No such thing as a free lunch?

Cafe UtopiaIt was Milton Friedman – one of the founders of neoliberal economic doctrine in the 1980s – who popularized this phrase. Was he right?

The short answer is yes.

Just as a clock that’s stopped is right twice a day, Friedman got two things right. One was that even in the Café Utopia, where delicious lunches like this don’t cost customers any money, they’re not really free, because someone has to cook and serve them, which costs them time and effort.* OK the apples that fall off my tree are free, but even eating them requires me to go out and pick them up before the bugs get them. Some useful things, like sunshine, are free, but to put together a lunch somebody has to do some work.

It may still be possible for many people to get free lunches, free in the sense that they are costless to the recipient, requiring no payment in money or work (like washing up in the Café), but they will always be a cost to someone else. Children are given free lunches by their parents, but their parents or someone else has to grow the food or work for money to buy it and then cook it, so it’s not free for the provider. That’s fine: it’s a gift – a great thing to do, and of course young children can’t be expected to cook for themselves.

But the problem is that our economic system also allows some people to get fabulous free lunches – I’m not talking beans on toast here – even though, unlike children, they’re perfectly capable of producing something useful in return. And they get them not because they need them, but because they can. If they own land, they may be able to rent it out to others that lack land. Their free lunch comes in the form of rent; because the land already existed, they didn’t have to work to produce it. Even if they bought the land with their hard-earned money and then rented it out, the money they paid to the previous owner would be equivalent to rent. Once they’d bought it, and become the landlord, they could get rent without doing anything. They wouldn’t be selling the tenants something they’d produced, so it’s parasitic. A free lunch too far.

Lloyds bank

Private banks have a free lunch ticket because they’re allowed to create money when they lend – just by typing figures into the borrowers’ account, so it’s hardly ‘work’ – and then get the money back with interest added. Why do we keep getting all those junk letters and emails offering us ‘cheap’ credit? Because those offering them are seeking free lunches at our expense.

Owners of firms can get free lunches because by law, they are entitled to determine what happens to the revenue from the sale of goods and services produced by their workers, even if they do no work themselves. And as I show in my book there are other ways of getting unearned income – free lunches – too.

In practice, neoliberalism is a system that promotes free lunches on the basis of control of key assets that others need. Neoliberal government budgets consistently cut back on free lunches provided in response to need through the welfare state (i.e. democratically regulated), and enlarge the scope for rentiers to get free lunches on the basis of power.

In effect, this is what my book says: more and more, capitalism has become a system in which the rich get free lunches at the expense of the 99%.2014-09-24 15.41.59

* What was the other thing was that Friedman got right?: his statement that land value tax is ‘the least bad tax’, but you can read about that in chapters 4 and 22 of Why We Can’t Afford the Rich.

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