RONALD REAGAN: We must keep the rate of growth
of government spending at reasonable and prudent
levels.
NARRATOR: Candidate Reagan advocated less
government.
REAGAN: We must reduce personal income tax
rates and accelerate and simplify depreciation
schedules in an orderly, systematic way, to
remove disincentives to work, savings, investment
and productivity.
NARRATOR: Candidate Reagan advocated cuts
in federal taxes.
REAGAN: We must review regulations that affect
the economy and change them to encourage economic
growth.
NARRATOR: Candidate Reagan advocated reducing
government intervention in the economy.
REAGAN: We must establish a stable, sound
and predictable monetary policy.
NARRATOR: Candidate Reagan advocated moderate
and stable growth of the economy.
CROWD OF PEOPLE: We Want Reagan! We Want Reagan! We Want Reagan! (Cheers)
REAGAN: Thank you very much.
NARRATOR: And the voters responded by giving
Candidate Reagan an overwhelming mandate when
he was elected president. President Reagan
tried to keep his promises, but like most
presidents, he was only partly successful.
Economist Milton Friedman explains why this
occurred. He discusses a political phenomenon,
“Tyranny of the Status Quo.”
FRIEDMAN: Everywhere, whether in the United
States, Great Britain, France or Germany,
a new administration has just about six months
to make major changes that will benefit the
community at large. Those changes will have
bad effects on small concentrated groups.
The bad effects will be visible and immediate.
The good effects will be less visible, take
longer to manifest themselves, and longer
to be recognized, unless the occupant of that
house, Republican or Democrat, makes such
changes in the first few months after being
elected or reelected, the tyranny of the status
quo will assert itself and prevent further
change.
NARRATOR: In Tyranny of the Status Quo, we
will examine government’s potential to act
as an agent for change. Joining Dr. Friedman
are young adults from throughout the United
States. These men and women will share the
rewards or suffer the consequences of today’s
political decisions. Like all of us, they
want improvements in our society. 
Like all of us, they have many different ideas as to
how those improvements can be achieved.
MALE SPEAKER: According the AFL-CIO, every
percent of unemployment in this country costs
the government $30 billion in lost payroll
tax deductions and unemployment compensation
paid out. Union leader, Jim Freeman says,
for that reason, any job creation bill is
a plus. But he says this one is something
of a disappointment.
JIM FREEMAN: Be a drop in the bucket to what
should go on. There’s just too many more
people out there who need help.
MALE SPEAKER: Freeman is well acquainted with
the area of the country where the most people
need help. He heads AFL-CIO Region One, the
Midwest, where industry from the auto assembly
lines in Detroit, to the steel plants outside
Chicago, used to keep unemployment to a minimum.
He says with unemployment now worse here than
anywhere else, the Midwest deserves special
consideration, like a bigger percentage of
the jobs bill money.
Narrator: Of course, the worker who gets
a job will be pleased. He receives an immediate
and visible benefit. Does anyone lose?
Reporter: Truckers are in a squeeze, and
not only because of the recession. Deregulation
multiplied the competition, but the higher
taxes approved by President Reagan will hurt
operators big and small. No wonder that at
a small company like Frantran, they’re worried.
They don’t support the strike, but they
don’t like the tax legislation either.
MALE SPEAKER: It should cost our company probably
an additional $50,000 a year. That’s on
20 trucks. It’s a small company, so the
tax is a heavy burden.
MALE SPEAKER: And it cuts into my take-home,
a couple of thousand at the end of the year,
you know. We’re just getting by now.
Narrator: Like the truck driver, the rest
of us lose every time we buy a gallon of gas.
That loss, too, is visible, but small for
each of us, but how about the people who lose
their jobs, because we have less to spend?
They won’t realize that the tax to pay for
the jobs bill cost them their jobs.
