WEBVTT

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- I believe that open markets
and free enterprise are the best

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imaginable force for improving
human wealth and happiness.

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- (Protesters): Who protects
the bankers?

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Police protect the bankers!

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- Did you ever have a moment
of doubt about capitalism?

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- Is there some society you know
that doesn\'t run on greed?

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- How would Smith see the
economic world around us?

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- I think Keynes would have said
the problem is the hole

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in the economy.

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- Hayek really wrote
\"The Road to Serfdom\"

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as a warning.
- You always have to be careful

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with Marx about the one-liners.

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- Polanyi, for me, was
an intellectual earthquake.

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- I mean, if I had to stereotype
Ricardo, I would say he would

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look like George Soros.

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- (Narrator): We were told
that capitalism is the product

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of big thinkers and big ideas,
but is it true? How did ideas

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shape our lives? What is
their relation to reality?

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Can they help us understand
today\'s economic crisis,

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let alone the future
of capitalism?

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- Lord Keynes, welcome sir,
it\'s a pleasure!

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- The pleasure\'s all mine,
tell them I\'ve arrived.

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- And then, tell them
I\'ve arrived.

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- Hayek versus Keynes, it was
described as a debate that

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shaped the economic thinking
of an entire century. It was

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even made into a music video
after the 2008 financial

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collapse.
(dring dring)

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- Freddy?
- Yup.

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-Hey listen, party at the Fed.

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- Austrian economist
Friedrich Hayek was going

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to debate British economist
John Maynard Keynes on how

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to extricate society
from the severe depression

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of the 30\'s, capitalism\'s
worst crisis.

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♪ We\'ve been going back
and forth for a century ♪

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♪ I want to steer markets.
I want them set free. ♪

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♪ There\'s a boom and bust cycle
and good reason to fear it. ♪

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♪ Blame low interest rates.
No it\'s the animal spirit. ♪

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- Of course Hayek was on
the losing end of the argument.

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The notion that he had
that public expenditures could

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not reduce unemployment was
considered definitively

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refuted.

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- Since the crash of 2008,
the debate is with us again.

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- We are on the
\"Road to Serfdom\".

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Friedrich Hayek wrote this book
50 years ago, but what

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he predicted is coming true.

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-In Hayek\'s name, a rebellion
against government\'s
involvement

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in the economy sprang
up in the United States.

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In Europe, Hayek is the enemy
for these anti-austerity

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demonstrators rebelling
nagainst market rule of society.

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This is the story of how and
why the debate, which seemed

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to be resolved in the 30\'s has
nresurfaced time and time again.

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- We\'ve come to Freiburg,
in West Germany, where I\'m going

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to be talking to Professor
Friedrich von Hayek.

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Professor Hayek, I\'m sure you\'ll
be well aware that to many

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people in Britain and
particularly on the left,

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you are a kind of bogeyman.
You\'re believed to want to throw

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people out of work, send
children down the coal mines

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again, grind the faces
of the poor in general.

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I don\'t suppose you share
that view of yourself?

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- Well naturally, I don\'t share
it, but must say I understand

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it. If you tell somebody that
his past has led him to morass,

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the withdrawal may be even
more painful than to go on

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where you are.

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- Friedrich Hayek was born
in Vienna in 1899,

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and at that time, Vienna was the
capital of the Austro-Hungarian

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Empire.

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Early in his life, he served
in World War I as a teenager

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in the Austrian Army and it was
in fact through his experiences

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in the Austrian Army during
World War I that he first became

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exposed to ideas of economics
and of nationalism in the old

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Austro-Hungarian Empire.

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- (Quote): Dear mother, here I am
again in a spotter\'s position

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in a foxhole euphemistically
called \"heroes hole\". It is

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mostly wet, cramped and
disgusting, but at least,

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bulletproof. We\'re under
constant aerial attack. No, not

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of Italian or British planes,
but horseflies and mosquitoes

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with their ground support
troops of bedbugs and lice.

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Friedrich Hayek,
\"A Letter from the Front\"

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- As a young idealist who\'d
witnessed so much chaos,

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who\'d witnessed war, who\'d
witnessed political

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disintegration of the old
Austro-Hungarian Empire,

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Hayek became interested in
issues of social organization.

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After the war, when he returned
to Vienna, he enrolled

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at the University of Vienna,
which in the immediate

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post-World War I era, had many
scholars from throughout

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the Austro-Hungarian Empire
who returned to Vienna and

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returned to the University
of Vienna.

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- The University of Vienna came
to be known as the home

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of the Austrian School
of Economics, which broke from

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dominant economic theories
and methods of the time.

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- The difference with
the classical economics was

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that they were now dealing with
large social entities, classes,

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but they were dealing with
individuals, the decisions

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of individuals acting
in a market.

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So, we are in a world that is
entirely individualized,

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in the sense of individual
consumers, individual producers

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considered like independent
freestanding little firms.

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It was an extreme individualism.
Really, I think it is a class

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issue. It was the art of fear
of Bolshevism. The Russian

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Revolution made a huge, huge
impact in Europe. It utterly

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terrified the property
classes across the continent.

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And the language that was
used, \"the dictatorship

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of the proletariat\",
sounded utterly frightening.

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- Hayek originally had views
that were moderately socialist.

