages.

Friedman served as an unofficial adviser to Ronald Reagan during his 1980 presidential campaign, and then served on the President's Economic Policy Advisory Board for the rest of the Reagan Administration. During 1988, he received the National Medal of Science and Reagan honored him with the Presidential Medal of Freedom. Milton Friedman is known now as one of the most influential economists of the 20th century.^[32][33] Throughout the 1980s and 1990s, Friedman continued to write editorials and appear on television. He made several visits to Eastern Europe and to China, where he also advised governments. He was also for many years a Trustee of the Philadelphia Society.^[34][35][36]

Scholarly contributions[link]

Economics[link]

Friedman was best known for reviving interest in the money supply as a determinant of the nominal value of output, that is, the quantity theory of money. Monetarism is the set of views associated with modern quantity theory. Its origins can be traced back to the 16th-century School of Salamanca or even further; however, Friedman's contribution is largely responsible for its modern popularization. He co-authored, with Anna Schwartz, A Monetary History of the United States (1963), which was an examination of the role of the money supply and economic activity in U.S. history. A striking conclusion of their research was one regarding the role of money supply fluctuations as contributing to economic fluctuations. Several regression studies with David Meiselman during the 1960s suggested the primacy of the money supply over investment and government spending in determining consumption and output. These challenged a prevailing but largely untested view on their relative importance. Friedman's empirical research and some theory supported the conclusion that the short-run effect of a change of the money supply was primarily on output but that the longer-run effect was primarily on the price level.

Friedman was the main proponent of the monetarist school of economics. He maintained that there is a close and stable association between price inflation and the money supply, mainly that price inflation should be regulated with monetary deflation and price deflation with monetary inflation. He famously quipped that price deflation can be fought by "dropping money out of a helicopter."^[37]

Friedman's arguments were designed to counter popular claims that price inflation at the time was the result of increases in the price of oil, or increases in wages: as he wrote,

Inflation is always and everywhere a monetary phenomenon.

—Milton Friedman, 1963.^[38]

Friedman rejected the use of fiscal policy as a tool of demand management; and he held that the government's role in the guidance of the economy should be restricted severely. Friedman wrote extensively on the Great Depression, which he termed the Great Contraction, arguing that it had been caused by an ordinary financial shock whose duration and seriousness were greatly increased by the subsequent contraction of the money supply caused by the misguided policies of the directors of the Federal Reserve.

The Fed was largely responsible for converting what might have been a garden-variety recession, although perhaps a fairly severe one, into a major catastrophe. Instead of using its powers to offset the depression, it presided over a decline in the quantity of money by one-third from 1929 to 1933 ... Far from the depression being a failure of the free-enterprise system, it was a tragic failure of government.

—Milton Friedman, Two Lucky People, 233

Friedman also argued for the cessation of government intervention in currency markets, thereby spawning an enormous literature on the subject, as well as promoting the practice of freely floating exchange rates. His close friend George Stigler explained, "As is customary in science, he did not win a full victory, in part because research was directed along different lines by the theory of rational expectations, a newer approach developed by Robert Lucas, also at the University of Chicago."^[39]

Friedman was also known for his work on the consumption function, the permanent income hypothesis (1957), which Friedman himself referred to as his best scientific work.^[40] This work contended that rational consumers would spend a proportional amount of what they perceived to be their permanent income. Windfall gains would mostly be saved. Tax reductions likewise, as rational consumers would predict that taxes would have to increase later to balance public finances. Other important contributions include his critique of the Phillips curve and the concept of the natural rate of unemployment (1968). This critique associated his name, together with that of Edmund Phelps, with the insight that a government that brings about greater inflation cannot permanently reduce unemployment by doing so. Unemployment may be temporarily lower, if the inflation is a surprise, but in the long run unemployment will be determined by the frictions and imperfections of the labor market.

