“Capitalism and Freedom” Summary, Chapter 1: The Relation Between Economic Freedom and Political Freedom

by Danny Fenster

This chapter is a free excerpt from Quicklet on Capitalism and Freedom.

There is an intimate connection between politics and economics, and different systems of the two can only exist side-by-side in certain pairings. For instance, says Friedman, a society which is (economically) socialist cannot also be (politically) democratic, in the sense of guaranteeing individual freedom."

As an economic system, capitalism promotes freedom both directly and indirectly; on one hand market freedoms are their own freedoms, and on the other, they promote broader political freedoms. Capitalist institutions are a primary reason we are currently freer than at almost any other period in history. Trade restrictions are burdensome, harmful to the economy and a dangerous overreach of government.  

Friedman claims that "intellectuals," a loosely-defined set of academics who judge their "self-defined higher values” above individual freedom, are out of touch with most citizens, who believe that the freedom to do what one wants with their earned income is a paramount personal freedom.


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There is an intimate connection between politics and economics, and different systems of the two can only exist side-by-side in certain pairings. For instance, says Friedman, a society which is (economically) socialist cannot also be (politically) democratic, in the sense of guaranteeing individual freedom."

As an economic system, capitalism promotes freedom both directly and indirectly; on one hand market freedoms are their own freedoms, and on the other, they promote broader political freedoms. Capitalist institutions are a primary reason we are currently freer than at almost any other period in history. Trade restrictions are burdensome, harmful to the economy and a dangerous overreach of government.  

Friedman claims that "intellectuals," a loosely-defined set of academics who judge their "self-defined higher values” above individual freedom, are out of touch with most citizens, who believe that the freedom to do what one wants with their earned income is a paramount personal freedom.

Competitive capitalist economies are politically important as a means of separating economic power from political power, checking each other and ensuring political freedom, says Friedman.

But, he cautions, "history suggests only that capitalism is a necessary condition for political freedom. Clearly it is not a sufficient condition," for Italy and Spain under fascism and tzarist Russia were not politically free but were dominated economically by free enterprise.

As political and economic freedom expanded in the nineteenth century, by the early twentieth century it had created a backlash against itself. “Welfare rather than freedom became the dominant note in democratic countries,” wrote Friedman, and Western democracies moved towards collectivization. This trend, however, was kept in check by “the limited success of central planning or its outright failure to achieve stated objectives.”

Friedman says central planning, taken to its logical conclusion, will always violate personal freedoms.

The individual’s freedom--the ultimate value for Libertarians, says Friedman--is not all-encompassing. “Freedom has nothing to say about what an individual does with his freedom,” he writes. That is a question of his own personal political and ethical wrestling.

In a complex and interconnected world such as ours, the challenge is to balance individual freedom with the widespread interdependence we now live in. For example, we are dependent on farmers that grow the grains and vegetables we eat, the distributors that bring them to market, and the merchants who take a chance by buying them in the hopes of selling them at a higher price.

The solution is the free exchange of goods and services on a competitive free market, so long as neither party is coerced and both have full information. In a free exchange, both parties benefit, or they wouldn’t agree.

“The consumer is protected by the seller because of the presence of other sellers with whom he can deal. The seller is protected from coercion by the consumer because of other consumers he can sell to, and the employee is protected from coercion by the employer because of other employers for whom he can work, and so on.”

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