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He thought that there was a very
large role for government

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to play in society in directing
economic activity. However,

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after he graduated from
the University of Vienna,

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he began to take classes
and work for Ludwig von Mises,

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who was a great Austrian
economist who really persuaded

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Hayek that the problem with
socialism wasn\'t that socialism

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would be undesirable if it were
feasible, but that practically

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socialism is not possible.

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- The idea of socialism was
always connected with the firm

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conviction that there is only
one good plan possible

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and that only one plan ought
to be put into practice.

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- Mises really developed these
arguments in his socialist

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calculation debate where
he tried to argue against

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socialism that simply without a
profit and price and property

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system that you really can\'t
have any sort of rational

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valuation or calculation
in economics. And therefore,

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rational economic activity
becomes impossible.

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Hayek really resonated with
these arguments and then

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extended and applied
them in his own work.

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- 60-Second Adventures
in Economics.

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An economy is a tricky thing
to control and governments

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are always trying to figure out
how to do it. Back in 1776,

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economist Adam Smith shocked
everyone by saying that what

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governments should actually
do is just leave people alone

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to buy and sell freely among
themselves. In this case,

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everyone is happy. Later
free marketers, like Austrian

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economist Friedrich Hayek argued
that this hands-off approach

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actually works better than
any kind of social plan.

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- The essential idea of Mises
and Hayek was that prices are

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necessary to guide production.
There\'s no substitute

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for a price system because
prices provide the relative

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value of all goods in society.

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Mises gave the example of
building a house. He said that

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a house can be built of wood,
it can be built of concrete,

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it can be built of steel.
You can use brick, you can use

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glass. How much of each one
of those products should you use

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in the building and without
a rational standard which prices

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provide, it\'s very difficult
to come up with what

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the appropriate way to build a
house is the most economically.

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- The whole order
of international cooperation has

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been built on such
a signalling system.

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- These signals, you mean,
on the prices in a free market.

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- Entirely the prices in the free
market which, alone, have made

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the present level
of wealth possible.

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- Isn\'t it a philosophy based
essentially on selfishness?

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What about altruism?
Where does that come in?

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- It doesn\'t come in. See, both
altruism and solidarity are

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very strong instincts which
guided man in a small group

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where he was serving known other
persons, where his efforts were

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directed to the needs
of familiar people.

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- In the attempt to justify
and rationalize this economic

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network, which is what they were
all doing, was to say that

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it was rooted in the human mind.

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The brain was built that way.
And this was rational action.

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And that any other kind of
economics or economic system

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would either get hopelessly
entangled without the lead

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of prices or it would
just be irrational.

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Capitalism, in short, was to be
an eternal economic system

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because it was the most
rational, the most efficient

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and the fairest in terms
of rewarding people\'s

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contributions.

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- If Hayek\'s ideas were forged
out of the chaos of the First

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World War, John Maynard Keynes
came of age intellectually

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in this house
in Charleston, England.

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It is here where the young
Keynes underwent

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a transformation rebelling
against his rigid schooling

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in the all male prestigious
Eton Boarding School.

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- Keynes was the product of
a late Victorian comfortable

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academic family
in Cambridge, England.

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He was raised and educated
in the company of philosophers

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and mathematicians.

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- Keynes belonged to
the Bloomsbury Group

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and the Bloomsbury Group
was a cultural coterie

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of intellectuals and artists.
They were part of the

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\"fin de siècle\" revolt
against the Victorians.

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You had this revolt in art,
in literature and in philosophy.

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And it was just basically saying
a new age has dawned and we\'re

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part of that.

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It was also an age of sexual
liberation. They abandoned

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the conventions of marriage. And
there was a lot of homosexuality

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and Keynes was involved
in that as a young man too.

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- Keynes became absorbed
in economic policy, primarily

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of the First World War, emerging
at the end to be an advisor

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to the Prime Minister,
Lloyd George, at the Paris

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Peace Conference that led
to the Treaty of Versailles.

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- Greatest headlines
of the century.

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The Versailles Palace was
a scene of much feverish

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activity on the part of allied
statesmen. Woodrow Wilson

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from the US, Georges Clémenceau
of France, Lloyd George

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of England and Premier Orlando
of Italy represented

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the four major powers
at the conference.

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Months of argument had achieved
a final treaty that was offered

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without discussion to
the German delegation headed

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by Count von Brockdorff-Rantzau.

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- A deeply embittering
and disillusioning experience

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which led to of course
to this very remarkable book,

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\"The Economic Consequences
of the Peace\" in 1919.

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- Which is probably the first
book of economics that became

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a best-seller, a world
best-seller. And he denounced

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the treaty and he predicted
that unless it was revised,

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vengeance shall not limp.

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- Once again the world was at
peace. A peace that was destined

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to last for but 20 years before
the same defeated country

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of Germany would again plunge
the Earth into a second

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Great War.

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- He said that these debts
that the allies were imposing

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on Germany will never
be collected. He said such

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tributes cannot be maintained
for year after year after year.

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It\'s against human nature,
it\'s against social nature.

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And he was right. I think
he thought that bad economics

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would lead to bad politics
and that you had to have

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an economics that was consistent
with maintaining social

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cohesion and political
stability. And if your economic

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theories led you to ignore those
two things, then you would get

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into terrible political
and social trouble.

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- But such a mixing of politics
and social observation

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with economics was alien
to Hayek and the Austrian

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School of Economics.