Friedman's essay "The Methodology of Positive Economics" (1953) provided the epistemological pattern for his own subsequent research and to a degree that of the Chicago School. There he argued that economics as science should be free of value judgments for it to be objective. Moreover, a useful economic theory should be judged not by its descriptive realism but by its simplicity and fruitfulness as an engine of prediction. That is, students should measure the accuracy of its predictions, rather than the "soundness of its assumptions. His argument was part of an ongoing debate among such statisticians as Jerzy Neyman, Leonard Savage, and Ronald Fisher.^[41]

Statistics[link]

One of his most famous contributions to statistics is sequential sampling. "Friedman did statistical work at the Division of War Research at Columbia. He and his colleagues came up with a sampling technique, known as sequential sampling, which became, in the words of The New Palgrave Dictionary of Economics, 'the standard analysis of quality control inspection.' The dictionary adds: 'Like many of Friedman’s contributions, in retrospect it seems remarkably simple and obvious to apply basic economic ideas to quality control; that however is a measure of his genius.'"^[42]

Public policy positions[link]

Federal reserve[link]

Friedman believed that if the money supply was to be centrally controlled (as by the Federal Reserve) that the preferable way to do it would be with a mechanical system that would keep the quantity of money increasing at a steady rate. However, instead of government involvement at all, he was open to a "real," non-government, gold standard where money is produced by the private market: "A real gold standard is thoroughly consistent with [classical] liberal principles and I, for one, am entirely in favor of measures promoting its development." He did however add this caveat, "Let me emphasize that this note is not a plea for a return to a gold standard.... I regard a return to a gold standard as neither desirable nor feasible—with the one exception that it might become feasible if the doomsday predictions of hyperinflation under our present system should prove correct."^[43] He said the reason that it was not feasible was because "there is essentially no government in the world that is willing to surrender control over its domestic monetary policy." However, it could be done if "you could re-establish a world in which government's budget accounted for 10 percent of the national income, in which laissez-faire reigned, in which governments did not interfere with economic activities and in which full employment policies had been relegated to the dustbin..."^[43]

He was critical of the Federal Reserve's influence on the economics profession. In a 1993 letter to University of Texas economics professor and former House Banking Committee investigator Robert Auerbach, Friedman wrote:

I cannot disagree with you that having something like 500 economists is extremely unhealthy. As you say, it is not conducive to independent, objective research. You and I know there has been censorship of the material published. Equally important, the location of the economists in the Federal Reserve has had a significant influence on the kind of research they do, biasing that research toward noncontroversial technical papers on method as opposed to substantive papers on policy and results.^[44]

School choice[link]

In his 1955 article "The Role of Government in Education" Friedman proposed supplementing publicly operated schools with privately run but publicly funded schools through a system of school vouchers.^[45] Reforms similar to those proposed in the article were implemented in, for example, Chile in 1981 and Sweden in 1992.^[46] In 1996 Friedman, together with his wife, founded the The Foundation for Educational Choice to advocate school choice and vouchers.

Conscription[link]

Milton Friedman was a major proponent of a volunteer military, stating that the draft was "inconsistent with a free society."^[47][48] In Capitalism and Freedom, he argued that conscription is inequitable and arbitrary, preventing young men from shaping their lives as they see fit.^[49] During the Nixon administration he headed the committee to research a conversion to paid/volunteer armed force. He would later state that his role in eliminating the conscription in the United States was his proudest accomplishment.^[9] Friedman did, however, believe a nation could compel military training as a reserve in case of war time.^[49]

Libertarianism and the Republican party[link]

He served as a member of President Reagan's Economic Policy Advisory Board during 1981. During 1988, he received the Presidential Medal of Freedom and the National Medal of Science. He said that he was a libertarian philosophically, but a member of the U.S. Republican Party for the sake of "expediency" ("I am a libertarian with a small 'l' and a Republican with a capital 'R.' And I am a Republican with a capital 'R' on grounds of expediency, not on principle.") But, he said, "I think the term classical liberal is also equally applicable. I don't really care very much what I'm called. I'm much more interested in having people thinking about the ideas, rather than the person."^[50]