FRIEDMAN: When you turn to the problem that
is of so much concern to so many people today
about how we achieve renewed industrial and
economic progress, how we get out of the stagnation
that we’ve been in for the last ten years
with almost no change, no growth in industrial
productivity or in output, you get into a
whole lot of proposals, many of which are
in some ways self-defeating. You have the
standard example of the smokestack industries
declining, steel, automobile and so on, the
high-tech industries, computers and so on,
rising.
So, we have proposals on the one hand, that
you subsidize the high-tech industry, the
smokestack industries so they stay here. You
subsidize the high-tech industry so that they
can compete, supposedly, with Japan or other
high-tech countries. They’re self-defeating.
And that in turn, leads everybody to talk
about, “Well, we want to have a central
economic plan, which would avoid all these
self-defeating things.”
MALE SPEAKER: Well, I think there’s actually
no sense in sort of protectionism or subsidization
of industry, but I do have a question for
you. Given that, I agree with you. What do
you do with displaced 40, 50-year-old workers,
who for practical purposes, really can’t
be retrained for another profession, are put
out of work, say in the automobile industry?
FRIEDMAN: Maybe you don’t do anything about
it. What can you do about it?
MALE SPEAKER: Well, I don’t know. The thing
is, if you do provide the subsidy to the industry
so these people stay employed, then you’re
promoting this sort of thing and it just gets
worse and worse.
MALE SPEAKER: In industries like the automobile
industry, we’ve had, you might say, over-employment
because automobile sellers have been so high.
One of the reasons that automobile sellers
have been so high is that the government has
protected automobile workers and steel workers,
and a few other foreign trade-sensitive industries.
They’ve protected them excessively from
the burdens of unemployment because there’s
special – there’s special unemployment
benefits for people who lose their jobs because
of foreign trade. And that has –
FRIEDMAN: That has not been a major factor,
it really hasn’t.
MALE SPEAKER: Well, I –
FRIEDMAN: The reason why the automobile workers
and the steel workers are overpaid is because
those are industries which, at one time, we
had a great advantage over other countries
in productivity. And therefore, there was
a great demand for workers and the industries
were willing to pay high wages. Then you had
those industries unionized, and the unions
more or less froze those high wages there,
when the conditions changed, for which they
were no longer relevant. Today, it is true
that the average wage in the automobile and
the steel industry is nearly twice as high
as the average wage of all workers in the
United States.
MALE SPEAKER: Okay, but automobile industry
workers are now…now that unemployment is
desperate; they’re willing to take cutbacks.
I was in Detroit two years ago, interviewing
automobile workers, unemployed people. And
there wasn’t really a whole lot of distress
with the idea of being unemployed, because
unemployment benefits were so generous that
a lot of them were doing perfectly well being
unemployed, so there wasn’t pressure for
giving givebacks in the contracts. If that
pressure had come two or three years earlier,
the contracts might have been reasonable enough
that unemployment wouldn’t be so desperate
now.
FRIEDMAN: That may well be true. And now we
have a situation now where we have more people
in those industries than we are likely to
have for a long time. We do have a very real
problem that there are people of the kind
Harry has talked about, who are gonna be unemployed.
And the question is: What should or could
we do about it? When we went out of the business
of producing horseless carriages, there were
lots of empty carriage factories.
All over the West, you’ll have deserted
gold mines, you know, physical capital. Fundamentally,
people have a great misconception. Physical
capital is not really very important. What’s
really important is human capital. Simple
example: After World War I, World War II,
there was a tremendous destruction of physical
capital in Europe. Within four or five years,
those countries were back on target because
what really was important is not the physical
capital, it’s the human capital.
MALE SPEAKER: Okay, so the problem is making
these people switch. I mean these people are
FRIEDMAN: Not making them switch, giving them
an opportunity to switch.
MALE SPEAKER: Okay. In my view, the government
role is to let them switch as easily as possible.
FRIEDMAN: What can the government do to facilitate
that?
MALE SPEAKER: First of all, they can make
sure that high-tech firms locate in the same
place as smokestack industry firms are located.
FRIEDMAN: Even though it’s much more expensive
to be in those places?
MALE SPEAKER: Yeah.
FRIEDMAN: That means fewer jobs all around,
doesn't it?
