A Healthy Dose of Adam Smith

[SingingMongoose]

We often get fooled by a one-dimensional look at economics - it's got to be either capitalism or communism. Some bold thinkers even go so far as to add a third option: a hybrid between the two.

To only see these options, even if you see the third, is to be narrow-minded. Communism is one thing I'm just not sure about, but when it comes to capitalism at least, there's more than one way to approach things.

Shall we privatize everything, with heavy regulation? Shall we privatize everything, with little regulation? Maybe we should only privatize some things, with "moderate" regulation (whatever that means)?

Even that above paragraph is overly simplistic, I think, but it at least proves that there isn't just "capitalism." There's more than one way to do it.

I bring this up because I was just thinking about some Adam Smith quotes I remembered, quotes that made him sound like a real "pinko" to me. I googled what I remembered, and found this (from this blog):

People of the same trade seldom meet together, even for merriment and diversion, but the conversation ends in a conspiracy against the public, or in some contrivance to raise prices.

(Adam Smith, An Inquiry into the Nature and Causes of the Wealth of Nations: B.I, Ch.10, Of Wages and Profit in the Different Employments of Labour and Stock in paragraph I.10.82)

Further, at this blog, I found this:

The proposal of any new law or regulation which comes from [businessmen], ought always to be listened to with great precaution, and ought never to be adopted till after having been long and carefully examined, not only with the most scrupulous, but with the most suspicious attention. It comes from an order of men, whose interest is never exactly the same with that of the public, who have generally an interest to deceive and even to oppress the public, and who accordingly have, upon many occasions, both deceived and oppressed it.

Wow! Look at him go, busting out the buzz-words like "public!" He may as well be working for Ralph Nader!

Of course, "public" didn't have anywhere near the same kind of meaning in Adam Smith's context as it does in the modern American political context. And speaking of context, economic conservatives might respond that I'm pulling this out of context.

Fortunately, both the blogs I looked at provided plenty of context. Both noted that Adam Smith was speaking specifically to the mercantile economy of his times, where guilds established monopolies and stymied competition. The second blog noted that "Adam Smith never 'advocated a laissez faire economic system,'" and even added "He saw specific roles for government and states them in Book V of Wealth Of Nations; he was not sure about whether publicly-funded activities should be managed by the state or by private persons."

None of this is to say that Adam Smith wasn't a capitalist, or to say that he was some kind of pre-communism communist. (Me calling him a "pinko" is a joke.) It does call into question the cut-and-dried way we have of looking at things these days, so worried about competing ideologies that we can't see the disagreements and subsets of ideologies within them.

With that context provided, I still fail to see how Smith's comments don't apply today, almost exactly as one might read them at first glance. His complaint with the guilds was their establishment of monopoly. It seems to me that everywhere you turn, the "capitalists" of today are interested in creating monopolies - whether it's media conglomerates consolidating control of the news (GE, Viacom, News Corp., Time Warner, and Disney), Microsoft getting caught bribing experts, or internet service providers attempting to assert control over internet content, I'm not seeing how it is that we have a competitive market.

I think it's a simple truth that when forces compete, they're rarely equal. Competition therefore yields dominance, and dominant forces aren't interested in stimulating competition. There's a reason why teams with the worst records in pro football are the ones who get to pick first in the draft; there's a reason for Teddy Roosevelt's famous schooling of J. Pierpont Morgan with the line "That can't be done."

 

[midcan5]

Adam Smith lived in a time we will not see again and he is often misquoted and used by people as a stick and not a help.

What improves the circumstances of the greater part can never be regarded as an inconveniency to the whole. No society can surely be flourishing and happy, of which the far greater part of the members are poor and miserable.

Adam Smith
The Wealth of Nations, Book I Chapter VIII
Adam Smith - An Inquiry into the Nature and Causes of the Wealth of Nations - The Adam Smith Institute

Anyway economies today need to be mixed, since Reagan we are moving away from a mixed economy to a more capitalistic one. The results are obvious. Check Dean Baker's book, 'America since 1980' for how we have changed. I never realized how much Reagan fought minimum wage and how much a fair wage is so alien to republicans today.