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Had Hayek gone back
to the Versailles Treaty,

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he would have discovered
that the speculative bubble

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that burst in 1929 and
triggered
the Depression had its roots

00:17:21.709 --> 00:17:24.875
in America\'s decision to insist
on getting paid for the money

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it had loaned to its
allies during the war.

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- The allies than turned
to Germany and said: \"You have

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to pay us enough money to pay
the United States for the debt

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that we took in defeating you\".

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And under the Versailles Treaty,
Germany\'s debt was infinite.

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There was no limit to the debt.

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-A circle of loan payments was
created. It necessitated
keeping

00:17:54.501 --> 00:17:58.374
interest rates artificially low
so countries would not default

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under debt.

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Investors seeking higher
returns
flocked to the stock market.

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- Soaring high under the wild
blue yonder, stocks hit what

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looks like a permanently high
plateau. But conditions are

00:18:17.125 --> 00:18:21.918
fundamentally sound,
aren\'t they?

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- Tuesday October 29th, 1929.
In history\'s worst panic,

00:18:50.417 --> 00:18:53.583
over 16 million shares are
dumped on the market.

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And stocks go down, down, down.
Alleluia.

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- In 1929, the stock market
collapsed. Free market

00:19:05.375 --> 00:19:08.750
capitalism was in crisis,
perhaps the gravest

00:19:08.751 --> 00:19:10.999
in its history.

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-It\'s over, all over.

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- ♪ Once I lived the life
of a millionaire. ♪

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♪ Spending my money,
I didn\'t care. ♪

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- Unemployment in many countries
was over 25%. US industrial

00:19:30.083 --> 00:19:33.999
production fell by 50%.
In some countries in Europe,

00:19:34.000 --> 00:19:39.374
even higher. Economists were
at a loss over how to halt

00:19:39.375 --> 00:19:41.998
and reverse the decline.

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♪ I didn\'t have a friend
and no place to go. ♪

00:19:46.792 --> 00:19:54.750
♪ It\'s mighty strange, without
a doubt. Nobody knows you ♪

00:19:54.751 --> 00:20:01.374
♪ when you\'re down and out,
I mean when you\'re down ♪

00:20:01.375 --> 00:20:03.875
and out. ♪

00:20:03.876 --> 00:20:08.750
- In 1931, Hayek was invited
to give a series of lectures

00:20:08.751 --> 00:20:12.083
at the London School
of Economics by Lionel Robbins.

00:20:18.751 --> 00:20:21.333
They were among the most
successful series of lectures

00:20:21.334 --> 00:20:26.917
that economists in England had
ever heard. They seemed to give

00:20:26.918 --> 00:20:31.501
an answer to what was wrong
with the Great Depression.

00:20:34.918 --> 00:20:37.416
- Lionel Robbins, who was
professor of economics

00:20:37.417 --> 00:20:40.998
at the LSE, wanted to boost
the LSE as against Cambridge,

00:20:40.999 --> 00:20:45.166
so he thought: here, let\'s bring
this bright young man to the LSE

00:20:45.167 --> 00:20:48.333
where he\'ll challenge
the dominance of Cambridge.

00:20:48.334 --> 00:20:53.500
Because Cambridge by this
time was the premier centre

00:20:53.501 --> 00:20:56.999
of academic economics
in Britain.

00:21:04.751 --> 00:21:07.998
- So this is how the so-called
debate of the century began,

00:21:07.999 --> 00:21:12.917
with a rivalry between schools
of economics. A younger LSE,

00:21:12.918 --> 00:21:16.291
London School of Economics,
against the older, more

00:21:16.292 --> 00:21:18.998
established Cambridge,
a university which was under

00:21:18.999 --> 00:21:22.625
the spell of John Maynard
nKeynes, probably the best-known

00:21:22.626 --> 00:21:25.501
British economist at the time.

00:21:35.417 --> 00:21:39.416
- ♪ Boom, 1929, the big crash.
We didn\'t bounce back ♪

00:21:39.417 --> 00:21:40.625
♪ economy is in the trash ♪

00:21:40.626 --> 00:21:42.998
- Having predicted the crisis
more than 10 years earlier,

00:21:42.999 --> 00:21:44.958
Keynes had to offer a solution.

00:21:44.959 --> 00:21:49.041
- ♪ I had a real plan
any fool can understand ♪

00:21:49.042 --> 00:21:53.124
- Keynes\' central thesis was
that the level of employment

00:21:53.125 --> 00:21:57.166
depends on aggregate demand
in the economy, basically

00:21:57.167 --> 00:22:01.041
on total spending power
in the economy.

00:22:01.042 --> 00:22:04.374
- A live-fast-die-young kind
of chap called John Maynard

00:22:04.375 --> 00:22:07.875
Keynes cheerfully pointed
out that, in the long run,

00:22:07.876 --> 00:22:10.998
we\'re all dead. So to avoid the
misery of unemployment,

00:22:10.999 --> 00:22:14.541
the government should instead
spend money to create jobs.

00:22:14.542 --> 00:22:16.583
Whereas if a government tightens
its belt when people and

00:22:16.584 --> 00:22:20.583
businesses are doing the same,
less is spent, so unemployment

00:22:20.584 --> 00:22:21.125
gets even worse.