MALE SPEAKER: Not if the government can subsidize,
not if the government can make it –
FRIEDMAN: Excuse me. Where does the government
get the money to
subsidize?
MALE SPEAKER: Lowell, Massachusetts, I think
is a case where it’s worked. Here was an
old mill town that was breaking down, and
what city planners did was they made it very
attractive, and presumably, they had the money
to do it. They made it very attractive for firms...
FRIEDMAN: Where did they get the money from?
FRIEDMAN: See, the problem…yeah, the problem
with all of these things is we tend to look
at the benefit for the money and not the harm
to the people who have to pony up the money
to do it.
MALE SPEAKER: David, in a situation like Lowell,
where…accepting your facts that the local
people did what is necessary, the difference
between local economic planning and national
economic planning is the method. Local economic
planning usually means that the locals cut
taxes. Of course, locals…of course when
you cut taxes, it’s going to inspire greater
economic activity. That’s a much different
thing than taking tax money from here in the
country and putting it somewhere else. There’s
no reason to believe that on net, that’s
going to increase the economic activity. Of
course, if you have a tax cut lower, you’re
going to get some more industry.
FRIEDMAN: Go back to your major point. You
said that the government should determine
the location of the new industries. Just carry
out the logic of that. See where that leads
you, and see whether you really want to do
that.
MALE SPEAKER: Well, where does it lead?
FRIEDMAN: It leaves you, as you look through,
with an increasingly rigid system, in which
people are not free…I’m not free…here’s
a world. Mr. X wants to set up a plant. Now
he can’t do it, unless he gets permission
from the government to set it up somewhere
because they’re gonna decide where he can
set it up.
MALE SPEAKER: Yeah, I’m willing to accept
that.
MALE SPEAKER: You’re willing to accept the
government should be able to do that? Should
be able to tell someone not to set up a plant?
Unemployment just…they’re very marginal
things. In the worst state in the country,
according to federal statistics, West Virginia,
there’s 20 percent unemployment.
FRIEDMAN: And 80 percent are employed.
MALE SPEAKER: That’s right. In the best
state, maybe it’s four percent. So, for
the purpose of the 16 percentage differential,
you’re going to forbid someone to build
a plant here, rather than here, because this
16 percentage point differential entitles
you, in your view, to deprive people in this
state of jobs, so you can give it to people
in that state? This is like a very small basis
on which to discriminate.
FRIEDMAN: Whom are you kidding? Whom are you
kidding? Go…stop, for a moment! What’s
gonna happen under such a scheme is that the
politically powerful states will get plants
located in their area, and the politically
weak states will not.
MALE SPEAKER: Look at the current jobs bill.
FRIEDMAN: Exactly.
MALE SPEAKER: West Virginia in the current
jobs bill is getting $26 million out of nearly
$5 billion. It’s the worst state in the
country. You know, absolutely, the one most
in need of help. And it’s getting the worst
…practically the worst treatment of any
state in the country.
FRIEDMAN: Here…that jobs bill is marvelous
example: It’s supposed to create jobs by
repairing what’s called the infrastructure.
First of all, it isn’t creating any jobs;
it’s destroying jobs because of taxes that
are being imposed. We’re destroying more
jobs than the spending will create. In the
second place, who is getting the jobs? Not
the unemployed. The money is going to the
states that are politically powerful, that
have the clout. And even there, it’s being
spent on high-paid construction jobs, not
on employing the low-paid unemployed.
Let’s ask a very different question for
a moment. Consider these 40 to 50-year-old
unemployed people. No government assistance
whatsoever, what happens to them?
 Do you suppose they don't have a private incentive to try to get jobs of a different kind?
MALE SPEAKER: Oh, yes, I’m sure they do.
FRIEDMAN: Suppose they don’t have skills.
What’s the problem? The problem is very
simple. Most of them have been earning a great
deal more than they are qualified to earn
in alternative skills, and they understandably,
don’t like to see a reduction in their standard
of life. I can’t blame them for that.
