The ‘free market’ manifesto that broke America and led to Trumpism
On Sept. 13, 1970, the New York Times published the “essay heard round the world.” In his manifesto, economist Milton Friedman argued that corporations have one – and only one – obligation: maximizing profits for shareholders.
Five decades after the “Friedman Doctrine” emerged, the American middle class is in tatters. Long before the coronavirus, millions of Americans were poor, sick and angry; perfect prey for Donald Trump’s resentful demagoguery and racial scapegoating.
Friedman’s philosophy – “arguably the most consequential economic idea of the latter half of the 20th century” – changed America forever. Its singular focus on profits became gospel for generations of business school graduates, CEOs and politicians alike.
Little did they know that their fealty to Friedman’s ideas would crush the American Dream.
According to Friedman, any business seeking “desirable ‘social’ ends” – such as “providing employment, eliminating discrimination, avoiding pollution” or even using higher quality ingredients in food – “undermines the basis of a free society.”
In other words, beyond complying with the law, Friedman believed that corporations have no moral or ethical responsibility to their workers or to society as a whole.
The broad adoption of this philosophy by American businesses resulted in a half century of stagnant wages, dwindling worker benefits, the evisceration of unions and the outsourcing of millions of good paying jobs — all in the name of cutting costs to maximize profits for wealthy shareholders.
Friedman’s ideas also resulted in decades of skyrocketing health care costs. At the same time, Americans became more obese, sicker (processed foods are enormously profitable) and – unsurprisingly – angrier.
Before the publication of Friedman’s essay, America’s middle class was the envy of the working world. In the decades after World War II, wages were high and grew steadily. Education, housing and health care were affordable, and Americans enjoyed robust social and economic mobility.
With a vibrant middle class spending its growing wages, the economy grew at a breakneck pace. Americans of all socio-economic classes saw capitalism deliver shared prosperity on a scale unparalleled in human history.
Then, with one opinion piece, it all came crashing down — and the seeds of Trumpism were sown.
From 1945 to the early 1970s, incomes of all Americans grew at roughly the same rate. But middle and working class wages suddenly stagnated around 1973, ushering in the devastating levels of wealth and income inequality that plague the United States today.
Is that pesky union asking for better health insurance, a pay raise or more robust pensions for its workers? Well, the Friedman Doctrine dictates that the union is an obstacle to realizing maximum profits; an entity to be undermined and attacked.
Better yet, Friedman says, slash worker benefits as much as possible.
Indeed, pensions were the norm among America’s most prominent employers in the post-World War II years. But five decades of a profit-centric ethos made them largely extinct.
And if unions – despite their inherent interest in keeping companies profitable – get too uppity on behalf of their workers, the Friedman Doctrine offers an easy solution: Send the jobs overseas to countries with vast pools of cheap labor. With the stroke of a pen, that irritating, costly union (that is, American worker) problem goes away for good while the shareholders enjoy exponential gains. Friedman’s ultimate win-win!
It should come as no surprise that Republicans were enthusiastic supporters of “free trade” policies that aligned with Friedman’s profits-at-all-costs ideology.
While Democrats largely opposed NAFTA, Republicans voted for it in significant numbers.
Republicans and Big Business also supported normalizing trade with China by large margins. As a result, millions of good-paying jobs moved to Asia, destroying countless American livelihoods, families and communities.
Unsurprisingly, the Friedman-esque outsourcing of American jobs in the name of shareholder profit is directly linked to the opioid epidemic and the extreme political polarization ravaging America (See: Trump, the rise of).
Friedman also had enormous influence over Ronald Reagan, who – like Trump – slashed taxes for the ultra-wealthy.
The long-term effects of Reagan’s embrace of “shareholder primacy” are nothing short of devastating.
Much of the trillions freed up by Reagan’s tax cuts for the super-rich found its way into politics. Enormous sums went into funding “free market” think tanks and buying off politicians who then eagerly pushed policies that made the fantastically wealthy even richer. (Think anti-union “right to work” laws, opposition to minimum wage increases and climate change denial)
In a stark example of this phenomenon, Republicans went from a pre-Friedman platform of championing a robust minimum wage, labor unions, Social Security and strong unemployment insurance benefits – all keys to a vibrant middle class – to fiercely opposing them.
Ultimately, the long-term costs of the Friedman Doctrine are incomprehensibly vast.
Researchers recently estimated that Friedman-fueled inequality led to the top 1 percent taking $50 trillion from the bottom 90 percent since 1975. The poverty engendered by this mass transfer of wealth is beyond staggering.
Unsurprisingly, a politically savvy demagogue emerged and tapped into the seething anger of the millions of Americans who lost it all.
Trump channeled much of his white, male, blue collar base’s rage into animosity towards Mexicans and immigrants. But, as it turns out, the predominantly white males who make up America’s wealthiest 1 percent are overwhelmingly responsible for the economic, social and cultural carnage that afflicts parts of Trump’s base.
Ultimately, the inequality catalyzed by Friedman’s ideas robs 90 percent of Americans of $2.5 trillion every single year.
With that kind of money in the pockets of white, blue collar Americans, Trump would never have found a voter base to exploit.
Marik von Rennenkampff served as an analyst with the U.S. Department of State’s Bureau of International Security and Nonproliferation, as well as an Obama administration appointee at the U.S. Department of Defense. Follow him on Twitter @MvonRen.