Where do you find the Answers? Try Milton and Rose

We, of course, expected cries of war mongers about our position on Iran, but we stand by it. The alternative is far worse.  On the other hand, people who might agree with our stand on zero tolerance for rioters in Baltimore or anywhere else, still ask what would you do about the underlying problems that lead to these protests?  In order to  provide answers we have to move from commentary to actual policy proposals.  To do so, we need help from some notables both living and dead.  The first one we turned to was President Obama who when faced with a long entrenched policy he felt was at a dead end said ” I do not believe we can keep doing the same thing for over five decades and expect a different result.”  While he said in reference to Cuba, the point was well taken. Instead of doing the same unsuccessful things decade after decade, it just might be worthwhile to head in a different direction.  Baltimore like many other of our cities have had one party rule for decades.  That means a certain political philosophy has governed the decisions and the general direction that have brought them to their present deplorable state.  Democrats who ruled all these years, adhere to a big government creed that goes back to the great depression.  Then It received its economic gravitas from John Maynard Keynes who proposed that government action could ameliorate the negative aspects of the business cycle.  After his passing, like minded economists such as John Kenneth Galbraith expanded on this government primacy philosophy to a system where government was the supreme arbitrator between Capital, represented by Big Business, and Labor represented the unions.  On the level of cities like Baltimore this has come to mean unaccountable positions for public employee unions, such as the police and teachers unions. They provide the money and reliable voters to for democrat politicians to prevail. The cost is unfunded pensions and an inability to fire bad or unproductive employees.  Businesses close to City Hall get contracts, zoning and tax breaks in return for their support.  How else can you explain more than 2 billion dollars Stimulus money not making any notable difference in Baltimore’s major problems in education,employment and overall economic growth.  Only the politicians, crony capitalists and unions seem to  made out.  Freddie Gray’s Sandtown-Winchester  neighborhood just continued its downward spiral. John Maynard Keynes was never without contemporaries who pointed to a different path forward.  Chief among them was Friedrich von Hayek, who saw this government dominance as leading us down “the Road to Serfdom” in the book by that name.  Later the NeoKeynesians moved us further down this road, but also had opposition and one who stood out was Milton Friedman along with his collaborator wife  Rose.  From Ronald Reagan to today’s majority of the Nations Governors, his smaller government individual centered way forward has offered an alternative to the philosophy that has brought Baltimore and similar cities to their present dire circumstances.  In light of this we may do well to ask what would Milton and Rose do? Even though both he and Rose are gone, they left us with starkly different policy proposals from those practiced in these faltering cities.  Education, employment and and how a city achieve economic growth were all tackled by the Friedmans.  It was Milton that said “One of the great mistakes is to judge policies and programs by their intentions rather than their results.”

Nothing quite moves people up the economic ladder like education.  The American people understand this and for primary and secondary education spend more per pupil than other country except maybe the Swiss.  Baltimore is right up there near the top in spending at $15,287 per student per year.  What is stunning how little we get for  investment.  In Baltimore, one in four drops out before graduation.  Even for those that stay in school, fewer than half the high school seniors in Baltimore public schools passed the High School Assessment exam.  High school seniors’ average SAT scores were more than 100 points below state and national averages for each of the three testing components.  When you realize that the U.S. ranks only 14th in the world in cognitive skills and educational attainment, these outcomes are actually even worse.  Where else but in education would these dismal results be tolerated?  Isn’t time to try something else?  The Friedmans proposed a system of school vouchers:

Our goal is to have a system in which every family in the U.S. will be able to choose for itself the school to which its children go. We are far from that ultimate result. If we had that — a system of free choice — we would also have a system of competition, innovation, which would change the character of education.

Their goal was nothing less than an education revolution:

The major objective of educational vouchers is much more ambitious. It is to drag education out of the 19th century — here it has been mired for far too long — and into the 21st century, by introducing competition on a broad scale.

Instead of condemning our children to a failing system, the Friedman in essence argued that we deregulate our near monopoly school systems as we did telephones so the marketplace can provide individual choices that maximize our children’s future.  Does anybody dispute that $15,000 would buy on average a much better education in a private market?    The average Catholic elementary school tuition is $3,673; the average Catholic secondary freshman tuition is $9,622.  Their student outcomes are far superior.  When we talk  of opening the system to innovation, remember the online Kahn Academy costs…well nothing.

So why don’t we give vouchers a shot?  We hardly could do worse.  Remember the Neo Keynesian triad.  Government, Organized Labor and Big Business.  In this case it’s the labor leg of this stool that stands in the forefront of the opposition. The governments that union money and efforts put in office block reforms.  The crony capitalists fearing a loss of government largesse just go along. The Friedmans were never fans of Labor Unions either in the public or private sectors.  Milton put it this way:

When unions get higher wages for their members by restricting entry into an occupation, those higher are at the expense of other workers who find their opportunities reduced.  When the government pays its employees higher , those higher wages are at the expense of the taxpayers. But when workers get raises higher wages and better working conditions through the free market , when they get raises by firms competing with one another for the best workers by worker’s competing with one another for the best jobs, those higher wages are at nobody’s expense. They can only come from higher productivity, greater capital investment, more widely diffused skills. The whole pie is bigger-there’s more for the worker, but there is more for the employer, the investor, the consumer, and even the tax collector.