But the question is: Shouldn’t we congratulate
them for having been so fortunate in having
very high-paid jobs for so long? Or should
we impose taxes on people, who earned much
less than they did, and who are still earning
much less than they did, in order to prevent
them from having to take jobs earning the
same as the rest of the population? That’s…
I think, the real issue, when you come down
to the nitty-gritty of it. And they will not
stay unemployed. Most of them have good work
habits. Many of them…
MALE SPEAKER: Age discrimination is certainly
something that’s talked about. I mean, picture
yourself an employer. It’s easier to train
somebody who is gonna give you 40 years of
service.
FRIEDMAN: Absolutely. That’s why I wouldn’t
be willing to pay as much, but if you allow
the wage rate to be free- what people don’t
understand is that anybody who is disadvantaged,
his main tool, his most effective weapon,
is to be willing to be work for less.
NEWSMAN: An investigation started by the state
police, they contacted me about 13 months
ago, and since then, they’ve had a number
of undercover agents working the area, trying
to make undercover buys, and have been successful
in, I think, 29 cases.
NARRATOR: It’s surely government’s business
to enforce the laws of the land, but what
acts should be illegal? Can making an act
illegal do more harm than good? Have we learned
anything from that noble experiment, prohibition?
FRIEDMAN: Of all the problems that are bedeviling
the American society, one of the most troubling
and long-lasting, is the problem of crime.
Just as the first duty of a government is
to defend its country against foreign invaders,
surely the second duty is to try to prevent
coercion of one citizen by another, try to
hold down crime. Here we are a nation, as
a nation, far wealthier than we have been
in earlier days.
Surely we ought to be far more capable of
providing citizens with a defense against
coercion by their fellow citizens. And yet
it is widely believed that crime has been
on up-grade, and not down-grade; that we’ve
had more and more of it. And people throughout
the country feel more and more threatened
by it.
MALE SPEAKER: I think it’s not the amount
of money people have that makes them want
to commit crime, or the lack of money they
have that makes them want to commit crime,
but the perceived inequalities between how
much they have and how much other people have,
and how much they think they deserve and how
much other people have…
FRIEDMAN: But in that connection also, the
inequalities are…the perceived inequalities
and the actual inequality are very much less
today, in general, than they were 60…70
years ago.
FEMALE SPEAKER: And very much less at any
point in the United States than they were,
say…in the 18th century in England, when
there was very little crime.
FRIEDMAN: Well, very much less today than
they are in a place like India, where you
will feel safer in walking the street at night
in Bombay or Calcutta, than you do when walking
the street in New York City.
MALE SPEAKER: I still maintain that there
are two distinct groups in society, here in
America, the “haves” and the “have-nots.”
And when the have-nots consistently see the
haves as having all the privileges, having
all of the chances to become great and to
have large amounts of material acquisition,
these people become disillusioned. They say,
“We’re in America, too. We’re here,
we’re citizens, why is that we don’t live
in nice mansions? Why is it that we don’t
have a car? Why is it that we can’t attend
Princeton, Harvard, Yale, etc., etc?” And
once they see these things, they say, “Well,
I can’t attain these goals the same way,
so therefore, I’ll go about it the way I
know how. I’ll go buy a gun and I’ll rob
the Cadillac dealer. I’ll go get a knife,
and I’ll stick up the business executive.
Therefore, I attain his wealth my way.”
FRIEDMAN: Yeah, there is a great deal to that,
but that has been true all along. And there
always have been, at any point in time, the
haves and the have-nots. If anything, the
ability to move between them has increased
and not decreased. So, I’m not questioning
your statement about that being the story.
I just find it hard to attribute the enormous
increase in crime to that particular story.
FEMALE SPEAKER: The undermining of the family,
I think has also played a very major role,
probably, in at least the black ghettos in
the cities, because as long as you have a
certain amount of stability provided for you
in an environment where you’re trained that
certain behavior is simply not socially acceptable,
you’re much more likely to feel as if you
are going to behave in the ways that are socially
acceptable. And if you’re brought up with
no notion of that at all, it seems to me that
there’s no reason why you don't go out and
just grab anything that comes your way. To
me, in fact, the puzzle is: Why there are
ghetto kids who do pull out of this, rather
than why nobody does. It seems to me, miraculous,
that some of them decide to be honest.
