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The Captain of Capitalism : Even as Milton Friedman's Theories Have Gone Out of Vogue in Washington, His Ideas Have Come to Shape the Way Nations Manage Their Money.

December 14, 1986|JONATHAN PETERSON | Jonathan Peterson is a Times financial writer.

It's a noisy, black-tie reception at the Biltmore Hotel downtown, and the keynote speaker is holding court at the bar, Scotch and soda in hand. Timidly, a 22-year-old college student asks Milton Friedman what he thinks about drug testing in the workplace. "I'm in favor of legalizing drugs," replies the Nobel Prize-winning economist and anti-government crusader. "According to my value system, if people want to kill themselves, they have every right to do so. Most of the harm that comes from drugs is because they are illegal."

The room, bathed in a soft, blue-green light, is packed with libertarians who hold similar views. Friedman, 74, has been asked by the free-enterprise Reason Foundation to speak after dinner. But for now the crowd looms over the speaker, who--at 5 feet, 2 inches tall, bald and bespectacled-- exercises the command of a revered professor surrounded by eager students.

Somebody grumbles about government ownership of railroads. "My solution in these cases has never been to sell them," Friedman says, pausing for effect. "It's to give them away." A guest points out that such a move would be radical. "It wouldn't matter if it's radical," Friedman retorts. "It's right."

A former student-turned-psychologist says he just can't express how much he got out of Friedman's economics course in college. The professor cracks: "If you turned into a psychologist, you didn't get enough." Moments later a giggly, middle-aged woman whispers in Friedman's ear, then plants a worshipful kiss on his cheek. "You embarrass me," he protests.

One by one they step forward: students, academics, entrepreneurs--true believers all in the professor's capitalist credo. Some have serious questions; others merely want to shake the celebrated hand. Shortly, they will attack the roast beef, this assemblage of ideological outsiders who are a tad closer to the inside than they used to be.

Milton Friedman--adviser to presidents, hero or villain to millions, agitator extraordinaire --is smiling.

It has been a remarkable journey for a sheltered kid from North Jersey whose early ambition was to do arithmetic for insurance companies. And his speech topic for the libertarians is apt indeed: the relationship between the world of ideas and the world of practice. For Friedman's career represents a dramatic collision between these worlds. In a striking range of areas--monetary policy, tax reform, deregulation, the volunteer army and currency exchange rates--his influence has been powerful, possibly unparalleled.

To be sure, the world of practice has been rather nasty of late to the scholar who now makes his home in Northern California. Friedman's "monetarist" teaching, that a carefully controlled increase in the money supply is the key to prosperity, has fallen out of favor with many in Washington. Free trade, another cherished value, has been undermined by restrictions on everything from Japanese autos to Canadian lumber. Other proposals to severely curtail the federal government can't get a serious hearing in Congress.

Yet to the many who consider Friedman an economist of epic stature, it's a mistake to focus on such political ups and downs.

For years, Friedman's was a lonely voice extolling the virtues of unrestricted capitalism at a time when controls over business were the vogue internationally. His crusading, once seen as reactionary, now looks prophetic. Today a capitalist renaissance is under way throughout the world. Entrepreneurs and business executives are glamorized on magazine covers. Countries as disparate as Britain, France, Argentina and even China are placing new faith in free enterprise. Capitalism, it seems, has even regained respectability among intellectuals, a trend with historic implications.

To Friedman's followers, sparking this change in the tide of ideas is the professor's legacy--and a profound one. "If you step back and look at all the sweeping political changes in the United States and even other countries--mainly in terms of economics--a lot of people have had an important effect," says Martin Anderson, a former chief domestic policy adviser to President Reagan. "But if you had to say one person who had the most impact, it's Milton Friedman."

Says Jerry Jordan, chief economist at First Interstate Bancorp and formerly a member of Reagan's Council of Economic Advisers: "He's not a one-issue economist, and he's not an economist for one era. He's so broad in applying his economics--that's why I think he will go down as the greatest."

Win or lose, Milton Friedman seems a man at peace as he settles into his eighth decade. If politicians are too dense to see the truth, that's no cause for torment. Progress is measured in terms of decades, not weeks or months. Friedman isn't self-effacing--his living room features his likeness in both a bronze bust and a portrait--but he speaks modestly of his impact.

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