00:22:21.126 --> 00:22:24.291
- When every one else is trying
to increase their saving,

00:22:24.292 --> 00:22:27.041
if governments then decide
they\'ve got to reduce their

00:22:27.042 --> 00:22:32.833
spending, that simply aggravates
the fall in total spending

00:22:32.834 --> 00:22:36.709
in the economy and makes the
slump worse than it should be.

00:22:39.999 --> 00:22:43.124
- Hayek\'s view was that there had
been too much capital production

00:22:43.125 --> 00:22:46.416
because interest rates had
been kept artificially low

00:22:46.417 --> 00:22:49.998
by the Federal Reserve Board
in the United States. This had

00:22:49.999 --> 00:22:52.998
encouraged too much capital
development. The capital

00:22:52.999 --> 00:22:55.998
development was unsustainable
and for that reason

00:22:55.999 --> 00:22:58.998
the appropriate course for
the economy and for government

00:22:58.999 --> 00:23:03.249
to follow was basically
a hands-off policy and allow

00:23:03.250 --> 00:23:07.458
the economic downturn to play
itself out and for the bad

00:23:07.459 --> 00:23:09.918
investments to be liquidated.

00:23:14.999 --> 00:23:17.791
- While he was in London,
Hayek\'s ideas were put

00:23:17.792 --> 00:23:21.083
to the test in Germany.

00:23:44.626 --> 00:23:48.458
- Germany, which is putting all
her energies to the gigantic

00:23:48.459 --> 00:23:53.166
task of setting her house
in order by hard work

00:23:53.167 --> 00:23:58.124
and sound economy, will feel
encouraged in her heroic

00:23:58.125 --> 00:24:02.918
struggle for reconstruction
and stability.

00:24:32.459 --> 00:24:36.833
- \"Vengeance should not limp\",
said Keynes in his book.

00:24:36.834 --> 00:24:39.708
His warning about ignoring
the social costs of economic

00:24:39.709 --> 00:24:43.625
decisions materialized
in Germany\'s 1932 electoral

00:24:43.626 --> 00:24:45.709
campaign.

00:25:31.918 --> 00:25:34.249
- So Hayek\'s ideas seem to have
failed to have failed the test

00:25:34.250 --> 00:25:38.500
of historical reality. A fact
now acknowledged even

00:25:38.501 --> 00:25:40.709
by his supporters.

00:25:41.959 --> 00:25:43.333
- I had an interview with
Milton Friedman and

00:25:43.334 --> 00:25:45.791
he commented to me he said:
\"I could never understand

00:25:45.792 --> 00:25:47.208
why all those folks
at the London School

00:25:47.209 --> 00:25:51.041
of Economics were so impressed
by Hayek\'s lectures there.\"

00:25:51.042 --> 00:25:54.999
So, in retrospect,
it\'s something of a mystery.

00:26:03.999 --> 00:26:06.750
- By the end of the war, Hayek
was forgotten, his ideas

00:26:06.751 --> 00:26:10.583
marginalized. Keynes\' message
and ideas appeal to a world

00:26:10.584 --> 00:26:14.041
where public and private
sectors
tried jointly to rebuild

00:26:14.042 --> 00:26:16.709
out of the ruins.

00:26:17.999 --> 00:26:23.791
- Japan lost the war in 1945
and the entire nation was

00:26:23.792 --> 00:26:30.709
devastated. And we needed
to reconstruct the nation.

00:26:32.417 --> 00:26:38.998
Naturally, in the new world,
the private corporations also

00:26:38.999 --> 00:26:44.083
need to help
the Japanese country.

00:26:46.999 --> 00:26:49.333
- You could imagine yourself
at Earl\'s Court if you wandered

00:26:49.334 --> 00:26:52.541
into the New York Motor Show.
There were so many British cars

00:26:52.542 --> 00:26:54.998
there, a great thing
for the export trade.

00:26:54.999 --> 00:26:58.458
The Japanese section attracted
a lot of interest. Exports are

00:26:58.459 --> 00:27:00.998
as vital to them
as to our own country.

00:27:00.999 --> 00:27:05.750
- To become more strong country
and economically better country,

00:27:05.751 --> 00:27:12.500
we need to export automobiles
so that we can earn the foreign

00:27:12.501 --> 00:27:15.583
currencies so that we can
import oil, food and so forth

00:27:15.584 --> 00:27:21.999
to the country. So that was one
of Toyota\'s responsibilities

00:27:22.000 --> 00:27:27.875
being the manufacturer, being
able to export our products

00:27:27.876 --> 00:27:30.083
and earn the foreign currencies.

00:27:39.167 --> 00:27:41.583
- In France, a car company
like Renault was nationalized

00:27:41.584 --> 00:27:44.750
and recruited for the national
project of reconstruction.

00:27:44.751 --> 00:27:48.998
Government was not the enemy
of the market as Hayek argued,

00:27:48.999 --> 00:27:52.541
but its ally. Capitalism
suddenly developed

00:27:52.542 --> 00:28:00.542
a softer image.

00:28:49.999 --> 00:28:52.541
- As the people of Britain began
digging out from among their

00:28:52.542 --> 00:28:55.998
ruins, they fixed all their
energies upon one goal:

00:28:55.999 --> 00:29:00.333
a more stable postwar society
and more equitable

00:29:00.334 --> 00:29:02.999
than any Britain had ever known.

