Fundamentally, there are only two ways of coordinating the economic activities of millions. One is central direction involving the use of coercion - the technique of the army and of the modern totalitarian state. The other is voluntary cooperation of individuals - the technique of the marketplace.
Interpretation
The quote contrasts two methods of organizing economic activities: coercion through central authority and voluntary cooperation in a free market.
Milton Friedman highlights the fundamental distinction between two approaches to managing the economy: one that relies on centralized control and coercion typical of authoritarian regimes, and another that fosters voluntary cooperation among individuals, as seen in a free market. This reflects Friedman's belief in the superiority of market-driven economies, where individual freedoms and choices lead to better outcomes than those imposed by a centralized authority.
In practice
In a debate about economic policy, one could reference this quote to argue for free-market principles.
The economic miracle that has been the United States was not produced by socialized enterprises, by government-unon-industry cartels or by centralized economic planning. It was produced by private enterprises in a profit-and-loss system. And losses were at least as important in weeding out failures, as profits in fostering successes. Let government succor failures, and we shall be headed for stagnation and decline.
Universities exist to transmit knowledge and understanding of ideas and values to students not to provide entertainment for spectators or employment for athletes.
There is no place for government to prohibit consumers from buying products the effect of which will be to harm themselves.
There is one and only one social responsibility of business - to use it resources and engage in activities designed to increase its profits so long as it stays within the rules of the game, which is to say, engages in open and free competition without deception or fraud.
The great danger to the consumer is the monopoly -whether private or governmental. His most effective protection is free competition at home and free trade throughout the world. The consumer is protected from being exploited by one seller by the existence of another seller from whom he can buy and who is eager to sell to him. Alternative sources of supply protect the consumer far more effectively than all the Ralph Naders of the world.
The strongest argument for free enterprise is that it prevents anybody from having too much power. Whether that person is a government official, a trade union official, or a business executive. If forces them to put up or shut up. They either have to deliver the goods, produce something that people are willing to pay for, are willing to buy, or else they have to go into a different business.
We ask our companies to restructure; we ask employees to work more for less money because there is overproduction, but then we're unable to defend them from cheaper Chinese imports. We are insane.
No nation was ever ruined by trade.
History does not provide any example of capital accumulation brought about by a government. As far as governments invested in the construction of roads, railroads, and other useful public works, the capital needed was provided by the savings of individual citizens and borrowed by the government.
The collapse of the global marketplace would be a traumatic event with unimaginable consequences. Yet I find it easier to imagine than the continuation of the present regime.
It is a paradoxical truth that tax rates are too high and tax revenues are too low and the soundest way to raise the revenues in the long run is to cut the rates now Cutting taxes now is not to incur a budget deficit, but to achieve the more prosperous, expanding economy which can bring a budget surplus.
No amount of debt restructuring, even debt forgiveness, will help the Greeks achieve real prosperity. What they need is not short-term relief but, rather, a long-term cure.
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