Crusading conservative economist Milton Friendman, whose free-market philosophy seemed to have found its crowning jewel in the policies of Margaret Thatcher, has stumbled into a political storm here over how the British prime minister has put his theories into practice.

Thatcher has come under attack from increasingly aggressive critics in Parliament and the press, including influential dissidents in her own Cabinet and Conservative Party, because her survival-of-the-fittest policies appear to be accelerating rather than slowing the rapid deterioration of the British economy.

While she has been following the Friendman formula of restricting the money supply -- cutting public spending and reducing government involvement in the economy -- there have been alarming increases in inflation, unemployment and interest rates.

The auto, steel, shipbuilding, textile and other ailing manufacturing industries have continued to sag and a damaging steel strike has entered its third month. According to the latest independent economic forecasts, Britain is entering its worst postwar recession, which could last for the next two years.

Thatcher's critics turned their five toward Friedman when they found him here the past few weeks proselytizing in a BBC television series, University Lectures; meeting with Thatcher and her top economic advisers at 10 Downing Street, and promoting his U.S. best seller 'Free to Choose," just published here.

In a running debate with Friedman on television and in the press, opposition politicians, labor leaders, liberal economists and commentators and even some captains of industry castigated his theories as simplistic, out-of-date and dangerously divisive.

Smiling reassursity throughout, the short, balding University of Chicago economist remained calmly confident in the eye of the storm, happy to have won so much attention for himself and his crusade for capitalism.

Winner of the Nobel Prize in 1976, in recognition of the growing influence of his "chicago School" advocacy of free-market economics and "monetarist" theories about controlling inflation by controlling the supply of money, Friedman sees Thatcher's test of his policies as vital to their wider acceptance in the United States.

"What happens here in Britian will have a very important influence in the U.S.," he said in an interview before returning home. "If Thatcher succeeds, it will be very encouraging. It is a fascinating experiment, and a good deal depends on it."

But critics such as Britain's ranking labor leader, Len Murray, general secretary of the Trade Unions Congress, fear that "adoption of Prof. Friendman's monetarist policies [is] leading to the destruction of our productive industries and an attack on the welfare state. If we go along with these policies for much longer, we could end up like a banana republic on which Prof. Friedman is such an expert."

In his televised lectures here advocating the elimination of all government interference in free enterprise, from minimum wage laws to social welfare programs, Friedman has cited the economies of Japan, South Korea and Malaysia as contemporary examples of where "the invisible guiding hand" of an unfettered free market predictable has produced profits.

In one of the BBC debates staged here after each lecture in the series, which was televised earlier in the United States, a leading liberal economist at Cambridge University, Bob Rowthorne, accused by "over-simplifying" the development of those Asian countries and economics in general.

Industrialist Lord Kearton, former chairman of the Courtaulds Chemical conglomerate and the British National Oil Corp., told Friedman he was immpossible to argue with because he had made this theories into "a religion" and "had become a world figure because you don't let anyone else get a word in edgewise."

A leader of the left wing of the opposition Labor Party, Eric Hefer, wrote in the Times of London, "Despite his academic qualifications and Nobel Prize, Prof. Friendman is, like Mrs. Thatcher's government, only up to A-levels [high school requirements] in his economic thinking. His theories are so simplistic that one could be forgiven for believing he looks upon the people as having a mental age of no more than 15 or 16."

Leading liberal columnist Peter Jenkins of the Manchester Guardian, arguing that "the Thatcher revolution is nearing the end of its first flush of enthusiasm" because its policies are not working, added: "As for Friedmanism, the master's weekly appearance on television cannot be doing much to steady the Conservative Party's nerve."

"Do this is the guy Margaret and Geoffrey have been going on about," Jenkins observed, referring to Thatcher and her chancellor of the Exchequer, Geoffrey Howe, "this potty-sounding professor wearing the confident smile of a flat-earther who seems to think that we should shut up shop and 'buy Chinese.'"

Even the conservative elder statesmen of economic commentators here, Samuel Brittan of the Financial Times, distanced himself from Friedman. Arguing that Thatcher's critics made the term monetaism a "scare word" synonomous with her entire rightist philosophy, he insisted that monetarism was not "the same thing as the world outlook of Prof. Friedman."

While a less confident warrior for his cause might have broken and run under this barrage, Friedman stood his ground. He said he expected nasty attacks here because "in the Oxford and Cambridge tradition there is more emphasis on debate points and ad hominem attacks, more emphasis on effect and less on substance."

"But much more fundamentally," he said, "Britain, and much of the world, is at a turning point after a 50 to 60-year run of Fabian socialism." Thatcher's election in his view could mark the turning away from the welfare state back to the freemarket economies of the 19th century.

"Mrs. Thatcher was elected to produce dramatic change and that's what she is trying to carry out," Friedman said. "That's why opinions are so strong."

He believes that the intellectuals who sneer at him here are now out of step with "the bulk of public opinion in both Britain and the United States, which is more in line with my views and Mrs. Thatchers."

She and her Cabinet will succeed in the end if they stay on course through predictably difficult months ahead, according to Friedman, although he would like to see them make still more government spending cuts.

"I'm not surprised at the resistance right now," Friedman said. "Cutting government spending is like making an addict go through withdrawal. No alcoholic likes you to take away his bottle."

"But if they do stick to their policies and two years from now they begin to show effects," he added, "people will be singing a different tune."