00:29:37.792 --> 00:29:43.041
- Keynes died in 1946 in a world
that accepted his vision,

00:29:43.042 --> 00:29:46.292
but what happened to Friedrich
Hayek and his vision?

00:29:48.999 --> 00:29:52.708
In 1944, he published this
book,
a warning against the very

00:29:52.709 --> 00:29:56.292
world that was taking
shape around him.

00:29:58.999 --> 00:30:02.708
- Hayek really wrote \"The Road
to Serfdom\" as a wake-up call

00:30:02.709 --> 00:30:07.333
or a warning that if
the same sort of organization

00:30:07.334 --> 00:30:10.166
of the economy that existed
during World War II, were

00:30:10.167 --> 00:30:13.998
preserved after the war,
that it would lead

00:30:13.999 --> 00:30:16.292
to a dictatorial society.

00:30:19.751 --> 00:30:22.374
- The root of fascism and Nazism
according to Hayek, was not

00:30:22.375 --> 00:30:25.458
the economic collapse triggered
in part by the unregulated

00:30:25.459 --> 00:30:30.333
free market, but by precisely
the opposite. Abandoning

00:30:30.334 --> 00:30:35.083
the liberal ideas which were
nat the root of the free market.

00:30:36.000 --> 00:30:37.708
Regulations and state
intervention, he argued,

00:30:37.709 --> 00:30:42.999
led us to serfdom in the past
and would lead us there again.

00:30:57.167 --> 00:31:00.998
The road away from serfdom led
to the pristine Swiss Alps

00:31:00.999 --> 00:31:05.750
where his vision marginalized
in the postwar world was

00:31:05.751 --> 00:31:07.999
being nurtured.

00:31:12.417 --> 00:31:16.500
- In 1947, Hayek founded
the Mont Pèlerin Society,

00:31:16.501 --> 00:31:19.625
which was named after the
mountain in Switzerland where

00:31:19.626 --> 00:31:23.292
the first meeting
of this association met.

00:31:29.250 --> 00:31:33.082
Essentially, this was a group
of international classical

00:31:33.083 --> 00:31:37.208
economists, academics, political
philosophers, journalists

00:31:37.209 --> 00:31:40.374
and others, including a young
Milton Friedman at that time

00:31:40.375 --> 00:31:44.998
who went to Switzerland to talk
about these ideas for a week

00:31:44.999 --> 00:31:48.292
or 10-day long session.

00:32:14.501 --> 00:32:17.875
- It was a major factor
in maintaining a steady

00:32:17.876 --> 00:32:24.750
stream of influence on ideas.
It enabled people who were

00:32:24.751 --> 00:32:29.166
isolated in their own countries,
once a year to at least,

00:32:29.167 --> 00:32:31.999
to get together with people
who felt the same way they did,

00:32:32.000 --> 00:32:34.998
to be in a situation so
they could discuss issues

00:32:34.999 --> 00:32:38.166
without worrying that somebody
was trying to stick a knife

00:32:38.167 --> 00:32:40.292
in their back.

00:33:05.999 --> 00:33:08.458
- If post world war Europe was
immune to Hayek\'s vision

00:33:08.459 --> 00:33:11.998
of self-regulated markets,
the United States with its

00:33:11.999 --> 00:33:15.500
suspicion of government was
far more responsive.

00:33:15.501 --> 00:33:18.833
Hayek\'s fight against
Keynes legacy was taken over

00:33:18.834 --> 00:33:21.501
by Professor Milton Friedman.

00:33:23.584 --> 00:33:26.625
- For the immigrants who were
welcomed by this statue,

00:33:26.626 --> 00:33:29.709
America was truly
a land of opportunity.

00:33:30.375 --> 00:33:33.416
Once they arrived, they found,
as my parents did, not an easy

00:33:33.417 --> 00:33:37.041
life, but a very hard life.
But for many, there were friends

00:33:37.042 --> 00:33:39.998
and relatives to help them get
started, to help them make

00:33:39.999 --> 00:33:44.709
a home, get a job, settle
down in a new country.

00:33:46.083 --> 00:33:49.917
- Milton Friedman was born
in 1912 in New York and he was

00:33:49.918 --> 00:33:53.291
the son of Jewish immigrants to
the United States from Hungary.

00:33:53.292 --> 00:33:57.291
And he grew up somewhat
impoverished, not necessarily

00:33:57.292 --> 00:34:00.583
at the lowest socioeconomic
level, but not at all from

00:34:00.584 --> 00:34:03.791
as well-off background.

00:34:03.792 --> 00:34:06.416
- There were many rewards
for hard work, enterprising

00:34:06.417 --> 00:34:12.709
abilities. Life was hard,
but opportunity was real.

00:34:14.292 --> 00:34:16.124
There were few government
programs to turn to and nobody

00:34:16.125 --> 00:34:20.998
expected them. But also, there
were few rules and regulations.

00:34:20.999 --> 00:34:24.875
There were no licenses, no
permits, no red tape to restrict

00:34:24.876 --> 00:34:29.583
them. They found in fact a free
market and most of them

00:34:29.584 --> 00:34:30.666
thrived on it.

00:34:30.667 --> 00:34:32.998
- He was someone who said
the problem is government

00:34:32.999 --> 00:34:36.875
in all of its spheres.
Government is essentially

00:34:36.876 --> 00:34:39.208
wasteful, government is
essentially inefficient.