That’s the way the free market system distributes the fruits of economic progress among all people.  That’s the secret of the enormous improvements in the conditions of the working person over the past two centuries.

Industrial Union demands played no small part in Baltimore’s decline, such as driving the city’s crown jewel Bethlehem Steel into bankruptcy.  While they have receded to single digits as a percentage our population, the public sector unions have thrived and now dominate the union world. These are the unions that block your children’s choice of schools. You want charter schools or vouchers to go to private schools, these are the people that will force their bought and paid for governments to fight any of these choices.  Milton and Rose along with the rest of might ask, who speaks for the children?

Unions make it difficult to fire employees.  This keeps poor teachers on the job and it’s why bad or potentially dangerous police aren’t weeded out in a timely fashion.  However police are faced with other problems greatly expanding our need for more of them.  Foremost is the “War on Drugs.”  Just like alcohol under Prohibition led to increased lawlessness, the drug war has had a devastating effect.  Nowhere is this clearer than in the poorer areas of cities like Baltimore. Milton Friedman was solidly against this war, not because he thought drugs were good for you, but because it was damaging and ultimately futile:

It does harm a great many other people, but primarily because it’s prohibited. There are an enormous number of innocent victims now. You’ve got the people whose purses are stolen, who are bashed over the head by people trying to get enough money for their next fix. You’ve got the people killed in the random drug wars. You’ve got the corruption of the legal establishment. You’ve got the innocent victims who are taxpayers who have to pay for more and more prisons, and more and more prisoners, and more and more police. You’ve got the rest of us who don’t get decent law enforcement because all the law enforcement officials are busy trying to do the impossible.

Legalizing drugs would simultaneously reduce the amount of crime and raise the quality of law enforcement. Can you conceive of any other measure that would accomplish so much to promote law and order?

Unless we can repeal the basic laws of supply and demand, wouldn’t be better to take realistic look at another decades old destructive policy as Milton urged.

But can even these measures reverse Baltimore’s loss of businesses and population?  Not by themselves.  Remember that money goes where it’s treated well.  Baltimore and many other cities are just not business friendly.  At the end of World War II, Baltimore and Detroit were among the richest cities in the world. At the same time, Milton Friedman noted Hong Kong was:

a tiny, poor colonial backwater of only 600,000 people and few assets, Hong Kong’s average per capita income was about one-quarter of the average income in Great Britain and 60 percent of Israel’s. The historical accident that assigned a disciple of Adam Smith to be governor of Hong Kong set the tiny colony on a different path. “Britain went for socialism. [Hong Kong} went for laissez faire free markets,” with no tariffs and low taxes.

In 1996, the average income in Hong Kong was one-third larger than the average in Britain. It’s easy to say that; it trips off the tongue, but I want you to contemplate that a bit. Here is Britain, a world power and until recently the greatest economic force in the world, outperformed by Hong Kong, this tiny spit of land.  How do you explaain that?  The only answer was that Hong Kong’s free market system outperformed Britain’s socialism.

While not outright socialist, Baltimore is surely government centric.  Does it really need one in five of it’s citizens to be employed by government?  Bureaucrats aren’t known for making things easier for entrepreneurs. For those who cry race as the all purpose reason for failure, remember that Hong Kong was a basically Chinese populated Colony ruled by white Brits.  Yet when the British lease expired returning it to China in 1997, it was the people of Hong Kong that loudly objected.  Maybe Chinese weren’t welcome in British Clubs, but they were welcome to succeed.

Finally if it can be avoided, people shouldn’t  be trapped in dead end circumstances. Yet our system of welfare ties people to their immediate area.  How do you leave your housing subsidy and welfare office that supports your very life?  Upward economic mobility often means physical mobility.  A nation of immigrants knows this.  Milton was a great proponent of what is known as a negative income tax. Rather than doling out bits and pieces, food stamps here, public housing there etc, just total all of it up and give the people the cash instead via a tax credit.   As you make less than a taxable income, you are supported with a tax refund reflecting the welfare payments to which you were entitled.  A form this was adopted as the Earned Income Tax Credit. This was designed to help the working poor.  The Friedmans would’ve preferred all welfare be funneled this way, thus making it portable so the recipients would feel free to move to better circumstances and opportunities.  Maybe we could revisit this with this objective in mind.  Adopting Dave’s Plan of health care reform, as espoused here, uses the same negative income tax principal for funding. Obviously the deceased Friedmans had nothing to do with Dave’s Plan, but we feel it follows their principals as it empowers the individual not the state.  What is important here is that it is completely portable and would increase peoples mobility.

We think many people have forgotten that there is another route to better outcomes for these cities.  Looking to the Friedmans to put us on the right road when it’s obvious that cities like Baltimore are lost in the woods somewhere just might be the right idea..  After all  they said results matter.  Which outcome do we want, Detroit or Hong Gong?

Note:  We realize that many people have little knowledge of the Friedmans and what they proposed.  Others have forgotten.  The young seem especially unaware.  A way to gain a good understanding of the principals they espoused is to view Nobel Laureate Milton’s 1980 PBS series “Free to choose.”   While it is available on DVD, you can download the series for free at http://miltonfriedman.blogspot.com/.  We think you’ll find it just as if not more timely today.  For those that want more information on what may be the Civil rights fight of our time, School Choice, check out the Friedman Foundation for Educational Choice http://www.edchoice.org/.  They may be gone but the fight goes on.

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