- The Washington Times - Thursday, May 8, 2003

There is one important first step for American nation-builders to take as they begin to create a new and better world for the people of Iraq. L. Paul Bremer III, civil administrator-designate and retired U.S. Gen. Jay Garner, director of the office of reconstruction, should order translation into Arabic and Farsi these lapidary words of Milton Friedman, my favorite imam, and then have them distributed as leaflets by the millions:

“No country that has relied primarily on detailed central planning has been able to achieve a high level of prosperity for the masses of its people. On the other hand, every country that has achieved a high level of prosperity for the masses of its people has relied primarily on free private markets to coordinate economic activities.”

According to the Wall Street Journal, the Bush administration’s sweeping reforms of Iraq’s economy envision privatization of Iraqi industry, selling off some state companies, building a consensus for privatization of the oil industry. To accomplish this miracle, there must be an intellectual basis for such reforms based on free market principles. Mr. Friedman’s words are simple, easily grasped and solidly founded on historical experience. That historical experience is visible, first, in the global repudiation of socialism and “central planning” wherever it has been imposed and, second, just look at the floundering laboristic economies of Germany and France.

Mr. Friedman’s “law” may be rejected by the “etatisme” of Europe’s social democrats concentrated in Germany and France. Although the validity of Friedmanism has been proven over and over again, the many believers in socialism, Marxist, Christian, guild, Leninist or any other variety remain unpersuaded. There will be some Iraqis, unregenerate Ba’athists, who, after the United States leaves, will seek to impose “central planning” on liberated Iraq. And European social democrats, and the unelected bureaucracies in the United Nations and the European Union will support them.

China is a perfect example of Mr. Friedman’s “law” at work: Its economic reforms flout central planning and allow a middle class to flourish. What better example of Friedmanism at work is there than the vast difference, socially, economically and politically between South and North Korea?

It is now forgotten that there was once a political culture, enthusiastically received in the West, that was based on something called the five-year plan. I remember as a Columbia undergraduate that my economics instructor (he later turned out to be a member of the Central Committee of the Communist Party) raved about Stalin’s great achievements — piatiletka — Russian for the magic five-year plan that would turn what had been Czarist Russia into an industrialized utopia.

Incredibly, many Western intellectuals fell for this socialist-planning myth. Let’s remember that a famous economist like Paul Samuelson in 1985 wrote in his best-selling economics textbook “there can be no doubt that the Soviet planning system has been a powerful engine for economic growth.” Five years later, there was no planning system and no Soviet Union. And millions and millions of Soviet citizens had been killed in the name of central planning.

Even more incredible was the judgment of MIT professor Lester Thurow who as late as 1989, on the eve of the Soviet collapse, wrote: “Can economic command significantly compress and accelerate the growth process? The remarkable performance of the Soviet Union suggests that it can. … Today it [Soviet Union] is a country whose economic achievements bear comparison with those of the United States.” In 1989.

What these admirers of central planning ignored was a simple empirical fact: In planned economies, demand for anything always exceeds supply of everything. In an article some years ago, Federal Judge Alex Kozinski quoted an East European friend as saying: “What we have learned from the experience of Eastern Europe and the Soviet Union is that you need capitalism to make socialism work.” Judge Kozinski added: “In other words, capitalism must produce what socialism is to distribute.”

Hilaire Belloc, the British essayist, said a century ago: “The control of the production of wealth is the control of human life itself.” Saddam Hussein knew and acted upon that truth. The Iraqi people, weighed down for 30 years by a Ba’athist dictatorship, has to relearn the meaning of a free society and free markets. And what better teacher than Nobel laureate Milton Friedman?

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