00:34:39.209 --> 00:34:42.999
And because of that, we need
to allow the market to play more

00:34:43.000 --> 00:34:46.583
of a role in society and
in particular to play more

00:34:46.584 --> 00:34:48.999
of a role in the economy.

00:34:54.167 --> 00:34:55.998
- Hayek was a refugee
from the old world without

00:34:55.999 --> 00:35:00.917
a permanent teaching position
in the US. Milton Friedman was

00:35:00.918 --> 00:35:04.998
American born with a large
reputable academic institution

00:35:04.999 --> 00:35:06.998
behind him.

00:35:06.999 --> 00:35:11.791
- The image of the Chicago
School outside of Chicago,

00:35:11.792 --> 00:35:15.998
outside of us is
semi-ideological.

00:35:15.999 --> 00:35:20.666
The idea is that Milton Friedman
wrote \"Free to Choose\"

00:35:20.667 --> 00:35:26.583
and other books which were
persuasive tracts in a sense.

00:35:26.584 --> 00:35:32.124
But in his classes, he never
taught anything of that.

00:35:32.125 --> 00:35:36.708
We got not one message
of \"Free to Choose\" or anything.

00:35:36.709 --> 00:35:42.875
We got how the price system
works, how human behaviour

00:35:42.876 --> 00:35:45.918
works in the economic sphere.

00:35:47.999 --> 00:35:51.750
- As one of the first students
of Milton Friedman, I discovered

00:35:51.751 --> 00:35:55.208
later that among
Milton Friedman\'s students,

00:35:55.209 --> 00:35:57.918
there were two groups.

00:35:58.999 --> 00:36:03.333
One group became his disciples
for life. The other group

00:36:03.334 --> 00:36:10.998
were vaccinated and were able
to ward off these ideas.

00:36:10.999 --> 00:36:14.083
I was of course
in the second group.

00:36:25.918 --> 00:36:30.166
When we look back at the 19th
century, what is striking

00:36:30.167 --> 00:36:36.917
then and I have to admit
even today, I regret to say,

00:36:36.918 --> 00:36:44.292
is the sense that the market is
the utopia for human existence.

00:36:50.042 --> 00:36:55.998
Left to itself, it will produce
benevolence, a cornucopia

00:36:55.999 --> 00:37:03.999
of products, a perfect
outcome, and moreover,

00:37:07.000 --> 00:37:09.292
it is self-regulating.

00:37:12.459 --> 00:37:20.208
- ♪ I\'m the king of excess.
I\'m the sultan of sells. ♪

00:37:20.209 --> 00:37:25.500
♪ I\'m the boss of bargains.
My credit cards, ♪

00:37:25.501 --> 00:37:30.625
♪ they never fail. I got 700
something on my beacon ♪

00:37:30.626 --> 00:37:35.666
♪ score, which means I don\'t
own a thing and I can buy ♪

00:37:35.667 --> 00:37:37.458
♪ even more! I\'m
a buffet-eating, ♪

00:37:37.459 --> 00:37:41.833
♪ tabloid-reading lovable guy.
I\'ve got the best of the best ♪

00:37:41.834 --> 00:37:48.500
♪ that my money can buy.
It\'s a wonderful life, ♪

00:37:48.501 --> 00:37:52.918
♪ with my redheaded wife! ♪

00:39:14.334 --> 00:39:16.998
- Is he telling us that
absolute equality is

00:39:16.999 --> 00:39:18.249
a mistaken objective?

00:39:18.250 --> 00:39:20.999
- But libertarians like Milton
Friedman draw directly

00:39:21.000 --> 00:39:23.833
the opposite lesson
from history.

00:39:23.834 --> 00:39:26.166
- When you say that it is wrong
for government to intervene

00:39:26.167 --> 00:39:29.666
in the free enterprise system to
do something about inequality,

00:39:29.667 --> 00:39:33.458
you evoke a model of a free
enterprise system which does

00:39:33.459 --> 00:39:37.998
not exist and has never existed
to a significant extent

00:39:37.999 --> 00:39:40.082
in history or anywhere
in the world.

00:39:40.083 --> 00:39:42.500
- I agree with you that
everything called free

00:39:42.501 --> 00:39:45.917
enterprise is not free
enterprise. But I challenge you

00:39:45.918 --> 00:39:48.500
to find a single example
in history at any time

00:39:48.501 --> 00:39:52.917
of any society where people
have been relatively free,

00:39:52.918 --> 00:39:57.208
and I don\'t mean merely what
you call economic freedom,

00:39:57.209 --> 00:40:00.374
I mean freedom in the full
sense. I mean freedom

00:40:00.375 --> 00:40:02.917
of individuals to pursue their
own objectives, their own values

00:40:02.918 --> 00:40:05.541
to live their lives. I want
you to name me any society

00:40:05.542 --> 00:40:07.625
in which you\'ve had any large
measure of that freedom,

00:40:07.626 --> 00:40:10.249
where capitalism and free
enterprise has not been

00:40:10.250 --> 00:40:13.917
the predominant mechanism
for controlling economic

00:40:13.918 --> 00:40:15.999
activity.

00:41:02.999 --> 00:41:05.124
- The lesson from
the 19th century was lost

00:41:05.125 --> 00:41:07.708
as economic stagnation
and decay gripped Britain

00:41:07.709 --> 00:41:11.541
and the United States
in the early 70\'s.

