Milton Friedman and Israel

Attitudes toward Friedman and his teachings has become litmus test for Israeli elites' feelings about the market economy.

By
December 13, 2006 22:14
4 minute read.
Milton Friedman and Israel

milton friedman 88. (photo credit: courtesy)

 
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Milton Friedman's great passion was the love of knowledge, particularly of economics, which he considered an excellent tool for social change and for the improvement of human life. He had a rudimentary heder education but later in life he was not a practicing Jew. He found little time to learn about Judaism or about Israel until 1962, when he first visited it as guest of the Israeli government. Friedman and his wife, Rose, a distinguished economist and his true partner, visited Israel several more times, in 1972 to deliver the Horowitz lecture, in 1977 to receive an honorary Hebrew University degree. "It coincided," he wrote, "with the unexpected election victory… of the Likud" - a coincidence that enabled his enemies to create the fantastic myth that he came to Israel as adviser to Menachem Begin on economic policy and that therefore he was responsible for the ensuing runaway inflation. The Friedmans' last visit was in 1990 to participate in a conference on economic policy organized by my institute, The Israel Center for Social and Economic Progress. Held at the beginning of the large wave of immigration from the former Soviet Union, it focused on fashioning better absorption policies and the provision of housing and jobs. Milton lectured several times and participated in all the workshops that dealt with a variety of issues, demonstrating his brilliance, creativity and good common sense. By then the Friedmans had already developed a deep fondness for Israel which they described on earlier visits as not only beautiful but "an incredibly diversified country, surrounded on all sides by enemies." Friedman was also interested in the role of Jews in civilization and particularly puzzled by the allure socialism held for so many Jewish intellectuals. Since it was capitalism that always enabled Jews to not only survive the Dark Ages in Europe but also to prosper after the Enlightenment. That era made possible by capitalist progress, and its massive creation of wealth, its great improvement of all facets of life including leisure and knowledge. So he could not fathom why so many Jews embraced socialism, which, even when it was hospitable to individual Jews was often hostile to Judaism. And he was most disturbed by the tenacity with which Israelis stuck to socialist notions despite the obvious ruin they visited on them. AFTER A long talk in 1990 with Shimon Peres, Friedman wrote: "There was no real meeting of the mind. Socialist to the core, yet anxious to appease the growing sentiments for free market reforms… he was trying to make debating points rather than seriously discuss the issues… the meeting was for show, not for substance." In 1998 Friedman wrote to me: "I have to confess that I never got very much involved with Zionism… and never read very much about its history. "The story you present about the economic history of Zionism is extraordinary… a wholly different way than the vague impressions I had received." Yet even in a 1977 Hebrew University speech Friedman already understood the problem without knowing its origins. Like Israelis, he said, he was also a citizen of a country that respects individual freedom and he shared with us a pride in Jewish tradition and in Israel's spectacular achievements. But he warned that the future of Israel depended on the outcome of a struggle between two opposing traditions; a newer socialist tradition that relied on paternalistic and coercive government, rejecting the millennia-old tradition of self-reliance, voluntary cooperation and a healthy suspicion of government. The latter enabled Jews to survive their many tribulations and made them capitalist pioneers. Friedman noted that the creation of Israel would have been impossible had socialism ruled the world. Worse, Israel's socialist-cum-statist ethos was threatening its future, aggravating most of its social and economic problems. That Friedman could use the same words to introduce the 1988 translation of his Free To Choose and his 2002 retranslation of Capitalism and Freedom proves how the anti-capitalist ethos kept dominating the thinking of Israel's ruling elites. The attitude toward Friedman and his teachings has become a litmus test for how the Israeli elites feel about the market economy. When tested they mostly turn red. This is why Israel is inflicted, alas, with essentially the same destructive economic ethos promoted by its universities that Friedman warned about in 1977. BUT MILTON never despaired. He and Rose were ardent supporters of our center's work, helping us both morally and materially. They also helped Israel in many other ways, all with their accustomed modesty and discreetness. He often wrote to people holding positions that affected Israel's economy encouraging them to follow better policies. He wrote to then finance minister Binyamin Netanyahu warmly supporting his several reform plans and congratulating him on his courage. He was especially supportive of the financial market reforms in which ICSEP participated. "Your proposed reforms are excellent. If you can get these adopted you will have achieved a miracle," he wrote. In 2004 he wrote to prime minister Ariel Sharon to congratulate him on his support for these reforms, concluding: "Israel needs a competitive financial structure. It needs a structure that is favorable to private enterprise and initiative, both in banking and elsewhere, not one that is rigid and monopolistic. Freeing up the economy, introducing effective competition, can provide a short-run stimulus as well as promote long-run growth." Israel has lost a great and caring friend.

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