Pure capitalism v Government intervention - Friedman (#264, Topic B)

A few days ago, Nobel laureate Milton Friedman passed away at age 94. He was said to be a champion of pure capitalsim and disliked government intervention. What happens when the two are in direct conflict? I knew three instances addressing this issue of which Friedman was aware, and he reacted differently. One, the Long-Term Capital Management, a 1980-ish hedge fund in US, that was heavily invested in illiquid foreign bonds. When some of them were defaulted, LTCM financial viability was in jeopardy; this, in turn, caused the Wall Street to be in jitters, necessitating a bailout by the New York Fed. Friedman acquiesced. One reason might be that many of his fellow Nobel laureates in Economics were principals in LTCM; another might be that both LTCM and NYF are US entities. One certainly does not want to say bad words against rescuing one's friends in jeopardy by one's own country. Two, Thai's currency crisis in late 1990s, with US speculators in Thailand's financial market. The latter was no match to the former; it was almost brought down -- in addition, other capital markets in Asia were seriously threatened. Friedman was silent. Conceivably, he was pleased; it was a triumph of pure capitalism. Armed with this success, and emboldened by an absence of any international disapproval, these same speculators moved, a year or so later, to the Hong Kong market, with a view to destabilizing not only her capital market but her political status as well (HK had just been returned to China after 156 years following the loss in the Opium War). A HK government agency responsible for the securities market intervened. With a sizable government treasury behind it, these speculators' indiscriminate selling (producing big short positions) were readily absorbed (squeezing their short positions in the process), causing them substantial losses -- and a much needed lesson. This was written up in a long research paper, published in the China Quarterly (Cambridge U, 2003), by a professor at HK Polytech and an ex-colleague then teaching at an Australian university. The research included a question: Should the HK government have intervened? For those who have lived in HK ten years or longer, a majority answered in the affirmative. For those who have lived in HK less than 10 years, including transients or visitors (Friedman's name was mentioned as a member in the latter group), a majority answered in the negative. Why so? It seems that US government intervention to bail out US entities is okay, while foreign government intervention to bail out her capital market against US capitalists is not okay. In other words, pure capitalism is permitted to play second fiddle to government intevention when US's national interest is at stake; pure capitalism must prevail, without foreign governments' intervention, when their national interest at stake. There is nothing wrong with nationalistic capitalism, if I may introduce a new term, which was what is being preached; but, just don't set a double standard. Every country has to protect her national interests; it is not a US monopoly.