Why Economic Freedom Is the Foundation of All Freedom

In Capitalism and Freedom, Milton Friedman argues something simple but often overlooked: economic freedom isn’t just about money—it’s at the core of what makes political freedom possible.

Government: Necessary, But Not Sacred

Friedman believes government is needed to protect freedom. But it should never be treated as something sacred or given unlimited power. When government power is concentrated in one place, freedom is always at risk. Even though setting rules and standards can improve society, they can also lead to stagnation and restrict new ideas.

The Changing Meaning of Liberalism

In the 18th and 19th centuries, “liberalism” meant protecting individual freedom, encouraging free trade, and limiting government power. Over time, especially in the U.S., the word shifted to mean more state involvement in welfare and equality. Friedman prefers the original meaning, which focused on freedom rather than relying on government.

Economic and Political Freedom Are Connected

Some people think you can separate freedom into political and economic parts—as if you can have political freedom even if the economy is controlled by the state. Friedman says this is false. Controlling people’s economic lives—what they can buy, where they can work, where they can travel—directly limits their overall freedom.

He gives examples: governments controlling travel between countries, forcing people into certain social programs, or restricting prices and trade. Even if few people complain, these limits hurt freedom in the same way as censorship or banning religious practices.

Markets as Voluntary Cooperation

A market economy is built on voluntary exchange. People trade and specialize so everyone benefits—without central force or coercion. Government is still needed to set basic rules and prevent harm, but markets let people coordinate their lives freely.

Dispersing Power Protects Freedom

Friedman warns that concentrated power—political or economic—is the biggest threat to freedom. Markets naturally spread out economic power. A society can have thousands of successful businesses, but only one government. When the state controls the economy, political and economic power combine—and individual freedom disappears.

Money Helps Protect Free Speech

In capitalist countries, new or controversial ideas can find funding from people willing to take risks or seek profit. In socialist countries, where the government controls jobs, resources, and industry, dissent becomes almost impossible. Even if the government claims to allow free speech, it controls the tools needed to spread ideas—printing presses, paper, mail, and public spaces.

The Profit Motive Overcomes Prejudice

Under capitalism, people are often motivated by profit rather than personal bias. A publisher doesn’t have to agree with a message to print it—only believe it will sell. This helps protect freedom of expression and encourages diversity of ideas.

Why This Matters

Friedman warns that every time governments take more control over the economy—through planning, quotas, or heavy regulations—they also limit personal freedom. Economic freedom isn’t just about getting rich—it’s the way people remain free to speak, act, and choose their paths.

Key Lesson: Protecting markets and economic freedom is the best way to protect all other freedoms. When power is dispersed and people can act without government permission, freedom thrives.