In Capitalism and Freedom Friedman tries, although without much success judging by the state of things today, to challenge us to think about the meaning of 'equality' in the context of work and pay. Something a bit more sophisticated than 'having the same amount of stuff' or 'paying everyone the same wage'.
Friedman asks two questions to try and bring some clarity to this debate:
His starting point in approaching these questions is the principle of private property, which is where most of us are starting from today. If you start with communism or state ownership of everything then obviously you're going to ask different questions, run different arguments and end up with a different result - and all that remains is for us to wish you good luck.
But if you start with private property, you generally won't end up with conditions where everyone has the same amount of stuff. Is there a way to protect private property and also ensure that everyone has the same amount of stuff, perhaps by introducing laws to achieve equality while still retaining private property? According to Friedman, that depends on what you mean by 'equality'. After all, equality could mean that those who expend an equal amount of effort x should all get an equal outcome y. So it would actually be unequal and unfair to treat those who expend different amounts of effort in the same way by ensuring that they all get outcome y.
True equality in this sense is more than looking simply at the amount of money or amount of stuff people have. It takes into account the preferences of different individuals and their ability to secure, through the market, what they value most. It also takes into account their appetite for risk-taking. Some people think taking risks is fun and others would pay a premium to avoid uncertainty. Not everyone values the same stuff: so we are not equal in having the same amount of stuff but we are equal in achieving what we set out to do and (hopefully) in keeping what we have lawfully acquired.
But what if my preference is to be a surgeon, or a movie star, or a premier league footballer, or something else quite prestigious and high earning? Sadly, I lack the talent to achieve any of these things, but if I still have a really strong preference to do this can we equalize things by paying me the same as a surgeon or movie/sporting star (or at least taxing them and redistributing the extra money to me), so that it's a bit more equal?
Let's leave aside the moral issue of whether people should be ok with accepting handouts, because that's a matter for everyone's private moral code, and take a situation where someone is poor for no fault of their own.
After all, it's not my fault if my dreams didn't work out - if it wasn't because of laziness or something for which I am morally culpable, but more due to things beyond my control (the wrong parents, the wrong school, the wrong teachers, the wrong housing estate, etc). Not everybody begins life with equal opportunities to achieve their dreams.
Isn't it surprising to see that Friedman was very much aware that life is not fair and that not everybody starts out with the same advantages. It's the same sort of surprise you get when you read Adam Smith and discover that actually, he was aware that markets are not perfectly free and competitive. Obviously the assumption of the critics is that damn, if only these people knew about all the unfairness in the world they would totally change their minds about capitalism. This reflects the 'if only they understood the true facts they would have to agree with me' approach to life, where the only explanation you can think of for why anybody would disagree with you is that they must be a bit thick.
Yeah, no. I think everybody over the age of 5 is very much aware that life is not fair and that not everybody is starting with the same advantages. The question is whether it follows that we should start redistributing everything and cut all the fiscally fat folk down to size.
Even if we only want to redistribute some things and not others, by what principle shall we decide which things to redistribute and which things to leave untouched? As Friedman asks, on what basis would you choose to treat self-made wealth differently from inherited wealth? After all, isn't 'self-made' wealth usually 'inherited' indirectly by people who had supportive parents, or went to the right schools, or met the right people, or grew up on the right side of the tracks, etc? How will you distinguish between the deserving and undeserving rich?
Consider also that every redistributive mechanism can be side-stepped by anyone with an averagely good lawyer (and these days all the hacks are available for free on google for anyone with an average amount of smarts). Now that inheritance is taxed, all the rich people are deciding not to leave an inheritance; there are more tax-efficient ways to funnel the money, for instance by buying up a small African principality or an island of your own somewhere in a remote sunny clime where the authorities are too clueless to know one end of a tax law from the other. You then end up with a situation where the state must encroach more and more on private citizens to stop them from evading/avoiding every redistributive effort the government can come up with. Chasing after equality is not only elusive, but it also comes at a cost to freedom.
This is why Friedman's book is called 'Capitalism and Freedom', not 'Capitalism and Wealth' or 'Capitalism and How to be a Right Greedy Fecker'. It's really a book about freedom.
There you have it: it's not a defence of capitalism because of how ethical and morally upstanding capitalism is. It's a defence of freedom.
It is very unfortunate that freedom leads to some people becoming very wealthy, because of course wealthy people are so infuriating, dripping diamonds everywhere and buying expensive bottles of wine while others are starving. Instead of annoying everyone rich people should do everything within their power to sell all they have and give away all their money to charity, like Jesus said. It's for the redemption of their own mortal souls.
Meanwhile, encroaching upon everybody's freedom in a bid to get rid of the 1% of rich people is just cutting off your nose to spite your face - feeling happy to be a bit poorer as long as it means your neighbour is also a bit poorer, rather than face a situation where you are a bit wealthier but your neighbour is massively and intolerably wealthier than you. After all, wanting to be free is the first and most basic principle of being human, so becoming less free as a way of ensuring that other people will become less rich is not a worthwhile trade-off.