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Keynes vs Friedman

Friedman was first great economist who pricked a hole in the Keynes statist balloon and brought it down with a thud

I wonder if Milton Friedman, the famous Chicago economist who died last month at the age of 94, ever met another equally famous economist, John Maynard Keynes or Lord Keynes, whose theories Milton upturned and banished from the world's treasuries. Friedman was only 34 when Keynes died in 1946 and may have met him only in his textbooks. It so happens that I have met both of them, though in the case of Keynes, 'met' is not the proper word, as I had only shared a railway compartment with him, traveling from London to Cambridge, sometime in the winter of 1945-46.

I met Friedman in a small village in Sussex, also in England, where both of us were participating in a seminar. Friedman was a sprightly 80 then, and was gorging on free lunches at the seminar. Keynes and I traveled together, though we did not speak to each other. In fact, I did not know he was the famous Keynes until we alighted at Cambridge station and he was pointed out by a friend who had come to receive me. Keynes was at that time very much in the news as he was negotiating an important loan in Washington for his government and was always in the headlines. I met Friedman, also in England, 40 years later. He was in England for a seminar hosted by a British institute though I forget what the topic was. He was my neighbour in the country house where we stayed and I used to see him during the seminar as well as during meals.

Friedman was famous for his phrase, “There is no such thing as a free lunch," and every time we sat down for lunch, I had half a mind to ask him whether our meal, for which we were not paying, was not a free lunch! But I did not know him too well and he was in any case too big a man to crack jokes with about lunches, free or not, though I wish I had done so.

We were all Keynesians at one time or another, particularly after the war, when we were convinced that the state had to play a big part in economic management, especially when the economy was in such a shambles. London after the war was a terrible place to live in, and Keynesian theories were very much in vogue. We swere also told that things would improve after some time, but when they did not, and Britain continued to sink, Keynes was seen more as a liability and the governments started looking for some other alternatives.

Why did we fall for Keynes and his dismal statist ideas? Because we knew no better. Keynes was a liberal, but only on the surface. He was basically a statist, for whom, as for all socialists, and, of course, communists, the state was the solution for every trouble. It could print currency notes, manage steel plants, run railways, decide wages and generally keep more than an eye on how we ran our lives. The state was a real Lord or all it surveyed and could solve all problems. Friedman was the first great economist who pricked a hole in the statist balloon and brought it down with a thud, if that is what balloons do when they collapse. The first politician who swore by Friedman was Margaret Thatcher, who was actually a chemist, but who believed that it was not the state but the people who decided a country's fate. Thatcher banished Keynes from Downing Street and other depressing bits of Whitehall and other governments followed.

I shall always remember Keynes with his pipe and files marked 'secret' but it is Friedman whose week-long association in a Sussex village that I value more.