~BW Uzelman
Milton Friedman was a prolific writer and a widely respected economic theorist in the second half of the twentieth century. His witty and sharp expression of ideas was unequalled by that of his colleagues. FriedmanB次元官网网址檚 message was understandable and compelling to a considerable segment of the public of the United States B次元官网网址� he was an American B次元官网网址� and Canada and other nations, too. He had a public following.
Friedman was a proponent of free enterprise and minimal government activity. He quipped, B次元官网网址淚f you put the federal government in charge of the Sahara Desert, in five years thereB次元官网网址檇 be a shortage of sand.B次元官网网址� Similarly, he contended, B次元官网网址淗igher taxes never reduce the deficit. Governments spend whatever they take in and then whatever they can get away with.B次元官网网址� ThatB次元官网网址檚 perhaps a little cynical, but it resonated with people then and resonates still.
FriedmanB次元官网网址檚 theories became the foundation for the monetarist school of economic thought; he in turn became its leading advocate. Keynesian economists supported fiscal policy B次元官网网址� the management of government spending levels B次元官网网址� as the most important tool to stimulate or to slow the economy. The monetarists, in contrast, argued that monetary policy B次元官网网址� the manipulation of the money supply B次元官网网址� should be the primary tool to control economic variables. Freidman is credited with establishing the great influence enjoyed by the monetarists, beginning in the 1950B次元官网网址檚 and enduring for decades.
One of FriedmanB次元官网网址檚 most famous quotes centered on inflation and money supply. B次元官网网址淚nflation is always and everywhere a monetary phenomenon,B次元官网网址� he declared, B次元官网网址渋n the sense that it is and can be produced only by a more rapid increase in the quantity of money than in output.B次元官网网址� He encouraged a gradual increase in the money supply to allow for the growth of the economy, but warned a rapid increase promotes inflation.
Inflation plagued western economies from the 1960s to the early 1980s. This resulted in the influence of the monetarists waning in the 1980s and subsequent decades. But the leading monetarist remained defiant. The Federal ReserveB次元官网网址檚 failure to control inflation, Friedman said, was due to their emphasis on interest rates rather than the money supply.
All of this is pertinent to prevailing events. Economists are beginning to refocus on the money supply. Terance Corcoran writes in the Financial Post, B次元官网网址渁 new modern monetary policy is taking shape across the world.B次元官网网址� The policy, he says, relies on older theories that had been discounted until recently. Corcoran is referring to the work of Friedman and the monetarists. He calls the new movement B次元官网网址渘eo-FriedmanismB次元官网网址�, and credits its rise to the reemergence of international inflation. Corcoran points to two new reports, one by TD Economics and one by the International Monetary Fund.
James Marple, senior economist at TD Economics, argues, B次元官网网址淗istory has shown that sustained high rates of inflation cannot occur without excessive money growth.B次元官网网址� This statement echoes FriedmanB次元官网网址檚 decades earlier. Marple produces a graph showing the sharp uptick in (M1) money supply during the pandemic followed by an abrupt deceleration in money growth in early 2021. This pattern is reflected, after a lag of several months, by a near identical sharp increase of the inflation rate followed by a sudden fall. As Friedman had asserted, B次元官网网址淚nflation is always and everywhere a monetary phenomenon.B次元官网网址�
The IMF paper looks at 100 inflation shocks in 56 countries since the 1970s. The paper found that, B次元官网网址淔irst, [based on history] todayB次元官网网址檚 economies may be in for a long inflation-fighting period.B次元官网网址� B次元官网网址淪econd, policy consistency is key.B次元官网网址� It is crucial, the IMF notes, to exercise both tight monetary and fiscal policies for an extended period of time. The key finding, reads the paper, is that the successful resolutions of inflation were, B次元官网网址渁ssociated with more substantial monetary policy tightening.B次元官网网址� That, for the IMF, includes both raising interest rates and cutting the growth of the money supply.
The IMF report, at least in part, echoes Friedman. He supported cutting government largesse and containing the growth of the money supply. He stated, B次元官网网址淭here is only one real cure for inflation. B次元官网网址� The government must reduce spending and print less money. The alternatives are both recession and double-digit inflation.B次元官网网址� Friedman doesnB次元官网网址檛 offer answers to all economic problems, but has made and will continue to make a vital contribution to contemporary economic thinking. While not all economists accept monetarism, its influence is reemerging.
FriedmanB次元官网网址檚 colourful commentary on government enhanced public awareness and certainly provided for popular amusement. B次元官网网址淣othing is so permanent as a temporary government program,B次元官网网址� he once remarked. And, in a more serious moment, he alleged, B次元官网网址淚nflation is taxation without representation.B次元官网网址�
bruce
Bruce W Uzelman
I attended the University of Saskatchewan in Saskatoon.I obtained a Bachelor of Arts, Advanced with majors in Economics and Political Science in 1982.
I have maintained a healthy interest in politics throughout my adult years, and wish to put that and my research skills to work as a political columnist.
Contact: urbangeneral@shaw.ca