Public goods and monopoly[link]

Friedman was supportive of the state provision of some public goods that private businesses are not considered as being able to provide. However, he argued that many of the services performed by government could be performed better by the private sector. Above all, if some public goods are provided by the state, he believed that they should not be a legal monopoly where private competition is prohibited; for example, he wrote:

There is no way to justify our present public monopoly of the post office. It may be argued that the carrying of mail is a technical monopoly and that a government monopoly is the least of evils. Along these lines, one could perhaps justify a government post office, but not the present law, which makes it illegal for anybody else to carry the mail. If the delivery of mail is a technical monopoly, no one else will be able to succeed in competition with the government. If it is not, there is no reason why the government should be engaged in it. The only way to find out is to leave other people free to enter.

—Milton Friedman, Friedman, Milton & Rose D. Capitalism and Freedom, University of Chicago Press, 1982, 29

Welfare[link]

Friedman made newspaper headlines by proposing a negative income tax to replace the existing welfare system, and then opposing a bill to implement it because the bill proposed to supplement the existing system rather than replace it.

Drugs[link]

Friedman also supported libertarian policies such as legalization of drugs and prostitution. During 2005, Friedman and more than 500 other economists advocated discussions regarding the economic benefits of the legalization of marijuana.^[51]

Economic freedom[link]

Michael Walker of the Fraser Institute and Friedman hosted a series of conferences from 1986 to 1994. The goal was to create a clear definition of economic freedom and a method for measuring it. Eventually this resulted in the first report on worldwide economic freedom, Economic Freedom in the World. This annual report has since provided data for numerous peer-reviewed studies and has influenced policy in several nations.

Along with sixteen other distinguished economists he opposed the Copyright Term Extension Act and filed an amicus brief in Eldred v. Ashcroft.^[52] He supported the inclusion of the word "no-brainer" in the brief.^[53]

Friedman argued for stronger basic legal (constitutional) protection of economic rights and freedoms in order to further promote industrial-commercial growth and prosperity and buttress democracy and freedom and the rule of law generally in society.^[54]

Honors, recognition, and influence[link]

Friedman allowed the Cato Institute to use his name for its biannual Milton Friedman Prize for Advancing Liberty beginning in 2001. A Friedman Prize was given to the late British economist Peter Bauer during 2002, Peruvian economist Hernando de Soto during 2004, Mart Laar, former Estonian Prime Minister during 2006 and a young Venezuelan student Yon Goicoechea during 2008. His wife Rose, sister of Aaron Director, with whom he initiated the Friedman Foundation for Educational Choice, served on the international selection committee. Friedman was also a recipient of the Nobel Prize in Economics.

Hong Kong[link]

Friedman once said, "If you want to see capitalism in action, go to Hong Kong."^[55] He wrote in 1990 that the Hong Kong economy was perhaps the best example of a free market economy.^[56]

One month before his death, he wrote the article "Hong Kong Wrong – What would Cowperthwaite say?" in the Wall Street Journal, criticizing Donald Tsang, the Chief Executive of Hong Kong, for abandoning "positive noninterventionism."^[57] Tsang later said he was merely changing the slogan to "big market, small government," where small government is defined as less than 20% of GDP. In a debate between Tsang and his rival, Alan Leong, before the 2007 Chief Executive election, Leong introduced the topic and jokingly accused Tsang of angering Friedman to death.

Chile[link]

During 1975, two years after the military coup that ended the government of Salvador Allende, the economy of Chile experienced a severe crisis. Friedman accepted the invitation of a private foundation to visit Chile and speak on principles of economic freedom. He spent seven days in Chile giving a series of lectures. One of the lectures was entitled "The Fragility of Freedom," and according to Friedman, "dealt with precisely the threat to freedom from a centralized military government."^[58] Friedman encapsulated his philosophy in a lecture at Universidad Católica de Chile, saying: "free markets would undermine political centralization and political control."^[59]