FRIEDMAN: For a moment, I think it’s a great
mistake to suppose that crime and the ghetto
are synonymous terms. You have an enormous
upsurge in crime on the part of middle-class
kids. If anything, if you’re gonna make
any general statement, crime is a property
of young people.
MALE SPEAKER: The violent crime of middle-class
children and so forth, is probably encouraged,
especially by the leniency of sentencing of
that area because there again, the middle-class
hass secure ways of excusing its own from
responsibility for their actions.
FRIEDMAN: Now, are you saying…you’re saying
that the certainty and the severity of punishment
has gone down over time?
MALE SPEAKER: I believe there’s more discretion
now in the criminal law than there has been
at any other point.
FEMALE SPEAKER: There’s something also though…I
think there’s been some kind of shift even
in societal values at large, which may have
something to do with all of this.
FRIEDMAN: But let me take it one step further,
because I believe there’s a much more…there’s
another cause in there that we haven’t even
touched on. And that is there are more things,
more crimes today than there used to be. In
the one place…first place, there are more
laws to break, but in the second place, if
you have a proliferation of laws, in many
of which, people don’t think, are right
and proper, that encourages a disrespect for
law in general.
We saw that before the problem of the welfare
state rose. If you took it back in the 1920s,
when you had prohibition, and you had lawlessness
emerge in getting around the Prohibition Amendment.
And one of the results of that was the decline
in respect for law in general. And so I believe
one of the arguments we ought to make against
having so many laws, and that one of the most
effective, and this…in a way, I’m turning
to the problem of remedies. That one of the
most effective remedies for the problem of
crime…is to reduce the number of things
that are crimes.
I believe in free trade. I don’t believe
there ought to be any tariff laws. I think
tariff laws are fundamentally immoral, not
moral. And so, I don’t mind getting rid
of tariff laws. Now, a more controversial
case is the whole class of what are called,
“Victimless Crimes.” That includes things
like drugs; it includes things like prostitution.
MALE SPEAKER: Let’s just take drugs and
take these things one at a time. The usual
argument, anyway, presented for the abolition
of drug laws is prohibition. Prohibition didn't
work. But it seems to me that that analogy
is utterly fallacious, insofar as liquor has
been a cultural institution for…I mean forever.
It was widespread- everybody drank when they
tried to illegalize liquor.
FRIEDMAN: Before 1914, a very large number
of people were on drugs. It wasn’t illegal
at all. Opium and so on could be widely purchased.
You know most of these…many of these medicine
men who sold medicines were really selling
drugs.
MALE SPEAKER: Well, when China had…was wide
open to opium, they were also wide open to
being manipulated by foreign countries because
of their dependence on opium.
FRIEDMAN: That’s a big leap in the dark
about the cause. But I think drugs raise a
very interesting question on two different
levels. The first level, as a matter of what
you regard as just and proper, as ethical:
Is it right to have laws against drugs? Second:
Even if you believe it is right, is it expedient
to do so? So, you have an issue on both the
ethical level…and I…I personally…I must
say my own view is very straightforward. On
both levels, I think laws against drugs cannot
be justified, except in the very limited sense
of protecting young people and juveniles.
But if I take adults, tell me Harry, do you
believe in a law against people committing
suicide?
MALE SPEAKER: Yes.
FRIEDMAN: You do?
MALE SPEAKER: Yes.
FRIEDMAN: You don’t believe that people
should be free to commit suicide?
MALE SPEAKER: No, I believe that one of the
primary responsibilities of government is
to protect its citizens, and it seems to me,
protecting them from themselves is what you
do with people who are insane. And I don’t
think that you can say suicide is an entirely
personal matter.