00:41:11.542 --> 00:41:17.875
The golden years were over.
With
the economic decay, government

00:41:17.876 --> 00:41:20.166
involvement in the economy was
now seen as an obstacle

00:41:20.167 --> 00:41:25.918
to growth. Milton Friedman
and Friedrich Hayek were back.

00:42:16.000 --> 00:42:18.208
- The economic stagnation could
have been dealt with through

00:42:18.209 --> 00:42:21.208
adjustments. But for Milton
Friedman and Friedrich Hayek,

00:42:21.209 --> 00:42:24.666
it was the political opening
they\'d been waiting for since

00:42:24.667 --> 00:42:26.999
the seminars in Mont Pèlerin.

00:42:30.417 --> 00:42:35.291
- Keynes died in 1946. I\'ve
always regarded it as a tragedy

00:42:35.292 --> 00:42:39.958
that he did not live another
decade. He was the one man

00:42:39.959 --> 00:42:44.208
who had the standing,
the personality and the force

00:42:44.209 --> 00:42:48.791
of character to persuade
his disciples not to carry

00:42:48.792 --> 00:42:53.833
too far some ideas which were
good for the 1930\'s,

00:42:53.834 --> 00:42:59.709
but which did not apply
in the postwar situation.

00:43:19.292 --> 00:43:21.998
- ♪ How can you roll with
the flow, you can\'t foresee? ♪

00:43:21.999 --> 00:43:26.082
♪ How can you let go
control and the it be. ♪

00:43:26.083 --> 00:43:29.082
♪ Keynes, he won\'t stop calling,
he keeps blowing up my phone. ♪

00:43:29.083 --> 00:43:33.166
♪ He wants to teach me something
and he won\'t leave me alone. ♪

00:43:33.167 --> 00:43:37.333
♪ I tell him there\'s
no use in trying because ♪

00:43:37.334 --> 00:43:41.541
♪ Friedrich Hayek is my guy
and if you want to get ♪

00:43:41.542 --> 00:43:45.583
♪ with a girl like me,
you got to let go control ♪

00:43:45.584 --> 00:43:48.708
♪ of the economy. ♪

00:43:48.709 --> 00:43:53.709
- Suddenly Hayek was cool even
for rebellious teenage girls.

00:43:56.584 --> 00:43:58.917
It began as a debate between
Hayek\'s rigid understanding

00:43:58.918 --> 00:44:02.249
of the market and its supposed
natural laws and John Maynard

00:44:02.250 --> 00:44:05.875
Keynes flexible approach
in tune with the complexities

00:44:05.876 --> 00:44:07.999
of human reality.

00:44:11.334 --> 00:44:15.791
$0 years later, the roles were
reversed. Keynes\' followers

00:44:15.792 --> 00:44:19.708
were now perceived
as adhering to rigid models.

00:44:19.709 --> 00:44:21.875
Milton Friedman and
Friedrich Hayek were suddenly

00:44:21.876 --> 00:44:26.999
the champions of freedom and
liberation in tune with
reality.

00:44:30.584 --> 00:44:35.958
- The failure of the Keynesian
system, the inflation,

00:44:35.959 --> 00:44:40.500
return of unemployment
and all that, first confirmed

00:44:40.501 --> 00:44:45.249
my prediction in strictly
economics sphere. At the same

00:44:45.250 --> 00:44:51.166
time, my studies of politics
provided, I believe, answers

00:44:51.167 --> 00:44:56.291
to many problems which had begun
to bother people very seriously.

00:44:56.292 --> 00:45:01.958
And there is a good reason
why I am being rediscovered

00:45:01.959 --> 00:45:03.999
so to speak.

00:45:06.209 --> 00:45:11.124
- Since 1975, we have seen
our jobs security eroded,

00:45:11.125 --> 00:45:15.249
our working conditions fall
apart and our money wages

00:45:15.250 --> 00:45:18.998
go to hell with prices
and living go up and up

00:45:18.999 --> 00:45:21.875
and we are tired of it.

00:45:21.876 --> 00:45:24.166
- Indeed there were good reasons
why Hayek\'s ideas were

00:45:24.167 --> 00:45:26.998
rediscovered. They made sense
to business and financial

00:45:26.999 --> 00:45:29.998
leaders who saw their business
interests hurt by inflation

00:45:29.999 --> 00:45:34.998
and paralyzing labour disputes.
Economic activity was down

00:45:34.999 --> 00:45:37.999
and profits declined.

00:45:38.709 --> 00:45:40.958
- There was what we call
a counter-revolution

00:45:40.959 --> 00:45:45.917
in economics, ushering in what
is now referred to as

00:45:45.918 --> 00:45:51.709
the neoliberal agenda of
deregulation and privatization.

00:45:52.125 --> 00:45:55.750
- Ladies and gentlemen, the next
president of the United States

00:45:55.751 --> 00:45:58.999
of America, Ronald Reagan!

00:45:59.167 --> 00:46:02.333
- During the 1980\'s, both
Margaret Thatcher in England

00:46:02.334 --> 00:46:06.041
and Ronald Reagan in The United
States attempted to implement

00:46:06.042 --> 00:46:10.999
policies that were very
influenced both philosophically

00:46:11.000 --> 00:46:13.998
and practically
by Hayek and Friedman.