Friedman also met with military dictator President Augusto Pinochet during his visit. He never served as an adviser to the Chilean government, but did write a letter to Pinochet outlining what Friedman considered the two key economic problems of Chile. The letter listed a series of monetary and fiscal measures deemed a "shock program" to end hyperinflation and promote a market economy.^[60] His letter suggested (among other, more specific prescriptions) that a brief period of cutting government spending would reduce its fiscal deficit and thus reduce the rate of increase of the quantity of money in the country that was driving inflation. The economist did however admit his knowledge of Chile was "too limited to enable [him] to be precise or comprehensive" and that the measures he outlined were "to be taken as illustrative."^[60] Friedman felt that there might be a brief period ("measured in months") of higher unemployment, followed by recovery once inflation was tamed. His letter also suggested that cutting spending to reduce the fiscal deficit would result in less transitional unemployment than raising taxes to do so. Later, Friedman said he believed that market reforms would undermine Pinochet.^[61] Chilean graduates of the Chicago School of Economics and its new local chapters had been appointed to important positions in the new government soon after the coup, which allowed them to advise Pinochet on economic policies in accord with the School's economic doctrine.

According to his critics, Friedman did not criticize Pinochet's dictatorship at the time, nor the assassinations, illegal imprisonments, torture, or other atrocities that were well known by then.^[62] In his 1980 documentary Free to Choose, he said the following: "Chile is not a politically free system, and I do not condone the system. But the people there are freer than the people in Communist societies because government plays a smaller role. ... The conditions of the people in the past few years has been getting better and not worse. They would be still better to get rid of the junta and to be able to have a free democratic system."^[63][64] In 1984 Friedman stated that he has "never refrained from criticizing the political system in Chile."^[58]

Friedman defended his activity in Chile on the grounds that, in his opinion, the adoption of free market policies not only improved the economic situation of Chile but also contributed to the amelioration of Pinochet's rule and to the eventual transition to a democratic government during 1990. That idea is included in Capitalism and Freedom, in which he declared that economic freedom is not only desirable in itself but is also a necessary condition for political freedom. He stressed that the lectures he gave in Chile were the same lectures he later gave in China and other socialist states.^[65] During the 2000 PBS documentary The Commanding Heights (based on the book), Friedman continued to argue that criticism over his role in Chile missed his main contention that freer markets resulted in freer people, and that Chile's unfree economy had caused the military government. Friedman suggested that the economic liberalization he advocated caused the end of military rule and a free Chile.^[66]

Iceland[link]

Friedman visited Iceland during the autumn of 1984, met with important Icelanders and gave a lecture at the University of Iceland on the "tyranny of the status quo." He participated in a lively television debate on August 31, 1984 with socialist intellectuals, including Ólafur Ragnar Grímsson, who later became the president of Iceland.^[67] When they complained that a fee was charged for attending his lecture at the University and that hitherto, lectures by visiting scholars had been free-of-charge, Friedman replied that previous lectures had not been free-of-charge in a meaningful sense: Lectures always have related costs. What mattered was whether attendees or non-attendees covered those costs. Friedman thought that it was fairer that only those who attended paid. In this discussion Friedman also stated that he did not receive any money for delivering that lecture.

Estonia[link]

Although Friedman never visited Estonia, his book Free to Choose exercised a great influence on that nation's then 32-year-old prime minister, Mart Laar, who has claimed that it was the only book on economics he had read before taking office. Laar's reforms are often credited with responsibility for transforming Estonia from an impoverished Soviet Republic to the "Baltic Tiger." A prime element of Laar's program was introduction of the flat tax. Laar won the 2006 Milton Friedman Prize for Advancing Liberty, awarded by the Cato Institute.^[68]

United Kingdom[link]

Milton Friedman influenced the thinking of Alan Walters and Patrick Minford, two of Margaret Thatcher's main macroeconomic advisers. See the book Margaret Thatcher's Revolution: How it Happened and What it Meant, edited by Subroto Roy & John Clarke, Continuum 2005

Criticism[link]

