Milton Friedman, Israel, And The Socialist Jewish Paradox
By: Saul Jay Singer
The Jewish Press
May 6, 2016
The economic theories of Milton Friedman (1912-2006), “the Father of Economic Freedom,” have had broad national and international impact, including a powerful influence on the economic policies of, among others, Ronald Reagan, Margaret Thatcher, and Menachem Begin.
Considered by many to be the most important conservative American economist, Friedman became the leader of the so-called Chicago School of Economics, which emphasized the importance of the quantity of money as an instrument of government policy and as a determinant of business cycles and inflation.
Friedman, who was awarded the Nobel Prize in Economics (1976) and the Presidential Medal of Freedom (1988), rejected the broadly embraced theories of British economist John Maynard Keynes, who maintained that only through heavy government spending could a nation’s economy prosper. Friedman firmly believed the private sector bears the mantle of responsibility for a flourishing economy and, in that regard, he coined the famous phrase “There is no such thing as a free lunch.” Another of his more famous aphorisms is “A society that puts equality before freedom will get neither.”
Friedman’s parents, Sára Ethel (née Landau) and Jenő Saul, were Jewish immigrants from Beregszász in Carpathian Ruthenia, Hungary, who both worked as dry goods merchants. As a child, Milton had very strong ties to Judaism, studying in a Hebrew school and, in his words, “obeying every Orthodox religious requirement.” After a stint of extreme piety during the years before his bar mitzvah, he lost his faith and ceased Jewish practice, but he still strongly identified as a Jew and took great pride in both Jewish tradition and his Jewish heritage. After his father’s death he faithfully recited Kaddish for the full eleven months, even traveling to neighboring communities to find a minyan. And he was a devout Zionist who strongly identified with Israel and expressed pride in its achievements.
Friedman first became interested in Israel when, at the invitation of the Israeli government, he visited the Jewish state for the first of many times (1962). After his visit to Israel in 1977, when he was awarded an honorary degree by the Hebrew University in Jerusalem shortly after the Likud came to power, a bizarre fabrication was broadly disseminated to the effect that he had come to Israel to serve as Begin’s chief economic adviser and that, as such, he was uniquely responsible for Israel’s roaring inflation. During his final trip to Israel (1990), at the beginning of the opening of the Iron Curtain which led to the massive wave of Jewish immigration from the former Soviet Union, he actively participated in a conference on economic policy by the Israel Center for Social and Economic Progress, which focused on developing suitable absorption policies and the provision of employment and housing to the new olim.
Friedman, who had a special interest in the role of Jews in society, was mystified by the magnetic pull that socialism seemed to have for so many Jewish intellectuals, particularly since socialism had historically been antagonistic to Judaism and because it was capitalism that had enabled Jews to survive the Dark Ages and to thrive and prosper during and after the Enlightenment.
He was particularly disturbed by the obstinacy of Israeli Jews and their leaders, who continued to support and promote the very socialist economic policies that were causing them the greatest harm while rejecting the adoption of free-market reforms which, given Jewish creativity and work ethic, would send Israel’s economy booming. In a 1972 address, he famously presented the essential socialist Jewish paradox this way:
Here are two propositions. Each of them are validated by evidence, yet they are both incompatible one with the other. The first proposition is that “there are few peoples if any in the world who owe so great a debt to free enterprise and competitive capitalism as the Jews.” The second proposition is that “there are few peoples or any in the world who have done so much to undermine the intellectual foundation of capitalism as the Jews.” How do we reconcile these two contradictory propositions?
Friedman believed that while monopolies and oligarchies are injurious to everybody, these systems are particularly ruinous for Jews and for Israel. He argued that though Jews shared the American respect for individual freedom, Israel’s socialist character was not only exacerbating its greatest social and economic problems but also threatening its very future. (As it does every nation – think European Union) Consistent with his general economic and political philosophy, he maintained that for Israel to be successful, it would have to consign socialism’s reliance upon a paternalistic and coercive government to the trash bin of history and, instead, emphasize self-reliance; implement a competitive financial structure; and adopt policies supporting private enterprise and initiative. And he was more than happy to help the Jewish state however he could; as he stated in a May 31, 1977 interview:
Insofar as I can give any assistance [to Israel], I am delighted to, both because of my general desire to see freedom prosper, and also because I have a very strong personal sympathy and interest in Israel. I am Jewish by origin and culture. I share their values and their belief. I share the admiration which many have had for the miracles that have occurred in Israel.
I corresponded with Friedman on this subject in December 1994, arguing at length (though tongue in cheek) that the trend is such that soon the only two countries with true socialist economies will be Israel and the United States – and this was more than 20 years before self-identifying socialist Bernie Sanders earned broad popular support in his run for the American presidency. In the fascinating December 23, 1994 correspondence on his Hoover Institution letterhead exhibited with this column, he responded as follows:
Dear Mr. Singer:The United States today is more than half socialist as judged by (a) government spending as a fraction of national income plus (b) government regulation and controls over private spending. Israel is perhaps 70 or 80 percent socialist in that sense. I do not believe in simply extrapolating the past and, while I too find the observation provocative and troubling, I too am not sure of its validity. The recent election illustrated in the United States a strong public opinion in favor of a smaller and less socialist government. I believe the same popular opinion exists in Israel. In both countries, it may produce a reversal of trend.
The November 1994 midterm elections to which Friedman refers, which occurred during Democratic president Bill Clinton’s first term in office, was known as the “Republican Revolution,” an epic slaughter of the Democratic Party in which Republicans captured majorities in the House of Representatives (winning an additional 54 seats), Senate (additional 8 seats), and governors’ mansions (an additional 10 seats). As our correspondence demonstrates, Friedman was optimistic that the election results constituted a positive harbinger for smaller government and for the growth of the American economy.
Friedman concluded his letter with sharp analysis in response to my discussion of the correlation between economic freedom and democracy:
Finally, the relation between economic freedom and political freedom is complex. I believe that the growth of economic freedom initially tends to promote political freedom, but the growth of political freedom, of what is called democracy, tends in turn to restrict economic freedom.
(An astounding statement and associated obvious recommendation and conclusion. Let Americans take note at the on-coming election, Nov, 2016, if they are interested in the reversal of their current economic problems and abject, Obama-induced political decline) jsk
Friedman maintained high expectations that Israeli socialists would eventually come to their senses, and he frequently wrote to Israel’s economic and political leaders urging them to adopt free market reforms. For example, he famously wrote to congratulate and encourage Benjamin Netanyahu who, as Israel’s finance minister, adopted significant reforms consistent with Friedman’s own thinking. As he quipped, “Fortunately for Israel, the ancient tradition [as opposed to socialism] is strongly renewable.”
(And the Israel economy has sky rocketed ever since and is the envy of the world.) jsk
Saul Jay Singer
About the Author: Saul Jay Singer, a nationally recognized legal ethicist, serves as senior legal ethics counsel with the District of Columbia Bar. He is a collector of extraordinary original Judaica documents and letters, and his column appears in The Jewish Press every other week. Mr. Singer welcomes comments at firstname.lastname@example.org.
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