MALE SPEAKER: The law against suicide, in
any event, is a kind of moral tribute to Western
values, because it’s so ineffectual.
Friedman: But, it brings out the fundamental
issue, because I think it’s the easiest
way to separate people with two very widely
different sets of values. See, I don’t view
government the way you do at all. I view government
as a way in which we, jointly, do certain
things together that it would be difficult
or impossible for us to do separately. It’s
an instrument through which we achieve our
values. It is not something that’s going
to impose its values on us. And I agree, those
are two very different philosophical views
in the role of government, and both of them,
I may say, have very respectable and honorable
sponsors, so there’s nothing wrong.
MALE SPEAKER: The problem with drugs – and
this is an old argument. I recognize that
drugs have aspects of contagious diseases. They are addictive; they spread through communities quickly.
FRIEDMAN: I think on the same grounds you’re
prepared to ban Marx’s Das Kapital from
publication. It surely has killed and done
an enormous…more people, and done an enormous
amount more harm than all the drugs that anybody
has ever ingested.
MALE SPEAKER: Well, if you could make me a
good argument that banning Das Kapital would
have prevented that damage, would have eliminated
Soviet Russia and Communist China, (snaps fingers)–
FRIEDMAN: I can’t, and the reason I can’t
is: Because if you once accept the principle
that it’s okay to ban Das Kapital on those
grounds, then it’s also okay to ban anything
else that’s…
MALE SPEAKER: No, because you’re reducing
decision-making to a completely formal level.
You’re putting us on this slippery slope.
In fact, we can think about things and we
can decide that banning Das Kapital is okay,
but banning something by Galbraith isn’t.
FRIEDMAN: Who is the “we?” Who is the
“we” that can think that way?
MALE SPEAKER: Men…men thinking about problems
and making these decisions.
FRIEDMAN: But, you mean there’s gonna be
some governmental official who will make the
decision.
MALE SPEAKER: There’s no escape.
FRIEDMAN: There’s not gonna be a vote.
MALE SPEAKER: There is no escape from making
decisions, and setting up these formal protections
is an attempt to avoid these decisions. You
and I can distinguish between heroin and marijuana.
And there’s no point, really, to our giving
ourselves up to that formal decision that
we’re not going to have any rules against
drugs, rather than making the better judgment
that we’re going to eliminate the bad ones
and leaving the not-so-bad.
FEMALE SPEAKER: If our aim is controlled drug
use, and to try and minimize the use of drugs
because we think the effect is harmful, and
we think it’s appropriate for us to determine
what another individual can do to harm his
or her body; there are more effective means
to do that. Britain, for example, controls
its heroin addiction rate in a much more effective
manner than the United States.
I think the statistics in the two countries
are quite clear that a legalized method, legalizing
the use to a certain extent, registering the
heroin addicts and having a government dispensing
system for heroin, both controls the rate
of growth of heroin addiction, and minimize
the concomitant crime problem, which is produced
by making heroin addiction illegal.
MALE SPEAKER: So you would make the case that
legalization might cause a decline in the
number of drug users?
FEMALE SPEAKER: I think that if what we’re
concerned about is a decline in the number
of drug users, then that’s precisely what
we need to do.
FRIEDMAN: Legalization…look, let me give
you a very different argument for comparison.
With drugs illegal, there is a market incentive
for a drug pusher to create addicts. 
If I’m a drug pusher and you’re a potential addict,
I can afford to give you some free samples
to get you hooked because once you’re hooked,
you’re gonna be a captive customer.
But the other expediential argument, the other
side of that argument is: That prohibiting
drugs by all avenues accounts. That drug addicts
and drug addiction accounts for something
like half of all major crimes of violence,
because those crimes are produced by people
who are hooked; who don’t have enough money
to buy their next dose, and then go out and
steal and so on, in order to get the money.
And they have to do that because drugs are
so incredibly expensive, and they are expensive
because they’re illegal, because we interfere
with them. If you had a legal source of drugs
at relatively low prices, which they would
be, you would, it seems to me, drastically
eliminate this whole category of crime.