00:46:13.999 --> 00:46:17.541
- I would like to think
that the kind of leadership

00:46:17.542 --> 00:46:20.833
that I would exercise
in Washington is not the kind

00:46:20.834 --> 00:46:23.291
of leadership that I would
pretend that I can solve

00:46:23.292 --> 00:46:25.541
all the problems I\'ve
been discussing here,

00:46:25.542 --> 00:46:30.166
but that together you and
I can. I would like to take

00:46:30.167 --> 00:46:33.833
the lead in taking government
off the backs of the American

00:46:33.834 --> 00:46:38.501
people and turning you loose
to do what I know you can do.

00:46:39.667 --> 00:46:42.833
- Her supporters called it
her biggest achievement.

00:46:42.834 --> 00:46:46.500
Others called it her terrible
legacy. Margaret Thatcher\'s

00:46:46.501 --> 00:46:49.833
battle with the miners was
a defining moment, not only

00:46:49.834 --> 00:46:54.750
in British industrial relations,
but also in British history.

00:46:54.751 --> 00:46:58.708
- What we\'ve got in an attempt
to substitute the rule

00:46:58.709 --> 00:47:05.709
of the mob for the rule of law,
and it will not succeed.

00:47:07.999 --> 00:47:11.166
- The counter-revolution,
the so-called neoliberal

00:47:11.167 --> 00:47:15.998
policies introduced by Thatcher
and Reagan early in the 80\'s

00:47:15.999 --> 00:47:20.958
was designed to restore
the discipline of capital

00:47:20.959 --> 00:47:28.959
over labour. And it did because
we now know that median wages

00:47:30.834 --> 00:47:34.625
and salaries in the United
States, in real terms, have not

00:47:34.626 --> 00:47:40.999
increased since 1980,
although productivity has.

00:48:14.792 --> 00:48:18.958
- My name is Jordan Belford. At
the tender age of 22, I headed

00:48:18.959 --> 00:48:22.999
to the only place that befit
my high-minded ambitions.

00:48:29.918 --> 00:48:32.500
This is my home!
The show goes on!

00:48:32.501 --> 00:48:35.625
- And we thought capitalism had
finally been tamed after

00:48:35.626 --> 00:48:37.333
the Second World War.

00:48:37.334 --> 00:48:40.292
-Cause I ain\'t going nowhere!

00:49:40.999 --> 00:49:43.998
-In their vision of the
mythical
untamed capitalism

00:49:43.999 --> 00:49:46.541
of the 19th century, Milton
Friedman and Friedrich Hayek

00:49:46.542 --> 00:49:49.208
never discussed the very
elements that we now know

00:49:49.209 --> 00:49:52.998
contributed to its
catastrophic destruction:

00:49:52.999 --> 00:49:56.709
inequality, debt
and speculation.

00:49:59.751 --> 00:50:03.082
- Milton Friedman followed
Ricardo saying: \"Debt cannot

00:50:03.083 --> 00:50:06.416
create a problem\", and although
he called his approach

00:50:06.417 --> 00:50:09.998
\"monetarism\" and said \"money
matters\", the reality is that

00:50:09.999 --> 00:50:12.917
money didn\'t matter at all
in his approach and nor did

00:50:12.918 --> 00:50:14.999
wealth.

00:50:15.918 --> 00:50:19.082
You have a kind of tunnel vision
that was adopted

00:50:19.083 --> 00:50:20.708
by the bankers
to essentially say:

00:50:20.709 --> 00:50:24.166
\"Don\'t regulate the banks,
don\'t regulate Wall Street,

00:50:24.167 --> 00:50:27.291
have a deregulated economy,
everything will work out

00:50:27.292 --> 00:50:31.166
because economies tend
towards equilibrium.\"

00:50:31.167 --> 00:50:34.708
- When the price of an asset
rises faster than can be

00:50:34.709 --> 00:50:38.291
explained by economic
fundamentals, it creates

00:50:38.292 --> 00:50:40.292
a bubble.

00:50:41.375 --> 00:50:45.666
- Once again, financial bubbles
began to grow. Once again,

00:50:45.667 --> 00:50:49.083
they never featured in economic
models and discussions.

00:50:50.083 --> 00:50:55.875
- ♪ John Maynard Keynes,
F.A. Hayek: round two! ♪

00:50:55.876 --> 00:50:58.625
-So the debate of the 20th
century which was supposed to
be

00:50:58.626 --> 00:51:03.166
over in 1979, was reignited
after the bursting of 2008

00:51:03.167 --> 00:51:09.666
financial bubble.
But it is relevant anymore?

00:51:09.667 --> 00:51:13.998
- ♪ Which way should we choose?
More bottom up or more ♪

00:51:13.999 --> 00:51:18.208
♪ top down? Let\'s listen
to the greats, Keynes ♪

00:51:18.209 --> 00:51:21.292
♪ and Hayek throwing down. ♪

00:51:57.626 --> 00:52:00.583
- So the debate between Hayek
and Keynes might be obscuring

00:52:00.584 --> 00:52:04.208
today\'s reality rather
than helping to clarify it.

00:52:04.209 --> 00:52:07.249
Maybe it\'s time to discover
a lesser-known thinker who did

00:52:07.250 --> 00:52:10.998
talk about debt and money
and whose ideas may be far more

00:52:10.999 --> 00:52:14.958
relevant to helping us
understand our 21st century

00:52:14.959 --> 00:52:16.999
reality.