Tyranny of the status quo.

Friedmans believes that government is coercive and every governmental intervention in the free market breeds unintended results. Here are two examples:

Example 1 – jobs bills

The U.S. government intends to create jobs by raising the gasoline tax to finance the highway and bridge projects.

Who benefits?

Workers employed to rebuild the roads and bridges.

Who is harmed unintentionally?

(1) Workers employed to build the tanks.

(2) Taxpayers. They are now with less to spend and employ few people in other industries

Example 2 – protect American industry

The U.S. government intends to "save" the jobs of U.S. automobile workers by imposing "voluntary" quotas on Japanese car exporters.

Who benefits?

The stockholders of the U.S. companies manufacturing cars and their workers and suppliers.

Who is harmed unintentionally?

(1) The stockholders, employees, and suppliers of Japanese auto companies.

(2) The U.S. consumers. The buyers now have a smaller range of choice of cars and have to pay a higher price for them.

(3) The U.S. farmers and lumbermen. Agricultural and timber products are U.S.’s major export to Japan. If the Japanese earn fewer dollars by selling cars, their demand for these products will fall.

Ironically, the intended outcomes (usually the benefits) are visible, immediate, and concentrated; the unintended outcomes (usually the harms) are invisible, delayed and diffused. The workers who build the tanks, the farmers and lumbermen never have the faintest idea that it is the government who was responsible for their bad fortune (p.117). To the government, these beneficiaries can exert the most political influence.

His position of minimizing the role of government in favor of the private sector may not get rounds of applause these days. Yet, his views of monetary policy, taxation, privatization and deregulation shed insights to the policy of governments around the globe in 1980s. His ideas also played a major role in the transformation of China's economy.

Friedman, M. (1984). Tyranny of the status quo. Orlando: Harcourt Brace Jovanovich.