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Freedom & Economic Fragility

Lindsey Purves

Humanities 30 Mr. Kabachia

May 30, 2012

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According to the quotation by Milton Friedman every individual should be

able to “make the most of his capacities and opportunities according to his own

lights.” This is to say that an individual should be able to move freely up and down

in the economy based on his or her own ideas, knowledge and understanding in the

interest of themselves rather than others. Friedman supports the belief in allowing

those that are fit to rise in economic power to do so while those that are unfit will

be out-done by the competition presented by their betters. He rejects the idea of

having modern liberal principles that may hinder the rise of the powerful through

ensuring equality for all in the economy, believing that Classical Liberalism is

superior. Although Friedman’s belief in having a classic liberal economy presents

many opportunities to the best and allows these people to prosper, it is not

efficient economically and has been shown through one of the most impactful

economic hits in history.

The Great Depression affected most of the world and was the result of

Classical Liberalism going too far in its belief of economic freedom. During the

1920’s America was prospering more than ever in history and, like most people,

the people living in the United States took advantage of this huge “boom” in the

economy to invest in stock and buy everything they had wanted for years but had

not previously been able to purchase. The problem was in how these people were

getting the money to buy huge numbers of stocks and merchandise. The banks

were allowing people who could very obviously never afford to pay off such large

loans anytime soon, to take out the money they wanted, and more, to invest in the

economy. Being able to borrow large sums of money from the banks allowed even

the poorest people to rise up in the economy but in the end could not pay back any

of this money because they held a false position in the economy without having a

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steady, well-paying job that would allow them to make enough money to pay off

their debt.

The twenties were also a time of major consumerism. People finally had the

chance to buy what they wanted, not just what they needed and so they took out

loans that were higher than what they needed to buy stock to buy items like

expensive cars and clothing as well. Suddenly when the stock market crashed and

the banks that were “too big to fail” went broke, everyone was left with the

expensive items they had purchased but no money to buy their essential needs like

food. No one could afford to buy expensive things anymore so even the option of

selling their new cars and top brand clothing wasn’t an option; no one could afford

to buy the items from those selling them for what they’re worth.

Arguably one of the biggest factors that led to the Great Depression was the

free reign of competition between companies and banks. There were no

regulations to tell big corporations that they could not, or should not, sell a car

way out of someone’s range on bank loans alone, nor to tell banks that lending

money that can never be paid back will cause a devastating blow to the economy.

Everyone was in competition with each other to persuade consumers to buy their

product or service even though the only payment they would receive would be in

the form of a loan taken from a bank, never to be paid off. With money being put

into purchases but nothing being put back into the banking system, the banks

could not survive and eventually collapsed, all those loans that were taken out now

worth nothing at all.

When it comes to something as fragile as the economy, having Classical

Liberalism with no precautions set in place in case of stock market crashes or

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major bank failures can lead to so much economic failure that it affects most of the

world. It is too risky to let the economy run itself freely and expect no backlash

should economic freedom, self-interest and competition prove to go too far down

the wrong path. Milton Friedman had the right idea in his support of freedoms for

all and, to an extent, allowing everyone the equal opportunity to both fail and

succeed, but his ideas are too risky when it’s on an economic, or in the case of the

Great Depression, global scale and complete freedom affects not just the self but

others as well.