Keynesian criticism[link]

During the financial crisis of 2007–2010, several Keynesian economists such as James Galbraith and Joseph Stiglitz blamed the free market philosophy of Friedman and the Chicago school for the economic turmoil.^[69]

After Friedman's death in 2006, Keynesian Nobel laureate Paul Krugman, praised Friedman as a "great economist and a great man," but criticized him by writing that "he slipped all too easily into claiming both that markets always work and that only markets work. It's extremely hard to find cases in which Friedman acknowledged the possibility that markets could go wrong, or that government intervention could serve a useful purpose."^[70]

Austrian school criticism[link]

In 1971, libertarian economist Murray Rothbard criticized Friedman's efforts to make the government more efficient as detrimental to individual liberty, concluding "...as we examine Milton Friedman’s credentials to be the leader of free-market economics, we arrive at the chilling conclusion that it is difficult to consider him a free-market economist at all."^[71] Friedman's position on governmental control of money changed since 1971 when this criticism was made.^[72] In a 1995 interview in Reason magazine he said the "difference between me and people like Murray Rothbard is that, though I want to know what my ideal is, I think I also have to be willing to discuss changes that are less than ideal so long as they point me in that direction." He said he actually would "like to abolish the Fed," and points out that when he has written about the Fed it is simply his recommendations of how it should be run given that it exists.^[9]

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Other criticism[link]

In her book The Shock Doctrine: The Rise of Disaster Capitalism, journalist and author Naomi Klein criticized Friedman's ideology and the principles that guided the economic restructuring that followed the military coups in countries such as Chile and Indonesia, drawing analogies between the way that Friedman proposed using the social "shock" of the coups to create an economic "blank slate" with Ewen Cameron's controversial medical experiments that used electroshock therapy to create a mental "blank slate" in patients with mental disorders.^[73] Based on the extent to which the application of neoliberal policies has contributed to income disparities and inequality,^[74] both Klein and Noam Chomsky have suggested that the primary role of neoliberalism was as an ideological cover for capital accumulation by multinational corporations.^[75] Chilean economist Orlando Letelier asserted that Pinochet's dictatorship resorted to oppression because of popular opposition to Chicago School policies in Chile.^[76] Klein's book has been criticized. In the October 2008 issue of Reason magazine, Swedish historian Johan Norberg called her book a "disastrous ... polemic" and criticized the book as exaggerating some facts and ignoring others, subjecting Friedman to "the most malevolent distortions of a thinker's ideas in recent history." Norberg states that "Friedman's view was the opposite of what Klein claims" and "twists [the] relationship [between Friedman and Pinochet's regime] beyond recognition," concluding that "Klein is dead wrong about Friedman."^[77] Tom Redburn wrote that Klein "accuses Friedman of being the godfather of a Mafia-like gang", stated that "her argument constantly overreaches because her goal is not really to tame capitalism so much as to taunt it", and that Klein is "blind to the necessary role of entrepreneurial capitalism in overcoming the inherent tendency of any established social system to lapse into stagnation."^[78]

Personal life[link]

According to a 2007 article in Commentary magazine, his "parents were moderately observant [Jews], but Friedman, after an intense burst of childhood piety, rejected religion altogether."^[79] He described himself as an agnostic.^[80]

Friedman wrote extensively of his life and experiences, especially in 1998 in his memoirs with his wife Rose, titled Two Lucky People. He died of heart failure at the age of 94 years in San Francisco on November 16, 2006.^[81][82] He was survived by his wife (who died on August 18, 2009) and their two children, David, who is a philosopher and anarcho-capitalist economist, and Janet. David's son, Patri Friedman, is the executive director of the Seasteading Institute.^[83]

See also[link]

liberalism portal

• Works of Milton Friedman
• Friedman–Savage utility function
• Friedman rule
• Friedman's k-percent rule
• Friedman test
• List of economists
• List of Jewish Nobel laureates
• List of notable Presidential Medal of Freedom recipients
• History of economic thought

Notes[link]