Freedom & Economic Fragility


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Freedom & Economic Fragility

  1. 1. Freedom & Fragility Page 1 of 4Freedom & Economic Fragility Lindsey Purves Humanities 30 Mr. Kabachia May 30, 2012
  2. 2. Freedom & Fragility Page 2 of 4 According to the quotation by Milton Friedman every individual should be able to “makethe most of his capacities and opportunities according to his own lights.” This is to say that anindividual should be able to move freely up and down in the economy based on his or her ownideas, knowledge and understanding in the interest of themselves rather than others. Friedmansupports the belief in allowing those that are fit to rise in economic power to do so while thosethat are unfit will be out-done by the competition presented by their betters. He rejects the ideaof having modern liberal principles that may hinder the rise of the powerful through ensuringequality for all in the economy, believing that Classical Liberalism is superior.AlthoughFriedman’s belief in having a classic liberal economy presents many opportunities to the best andallows these people to prosper, it is not efficient economically and has been shown through one ofthe most impactful economic hits in history. The Great Depression affected most of the world and was the result of Classical Liberalismgoing too far in its belief of economic freedom. During the 1920’s America was prospering morethan ever in history and, like most people, the people living in the United States took advantageof this huge “boom” in the economy to invest in stock and buy everything they had wanted foryears but had not previously been able to purchase. The problem was in how these people weregetting the money to buy huge numbers of stocks and merchandise. The banks were allowingpeople who could very obviously never afford to pay off such large loans anytime soon, to take outthe money they wanted, and more, to invest in the economy. Being able to borrow large sums ofmoney from the banks allowed even the poorest people to rise up in the economy but in the endcould not pay back any of this money because they held a false position in the economy withouthaving a steady, well-paying job that would allow them to make enough money to pay off theirdebt.
  3. 3. Freedom & Fragility Page 3 of 4 The twenties were also a time of major consumerism. People finally had the chance to buywhat they wanted, not just what they needed and so they took out loans that were higher thanwhat they needed to buy stock to buy items like expensive cars and clothing as well. Suddenlywhen the stock market crashed and the banks that were “too big to fail” went broke, everyone wasleft with the expensive items they had purchased but no money to buy their essential needs likefood. No one could afford to buy expensive things anymore so even the option of selling their newcars and top brand clothing wasn’t an option; no one could afford to buy the items from thoseselling them for what they’re worth. Arguably one of the biggest factors that led to the Great Depression was the free reign ofcompetition between companies and banks. There were no regulations to tell big corporationsthat they could not, or should not, sell a car way out of someone’srangeon bank loans alone, norto tell banks that lending money that can never be paid back will cause a devastating blow to theeconomy. Everyone was in competition with each other to persuade consumers to buy theirproduct or service even though the only payment they would receive would be in the form of aloan taken from a bank, never to be paid off. With money being put into purchases but nothingbeing put back into the banking system, the banks could not survive and eventually collapsed, allthose loans that were taken out now worth nothing at all. When it comes to something as fragile as the economy, having Classical Liberalism withno precautions set in place in case of stock market crashes or major bank failures can lead to somuch economic failure that it affects most of the world. It is too risky to let the economy runitself freely and expect no backlash should economic freedom, self-interest and competition proveto go too far down the wrong path. Milton Friedman had the right idea in his support of freedomsfor all and, to an extent, allowing everyone the equal opportunity to both fail and succeed, but his
  4. 4. Freedom & Fragility Page 4 of 4ideas are too risky when it’s on an economic, or in the case of the Great Depression, global scaleand complete freedom affects not just the self but others as well.